2023-24 performance priorities

In 2023-24, we continued to safeguard and promote our independence through risk and ethics management and quality management, and by successfully defending the organisation against litigious claims. While we highlight the positive impact of our activities in this report, we also acknowledge areas for improvement to further strengthen our processes and ensure our credibility and sustainability.

Audit quality management

The quality of our audit work is paramount as it ensures the credibility of our audit opinions and enhances our reputation. The work that we produce attracts significant attention, both from our auditees and from the public, so we are mindful that our products and processes may be subject to increased scrutiny before the courts. We therefore make quality audits our top priority.

During 2023-24, we successfully operationalised and evaluated the SoQM, following its implementation, in line with the ISQM in the previous year. In setting up the system, we achieved the following deliverables to enable the QMAC to evaluate and conclude on the SoQM:

In 2023-24 the auditor-general, supported by the QMAC, undertook the inaugural evaluation of the AGSA’s SoQM and concluded that, as at 30

November 2023, it provided reasonable assurance that we achieved the objectives of ISQM 1.

She also concluded that the AGSA SoQM provides reasonable assurance that:

• the AGSA and its personnel fulfil their responsibilities in accordance with professional standards and applicable legal and regulatory requirements
• AGSA engagements are in accordance with such standards and requirements
• AGSA engagement reports issued by engagement managers or any other delegated signatories are appropriate in the circumstances.

An effective SoQM is one that consistently monitors performance in all the components of the quality management system. It identifies and corrects deficiencies and annually evaluates the effectiveness of the corrective measures implemented. In line with paragraph 13 of the

ISQM, our SoQM included the post-issuance quality review outcomes for engagement files for the 2022-23 performance year.

This process serves as an early indicator to assist us in promptly identifying areas of quality management that may require attention, with a view to taking immediate steps to sustain improvements in our SoQM.

During 2023-24, we subjected 71 audit engagement files for 69 engagement managers to a post-issuance quality review. The review was finalised in June 2024 and the office obtained a 69% achieved rating, which is below the target of 80%. Although we achieved reasonable assurance on the SoQM, which is measured at firm level, we acknowledge that we did not achieve our targeted quality performance for 2023-24.

Key resolutions taken from the QMAC meeting in June 2024 are in line with an effective SoQM as articulated in the ISQM:

• Conduct a detailed remediation process including a root cause analysis at business unit level
• Identify the real root causes that led to the decrease in the quality outcome from the previous year
• Implement various quality initiatives to ensure that the quality outcome improves in the next cycle.

While the current audit file review outcome is below our expectation, we are encouraged by our leadership’s commitment to prioritising the initial assessment and to own the remediation process required to return our file quality to the desired state.

In November 2024, we will evaluate and assess the root causes for a quality score that is below expectations, as well as the effectiveness of the corrective initiatives. The outcome of this evaluation will inform any additional steps needed to keep our SoQM effective.

SoQM change management

As part of our SoQM work, we implemented a robust internal change management programme, aimed at supporting us to achieve the shift required to ensure that we have embedded and taken ownership of the quality management principles in our day-to-day operations.

Some key change initiatives driven around quality management during the year included the following:

• Establishing the quality community of the change practitioners’ forum, made up of representatives from all our business units.
• Planning and designing dipstick surveys that will be used to determine the status of change implementation and progress over time.
• Using a communication plan to ensure that all key communication to the organisation occurred on various quality management topics, including the status of SoQM evaluation.

Ethics strategic programme

Exco approved the ethics strategic programme during 2023-24. The programme represents our approach to building a strong ethical environment in the organisation and to using our position

to influence ethical behaviour in the auditing profession, and in the environment in which we operate. The ethics strategy clarifies the direction, actions and envisaged outcomes to move the organisation to an integrated culture of ethical savviness and sustainable ethical posture.

The programme aims to spearhead the following initiatives:

• Design and implement a seamless model that supports the creation of an ethics ecosystem.
• Enhance leadership posture and actions on ethics.
• Improve the management of ethics at an organisational level.
• Acquire or develop a customised, risk-based ethics tool that incorporates all factors that impact the ethics environment (processes, employee patterns of behaviour, service providers / contractors, etc.).

The core drivers of organisational culture are leadership (as the most powerful driver), values, principles and rules (which encompass mechanisms such as laws, regulations, policies and procedures). We believe that implementing focused leadership interventions and deliberate, organisational engagement on all employee levels will facilitate our response to our ever-evolving operating environment and will create a proactive ethics approach. This will ensure that we safeguard the organisation against ethical risks as we implement the #cultureshift2030 strategy. As part of our ethics strategic programme and organisation-wide training plan, we conduct ethics training across the various employee levels. The ethics training was also rolled out to new employees at three welcome and orientation workshops held during the year.

Individual ethics induction sessions were conducted with all new executive leaders, and we also held two rounds of business unit ethics engagements (for all 35 business units internally). During 2023-24, we also trained 176 first-year trainees, 364 second- year trainees and 273 third-year trainees. 

Ethics maturity assessment outcomes

We assessed our ethics maturity level and used our 2019-20 performance year as the baseline (in that year, we achieved an AA rating). Unfortunately, in 2023-24, we regressed from the AA rating to an A rating. While an A rating is not inherently bad, it did indicate a regression from our set baseline and, therefore, what we know we are capable of in terms of our ethics standards. We are busy developing an implementation plan to address the issues raised by the independent assessment.

Dealing with ethical breaches

In 2023-24, there were no ethical breaches noted from the cases concluded. This is an indication that our employees have a strong and solid ethical posture. Our Risk and Ethics unit continued to scan the internal and external environment as part of our complaints and ethics monitoring process, to identify and address any ethical breaches promptly.

Our annual declaration system also served to confirm employees’ adherence to the organisation’s policies, principles and codes. At year-end, 98,7% of our employee’s annual declarations were submitted and approved, with 14 declarations (0,4%) pending approval and 35 declarations (0,9%) outstanding.

The outstanding declarations were those of employees who were on extended leave during the declaration cycle. We consistently engage our employees to ensure that they understand their ethical requirements during induction and orientation sessions. The compliance rates indicate that the AGSA community values the declaration process and the role it plays in our overall ethics management programme.

Risk management strategic programme

During the year under review, exco approved a risk management strategic programme to improve the organisations’ risk management process. The purpose of the risk management strategy is to build a data-led risk management system that enables our stakeholders to be risk savvy when making daily business decisions and implementing business processes.

The strategy intends to ensure that where data is used for risk management purposes, it is accessible / available, accurate, complete, reliable, relevant and timely, as well as informs the thinking process of managing organisational risks.

The programme will focus on the following objectives:

• Drive a culture of risk
• Emphasise the need for a risk intelligence
• Ensure that risk management services are value- adding (i.e. client-oriented services).
• Ensure that the function has appropriate skills and is capacitated (i.e. resources, tools and data-enabled).
• Support the organisation to be resilient (risk-based business continuity and crisis management [crises and business continuity management])

Complaints management

We received 58 complaints since the beginning of the 2023-24 financial year. Of these, 37 (64%) were out of scope according to our complaints policy, including 15 identified as audit tip-offs, which were considered by the audit teams as they deemed fit through the audit process. The remaining 21 cases (36%) were complaints within our scope of work.

In terms of the complaints platform utilisation, 30 complaints (55%) were reported via the AGSA website, 18 (28%) via direct email, and 10 (17%) through our Speak-Up whistleblowing platform, indicating the confidence our citizenry has in reporting directly to the AGSA.

Effectiveness of whistleblowing platform

The whistleblowing platform is still an effective channel to report complaints; however, most valid complaints, or those within our scope, were received directly by email and walk-ins. The numbers are indicated in the table below:

Litigation against the AGSA

The work that we produce attracts significant attention, both from our auditees and from the public. We are mindful that our products and processes may be subject to increased scrutiny before the courts and thus focus on having a professional and responsive legal function.

The Road Accident Fund (RAF) case

The RAF court case began when the auditee took our 2020-21 audit report on judicial review.

A disclaimed audit opinion was issued based on the inappropriateness of the RAF’s annual financial statements. In 2021, the court saw no credible argument to interrupt, delay or halt the AGSA from executing its constitutional obligation. The RAF opted to apply for a leave to appeal, which was granted, but later withdrew its appeal. However, the RAF continued to challenge the auditor- general’s decision to issue a disclaimed audit opinion on the 2020-21 audit report. Eventually, the judgment was issued in favour of the AGSA, with the Constitutional Court dismissing the RAF appeal with costs.

This case was important because its purpose, primarily, was holding public institutions to appropriate accounting standards as set by the Accounting Standards Board. The case sends a strong message to other public bodies on where the authority stands on determining applicable accounting standards.

Conclusion

With 2023-24 having presented challenges in the ethics assessment outcomes and the quality area, our focus for 2024-25 and beyond will be on how we make improvements in the areas that presented challenges, while sustaining the strong performance we saw in others. The revised dispute resolution process continued to yield excellent results in bringing finality to litigious matters outside of the courts. We also take encouragement from the fact that even in the areas where we want to improve, our organisation still benchmarks as a strong performer, especially relating to matters of ethics.

2023-24 performance priorities

During 2023-24, we worked hard to reposition the people portfolio function, developing and approving the new people strategy to guide our approach to people development. In developing the people strategy, we analysed the people barriers and opportunities to achieving the #cultureshift2030 strategy. These were themed around four critical areas:

• leadership;
• talent pool;
• wellbeing; and
• culture and

The people strategy is characterised by five strategic imperatives, as shown below.

We believe that in building an organisation where people can reach their full potential and experience growth, we will be creating a positive experience for our employees. The people strategy is also crucial in supporting the implementation and successful realisation of the #cultureshift2030 strategy.

Workforce profile

The success of the #cultureshift2030 strategy rests on our people’s capacity, competencies and wellbeing. As an aspiring employer of choice, we committed to acquire, develop and maintain the quantity, quality and configuration of resources and capabilities to achieve and sustain our desired levels of impact. Our employees remain our most valuable asset. Creating an environment to promote engagement and contentment will allow our employees to flourish and achieve their full potential, for their own and our organisational benefit. We believe that promoting good health and wellbeing can be a core enabler of employee engagement and organisational performance.

Wellbeing relates to all aspects of work-life, including physical, emotional, financial, social, career, community and purpose elements.

The AGSA workforce stood at 3 933 employees, inclusive of trainee auditors and fixed-term employees, which represents a 7% increment from 2022-23.

As at 31 March 2024, we had 1 045 CAs(SA) in our employ. This number consists of 579 females, of which 466 (81%) are African, demonstrating our contribution to the transformation of the audit profession. A total of 2 017 CAs(SA) were produced since the advent of the AGSA trainee auditor scheme. Over the past three years, we have produced 700 CAs(SA), illustrating the impact that we have made in professionalising the organisation and the audit profession.

The Assessment of Professional Competence (APC) is the final test of competence in the CA(SA) journey. In 2023-24, 175 of our candidates passed, at a pass rate of 34%. Our candidates achieved a 48% pass rate in the Initial Test of Competence (ITC) (those writing for the first time achieved a 69% pass rate). Based on the success rate of candidates on their first attempt, we believe a focus on this cohort will have more impact on increasing the number of CAs(SA) we produce. We will implement separate support plans for our repeat candidates.

Attraction of young professionals

In 2023-24, we recruited 165 young professionals with Certificate in Theory of Accounting (CTA) qualifications, 100 associate general accountants, and 25 data analysts. The addition of data analysts will contribute towards ensuring that we are able to mine meaningful and impactful audit insights. The intake of CTA candidates remains under pressure with the decline of these candidates in the market. Our diversified recruitment approach, however, has enabled us to capacitate audit business units amidst this shortage.

Retention of our top talent

Our talent attraction focus is evident in our improved occupancy rates, which increased from 83,72% to 87,54%, with the audit portfolio capacitated above 90%.

Our emphasis on leadership development and talent retention is evident in our turnover rate of high-potential employees at 5,2%, which is well below the commitment target of <6% and industry benchmark of 10% to 12%, underscoring our ability to attract and retain top-tier talent.

Investment and success through AGSA bursary fund

The AGSA’s external bursary scheme is a strategic initiative that aims to provide financial assistance to academically capable individuals who otherwise would not be able to access tertiary education due to a lack of adequate financial resource or sustenance of such resources. The scheme seeks to drive the growth and transformation of the accounting profession and thereby share our financial resources and professional knowledge and experience with South Africa’s young people, while also transforming the accounting profession in the country.

During the 2023 academic year, we distributed R5 889 585 to 36 active bursars on the AGSA bursary scheme, who achieved a CTA pass rate of 75%, exceeding our internal pass rate of 57%.

Partnership with Thuthuka bursary fund

The Thuthuka development fund administered by Saica provides all-round, holistic support to talented African and coloured students who want to become CAs(SA). The AGSA-Thuthuka partnership continues to highlight the importance of the AGSA as a formidable training institution in the public sector. We contributed R15 006 247 to Thuthuka for the 2023 academic year, an increase from the R11 497 125 contributed in 2022-23. In return, 45 Thuthuka candidates began their articles with us in 2024.

Technical training

A highlight of the year was the capacitation of our employees on ISQM, with topics covered including technical audit areas and ISQM and SoQM principles. A total of 3 425 (87,65%) employees successfully completed the mandatory modules. In 2024-25, we will focus on the capacitation of the MIU, influence training and other priorities aligned to the MYAP.

The table below indicates leadership development programmes that took place in 2023-24, demonstrating our continued focus on leadership development.

Our journey towards #cultureshift2030 is anchored in strengthening culture and leadership from within and empowering our teams to drive positive change within the public sector. Our internal culture is rooted in the organisational values, which are:

Through practices of leader-led conversations and values-in-action initiatives, we aim to foster a culture of trust, collaboration, wellbeing, improving work-life integration, enabling enhanced confidence in managing life demands, and bringing a renewed focus on personal wellness among our teams.

Key highlights for the year included our values-in- action e-learning modules, business unit values workshops and leader-led conversations. These contributed significantly towards laying the groundwork required for bringing about shifts in our internal culture as demonstrated in engagement and culture survey scores.

Leadership development

We developed a leadership DNA that was approved by exco and socialised with all our executives. The DNA has been translated into a leadership 360-degree assessment tool that was rolled out so that we can use the results to craft leadership development programmes going forward. This will also give us an indication of our current leadership rating baseline. The initial assessment of our executives demonstrates a rating above the internal leadership benchmark.

This process will assist us in crafting specific developments plans for each leader, thereby ensuring that our leadership pipeline remains sustainable.

AGSA culture index

To begin the robust tracking of engagement and culture levels, we established a baseline for culture initiatives with an impressive 89% participation rate in our engagement and culture survey, paving the way for tangible progress towards our vision of a more inclusive and values-driven organisational culture. This survey gave our employees an opportunity to meaningfully participate in creating the culture that we desire as an organisation.

The next steps will focus on improving our culture index baselines through targeted efforts and initiatives.

Prioritising employee wellness

We implemented proactive initiatives to support employee wellbeing aimed at addressing mental health matters, work-life balance and other employee wellness concerns.

Transformation, diversity and inclusion

The AGSA has maintained a level 1 B-BBEE certification status for six consecutive years which is a significant accomplishment for any organisation. Achieving this would also demonstrate our dedication to equitable opportunities, inclusive growth and community upliftment. We initiated a comprehensive assessment to evaluate the impact of proposed sector targets on our transformation efforts, allowing the organisation to strategically plan its future transformation initiatives.

Employee relations

Commission for Conciliation, Mediation and Arbitration (CCMA) disputes by outcomes

At the AGSA, we conduct a proactive approach to employee-relationship issues, thereby fostering a positive workplace culture. By identifying and addressing the underlying causes of misconduct, we not only prevent future occurrences but also promote transparency, care, trust and accountability among employees.

Six disputes were referred to the CCMA in 2023-24 (down from seven in the previous year). Four of these were finalised through CCMA settlements with no admission of guilt by the AGSA. One was finalised in favour of the employee and the last one was finalised in favour of the employer. It is worth noting that there were no Labour Court referrals. 

Strategic partnerships and collaborations

We have forged strategic partnerships and collaborations to drive our influence in the young professional and human resource spaces.

These included:

• Through our strategic partnership with Saica, we have maintained low-risk ratings for all 15 training offices.
• We signed a memorandum of agreement with the Finance and Accounting Services Sector Education and Training Authority, unlocking access to vital bursary funds and certification funding for forensic practitioners and data analysts.
• We collaborated with the supreme audit institutions of Uganda and Zimbabwe on thought leadership and the exchange of human resource best practices.

We encourage integration and partnership between business units within the organisation. In 2023-24, this collaboration focused on digital marketing and resulted in significant growth in the cultivation of employee brand ambassadors, enhanced candidate experiences and the impactful contribution of the AGSA’s employer brand initiatives.

Conclusion

This year saw many improvements within the people and organisational spaces. The findings of our culture survey provided an encouraging assessment of the impact of our culture interventions over the past few years. On the APC pass rate, where we saw performance below our target, we put interventions in place for 2024-25 and beyond. It is our intention that these will see us improve our pass rate in the coming years.

Going forward, our aim is to build on our successes to uphold the AGSA as an employer of choice and a place where talent grows professionally while contributing to the betterment of the country and its people.