7 / 18
INVESTIGATIONS
INVESTIGATING COMMITTEE
The Investigating Committee met three times during this period and
referred 40 matters to the Disciplinary Advisory Committee with
recommendations.
DISCIPLINARY ADVISORY COMMITTEE
The Disciplinary Advisory Committee met once during this period
and concluded on 12 matters.
Decisions not to charge
Five matters in terms of Disciplinary Rule 3.5.1.1 – the respondent
was not guilty of improper conduct.
One matter in terms of Disciplinary Rule 3.5.1.2 – there is a
reasonable explanation for the respondent’s conduct.
One matter in terms of Disciplinary Rule 3.5.1.4 – there are no
reasonable prospects to succeed with a charge of improper
conduct against the respondent.
Decisions to charge and matters finalised by consent
order
Five matters were finalised by consent order.
Matter 1
The respondent was a trustee in a trust that is a major shareholder
of a company that is audited by the respondent’s firm. The firm
was not aware of the respondent’s trusteeship in the client when
the engagement partner made enquiries concerning risks of
independence at the commencement of the audit. The audit of
the company should not have been undertaken by the firm due
to the independence conflict resulting from the trusteeship of the
respondent.
The respondent was sentenced to a fine of R200 000, no cost
order and publication by the IRBA in general terms. In addition, the
respondent must implement improvements to the firm’s system of
controls regarding independence, and must also arrange and ensure
that he and all audit partners nationwide attend external training
on the independence requirements of the Code of Professional
Conduct within 60 days of the imposition of the sentence, and must
provide the IRBA with evidence of having complied to this.
Matter 2
Mr Edward Dreyer, the respondent, audited two years of financial
statements that contained material errors that subsequently
required restatements. The restatements resulted from errors
relating to debtors, loans to a subsidiary and an investment in an
associate. These errors were not detected in the prior year audits
and, as such, unqualified audit opinions were incorrectly expressed
by the respondent on annual financial statements relating to these
years.
The respondent was sentenced to a fine of R150 000, of which
R75 000 has been suspended for three years on condition that the
respondent is not found guilty of unprofessional conduct relating
to work done during the period of suspension, no cost order and
publication by the IRBA of the respondent’s name, the findings of
the investigation and the sanction imposed.
Matter 3
The respondent was the auditor of a holding company and a
subsidiary where there was a sale of shares to the holding company.
There was a dispute among the parties regarding the accounting
treatment of the sale agreement, of which the respondent was
aware. The respondent failed to ensure that the terms of the sale
agreement were appropriately disclosed by management in the
audited financials.
The respondent was sentenced to a fine of R60 000, of which
R30 000 has been suspended for three years on condition that the
respondent is not found guilty of unprofessional conduct relating
to work done during the period of suspension, no cost order and
publication by the IRBA in general terms.
Matter 4
The matter was a referral from the Inspections Committee. The
respondent breached S90 (2) of the Companies Act by auditing
financial statements that had been prepared by another partner
within the audit firm. In addition, the respondent failed to obtain
sufficient appropriate audit evidence regarding shareholder loans
and revenue recognition during the audit.
The respondent was sentenced to a fine of R150 000, of which
R75 000 has been suspended for three years on condition that the
respondent is not found guilty of unprofessional conduct relating
to work done during the period of suspension, no cost order and
publication by the IRBA in general terms.
Matter 5
The matter was a referral from the Inspections Committee. The
respondent failed to obtain sufficient and appropriate audit evidence
on plant and equipment and inventory.
The respondent was sentenced to a fine of R50 000, of which
R25 000, has been suspended for three years on condition that the
respondent is not found guilty of unprofessional conduct relating
to work done during the period of suspension, no cost order and
publication by the IRBA in general terms.
Decisions to charge and matters referred for a
disciplinary hearing
No matters were referred to the Legal Department for a disciplinary
hearing.
Jillian Bailey
Director Investigations
Telephone: (087) 940-8800
E-mail:
investigations@irba.co.zaIssue 43 | July-September 2018
7