Assurance updates

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.