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Queries:
Jane O’Connor
Director:
Legal
Telephone:
087 940 8804
Facsimile:
087 940 8873
E-mail:
legal@irba.co.zaauditor, prior payment of the fine is
a condition of re-registration as such,
(the same sanction proposed in the
consent order), and was ordered to
pay costs in the sum of R220,000.
COMPANY SECRETARIAL WORK
The IRBA has received an increasing
number of allegations of improper
conduct relating to unauthorised
changes to the records held by the
Companies and Intellectual Property
Commission (‘CIPC’).
In a typical scenario, a Registered
Auditor (RA) is approached by a
prospective client who is involved in a
family and/or shareholders’ dispute.
The aggrieved client presents the RA
with a very credible story in which
the incumbent auditor is painted as
someone who is not independent and
is seen as colluding with the other
shareholders and/or directors.
The RA is furnished with copies
of signed resolutions and other
documents to support the client’s
case, and in some cases copies of
the share register. The circumstances
seem very compelling and the RA
is persuaded to effect the changes
on the CIPC website. The RA can,
in this manner, become an unwitting
party to unauthorised changes
to CIPC records. Such unwitting
participation will not be condoned by
the Regulators as RAs should always
verify information from a third party.
RAs need to exercise extreme caution
and scepticism when approached
by such clients in circumstances in
which changes to the CIPC records
are requested. The “hijacking” of
companies has become prevalent.
Contact should be made with the
incumbent auditor as a priority to
understand the context and to assess
the
bona fides
of the client. To say
that ‘we trusted the client’, is not
good enough. Changes should not
be effected until the RA is satisfied
of their validity by reference to the
original minutes, share register,
signed resignation letters and original
transfer security deeds.
RAs should also refer to the
requirements of
ISQC1
, especially
regarding the ‘Acceptance of Client
Considerations.’ ISQC1 acts as an
umbrella standard and covers audits,
reviews of financial statements, other
assurance engagements and related
services engagements, and clearly
does not apply only to regulatory
audit work performed.
RAs should furthermore heed
the requirements of the
Code
of Ethics
(‘The Code’) - even
though these services are not
specifically disallowed by the
Code, the fundamental principles
of “professional competence and
due care” and independence
should be considered. Where an
RA who is not the auditor of the
entity is approached to provide
these services, the RA would in all
probability not have access to all the
information required to be able to
perform such work and this should
already be a cause of concern
for the RA. Section 210.12 of the
Code does not in itself disqualify
an RA from performing such work,
but if the client does not allow the
consulting RA to communicate with
the incumbent RA or provide the
necessary information as required,
this can be enough reason not
to perform such services. If the
consulting RA proceeds with the work
without attempting to consult with the
existing auditor, the consulting RA is
in breach of the Code. RAs should
regard any such request as high risk
if the RA is not the appointed auditor
or the appointed secretary of the
client.
An equally disturbing practice
currently taking place
involves that of property
transactions. The
Registrar of Deeds requires, where
the transferee is a company, that a
solvency certificate be submitted with
the other conveyancing documents
by the appointed conveyancer.
Certain conveyancers will accept
such a solvency certificate from an
RA regardless of whether or not the
RA is the auditor. The conveyancer
and the Registrar of Deeds are
satisfied regardless of who is issuing
such a certificate and assume that
the RA would have done the required
investigation. This assumption is not
correct but can be explained as the
conveyancer is not aware of the
professional standards and Code
of Ethics applicable to RAs. An RA
that accepts such an assignment who
is also not the officially - appointed
RA, does not know the status of the
transferee and cannot reasonably
have knowledge of the transferee.
COntinued
LEGAL