Defend Truth


It’s time for a new normal in business audits to tackle corruption


Wayne Duvenage is a businessman and entrepreneur turned civil activist. Following former positions as CEO of AVIS and President of SA Vehicle Renting and Leasing Association, Duvenage has headed the Organisation Undoing Tax Abuse since its inception in 2012.

It’s a common fact that there are two sides to the corruption coin. The Payer – very often government with its huge chequebook – and the Payee, generally businesses in the private sector that supply goods and services to government. Corruption is not a one-sided affair. This dance needs two players and the more skilful the dancers, the more they are able to cream from the Treasury trough.

Let’s be frank about this issue. First, corruption is killing South Africa and we have become numb to the scourge. Business leaders almost take for granted the need to “pay the required fee”, in order to open the door and get a favourable look into the government tender or business transaction, be it at the national, provincial or local level.

Many business leaders justify this form of corruption as a “cost of transformation”, while others label it a “finder’s fee”, a “commission” or the “consultant’s charges”. This is especially true in those high-value, capital expenditure transactions where there is the ability to hide or justify the kickbacks by slipping them into the web of project expenses.

And the retorts to the morality of the transaction when questioned in the boardrooms are “if we don’t, our competitors will” and “look at the profit we can make”, followed by “think of the dividends / bonuses and shareholder returns”. Generally, the profits have to be massive, too big to ignore, and this is where the audit firms have failed in their duty to society. They have ignored their ability or need to question the excessive commission/ consultant fees linked to projects that private business have no need to pay or receive no value for.

More worryingly is the knowledge that auditors largely do not bother to delve into asking why it is that services/ products are often sold to government at prices well above that which they can obtain in the open market. It’s called benchmarking and an auditor worth his or her weight in salt would be able to identify the red flags of a corrupt transaction and to dig a little deeper when these are detected.

Here’s the challenge and proposals we put to the audit industry and business leaders/boards of directors for all future audits conducted in businesses:

  1. If a company is doing business with government – that’s a red flag. It’s a double red flag if the transaction entails a large project or is of a capital expenditure nature.
  2. These red flags should trigger the auditor’s request for additional expertise to assist with benchmarking exercises. Here, they should be cross-checking with other similar transactions on a cost per unit basis, with those of similar services or products to other customers, preferably in the private sector (who generally won’t pay more than they should for these goods). By doing so, the auditor will soon find out if the government-related transaction has been overpriced. And if so (by anything more that 10%) the alarm bells should sound, to ask why did government not receive these items at the open market price.
  3. If these warning signs are clear, the auditor should start sniffing for separate or linked “commissions” or “consultant” transactions, which are generally joined to the corrupt conduct therein.

It’s time for businesses and audit companies to stop looking away and ignoring the glaring and obvious signs of corruption. It’s time they teach and reward their auditors who uncover the corruption within business transactions.

It is also time that the boards of companies instructed the audit houses to conduct their audits in a manner that removes any fear of losing the account, if they do uncover corrupt or highly unusual/ suspicious transactions within their books. Furthermore, it is time for the directors on the boards of companies to instruct their finance departments that no consultation transactions will take place with a company that provides the auditing services to them.

And the corollary applies to those auditing houses and leadership who check the books of the various government departments and State-owned Entities. If it is clearly obvious that government could have purchased the goods or services on the open market at a significantly lower price – the red flag of probable corruption must be hoisted. And if the government is also paying exorbitant consultant fees to another division of the company that audits their books – the alarm bells should sound loudly.

Our call to the auditors and finance clerks, supervisors and managers within business is to do the benchmarking. If the company you work for is invoicing for services and goods to government at prices well above the open market prices, it’s time to raise the alarm. And if you’re told to keep quiet, or mind your own business, or are threatened with your job, quietly gather the evidence, get the facts, dig deeper and connect the dots while planning the exposure, in a safe manner, to an organisation that will do something about it.

Be careful of using your internal whistle-blower lines, as these are often connected to the very people responsible at the top of the chain, who may very well be the ones perpetrating the corrupt conduct.

This is now the time for the audit industry to seriously clean up its act. To get tougher and be bold. Society is tired of audit houses’ management pandering to the whims and excuses of their “customer”, and failing to ask the tough questions. The regular high-value invoices that offer little value need to be questioned and checked. And while addressing the need to halt corruption, why does the audit industry not decree that a company supplying auditing services to a client may not be part of or linked to the provision of consulting services to the same business.

Yes it’s extreme, but let’s face it, this industry has pulled the ring out of consulting fees and charges, more specifically to government where the “corrupt conduct” has literally been condoned in exchange for the lucrative consulting contracts. This is the behaviour that has robbed our nation – and particularly the poor – of their rightful services and infrastructure.

The audit firms which declare and succeed in a “war on corruption” ethos will become the biggest audit firms in the future. They will be the firms that boards of companies will insist on using for their audit services. Boards of these corruption fighting companies will encourage their audit and finance staff to become the bane of their lives if their company doesn’t subscribe to the new normal of oversight aimed at rooting out corruption. These are the boards that will instruct their executives that corrupt conduct will not be tolerated and that their competitors are free to “win” the corrupt transactions.

It’s time for a new normal. Corruption can be beaten. It just takes effort and – most of all – moral courage. Does your board of directors have the courage to insist on these initiatives that will go a long way to halt corrupt conduct? Ask them. DM


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