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 [...]

Legal Practitioners: Agreed-upon Procedures The legislative landscape for legal practitioners’ trust accounts is continuously changing, and it remains crucial for auditors to remain up to date to ensure full compliance with the requirements. During 2023, the Legal Practitioners Fidelity Fund (LPFF) and SAICA issued several communications regarding the Application for a Refund of Bank Charges and Audit Fees form and the subsequent procedures that auditors need to perform. It is important to understand and apply these requirements correctly. Application for a Refund of Bank Charges and Audit Fees form In terms of section 57(2) of [...]

Navigating the Crucial Phases of Audit Completion As the year is drawing to a close, many audits are being finalised. Completing an audit is a multifaceted process that involves meticulous attention to detail, comprehensive analysis, and rigorous adherence to established protocols. As auditors approach the culmination of their engagements, several key components demand intricate scrutiny and consideration to ensure the accuracy, compliance, and reliability of financial statements. Let's explore these essential elements integral to audit completion procedures. Subsequent events procedures Subsequent events occurring between year-end and the date of the audit report may impact an [...]

Public Interest Entities The final pronouncement on the revisions to the definitions of ‘listed entity’ and ‘public interest entity’ has finally been issued by the IRBA. Therefore, it is time for South African auditors to determine how these local revisions impact their firms, and to adapt, as necessary. The revised requirements are effective for audits of financial statements for periods beginning on or after 15 December 2024, with early adoption permitted. Definition of a PIE Up to now, the definition of a public interest entity (PIE), according to the IRBA Code included: a. Listed entities [...]

Audit Sampling Auditors apply audit sampling in almost every audit engagement. However, very often, auditors do not adequately document their thought processes on how the sample size was determined, and how the sample was selected from the population. Also, deviations and misstatements aren’t always identified, and responded to appropriately. It is important for sampling considerations to be clearly documented to support professional judgment applied, and compliance with the requirements. Reliable information When designing and performing audit procedures, the auditor must start by considering the relevance and reliability of the information to be used as audit [...]