Johannesburg, 15 August 2018 - Corporate governance guru Professor Mervyn King says the fourth industrial revolution will usher in a new era for the internal audit sector - but warned that its oversight function will be severely tested. Speaking at the 21st Southern African Internal Audit Conference in Sandton, Johannesburg this morning, King said both the external and internal audit sectors were undergoing a period of introspection following a litany of public and private sector corruption scandals. King was addressing over 1 000 delegates at the conference which is annually hosted by the Institute of Internal Auditors SA (IIA SA) to discuss sector developments and innovation.

He said while external audit mainly focused on a company’s finances, internal audit was “the right arm of the board” saying: “A recent study found that the chief audit executive … provides 87% more information than a report by the lead of the external auditing team.”  He said the advent of the fourth industrial revolution necessitated changes to the industry saying: “You cannot have an organisation today without technology. The internal audit function must be on top of this … talent and technology must be built into internal audit plans.” He said in the next few years “the internal audit function will be faster and of a greater coverage”, adding that the industry must understand eight essential emerging technologies.

These include the Internet of Things, augmented reality, virtual reality, blockchain, artificial intelligence, 3D printing, drones and robotics. He said, therefore, that internal auditors “had to enlist innovative tools and upskill”. Asked by a delegate what recourse they had when a board failed to address concerns or how to deal with a corrupt board, he said: “The question is are you a party to the problem (and) what happens if an internal auditor is not a party to it? Well, the internal auditor can become a whistleblower.”

Notwithstanding this, he said he remained “hyper critical of existing whistleblowing legislation” such as the Companies Act and the Protected Disclosure Act. ”None of these Acts actually motivates people to disclose. None of them honours and respects and make sure that the whistleblower is seen to be an honourable person in society.”King said the Gupta wedding scandal and KPMG’s allegedly complicit role in it – as exposed by the #Guptaleaks email debacle – was a lesson to internal auditors to be more “sceptical”.

“The audit profession has without any doubt suffered serious credibility and reputational damage … I’m prepared to wager that the leader of the external auditing wasn’t sceptical enough when he asked one of the Gupta brothers where is this money coming from and what is the purpose of the loan? “And the answer was it was a family company and (the money) was coming (from the Free State dairy farm project) to pay for the wedding, drinks and catering etc. On that basis it was a hiccup. The question is was he sceptical enough with the red flags … this is the critical issue.”Following King, David Lewis of Corruption Watch urged all South Africans to take personal responsibility when it came to matters of corruption.

He said one cannot bribe a traffic cop while at the same time bemoan government corruption. “Corruption is about the interface between the public and private sector. The public sector belongs to us. We elect a government which appoints public officials in order to regulate palpable interests like the private sector … this is why there is a large concern with what is going on in the public sector.”He said recent revelations such as the KPMG and Gupta scandal, the collapse of Steinhoff, and corruption involving companies such as SAP “has reduced public trust in the private sector” which is “a very big problem”. Speaking at the end of the three-day event, IIA SA CEO, Dr Claudelle von Eck, said the conference was one of the most important in years.

“This is so because key issues such as digitisation and the fourth industrial revolution were explored. These critical technological advances will not only transform the way we live and work but also impacts severely on the internal audit sector.” She said however that corruption as well as public and private sector malfeasance were still key factors that South Africans are talking about. “The audit industry is now under the microscope like never before and the conference has allowed us to introspect and confront these challenges. Moving forward, it is imperative that we adapt to these new realities that we face.”--ENDS-

Cheryl NaiduPR Liaison (At Vogue Communications)Tel: +27 73 524 6034Email: This email address is being protected from spambots. You need JavaScript enabled to view it.