Assurance updates

Early in 2020 a colleague, Shruti Maharaj, and I wrote an article called “Auditors marking their own IFRS homework”, which was also published in Accountancy SA.

Over the December festive season, I encountered an article on the Innovation Enterprise website written by James Ovenden which, for obvious reasons, caught my attention. Will Blockchain render accountants irrelevant?

The “going concern” principle has been one of the fundamental concepts in the preparation of any financial statements for as long as most of us can remember.

The title of this article is the tagline of the final report by Sir Donald Brydon that was published in December 2019.

Companies may choose to appoint an audit committee as part of a good corporate governance strategy, or they may be required to do so in terms of legislation or other requirements.

In preparation for an audit some groundwork can be done to aid both the audit team and client staff, which could result in saved time and costs.

An audit is an inspection of your business accounts, including accounting systems documents and invoices. The goal of an audit is to determine if the financial statements are representing an accurate view of the company.

If the saying that “any publicity is good publicity” were true, auditors would have come very close to celebrity status lately.  After recent events like state capture, the SARS report, VBS Bank, Steinhoff, etc.

The annual audit is never an event that our clients look forward to. It can be time consuming for the client and, of course, quite costly. The Companies Act introduced a “lighter” alternative to the audit in the form of the independent review, however many clients, understandably, are seeking ways to reduce the costs.

Planning is one of the most important parts of the audit process and proper planning will ensure that the audit is executed and conducted properly. The audit process includes the following.

An external audit provides reasonable (but not absolute) assurance that the financial statements of the entity being audited are free from material misstatement. However, external auditing is often seen as costly and of no practical value to businesses. This is particularly prevalent in small to medium-sized businesses.

There are many legal, and practical, reasons why companies may be structured in groups, branches, etc. as opposed to just one reporting unit. 

Users of financial statements are often surprised at the extent of estimation involved in the preparation of financial statements.  One would think that accounting is more of an art than a science and that the world of reporting consisted of measurables – prices, percentages, debits, credits, etc.   Sadly, that is not the case anymore.  As business has become more

Previously, only Sectional Title Schemes with ten or more units were required to have their annual financial statements audited.

Auditors, especially in South Africa with its “Reportable irregularities” requirements, are painfully aware of their duties to report irregularities. These duties are well defined in the Auditing Professions Act, International Standards on Auditing, etc.

Independence is the cornerstone of the auditing profession.  Independence is just another, slightly stronger, word for objectivity. If an auditor is to add any value to the client, investors, lenders, the economy or even the world, he/she must be objective, or “independent” of the information and the entity being audited.

The new auditor reporting requirements are not just going to affect the audits of listed entities. This article highlights some of the considerations for smaller entities in terms of the requirements applicable to all entities and those that may be applied on a voluntary basis.

So many articles have been written on the Companies Act, 2008 starting years before its implementation in May 2011, and still continuing up to this day.  When our clients read these articles or consult with us on the “new” Act we are often asked what the purpose of all of this is and where all of this regulation is going. 

Let’s start by looking at the provision of Section 45, as to who the section applies to. Section 45 of the Companies Act No 71 of 2008 applies to direct or indirect assistance to:

Before 2008, all companies had to be audited – irrespective of size, shareholding, etc. The new (or actually not so new anymore) Companies Act 2008 is more flexible.

The new Companies Act, 2008 has introduced a few principles that are aimed at preventing abuse of corporate structures to the disadvantage of others.

The Companies Act 2008 brought at least two alternatives to the traditional audit: Firstly, some smaller companies have no requirement at all, leaving shareholders with the ability to choose their own level of assurance, if any. For others, the concept of an “independent review” of the financial statements has been introduced.

In South Africa, auditors are required to issue audit reports in line with International Standards of Auditing (ISA) and International Standards on Review Engagements (ISRE) ensuring uniform application of assurance service reporting across the world.

With the implementation of the new Companies Act, many questions have been raised regarding the new audit requirements that were mandatory in the 1973 Companies Act. Here are some of the questions raised regarding the new Companies Act as well as answers to these questions. Hopefully this will shed some light on what is now required.

In contrast to King I and II codes, King III effective from 1 March 2010 applies to all entities regardless of the manner and form of incorporation or establishment and whether in the public, private or non-profit sectors.  The principles have been drafted so that every entity can apply them and, in doing so, achieve good governance.  In South Africa all companies

Sustainability Reporting is defined in the Global Reporting Initiative Sustainability Reporting Guidelines (“GRI Guidelines”) as “… the practice of measuring, disclosing and being accountable to internal and external stakeholders for organisational performance towards the goal of sustainable development”.

The Companies Act 71 of 2008 (the Act) was signed into law on 8 April 2011 and its commencement date was 1 May 2011. The Companies Act 61 of 1973 (the previous Act) was repealed on 1 May 2011. Schedule 5 of the Act sets out the transitional arrangements, which are summarised as follows. Pre-existing companies

Financial statements are prepared annually for the purpose of review and decision making by the intended users. It’s therefore imperative that the information presented in a set of financials be as fairly stated as possible.