Are you witnessing corruption but don’t know what to do about it? Ask the team of Corruption Watch experts what to do by writing to: letters@businesstimes.co.za and mark your letter 'Dear Corruption Watch'.
Dear Corruption Watch,
I've taken the plunge, and blown a whistle. But now it seems that the forensic auditor my company brought in to do an investigation has covered up what he undoubtedly found (I provided the evidence I had to him, which was damning). Is he potentially liable under section 34 of the Prevention and Combating of Corrupt Activities Act? Yours faithfully, Rusty Whistle
Dear Mr Whistle,
Firstly, thank you for blowing the whistle. The only way to combat corruption is for people to have the courage to refuse to engage in corruption or expose the corruption that they uncover. South Africa needs more people like you.
Now, is your auditor in hot water for keeping the cat in the bag? As you note, the first step is to look at section 34 of the Corruption Act. The section imposes a duty on any “person who holds a position of authority” to report any of the many corruption-related offences created in the Act (or any theft, fraud, extortion or forgery) if: (a) the offence involves more than R100 000; and (b) the person knew, or ought reasonably have known about the offence. Any “person who holds a position of authority” and who fails to report an offence as required, is guilty of an offence punishable by up to 10 years imprisonment.
The R100 000 question is: who is a “person who holds a position of authority”? The Corruption Act defines the phrase through a list of people it covers. That list includes: a Director-General; a municipal manager; the rector of a university; the manager, secretary or director of a company; a CEO; and a partner. It then includes the following catch-all phrase: “any other person who is responsible for the overall management and control of the business of an employer”. Considering that definition, an auditor probably isn’t in a position of authority with regard to your company. But that’s not the end of the story; there are at least four reasons why your auditor has nonetheless committed an offence.
First, section 34 does not limit the obligation to report offences to acts committed by people in the person’s organization or who are subordinate to him. If the Director-General of Health is aware that the Director-General of Education is guilty of corruption, she has to report it. So, if a director, CEO or partner of the auditing firm your company hired was aware of this cover-up, she may have violated section 34.
Second, section 19 of the Corruption Act makes it an offence to alter, destroy, falsify or omit information from a book, document or account, if the act is committed with the intent of concealing a corruption-related offence, or hindering the investigation of that offence. From your description, your auditor sounds pretty guilty of that offence.
Thirdly, you have to ask: why is the auditor covering up for the company? Why is he taking the risk of himself being convicted of an offence to help out whoever committed corruption in your company? A cynical person would suggest that he had been offered some sort of benefit. Maybe he was promised more work in the future, or a better rate, or a recommendation to another company. Whatever the carrot, both sides of that dodgy deal would be guilty of corruption.
Finally, section 52 of 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.
Presuming your auditor acted intentionally, he has almost certainly committed a range of offences. Report him.
Take a stand and report an incident of corruption. This article originally appeared in the Sunday Times Business Times on 9 September 2012.
