Prohibition of the Company Secretary from being
Appointed as the Company Auditor and/or for the
Auditor to Perform Prohibited Related Secretarial Work
The IRBA Inspections Department continues to identify auditors
(including individual auditors, audit firms and network firms) who
are also the appointed Company Secretary for companies that they
audit. In many instances, though, the company is not required by
the Companies Act, Act 71 of 2008 (Companies Act), to appoint a
Company Secretary. Auditors are reminded that Section 90(2)(b)(iii)
of the Companies Act prohibits the Company Secretary from being
appointed as the company’s auditor, making it illegal for the auditor
to accept such an appointment.
Therefore, auditors are strongly advised to scrutinise their company
client base, and immediately address any independence and
legal breach by either formally lodging their resignation notice as
Company Secretary with the Companies and Intellectual Property
Commission (CIPC), or resigning from the audit without delay.
Company auditors are also reminded to refrain from providing
prohibited related secretarial work to their audit clients (even if they
have not been appointed as the Company Secretary) in terms of
Where allowable secretarial work of an administrative nature is
provided to clients, auditors are further reminded to consider threats
to their independence in terms of the IRBA Code of Professional
Conduct for Registered Auditors.
Auditors are also required to comply with all the provisions of
Section 90(2) of the Companies Act and the
on the provision of non-audit services by the auditor of a company
which is available atwww.irba.co.za .
Any transgression of these requirements that is detected during
inspections will be seen in a very serious light and result in a referral
for investigation, with substantial sanctions likely to be imposed.
INFORMATION SESSION ON “HOW A LACK OF
DOCUMENTED EVIDENCE CAN TRIP YOU UP”
The Inspections Department hosted the abovementioned
information session on 21 June 2018. The session was attended
by 475 individuals and it covered areas such as the IRBA’s 2017
Public Inspections Report outcomes, expected changes to the
IRBA’s Seventh Cycle Strategy and Process, key standards, as well
as a number of common inspection themes related to a lack of
documented evidence on an audit file.
The majority of inspection findings can be linked to a lack of
documented audit evidence on an audit file. The IRBA Inspectors
cannot accept verbal representations as audit evidence if it was not
documented as such on the archived audit file at the time when the
opinion was formed.
The session also emphasised an increased focus by the IRBA on
firm leadership who are ultimately responsible to drive consistent
sustainable high audit quality within their firms as part of an effective
quality control system.
Some of the inspection findings relating to documented evidence
can easily be fixed as they are mostly basic in nature and not
complex at all. Therefore, auditors are encouraged to ensure that
sufficient attention is given to documented evidence when reviewing
their files and applying appropriate levels of professional scepticism.
In doing so, they will ensure that an appropriate audit opinion that
is supported by sufficient appropriate audit evidence on the audit
file is issued.
The presentation can be accessed onwww.irba.co.za
Guidance for RAs/Inspections.
IRBA INSPECTIONS REPORT SHOWS RECURRING
THEMES THAT REQUIRE IMPROVEMENT
In May the IRBA released its 2017 Public Inspections Report,
which reflects on key inspection findings and themes recorded
during the year. The report is aimed at registered auditors, including
those responsible for quality control within the firms, and other
stakeholders, such as audit committees, investors, company
directors and financial accountants, who are collectively responsible
for the integrity of reported financial information.
The objective of the report is to promote improvement in audit
quality at a broader level by providing a thematic analysis of key
inspection themes arising from firm and assurance engagement
(audit) inspections performed by the IRBA.
During the year, 23 (2016: 20) firm inspections and 197 (2016: 237)
file inspections were performed and reported on to the Inspections
Committee, with the majority showing one or more significant
deficiencies that require improvement. The Inspections Department
follows a risk-based approach, selecting audits with a higher public
interest exposure, such as audits of public interest entities (PIE),
listed entities and state-owned companies. It also selects any
statutory audits where risks could potentially expose the public and
The nature and extent of the findings reported do not significantly
differ from what was reported in the prior two years, and this
highlights a pressing need for audit firms to analyse, remediate and
monitor reported deficiencies more effectively.
Inspections is a crucial regulatory function that gives effect to
the IRBA’s mandate and strategy to protect the public interest
by influencing auditors in pursuing consistent, sustainable high-
quality audits that adhere to the highest standards. Further to this,
all relevant stakeholders are encouraged to read the report and to
focus on the principles behind the findings to help identify areas
where the integrity of financial information and the quality of audits
Issue 42 | April - June 2018