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LEGAL
Issue 27 July - September 2014
REPORT FROM THE DIRECTOR: LEGAL FOR THE
PERIOD 1APRIL 2014 TO30 SEPTEMBER 2014
accordingly his unmodified report was inappropriate. The
Practitioner was fined R40 000, of which R20 000 was
suspended for three years on conditions; and publication
was ordered in general terms only.
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Two matters
related to the same bridging finance company.
One Practitioner (the auditor of the company) failed to
perform adequate audit procedures to understand the entity
and its environment and as a result, the financial position
and performance of the company were not presented fairly.
He further failed to comply with provisions of the Companies
Act as well as IFRS. In particular, he failed to disclose a
Reportable Irregularity. The other Practitioner failed in his
fiduciary duties as non-executive Director of the company.
Furthermore, he allowed staff subordinate to him to be
employed by the auditor of the entity to perform the audit,
raising issues of independence. One Practitioner was fined
R50 000 of which R25 000 was suspended for three years
on conditions, R5 000 costs and publication in general
terms. The other Practitioner was fined R80 000 of which
R40 000 was suspended for three years on conditions, with
R5 000 costs and publication in general terms only.
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One matter
related to an “assisted holding out” where the
Practitioner facilitated a person who was not a registered
auditor to hold himself out as a registered auditor. Audit and
non-audit services were offered utilising the facilities of the
registered auditor. The Practitioner was fined R100 000, of
which R25 000 was suspended for three years on
conditions, with an order of R5 000 toward costs and
publication in general terms.
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One matter
related to an inspection where the IRBA
conducted two inspections in terms of section 47 of the
Auditing Act, in the fourth cycle. It was found that the
auditor's documentation did not provide a sufficient and
appropriate record for the basis for the auditor's report;
neither was there evidence that the audit was conducted in
accordance ISA 230 (audit documentation). As a
consequence, given the substantive transgressions, there
was inadequate evidence that audit procedures were
performed to enable the auditor to draw rational conclusions
on which he based his opinion as was required by ISA 500.
The practitioner was fined R100 000, of which R50 000 was
suspended for three years on conditions, and publication in
InvestigatingCommittee
The Investigating Committee met three times during this
period (13 May 2014, 27 June 2014 and 8 August 2014) and
referred 40 individual matters to the Disciplinary Advisory
Committee with recommendations.
DisciplinaryAdvisory Committee
The Disciplinary Advisory Committee met four times during
this period (11 April, 10 June, 14 July and 1 September 2014)
and disposed of 38matters, as follows.
Decisions not to charge
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Two
matters in terms of Disciplinary Rule 3.5.1.1 (the
respondent is not guilty of unprofessional conduct; this
includes the situation where the conduct in question might
be proved but even if proved, does not constitute
unprofessional conduct).
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Three
matters in terms of Disciplinary Rule 3.5.1.2 (the
respondent having given a reasonable explanation for the
conduct).
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Six
matters in terms of Disciplinary Rule 3.5.1.4 (being that
there are no reasonable prospects of succeeding with a
charge of improper conduct against the respondent).
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One
matter in terms of Disciplinary Rule 3.5.1.5 (being that
in all the circumstances, it is not appropriate to charge the
respondent with unprofessional conduct).
Decision to charge andmatter finalised by consent order
Eleven
matters were finalised with fines. One matter
concerned two Practitioners.
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One matter
related to an entity dependent on the National
Lotteries for annual grants. The audit report contained
various deficiencies relating to accounting policies as well
as various contraventions in respect of the provisions of the
CompaniesAct. The practitioner failed to disclose a material
going concern uncertainty despite the entity being insolvent.
The audit report therefore did not comply with ISA 570 and