Common Issues Identified On Audit Files Of Body Corporates

Body corporates: To audit or not to audit?

Just a few years ago new requirements came into effect that have changed the landscape for auditors of smaller body corporates and have caused many headaches and sleepless nights. Management Rule 26(4) requires that ALL body corporates must be audited, except if all sections / units are registered in the name of one person. In addition to this, Rule 26(5)(a) requires that the audit of a body corporate’s annual financial statements must be carried out by an independent auditor who has not participated in the preparation of the annual financial statements or advised on any aspect of the accounts of the body corporate during the period being reported. These requirements came into effect together with the new Sectional Titles Schemes Management Regulations, 2016.

Common issues identified

At LEAF we are constantly performing file reviews of various audits, including Body Corporates. The most common issue that we have identified is that auditors sometimes struggle to document their consideration of all relevant ISA requirements within their limited time allowed and small budgets. The most common issues identified are detailed below:


  • Engagement letters not addressing NOCLAR
  • Engagement letters not tailored to body corporate specific legislation and environment
  • No consideration of accounting framework
  • Consideration of ethical requirements: threat created by non-assurance services provided not addressed

Independence considerations

  • Auditor passed all adjusting journals
  • Time / other records indicate that financial statements are prepared by auditor


  • Kick off meeting not covering all requirements
  • Materiality inadequately justified
  • Analytical reviews not performed in enough detail
  • Control design & implementation testing inadequate
  • Fraud risk not properly considered
  • Money laundering not considered
  • Risk assessment not appropriately justified, especially rebuttal of presumed significant fraud risks.


  • No / inadequate details recorded for compliance testing (STSM Act, Regulations and Rules in terms thereof, CSOS Act, CSOS Regulations)
  • Classification testing for Cash & cash equivalents: Reserve fund, Administrative fund accounts
  • Inadequate verification of movements in Reserve fund
  • Auditor calculated tax liability on behalf of client
  • Sampling method not specified, sample size not justified
  • Related parties testing inadequate / not documented

Concluding and reporting

  • Support for opinion expressed not recorded / inadequate
  • Non-compliance not considered in terms of NOCLAR and Reportable irregularity requirements
  • Subsequent events working paper date vs. audit report date
  • Going concern consideration inadequate: consideration of management’s assessment / period covered
  • Management representation letter not tailored for body corporates

Guidance and recommendation

Consider the following for your body corporate audit:

  • Independence considerations: The auditor may not compile the financial statements, but the compiler and auditor can be two qualifying professionals from the same firm.
  • Rotation requirements: There are no audit partner rotation requirements in the STSMA, but the IRBA Code Sections 290.148 – 290.171 and 290.25 – 290.26 applies.
  • Significant risks: The presumed significant fraud risk on revenue recognition can be rebutted because of the simplicity of levy income. The significant risk rather lies with repairs and maintenance transactions with related parties.
  • Service organisations: Reliance on the managing agent’s systems must be considered as reliance on a service organisation, but this can reduce detailed testing if considered and tested properly.
  • Compliance testing: The auditor should compile a separate legal compliance working paper, including detail of the requirements and proper testing thereof. Don’t forget to consider whether levy increases fall within the allowed 10%, and whether the 10 years repairs & maintenance plan is in place and sufficiently budgeted for.


Be proactive by tailoring your audit methodology for body corporates to be as efficient yet compliant as possible. The issues identified in this article provide a starting point, but there are many more considerations involved. LEAF  has developed a body corporate audit methodology and templates that can be used on its own or together with your current methodology. Save yourself the headache of developing your own methodology by asking LEAF  for assistance.



  • Sectional Titles Schemes Management Act, 2011
  • Sectional Titles Schemes Management Regulations, 2016
  • Community Schemes Ombud Service Act, 2011
  • Community Schemes Ombud Service Regulations, 2016

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If you need advice, guidance, assistance or training, our experienced specialists at LEAF are ready to help your firm to push above and beyond the norm.

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