LEGAL c o n t .
Board, largely on a pro-bono basis. The respondent prepared
the underlying accounting records and the subsequent
annua l f i nanc i a l s t a t emen t s , pu r po r t ed l y i n
accordance with IFRS for SMEs. The respondent also
issued auditors' reports in relation to the annual financial
statements that he had prepared, without carrying out all the
audit procedures required in terms of International
Standards on Auditing. The combination of services
provided to the same client constituted a breach of auditor
independence rules. In addition, the annual financial
statements and auditor's reports contained multiple errors
and departures from IFRS for SMEs. The respondent was
sentenced to a fine of R80 000, of which was R50 000 was
suspended on conditions, and publication in general terms
only.
Decision to charge and matter referred to the Disciplinary
Committee
One
matter was referred to the Disciplinary Committee for a
disciplinary hearing.
On 30 March 2015 the Disciplinary Committee sat to consider
the matter of Ms A-M Grebe (First Respondent) and Mr H du
Preez (Second Respondent) of the firm HDP Audit. The First
Respondent was absent but represented, while the Second
Respondent was both present and represented. The
Respondents jointly faced three charges, in addition to which
the First Respondent separately faced four charges, and the
Second Respondent separately faced one charge. The
Respondents pleaded guilty to all of the charges levelled
against them.
The plea and sanction appear from the summary below.
The First Respondent was an employee and subsequently a
co-member of a close corporation ("the CC") owned by the
managing director of Avante Fishing Enterprises (Pty) Ltd
("Avante"), a major squid exporter. The First Respondent's
practice was operated through the CC, and was located at the
premises of Avante, from which she received a salary and
Disciplinary Committee
BRIEF BACKGROUND
substantial loans.
The First Respondent was subsequently appointed as the
auditor of Avante, together with the Second Respondent (who
had no prior relationship with Avante), on the understanding
that the First Respondent would factually perform all audit
work on Avante, and the Second Respondent would only sign
off formally on such audit work.
Charges One and Two
The Respondents issued an unqualified audit in respect of
Avante, but proper application of the International Standards
on Auditing ("ISA") and the International Financial Reporting
Standards ("IFRS") would show that the financial statements
were materially misstated to such an extent that the audit
should not have been unqualified. The Respondents thus
failed to demonstrate a reasonable degree of professional
competence and care.
The Respondents were guilty of contravening Old Disciplinary
Rules 2.1.1, 2.1.5 and 2.1.20.
Charge Three
The Respondents failed to report several reportable
irregularities in Avante's financial affairs at any time during or
after the audit, including illegal loans and misappropriation of
funds owed toAvante's suppliers. Moreover, the Respondents
issued letters stating thatAvante was solvent when it was not –
and they acted with reckless disregard for the falsity of their
statements.
The Respondents were guilty of contravening Old Disciplinary
Rules 2.1.1, 2.1.2, 2.1.4, 2.1.5 and 2.1.20.
Charge Four
The First Respondent functioned as Avante's auditor, and had
the Second Respondent "front" for her as the formal auditor,
while she knew that her various relationships with Avante and
its directors disqualified her fromappointment as its auditor.
JOINTCHARGES
SEPARATE CHARGES AGAINST THE FIRST
RESPONDENT
9
Issue 29 March - April 2015
