Dear Corruption Watch,
Internal auditors often have to speak out against corruption and frequently face intimidation in doing so. Is South Africa’s whistleblower framework sufficient to encourage and protect internal auditors as they perform their vital governance functions?
Afraid of Bullying
Internal auditors occupy a unique and important position when it comes to preventing corruption. Not only are they employed to put in place measures to strengthen the governance mechanisms of companies, but they can act as whistleblowers when they discover corrupt activities.
Auditors are professionally and legally obliged to report suspect activity. This is the very function they are employed to perform. The Auditing Profession Act makes it an offence for an auditor not to report a “reportable irregularity”, which includes any instance of fraud or breach of fiduciary duty.
Auditors may also face criminal sanctions in terms of the Financial Intelligence Centre Act and the Prevention and Combating of Corrupt Activities Act should they fail to report a wide variety of unlawful or even suspicious activities or transactions.
It is therefore essential that internal auditors are able to expose corruption wherever they find it without the fear of professional or even personal repercussions. Unfortunately, this is not always the case. The Internal Audit Association of South Africa has reported that auditors conducting audits on municipalities have, at times, faced intimidation and demands that irregularities be “covered up”.
Last year, forensic auditor Lawrence Moepi was gunned down in the parking lot of his Houghton firm. At the time of his death, he was involved in a number of highly sensitive forensic investigations. Some commentators believe his death may have been linked to his role in uncovering corruption.
The main law protecting whistleblowers against victimisation, reprisals and discrimination is the Protected Disclosures Act. This legislation protects those in both the public and private sectors who disclose criminal and other irregular conduct in the workplace. It also requires employers to ensure that there are measures in place to protect whistleblowers from being victimised or dismissed as a result of their disclosure.
The scope of the act is narrow and the protection applies only to employees. It will therefore only cover internal auditors who are employed by the company and will not extend to independent contractors or volunteers.
However, the Companies Act does provide important additional safeguards. Section 159 provides protection for a broad range of people connected to a company. A disclosure by an employee or a supplier of goods or services to a company will be covered by this provision.
• This article was first published in Sunday Times: Business Times