T Manuel: Launch of new name and identity of South African Institute of
Professional Accountants

31 August 2006

Master of Ceremonies,
Mr Saleem Kharwa, Chairperson of the South African Institute of Professional
Accountants (SAIPA),
Members of the board of SAIPA,
CEOs of various organisation present tonight,
Distinguished guests,
Ladies and gentlemen:

I am honoured to be present at this launch as it signifies an important
paradigm shift in respect of the role this institute will in future fulfil
within the accountancy profession. South African Institute of Professional
Accountants (SAIPA) is being launched at a time when the accounting profession
is experiencing credibility problems.

The launch is also a culmination of serious introspection done by the
members of the institute to define the role the institute ought to play within
the confines of existing legislation. I congratulate the board and the members
of the institute for maturity displayed in addressing the challenges the
changes SAIPA sought to introduce in the past two years. The resolution and
this launch lays a foundation for all stakeholders in the accounting profession
to work together to ensure the country produces the financial management skills
that are needed to attain the desired levels of economic growth.

The amendments to your Constitution that allow for broad participation in
the affairs of this board creates an environment in which more innovative and
co-operative strategies can be developed to address the shortage of accountants
in the South African economy. As I will indicate later it should be possible
for members of this institute to become registered auditors if they so wish and
meet the requirements the regulatory board may prescribe.

Programme Director; allow me to talk briefly about the importance of the
accounting profession in the South African as well as the world economy. The
observations made by the Nobel Prize-winning Economist, Joseph Stiglitz, are
relevant in this regard. In his book "The Roaring Nineties", he said:
"Corporate financial reports are tremendously complicated. That's why
accountants get hired. They are supposed to present profits and losses and net
worth and so on, in standardised ways that can be widely understood. Some argue
that capitalism and the modern corporation could not have arisen without a
reliable accounting industry able to provide a reasonably accurate picture of a
firm's net worth and profits.

"Without that information, how can anyone assess the value of a firm?
Equities are supposed to give the stockholder a share of a firm's profits; but
if the firm could simply make up any old number, who would buy a share?

"Accountants are required in part because shareholders know that they can't
trust firms there is simply too strong an incentive, even in the presence of
fraud laws to provide misleading information."

This observation alludes to the importance of the accounting profession as
well as accountants who are professional observe the highest standards of
ethical conduct and deliver a service of the highest quality to the
organisation they belong. This expectation is consistent with the role that the
profession has played throughout its history. The survival of businesses during
the industrial revolution in Europe depended largely on accountants to help
corporations understand the health of their businesses. It is the accountants
that brought innovation to trade that allow price discrimination based on the
intrinsic value of the product and the status of the buyer as was the case
before 1770. Accountants provided valuable information to the shareholders
during the times of depression that allowed the captains of the industry to
steer their ships to safety. There are numerous positive examples of the
contribution accountants made in the economy, but as we all know there have
been regrettable instances of malfeasance and corruption committed by
corporations with assistance of accountants. The impact of these practices has
caused untold hardships to ordinary citizens whose lifetime savings were lost
as a result.

It is this fact that leads me to challenge SAIPA on its launch to ensure
that it develops an institute that will distinguish itself by hosting a group
of accountants who are professional, observe the highest ethical standards and
provide quality services.

It is critical that SAIPA establishes mechanisms both to provide an
environment of life-long learning and skills upgrades and ensures that those of
its members who bring the accounting profession and the institute into
disrepute are appropriately sanctioned.

I am mindful that many of the members of SAIPA offer an invaluable service
to many small and medium businesses. The overwhelming majority of these
businesses are unlisted and too small to hire a battery of skills in-house.
Consequently, many SAIPA members are in effect the chief financial officers
(CFOs) and investment advisers to these businesses. Too many small and medium
businesses in South Africa face untold growth constraints.

Some of the simple things that hinder the small businesses growth such
as:
* well-constructed business plans
* well-maintained financial records that allow the providers of capital
with
intelligible information
* limited financial management skills
* limited knowledge of where to raise funds.

I am not suggesting that members of SAIPA should be limited to servicing
only small and medium businesses, but I am simply affirming that the diverse
membership of SAIPA as opposed to other professional bodies places it in a
unique position to respond to these challenges. Understanding this role is the
key to understanding how we must dynamise the South African economy and very
importantly create the much needed employment opportunities. To achieve these
objectives, your client base is likely to remain more important than the large
corporations.

It is also worth thinking laterally about some of the unique attributes of
SAIPA members. Accountants in India much like the members of SAIPA do an
incredible amount of outsourcing work for firms in the united States of America
(USA), a recent article tells of how increasing numbers of tax returns in the
USA are completed by accountants who live and work in India the article
advises, “American firms scan an individuals tax documents into a computer. An
Indian accountant logs on, fills out the return on his computer and then it’s
printed out in the United States (US), checked, signed and sent to the Internal
Revenue Services (IRS).”

The future of SAIPA and its ability to attract an ever-increasing number of
members will be determined by the institute’s ability to innovate, to assist
its members to operate at the cutting-edge of technology and to utilise the
competitive edge that small partnerships have in an increasingly interconnected
world.

In the Second King Report on Corporate Governance for South Africa in 2002
it is noted that, “The 19th century saw the foundations laid for modern
corporations; this was the century of the entrepreneur. The 20th century became
the century of management. The 21st century promises to be the century of
governance as the focus swings to the legitimacy and the efficiency of the
wielding of power over corporate entities worldwide.”

This profound characterisation was written at a time when the corporate
world was badly tainted by a series of major corporate collapses and corporate
fraud on a scale previously never experienced. Global confidence in corporates
and the accountancy profession dropped to an unprecedented low, necessitating a
radical review of legislation and regulatory systems. Sadly, we in South Africa
also experienced similar collapses and fraudulent behaviour with many examples
that we can refer to.

The recently promulgated Audit Professions Act is an example of our ongoing
efforts to ensure better mechanisms to strengthen our corporate governance,
responsibility and accountability. Not only does this Act protect and define
the role and functions of registered auditors but it also seeks to ensure the
integrity, reliability and validity of the attest function they perform. We
appreciated that in today’s more empowered world, we need to act decisively, as
in the words of Arthur Levitt, former Chairman of the US Securities and
Exchange Commission, “It serves us well to remember that no market has a divine
right to investors’ capital.

If a company does not have a reputation for strong corporate governance
practices, capital will flow elsewhere. If investors are not confident with the
level of disclosure, capital will flow elsewhere. If a country opts for lax
accounting and reporting standards, capital will flow elsewhere. All
enterprises in that country regardless of how steadfast a particular company’s
practice may be, suffer the consequences.”

As a developing economy we face greater scrutiny in our efforts to attract
foreign direct investment. In a study conducted at the Stanford Law School to
examine the relationship between a company’s corporate governance behaviour and
its market value, it was found that institutions looking to invest in emerging
economies were much more likely to invest money in companies that had sound
corporate governance practices.

Ladies and gentlemen, by legislatively defining the space for auditors and
accountants we are intent on removing confusion in respect of these disciplines
in the minds of the public. Never was it our intention to stifle the very
important role accountants play within our economy. On the contrary we believe
that their role especially within the small and emerging business sector has in
fact been enhanced.

Their role in assisting businesses and individuals conduct their financial
affairs in the most responsible and productive manner is strongly recognised
and appreciated.

Those who portray their role and functions as inferior to the attest
function performed by auditors are deliberately malicious. Without their
services and skills, our economy would be unable to function.

I also need to emphasis that the Auditing Profession Act does not preclude
any one from conducting an audit. It simply specifies that in order for audit
services to be provided by any firm or individual such firm or individual ought
to be registered with the Independent Regulatory Board for Auditors (IRBA). The
legislation seeks to level the playing field in this regard, but we are mindful
of the needs for the highest professional standards that need to be maintained.
I have also requested a comprehensive review of the entrance requirements in an
endeavour to facilitate entry for persons who may have undertaken a route of
study other than an accounting degree. I therefore would urge SAIPA to ensure
that it influences the processes with the Regulatory Board that are intended to
allow for more professional bodies to be recognised.

You now need to tirelessly work towards implementing your comprehensive
transformation policy by eradicating all vestiges of racism and sexism from
your institute and by ensuring that an ever-increasing stream of black learners
enter the accountancy profession and are afforded a worthy professional
home.

I look forward to in future working with this institute in the service of
all our people, as we steadfastly to the values enshrined in our Constitution.
Your new name and identity now requires every member of this institute to give
substance and meaning to it. Build this institute with pride. Grow its
membership as part of the deepening of our skills base. Link arms with other
institutes in the profession. Let us build a better future together.

I thank you!

Issued by: National Treasury
31 August 2006
Source: National Treasury (http://www.finance.gov.za/)