1 / 64

PARLIAMENT NCOP HEARING

DRAFT AUDITING PROFESSION BILL. PARLIAMENT NCOP HEARING. National Treasury: Republic of South Africa 15 November 2005. Contents. Background History of the Profession Role of auditors Overview of the Bill Conclusion. Background (1). PAAA enacted in 1951

gyan
Download Presentation

PARLIAMENT NCOP HEARING

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. DRAFT AUDITING PROFESSION BILL PARLIAMENTNCOP HEARING National Treasury: Republic of South Africa 15 November 2005 1

  2. Contents • Background • History of the Profession • Role of auditors • Overview of the Bill • Conclusion 2

  3. Background (1) • PAAA enacted in 1951 • Protecting public interest main object of that Act • Minister handed the regulation to the profession – de facto self regulation • Amended 40 years since, in 1991 • Discussions on improving it since early nineties 3

  4. Background (2) • Corporate Failures • Independence of the Regulatory Board • Government funding – Independence • Complexities in corporates • Companies Act 4

  5. History (1) • Great depression impact on the profession • Oil price crisis in early seventies • US authorities question – self regulation practices • Increase competition, increase of non-audit services • Audit overtaken by non-audit services in contributing to revenues of firms • Authorities warn of impact to independence of auditors 5

  6. History (2) • Firms compete on prices for audit work and solicitation of clients intensifies • Low-balling develops into practice • Firms consolidate from “big 8” to “big 4” • Emergence of globalisation • Standards of accounting & auditing harmonised • Culture & character of profession changes 6

  7. Role of Auditors • Expression of opinion – on AFS • Provides users with assurance that AFS fairly present financial health of entities • Shareholders including pension funds • Workers in client companies • Creditors and other investors • Governments 7

  8. Focus of this Bill • Enhance integrity of the profession • Protection of the Public interest • Enhance independence & effectiveness of the regulator • Enhance independence of auditors • Ensure the RB is accountable • Hold auditors accountable • Ensure equitable access to profession 8

  9. Overview of the DABP 9

  10. DABP Overview • Interpretation & Object of the Bill (clauses 1 – 2) • Independent Regulatory Board for Auditors (clauses 3 – 31) • Accreditation and Registration (clauses 32 – 40) • Conduct and Liability of RA (clauses 41 – 46) • Accountability of RA (clauses 47 – 51) • Offences (clauses 52 – 54) • General Matters (clauses 55 – 60) 10

  11. Objects of the Act • Protection of public interest • Provide for establishment of Independent Regulatory Board • Prescribe ethical & auditing standards • Provide for competency requirements • Provide for procedures for disciplinary action in respect of proper conduct 11

  12. INDEPENDENT REGULATORY BOARD 12

  13. Independent Regulatory Board • Establishment and status (clause 3) • Functions (clauses 4 – 8) • Powers (clauses 9 – 10) • Governance (clauses 11 – 19) • Committees (20 – 24) • Funding and financial management (25 – 27) • National government oversight and executive authority (28 – 31) 13

  14. Establishment and Status • Juristic person • Exercise functions ito of this Act • PFMA • Constitution • Other laws 14

  15. Functions • General functions • Accreditation of professional bodies • Registration of auditors • Charging of fees • Education, Training and Professional Development 15

  16. General Functions • Promote the integrity of the profession • Investigate improper conduct & conduct disciplinary hearing • Impose sanctions for transgressions/ improper conduct • Protect public interest • Prescribe standards for qualifications, competence, ethics and conduct of auditors • Encourage education icw, & research into matters affecting the profession • Participate in international professional activities 16

  17. Accreditation of professional bodies • Prescribe minimum requirements for accreditation • Consider & decide on applications • Prescribe period for the validity of accreditation • Keep register of accredited professional bodies • Terminate accreditation of professional bodies 17

  18. Registration of auditors • Prescribe minimum requirements for registration • Consider & decide on applications • Prescribe period for the validity of registration • Keep register of registered auditors • Terminate registration of auditors 18

  19. Education, Training & Development (1) • Conditionally or unconditionally recognise educational institution iro educational qualifications & programs • Recognise or withdraw recognition for professional body iro FQE per section 38 • Prescribe requirements & conditions for continued education, training & professional development • Prescribe period for training and form of training contracts 19

  20. Education, Training & Development (2) • Recognise or withdraw recognition for firms as training officers • Reciprocal international professional recognition • Advise or consult relevant bodies wrt education, training & development of RAs • Approve & register training contracts • May establish an education fund 20

  21. Fees • Prescribe: • Accreditation & registration fees • Annual fees or part thereof • Examination fees ito section 38 • Fees iro education fund • Inspection or practice review fees ito clause 47 • Fees for services rendered • Due dates for all the fees 21

  22. Powers • IRBA may • Determine staff & related issues • Determine reimbursable fees for the board • Collect fees & invest funds • Borrow money ito PFMA • Grant bursaries or loans • IRBA may prescribe rules regarding • Any matter as per this Act • Any matter allowing it to function effectively 22

  23. Governance • Appointment of the Regulatory Board • Term of office • Who does not qualify? • Chairperson and Deputy Chairperson • Meetings • Decisions • Duties of members • CEO • Delegations 23

  24. Appointment of IRBA • Appoint not more than 10 non-executive members • Must be suitable qualified & experienced • Transparency & representativity • RA should not be more than 40% but must have RA • Appoint alternate members 24

  25. Term of board membership • Not more than two years • Reappoint may not exceed two consecutive terms • Minister may override – but may only do so twice • Minister may terminate period of office early • Appoint interim board in the event 25

  26. Who does not qualify? • Any person who is: • A Non RSA citizen and non residents; • An Unrehabilitated insolvent; • Convicted of offence; • Removed from office of trust due to improper conduct; • Guilty of improper conduct ito this Act 26

  27. Membership ceases when: • A person: • is disqualified ito the Act; • resigns; • Is of an unsound mind or mentally disordered; • Is absent for more than two consecutive mtgs; • Ceases to be permanently resident 27

  28. Chairperson & Deputy • IRBA must appoint a chairperson • Hold office for two years from date of appointment • Deputy assumes all powers of the chairperson in his/her absence • Board members may elect an acting chair 28

  29. Meetings • At least twice a year • Chairperson may convene a special meeting • At least three board members may request a special meeting in writing • All board members have one vote • Chairperson has a casting vote 29

  30. Duties of Members • Provide effective, transparent, accountable and coherent corporate governance • Provide effective oversight • Comply with all applicable legislation • Communicate openly and promptly with the Minister • Deal with Minister in good faith • Act in accordance with the code of conduct for board members 30

  31. Delegations • IRBA may delegate its powers other than prescribing rules • Assign any employee to perform any of its duties • Delegation is subject to limitations by the IRBA • May authorise sub-delegation • Delegation does not divest board of responsibility • IRBA may confirm, vary or revoke decision taken by committee, CEO or member 31

  32. Committees • IRBA must appoint the ff permanent committees: • Ethics committee; • Standard setting committee; • Education, training and professional development committee; • Investigating committee; and • Disciplinary committee • IRBA must consider transparency & representativity 32

  33. Ethics committee • Ethics committee shall be composed of; • Three registered auditors; • Three persons representing users of audit services; • One person representing a stock exchange; and • One advocate or an attorney with at least ten years experience • Must assist IRBA in determining improper conduct • Advise RAs on matters of professional ethics 33

  34. Standard setting committee • This committee shall be composed of; • Five registered auditors; • One person with experience of business; • The Auditor-General or his/her nominee; • The CEO of FSB or his/her nominee; • An experienced university lecturer in auditing; • A stock exchange nominee; • The commissioner of SARS or his/her nominee; and • The registrar of banks • Develop, maintain, adopt, issue or prescribe auditing pronouncements 34

  35. Disciplinary committees • A disciplinary committee must: • Be chaired by a judge or senior advocate; • Consist of the a majority of non-RAs; • Consist of other suitably qualified persons not associated with auditing profession 35

  36. Funding & Financial Management • Funding • Collection of prescribed fees; • Other monies that may accrue to the Board; and • Annual appropriations. • Annual Budgets and strategic plan ito PFMA • Financial management must be in accordance with PFMA 36

  37. National government oversight and executive authority • Powers of the Minister • Ministerial representatives • Investigations and directives • Information 37

  38. Powers of the Minister • Executive authority • Ensure the IRBA complies with the PFMA and other legislation • Ensure IRBA is managed responsibly and transparently • Establish clear channels of communication • Monitor and review performance 38

  39. Ministerial rep • Official from National Treasury • Act as a participating observer • May call or convene a meeting • Must represent the Minister faithfully • Act in accordance with Minister’s instruction 39

  40. Investigations and directives • Minister may instruct the Board to undertake specific functions • Instruct the Board to stop or desist from acting against the interest of the auditing profession • May investigate the affairs of the Board at any time 40

  41. Accreditation & Registration • Accreditation of professional bodies (clause 32 – 36) • Registration of individual auditors and firms (clauses 37 – 40) 41

  42. Requirements for Accreditation • Compliance with prescribed requirements of professional development • Ensure continued professional development for members • Disciplinary framework • Financially & operationally viable • Transparency and representivity 42

  43. Termination of Accreditation • Accreditation lapses automatically if: • PB ceases to exist • Fails to pay prescribed fees • IRBA must cancel Accreditation: • On non-compliance with requirements or • Suspend accreditation to protect public interest or auditing profession 43

  44. Effect of termination of ACC • Termination does not affect registration of RAs • RAs must satisfy the Board of suitability to continue registration 44

  45. Registration of Auditors • Must comply with prescribed education, training and competency requirements for a RA; • Serve under a registered training contract for the prescribed period; • Pass prescribed final qualifying examinations; • Have access to continued professional development; • Fit to practice the profession; and • Has the necessary competence to practice. 45

  46. Registration of Auditors • Board may not register an individual: • Was removed from an office of trust due misconduct; • Was convicted of fraud, theft, forgery or an offence ito PRECCA; • Is of unsound mind; and • Disqualified under this Act. 46

  47. Termination of Registration • Board must cancel registration: • Disqualification subsequent to registration; • If registration was made in error; and • Individual is guilty of improper conduct. • Board may cancel registration: • Sequestration or compromise with creditors • Fails to satisfy CPD requirements after ceasing to be a member of a professional body. 47

  48. Registration of Firms • Only firms that may be registered are: - • Partnerships where all partners are themselves registered auditors • Sole proprietor owned by an RA; • Companies if; • Registered ito of Companies Act; and • Only RA are shareholders; 48

  49. Conduct and liability of registered auditors • Practice (clause 41) • Compliance with rules (clause 42) • Information to be furnished (clause 43) • Duties in relation to audit (clause 44) • Duty to report irregularities (clause 45) • Limitation to liability (clause 46) 49

  50. Practice • Only registered auditors may practice or call themselves auditors; • A person not registered as RA may not; • Perform audit services; • Pretend to be, or in any manner hold out as an auditor; • Use any name per subsection (1) or any misleading name; • Make people believe he/she is an audtitor. 50

More Related