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11
LEGAL c o n t .
Issue 27 July - September 2014
general terms was ordered.
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One matter
related to a re-inspection in terms of section 47
of the Auditing Act, in the third 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, there was inadequate evidence that audit
procedures were performed to enable the auditor to draw
reasonable conclusions on which he based his opinion as
was required by ISA 500. The practitioner was fined
R20 000, of which R10 000 was suspended for three years
on conditions, and publication in general terms was ordered.
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One matter
was a JSE referral, although the company in
question was not listed, but had been acquired by a listed
company. The Practitioner had issued an unmodified
opinion on the fair presentation of the financial position of the
company. The major deficiency in the AFS related to the
disclosure of a non-current loan as current. This distorted
the financial position of the company. Further deficiencies,
of which there were many, related to IFRS for SMEs. The
practitioner was fined R100 000, of which R50 000 was
suspended for three years on conditions, and publication in
general terms.
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One matter
was a JSE referral of a property company –
although the company in question was not listed but had
been acquired by a listed company. There were issues
relating to going concern and non-compliance with IFRS for
SMEs. The Practitioner issued an amended report, which
excluded an emphasis of matter or other matter paragraph
explaining the reason for the amended report. The
disclosure in the going concern paragraph was prepared on
the basis of accounting policies applicable to a going
concern and presumed that the company would have been
able to meet its obligations, but did not indicate how this
would have been accomplished, given that its liabilities
substantively exceeded its assets. There was no evidence
of the methods applied in determining fair value of the
investment property by a suitably qualified independent
valuer. Accordingly there was non-compliance with IFRS for
SMEs. The practitioner was fined R50 000, of which
R25 000 was suspended for three years on conditions, with
a contribution of R5,000 towards costs, and publication in
general terms.
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One
practitioner had two cases against him that were
handled simultaneously. They related to two section 21
companies, where the Practitioner signed and issued a
report containing a qualified opinion, based on errors
contained in the financial statements. He failed to state that
the prior period AFS had not been audited and accordingly
failed to carry out sufficient procedures regarding the
opening balances of the current period. In one of the
companies, he failed to keep adequate work papers and
failed to obtain appropriate audit evidence about elements
of the financial statements. The grounds for qualification
were material and the Practitioner ought to have disclaimed
his opinion. The Practitioner was fined R100 000, with costs
of R5 000, and publication in general terms only. Owing to
the fact that the Practitioner was no longer registered with
the Board, the imposition of the entire sentence was
postponed until such time as hemight re-register.
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One
matter related to incorrect and/or misleading financial
statements. The Practitioner issued an unmodified audit
opinion where he inserted an emphasis of matter paragraph
stating that the going concern assumption depended on
shareholder support. But there were no subordination
agreements in place. He further issued a divisional special
purpose financial statement for the purposes of the
company's regulating body, on which the complainant relied
for the purchase of the company. The factual position was
that the company was insolvent and making losses.
Accordingly, the financial statements of the divisional
company did not present fairly and were misleading. He was
negligent and his conduct resulted in financial loss. He was
fined R75 000, with an order of R5 000 towards cost and
publication in general terms.
?
One
matter related to issues of independence, a conflict of
interest and an inappropriate audit report. The Practitioner
was a trustee of two entities, one of which owned a third
entity where he was appointed the auditor. This constituted
an impairment of independence. In addition, he offered a
loan to one of the trust entities – as well as to his client – to
cover personal financial needs. He was fined R50 000, of
which R45 000 was suspended for three years on
conditions, with no order as to costs and publication in