LEGAL c o n t .
detects need to be flagged as reportable irregularities and
reported to the IRBA.
We have been informed of the prosecution of an individual in
the Bellville Specialised Commercial Crimes Court in Cape
Town for allegedly illegally practising as an auditor. This
person had been registered as an RA but the registration had
lapsed. The State alleges that the individual signed
documents as if still a registered auditor and quoted an IRBA
registration number. It is also alleged that the individual
described themselves as an auditor and chartered
accountant, providing auditing services for a reward. We draw
the attention of RAs to the fact that continuing to practise while
your registration has lapsed will most likely result in a referral
for prosecution for contravening Section 41 of theAPA.
We are currently investigating a matter where the defence
raised by one respondent is that he is not in fact a partner or
director of the firm (which is an Inc), notwithstanding that both
the soft and hard firm stationery reflect him as such. It is for
precisely this reason that the IRBA published a
Guide for
Registered Auditors: Signing Authority, Naming Conventions
and Stationery
. Practitioners are advised to familiarise
themselves with this guide. Although it is not mandatory, this
guide has been prepared to avoid such situations.
Practitioners are cautioned to be extremely careful not to
misrepresent their status in a firm either unintentionally or
HOLDINGOUTS
STATUSMISREPRESENTATION
on costs in a part-heard matter that began in 2012. In 2014, the
committee had found the practitioner guilty on certain counts
of negligence and this finding is currently the subject of a
review application. The committee will hand down sanction in
thematter in due course.
The latter matter is on review and we have agreed not to
enforce the sanctions (which include publication in this
newsletter) until the review has been determined.
Recent cases of registered auditors who have been implicated
in managing or auditing pyramid schemes do further damage
to the profession's credibility.
As the regulator, the IRBA takes these cases seriously and will
instigate disciplinary action against those found to be in
contravention of their responsibilities. Currently, there are six
cases that have either been referred for hearings or in which
charge sheets have been drawn.
The Consumer Protection Act defines pyramid or Ponzi
schemes as arrangements in which participants receive
compensation derived primarily from their respective
recruitment of other persons as participants, rather than from
the sale of any goods or service. A clear indication of such
schemes is usually an emphasis in their promotion and
promises of high returns, which would not be possible through
conventional investment methods.
Pyramid schemes usually require large deposits upfront from
participants and often use manipulation to win the public's
trust. Clear indicators for auditors are that these entities often
operate as deposit takers that are not registered with the
Reserve Bank and are also usually not listed with the Financial
Services Board. In addition, they operate as credit providers
that are not in the National Credit Regulator's register and are
run as private companies that are not governed by strict
reporting/transparency rules.
With these pointers in mind, auditors are reminded that they
have a responsibility to assess management integrity before
accepting any engagement. They also need to understand the
legal and regulatory framework in which the clients operate.
Any suspected pyramid scheme activities that an auditor
PYRAMIDSCHEMES
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Issue 31 July - September 2015
Jane O’Connor
Director: Legal
Telephone: (087) 940-8804
Fax:
(087) 940-8873
E-mail:
