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DUTIES OF A PROFESSIONAL ACCOUNTANT (SA) AND ENGAGEMENT LETTERS
Region/District Forums 2018
PROFESSIONAL ACCOUNTANT (SA)
CONTENTS
1. Member’s guide- overview
2. SAIPA working papers
3. Duties in terms of the CC Act
6. Business Rescue
4. Independent Accounting Professional
5. Independent reviewer
6. Broad Based Black Economic Empowerment
RESOURCES AVAILABLE FROM SAIPA
Working paper file
Independent review
Member’s guide
CLOSE CORPORATIONS ATC 69 of 1984
Members appoint an Accounting
officer
Prepare and present AFS
Duty to report financial
irregularities –trading when
insolvent
Section 59 – Appoint an AO on the date of registration. Vacancy must be filled within 6 months Section 58
Statement of Financial PositionStatement of comprehensive income
Accounting Officers report – ISRS 4400 agreed upon procedure
DUTIES OF THE ACCOUNTING OFFICER
The accounting officer of a corporation shall, not later than six months after completion of the annual financial statements:
Determine whether the annual financial statements are in agreement with the accounting records of the corporation;
Review the appropriateness of the accounting policies presented to the accounting officer as having been applied in the preparation of the annual financial statements;
If during the performance of his duties an accounting officer becomes aware of any
contravention of a provision of this Act
Describe the nature of the contravention in his report.
Non compliance with Laws and Regulations (NOCLAR)
ENGAGEMENT PROCESS
REPORT TO CIPC IF
Has reason to believe, that the corporation is not carrying on business or is not in operation and has no intention of resuming operations in the foreseeable future; or
During the performance of his duties finds-
that any change, in respect of any particulars mentioned in the relevant founding statement has not been registered; or
That the annual financial statements indicate that as at the end of the financial year concerned the corporation's liabilities exceed its assets; or
REPORT TO CIPC IF
That the annual financial statements incorrectly indicate that as at the end of the financial year concerned, the assets of the corporation exceed its liabilities, or has reason to believe that such an incorrect indication is given,
REPORT TO CIPC
DUTIES OF ACCOUNTING OFFICERS
▪ If an accounting officer of a corporation has reported to the Commissioner (CIPC) that the AFS indicate that as at the end of the financial year the corporation's liabilities exceed its assets
▪ and he finds that any subsequent financial statements of the corporation concerned indicate that the situation has changed or has been rectified
▪ and that the assets concerned then exceed the liabilities or that they no longer incorrectly indicate that the assets exceed the liabilities or that he no longer has reason to believe that such an incorrect indication is given, as the case may be,
▪ Must report to the Registrar accordingly.
12
COMPANIES ACT 71 of 2008
Independent Accounting Professional – Compilation
report ISRS 4410
Business Rescue Practitioner – Chapter
6
Independent reviewer –IR report ISRE 2400
1. Is the company a public company or astate-owned company?
2. Is company a private company andcontrols fiduciary assets >R5m?
Yes Audit
No
Application of PIS to PrivateCompanies and CCs
Owner Managed
Greater/= than 350 PIS
Yes
No
Audit
No Audit/No
IR
Non-Owner Managed
Less than 350 PIS and greater/equal to than
100 PIS
Independent Review
Int Ext
Less than 100 PIS
Is entity CCYes
Acc Officer Non CA/CA
CA
Greater/= than 350 PIS
Less than 350 PIS and greater/equal
to than 100 PIS
EXT
INT
OM < 100No Aud/IRDuties of Acc Off
Public Interest Score Non-owner managed
Public Interest Score Financial Reporting Standard Audit Independent
Review
Independent
Accounting
Professional’s
Report
PIS ≥ 350 IFRS / IFRS for SMEs YES NO YES
PIS ≥100 and < 350
and AFS were
internally compiled
IFRS / IFRS for SMEs YES NO YES
PIS ≥ 100 and < 350
and AFS
independently
compiled
IFRS / IFRS for SMEs NO YES YES
PIS < 100 and AFS
independently
compiled
IFRS / IFRS for SMEs NO NO YES
PIS < 100 and AFS
internally compiled
The Financial Reporting Standard
as determined by the company
for as long as no Financial
Reporting Standard is prescribed
NO YES YES
Public Interest ScoreOwner managed
Public Interest Score Financial Reporting Standard Audit Independent
Review
Independent
Accounting
professional’s or
AO’s Report
PIS ≥ 350 IFRS / IFRS for SMEs YES NO YES
PIS ≥100 and < 350
and AFS were
internally compiled
IFRS / IFRS for SMEs YES NO YES
PIS ≥ 100 and < 350
and AFS
independently
compiled
IFRS / IFRS for SMEs NO NO YES
PIS < 100 and AFS
independently
compiled
IFRS / IFRS for SMEs NO NO YES
PIS < 100 and AFS
internally compiled
The Financial Reporting Standard as
determined by the company for as
long as no Financial Reporting
Standard is prescribed
NO NO YES
ANNUAL FINANCIAL STATEMENTS
Statement of Financial Position/ Balance Sheet
Statement of Comprehensive income/Income statement
Statement of changes in Equity
Statement of Cash Flows
REPORTING
Audit report
Independent review report
Accounting Officers Report
Compilation Report
STEPS INVOLVED IN THE INDEPENDENT REVIEW
• Who to accept or retain as a clientClient acceptance or continuance
• Focus the reviewEngagement planning
• Sufficient appropriate evidenceNature of review procedures
• More extensive proceduresWhere plausibility is in doubt
• Letter from managementManagement representations
• Support opinionDocumentation
• Appropriate conclusionReporting results
The core areas to consider in planning are as follows:
Planning Discussions
What’s changed this period? Is there any new business or fraud risks to address?
What does the entity do?Who are the key people?What are the key areas of concern to address?
What have we learned from performing previous engagements?
What is the timing of the review engagement and who will be assigned?
What materiality to use?Identify financial statement users and their needs.
What is our response to areas of risk? Where is more work required, and where can we reduce work?
DOCUMENTING AND EVALUATING RESULTSThe major steps in a review engagement process are summarized in the following exhibit:
Review
Engagement
Report
Assess Plausibility
Design and Performance of Review Engagement Procedures
The Foundation
The Basic Understanding of the Entity
REPORTABLE IRREGULARITIES
Is a practitioner obliged to report an irregularity? – S29(6)(a)
• A practitioner who performs a mandatory review engagement in terms of the Companies Act, 2008 and Companies Regulations, 2011, is obligated to report a reportable irregularity.
For a reportable irregularity to exist the following must be confirmed
• Was the act performed by a person responsible for the management of the entity?
• Can the act be described as an unlawful act or omission?
• Will the act cause or likely cause a material financial loss to the company or to any member, shareholder, creditor or investor of the company?
• Is the act fraudulent or does it amount to theft?
• Will the act cause or has it caused the company to trade under insolvent circumstances?
REPORTABLE IRREGULARITIES
Financial Accountability Report CoR 30.2
Business Rescue Practitioner
Business Rescue Practitioner
A Business Rescue Practitioner (BRP) is a person who has the competencies to facilitate the rehabilitation of a business in financial distress
ACCREDITATION OF BRP
Professional Bodies (PB)
BRP –Recognition by
PB
Recognised members
applies for a licence from
CIPC
CIPC accredits Professional Bodies after meeting the accreditation requirements.
Accredited professional body recognises members as BRP based on its set criteria
Recognised BRP applies for a Licence from CIPC
BRP COMPETENCE REQUIREMENTS
Full member of a recognised
Professional Body
Practical Skills
[Practical experience/ training]
Technical Competence
[Recognised Business Rescue or relevant
qualification]
BRP - PROFESSIONAL PATHWAY
Application for BRP to accredited Professional Body
Application for CIPC BRP license via Professional Body
Upload application of license application to CIPC
Confirm of license application outcome
CPD for BRP
ENGAGEMENT LETTER -CC
SCOPE OF SERVICES
Section 62 of CC Act
List of services
ACCOUNTING RECORDS
Responsibility for accounting records
PREPARATION OF AFS
What will be done by the acc officer on preparation of FS
Employees that will be involved
ETHICS
Electronic communicationsUse of softwareAccess to working papers
BROAD BASED BLACK ECONOMIC EMPOWERMENT
EME
Exempted Micro Enterprise
Need an affidavit
Generic threshold: Less than R10m
QSE
Qualifying Small Enterprise
Generic threshold
Less than R50m
EME automatically a level 4
51% black ownership –Level 2
100% black ownership –Level 1
B-BBEEGeneric Tourism
SectorInformation &communication Technology(ICT)
Marketing Advertising & Communications
EME threshold R10m R5m
QSE Threshold R50m R45m
Ownership targetBlack
25% 25% 30% 45%
Supplier Development
2% of NPAT 3% of NPAT 3% of NPAT
Enterprise Development
1% of NPAT 3% of NPAT 3% of NPAT