LEGAL
QUARTERLY REPORT FROM THE DIRECTOR: LEGAL
FORTHEPERIOD 1 JULY2015-30 SEPTEMBER 2015
The Investigating Committee met once (6August 2015) during
this period and referred
nine
matters to the Disciplinary
Advisory Committee with recommendations.
The Disciplinary Advisory Committee met twice (16 July 2015
and 3 September 2015) during this period and disposed of 23
matters, as follows:
Decisions not to charge
Nine
matters were finalised with decisions not to charge, and
these were disposed of as follows:
?
Two
matters in terms of Disciplinary Rule 3.5.1.1 (the
respondent is not guilty of unprofessional conduct, which
includes the situation where the conduct in question might
be proved but even if proved does not constitute
unprofessional conduct);
?
One
matter in terms of Disciplinary Rule 3.5.1.2 (the
respondent having given a reasonable explanation for the
conduct);
?
Two
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); and
?
Four
matters 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).
Decisions to charge and finalised by consent order
A total of
10
matters were finalised with fines by consent order,
and
two
consisted of
two
respondents each, while
one
consisted of
seven
respondents. So, those 10 matters dealt
with
18
practitioners in all.
Of those 10 matters,
four
were referred from the Inspections
Department and their particulars are as follows:
INVESTIGATINGCOMMITTEE
DISCIPLINARYADVISORYCOMMITTEE
?
One
matter involved a first inspection in the Fifth Cycle of
inspections. In the first finding, it was found that with the
audit of a client's annual financial statements, the
respondent's documentation regarding going concern
provided inconsistencies with the respondent's auditor's
report. In the second finding, the respondent's auditor's
report contained discrepancies pertaining to inventories,
and in particular between the basis for qualified opinion
paragraph and the opinion paragraph. The respondent was
fined R25,000, of which R12,500 was suspended on
conditions, with 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 a client, notwithstanding that
those annual financial statements were prepared in
accordance with SA GAAP for SMEs. This was no longer a
suitable financial reporting framework for companies at the
time. The respondent was fined R20,000, of which R10,000
was suspended on conditions, with publication in general
terms only.
?
In
one
matter, which consisted of
two
respondents, it was
noted in an inspection in 2010 that a network firm had a
direct financial interest by means of shareholding of its
partners and related parties in an audit client of another
network firm. The audit client was a JSE-listed company.
The firm was in contravention of the independence
requirements in the IRBACode of Professional Conduct and
the audit engagement partner was also in contravention of
other auditing standards pertaining to the issue of
independence. The matter had been referred to the Ethics
Committee after which the audit firm was notified to either
resign from the audit engagement or have the other network
firm's partners sell their shares in the client. It was later
revealed that another network firm also held shares via its
partners and related parties in the same client. One director
of the client, who was also the chairman of its Audit & Risk
Committee, was a partner in the one network firm. Though
he resigned as a partner from the network firm, he was
retained as a consultant.
Despite being instructed by the IRBA, the firms chose to
delay their ultimate resolution to solve this issue of
independence.
o The first respondent was the network firm’s national CEO,
who was sentenced to a fine of R100,000 with no
suspension.
o The second respondent was the audit engagement
9
Issue 31 July - September 2015
