Bending the Rules Auditors often find themselves in a delicate situation where an audit client wants a certain outcome, while the rules do not allow it. The correct treatment is usually not popular, and auditors then often try to find a way around it, on the instruction of their client. When confronted with such situations, auditors should ask themselves whether they can still comfortably say that they are acting in the public interest, or whether their objectivity may be called into question in the circumstances. There is a fine line between right and wrong, and this [...]

Changes in SAICA Training Regulations SAICA recently issued their updated SAICA 2025 Training Regulations, effective from 1 January 2025. Training officers must ensure that the current version of the training regulations is communicated to all role-players in the training programme, so that it may be applied, in relation to their responsibilities. An overview of the most significant changes from the previous version of the training regulations is provided below. Definitions The following amendments were made to the definitions: ‘Academic remission’ has been added to the definitions. All references to ‘accredited’ academic qualifications have been changed [...]

Audit Implications of IFRS 18 In the constantly evolving field of financial reporting, auditors must stay abreast of significant changes in accounting standards to ensure accurate and compliant financial statements. One such important standard is IFRS 18, which governs the presentation and disclosure requirements in financial statements. This standard introduces several modifications that have practical audit implications, and auditors must carefully navigate these changes to provide assurance on compliance. Key Changes Under IFRS 18 IFRS 18 becomes effective from 1 January 2027, which may seem far into the future. Auditors and their clients need to [...]

IRBA EAR Rule The IRBA Rule on Enhanced Auditor Reporting for the audit of financial statements of public interest entities (EAR Rule) was published in the Government Gazette on 15 September 2023. This rule will finally become effective from 15 December 2024, and auditors must ensure that they are fully prepared to implement its requirements. The EAR Rule For audits of annual financial statements of public interest entities (PIEs), the audit firm must disclose the following in the independent auditor’s report: a) The final materiality amount determined by the auditor for the financial statements, as [...]

Providing Accounting Services to Audit Clients Many audit firms provide financial statement preparation services to voluntary audit clients through accounting staff and engagement partners that do not form part of the audit engagement team. However, practical problems arise when these audits are required by the Companies Act and, therefore, fall within the ambit of the enhanced independence requirements of this Act. Companies Act requirements To be appointed as an auditor of a company, in terms of Section 90(2)(b) of the Companies Act, a person or firm should not be: (i) A director or prescribed officer [...]

Providing Accounting Services to Audit Clients Many audit firms provide financial statement preparation services to voluntary audit clients through accounting staff and engagement partners that do not form part of the audit engagement team. However, practical problems arise when these audits are required by the Companies Act and, therefore, fall within the ambit of the enhanced independence requirements of this Act. Companies Act requirements To be appointed as an auditor of a company, in terms of Section 90(2)(b) of the Companies Act, a person or firm should not be: (i) A director or prescribed officer [...]

The Motivations and Intentions of Management When performing an audit, it is important to determine the motivations and intentions of management, as this will greatly assist with identifying potential fraud risks and ensuring the integrity of financial reporting. This can only be determined through a thorough understanding of the entity, and its management and compensation structures, business model, controls and related business plans. Once determined, appropriate audit procedures shall be designed to respond to the fraud risks. Key audit areas to consider The intentions of management should be evaluated by applying professional scepticism and appropriate [...]

The Impact of Ethics on Acceptance and Continuance Decisions When looking at the topics addressed in investigation matters referred to the IRBA Enforcement Committee and matters referred to the IRBA Legal Department for disciplinary hearings, there is a concerning trend: in many cases, auditors and audit firms do not pay heed to the relevant ethical requirements and their impact on acceptance and continuance decisions. Clients that are not public interest entities It is often the case that auditors and audit firms provide various non-assurance services to clients prior to acting as their auditor, such as [...]

Property Practitioners: Payment Processing Agents Many property practitioners make use of payment processing agents. Payment processing agents meet the definition of a service organisation, and should be evaluated by the auditor, in terms of the requirements of ISA 402. However, in many instances, auditors omit to document how they considered these requirements for payment processing agents used by property practitioners. This article explains the key requirements of ISA 402, and how it applies to the payment processing agents. ISA 402 requirements The key requirements of ISA 402 may be summarised as follows: If the entity [...]

Proposed Changes to Fraud Standard The IAASB published an exposure draft in February 2024, which proposes a significant strengthening of ISA 240, The auditor’s responsibilities relating to fraud in an audit of financial statements (ED-240). The proposed changes should be considered thoroughly, and comments submitted to the IRBA by 10 May 2024, or to the IAASB by 5 June 2024, as the proposed revised standard will affect all auditors. Work effort required, if fraud or suspected fraud is identified The IAASB is proposing the following revisions in ED-240 to enhance clarity around the auditor’s response [...]