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Issue 30 April - June 2015
LEGAL
QUARTERLY REPORT FROM THE DIRECTOR: LEGAL
FORTHEPERIOD 1APRIL 2015 TO30 JUNE 2015
The Investigating Committee met twice during this period and
referred 19 individual matters to the Disciplinary Advisory
Committee with recommendations.
Due to the new Board being appointed, the Disciplinary
Advisory Committee missed the April meeting and only met
once during this period (10 June 2015) and disposed of 22
matters, as follows:
Decisions not to charge
?
Three
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);
?
Three
matters in terms of Disciplinary Rule 3.5.1.2 (the
respondent having given a reasonable explanation for the
conduct);
?
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);
?
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 improper conduct).
Decision to charge andmatter finalised by consent order
Three
matters were finalised with fines. All of these matters
were referred from the Inspections Department and their
particulars are as follows:
?
One
matter involved a re-inspection in the third cycle of
inspections, with the respondent not having passed the first
inspection. It was found that the auditor's documentation
did not provide an adequate record of the basis for the
respondent's auditor's report, neither did it provide adequate
evidence that the audit was conducted in accordance with
INVESTIGATINGCOMMITTEE
DISCIPLINARYADVISORYCOMMITTEE
International Standards on Auditing and/or applicable legal
and regulatory requirements, as required by ISA 230. As a
consequence, there was inadequate evidence that audit
procedures were designed and performed to enable the
auditor to draw reasonable conclusions on which to base the
respondent's auditor's opinion, as required by ISA 500. The
significant audit areas, for which the documentation and/or
audit evidence was found to be deficient, included:
o Independence and ethical considerations;
o Audit materiality;
o Fraud risk assessment;
o Related parties;
o Journal entries;
o Property, plant and equipment;
o Inventories;
o Revenue (including revenue recognition);
o Basis of preparation of the annual financial statements;
and
o Going concern.
The respondent was sentenced to a fine of R25,000 of which
R12,500 was suspended on conditions, and publication in
general terms only.
?
In one
matter the inspection revealed that the respondent
had issued an unqualified audit opinion in relation to the
annual financial statements of his client, notwithstanding
that those annual financial statements departed from the
IFRS for SMEs (which was the financial reporting framework
applied in preparing the said annual financial statements):
property plant and equipment was carried in the balance
sheet at a revalued amount, while IFRS for SMEs requires
this asset class to be carried at cost less accumulated
depreciation and impairment losses. The respondent was
sentenced to a fine of R50,000 of which R25,000 was
suspended on conditions, and publication in general terms
only.
?
In one
matter the inspection revealed that the respondent
had issued an unqualified audit opinion in relation to the
annual financial statements of his client, notwithstanding
that those annual financial statements were prepared in
accordance with SA GAAP for SMEs. This was no longer a
valid financial reporting framework for companies at the
time. The respondent was sentenced to a fine of R50,000 of
which R25,000 was suspended on conditions, and
