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Independent Reviews: How it can impact the auditing landscape

Independent Reviews: How it can impact the auditing landscape. Bernard Peter Agulhas 15 November 2012. 2. Background: Companies Act and Regulations. Effective from 1 May 2011

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Independent Reviews: How it can impact the auditing landscape

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  1. Independent Reviews: How it can impact the auditing landscape Bernard Peter Agulhas 15 November 2012

  2. 2 Background: Companies Act and Regulations • Effective from 1 May 2011 • Ultimate goal in repealing the previous Act was to ensure that the regulatory framework for all types and sizes of enterprises promotes growth, employment, innovation, stability, good governance, confidence and international competitiveness • Different types of companies must comply with different rules as set out in the Act

  3. 3 Background: Independent Review For all financial year ends after 30 April 2011, independent reviews are required by all companies which: • Are not required in terms of the Act to be audited; and • Do not choose to be voluntarily audited; and • Do not meet the exemption criteria set out in the Act

  4. 4 Background: Public Interest Score Is calculated by all companies at financial year end as: • One point per employee for the average number of employees during the financial year • One point for every R1 million or portion thereof in third party liabilities at financial year end • One point for every R1 million or portion thereof in turnover during the financial year • One point for every individual who at financial year end has a beneficial interest in issued securities of a profit company or is a member of a non-profit company

  5. 5 Background: Who can perform audit/independent review

  6. 6 Challenges and Opportunities: Accreditation • At present the only professional body accredited by IRBA is SAICA • Who are professionals referred to in Regulation 29? • Legal Opinion from Senior Counsel • Challenge: SAICA members not in public practice may not be familiar with assurance standards • Opportunity: SAICA members not in public practice can perform the independent review for companies with PI Score of 100 – 349 (approx. 30 000 CAs(SA))

  7. Challenges and Opportunities: Inequality • Distinction between professionals who can provide independent review for companies with a PI Score of 0-99 and a PI Score of 100-349 • Challenge: Difference in regulation, standard, enforcement and reliance • Challenge: Redistribution of work • Opportunity: Greater access to independent review profession

  8. 8 Challenges and Opportunities: Accreditation Model Accreditation requirements to be developed which will differ from the existing accreditation model requirements for auditors • Opportunity: The accreditation model for independent reviewers of companies with a public interest score of 100-349 will be developed in consultation with the professional bodies • Opportunity: These requirements will be less onerous than the requirements for auditors

  9. 9 Challenges and Opportunities: Regulation

  10. 10 Challenges and Opportunities: Other Services Accounting and Bookkeeping Services: • Opportunity: An auditor and the audit firm may not be currently involved, nor in the five years preceding appointment, in the maintenance of a company’s financial records or the preparation of its financial statements or in performing accountant/bookkeeper duties • Challenge: An independent reviewer may not be involved in the preparation of a company’s financial statements

  11. 11 Challenges and Opportunities: Rotation • Opportunity: The same individual may not serve as auditor of a company for more than five consecutive years, commencing 1 May 2011 • Opportunity: No rotation requirements for independent reviewers

  12. Increasing Thresholds • Already discussed with Companies and Intellectual Properties Commission • Inflationary adjustments for PI Score elements to be considered

  13. Value of Other Assurance Engagements • Lower cost to client? • Procedures followed by auditor in expressing negative assurance are less? • Increased access to profession? • More efficient for client? • Early days

  14. Impact on Auditing Landscape • Section 90(2) of the Companies Act • Requirements of the Revenue Service and Banks • Expectations • Parliament: Custodian of the Profession • EU Green Paper • Response by IRBA • SMP Support • Value of Auditor • Statistics

  15. Thank You Bernard Peter Agulhas Email: bagulhas@irba.co.za

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