REPUBLIC OF SOUTH AFRICA

_________

_________

_________

(MINISTER OF FINANCE)

To provide for the establishment of a juristic person to be known as the Independent Regulatory Board for Auditors; to provide for the recognition of educational institutions and accreditation of professional bodies; to provide for the registration of auditors; to regulate the conduct of registered auditors; and to provide for matters connected therewith.

1. In this Act, unless the context otherwise indicates -

"appropriate regulator" in relation to any entity, means any national government department, registrar, regulator, agency, authority, centre, board or similar institution established, appointed, required or tasked in terms of any law to regulate, oversee or ensure compliance with any legislation, regulation or license, rule, directive, notice or similar instrument issued in terms of or in compliance with any legislation or regulation, as appears to the Regulatory Board to be appropriate in relation to the entity;

"audit" means the examination of –

"auditing pronouncements" means those standards, practice statements, guidelines and circulars developed, adopted, issued or prescribed by the Regulatory Board, which a registered auditor must comply with in the performance of audit services;

"Auditor-General" has the meaning as assigned in section 1 of the Public Audit Act, 2004 (Act No. 25 of 2004);

"client" means the person for whom a registered auditor is performing or has performed audit services;

"company" has the meaning assigned to it in the Companies Act, 1973 (Act No. 61 of 1973);

"ensure" means to take all reasonably necessary and expedient steps in order to achieve the purpose, objective or intention of this Act or a provision of this Act;

"delegation" in relation to a duty, includes an instruction or request to perform or to assist in performing the duty;

"firm" means a partnership, company or sole proprietor referred to in section 41;

"improper conduct" means any intentional or negligent non-compliance with this Act or any rules or prescribed in terms of this Act or any conduct prescribed as constituting improper conduct;

"management board" in relation to an entity, which is a company, means the board of directors of the company and, in relation to any other entity, means the body or individual having control of the management of the business of the entity;

"Minister" means the Minister of Finance;

"nominated registered auditor" means the individual who is appointed by an entity to perform the relevant auditing services, whether by virtue of being personally appointed as registered auditor or by virtue of being a member of a firm which is so appointed;

"organ of state" has the meaning assigned to it in section 239 of the Constitution of the Republic of South Africa, 1996 (Act No. 108 of 1996);

"prescribe" means prescribe by rule in the Gazette and "prescribed" and "prescribing" have corresponding meanings;

"professional body" means a body of, or representing, registered auditors or both accountants and registered auditors;

"public accountant" means any person who is engaged in public practice;

"public practice" means the practice of a registered auditor who places professional services at the disposal of the public for reward, and "practice" and "public practice" has the same meaning;

"Public Accountants’ and Auditors’ Board" means the board established under the Public Accountants’ and Auditors’ Act, 1991(Act No. 80 of 1991);

"Public Finance Management Act" means the Public Finance Management Act, 1999 (Act No. 1 of 1999);

"publish" means to publish in the Gazette, or in any official publication or official website of the Regulatory Board dealing with the auditing profession and distributed or circulated on a national basis to members of that profession and "publishing" and "published" have corresponding meanings;

"registered auditor" means an individual or firm registered as an auditor with the Regulatory Board, or any one of them depending on the context;

"Regulatory Board" means the Independent Regulatory Board for Auditors established under section 3;

"reportable irregularity" means any unlawful act or omission committed by any person in the conduct of the management or control of an entity, which -

"rule" means a rule prescribed by the Regulatory Board under section 10;

"third party" means any person other than a client; and

"training contract" means a written training contract entered into in the prescribed form and registered with the Regulatory Board whereby a prospective registered auditor is duly bound to serve a registered auditor for a specified period and is entitled to receive training in the practice and profession of a registered auditor.

2. The object of this Act is –

(f) to ensure disciplinary action in respect of improper conduct.

3. The Independent Regulatory Board for Auditors is hereby established as a juristic person.

4. The Regulatory Board must, in addition to its other functions provided for in this Act -

5. The Regulatory Board must, subject to this Act—

(b) consider and decide on any application for accreditation;

(c) prescribe the period of validity of the accreditation;

1. the register to be kept;
2. the maintenance of the register; and
3. the reviewing of the register and the manner in which alterations thereto may be effected; and

6. (1) The Regulatory Board must, subject to this Act—

(b) consider and decide on any application for registration of auditors;

(c) prescribe the period of validity of the registration of a registered auditor;

(d) keep a register of registered auditors and decide on—

(i) the register to be kept;

(ii) the maintenance of the register; and

7. (1) The Regulatory Board must -

(2) The Regulatory Board may establish and administer an education fund for the purpose of education, training, professional development and continued education, training and professional development of registered auditors and students in the auditing profession.

8. (1) The Regulatory Board must prescribe -

(a) accreditation and registration fees;

(b) annual fees, or portion thereof in respect of a part of a year;

(c) the date on which any fee or levy is payable;

(g) fees payable for any other service rendered by the Regulatory Board; or

(h) any other fee or levy it considers necessary.

(2) The Regulatory Board may grant exemption from payment of any fees or levies referred to in subsection (1).

(3) A registered auditor may recover any fee or levy imposed in terms of this section.

9. The Regulatory Board may —

(c) collect fees and levies or invest funds;

(j) determine where its head office must be situated;

(l) open, and operate its own bank accounts;

(n) perform legal acts, or institute or defend any legal action in its own name; and

10. (1) The Regulatory Board may, by notice in the Gazette, prescribe rules with regard to –

(2)  (a) Before the Regulatory Board prescribes any rule under this section, it must publish a draft of the proposed rule in the Gazette together with a notice calling on the public to comment in writing within a period stated in the notice, which period may not be less than 30 days from the date of publication of the notice.

(b) If the Regulatory Board alters the draft rules because of any comment, it need not publish those alterations before prescribing the rule.

(3) The Regulatory Board may, if circumstances necessitate the immediate publication of a rule, publish that rule without consultation as contemplated in subsection (2).

11. (1) The Regulatory Board consists of not more than ten board members with suitable qualifications or experience to effectively manage and guide the activities of the Regulatory Board, appointed by the Minister, taking into account, amongst others, –

2. any nominations made by the Regulatory Board in accordance with section 12; and
3. the availability of persons to serve as board members.

(2) In the making of appointments under subsection (1), the Minister must ensure that, disregarding any temporary vacancy in its membership, not more than 40% of the board members of the Regulatory Board are registered auditors and that all the board members are non-executive board members.

(3) The Regulatory Board must, as soon as practicable after the appointment of the board members of the Regulatory Board, must publish—

(a) the name of every person appointed as a board member;

(b) the date from which the appointment takes effect; and

(c) the period for which the appointment is made.

(4) The Minister may appoint an alternate board member for every board member of the Regulatory Board appointed under subsection (1).

12. (1) The Regulatory Board may nominate persons for appointment as board members to the Minister.

(2) The Regulatory Board, before nominating board members, must invite the public, by notice in the Gazette and in any national newspaper the Regulatory Board considers necessary, to nominate persons for appointment to the Regulatory Board within a period of at least 60 days from the date of the notice.

(3) On receipt of any nomination, the Regulatory Board must, within 30 days from the expiry date specified in the notice referred to in subsection (2), make and submit its nominations to the Minister.

13. (1) The term of office of a board member of the Regulatory Board is not longer that two years.

(2) A board member of the Regulatory Board may be reappointed, but, subject to subsection (3), may not serve more than two consecutive terms of office.

(3) Despite subsections (1) and (2), the Minister may, by notice in the Gazette, after consultation with the Regulatory Board, extend the period of office of all the board members of the Regulatory Board for a period of six months, but he or she may only extend the period of office twice.

(4) Despite subsection (1), the Minister may, by notice in the Gazette, after consultation with the Regulatory Board, terminate the period of office of a board member or all the board members of the Regulatory Board -

(a) if the performance of the board member is unsatisfactory;

(d) to ensure the ratio of the membership referred to in section 11(2).

14. (1) A person may not be appointed as a board member of the Regulatory Board if that person—

(a) is not a South African citizen and ordinarily resident in the Republic;

(b) is an unrehabilitated insolvent;

(e) has, as a result of improper conduct, been removed from an office of trust; or

(2) For the purposes of subsection (1) (d), the Minister must take in as far as reasonably possible cognisance of the prevailing circumstances in a foreign country relating to a conviction.

(3) The membership of a board member of the Regulatory Board seizes if he or she -

(b) resigns by written notice addressed to the Regulatory Board;

(4) If a board member of a Regulatory Board during that person’s term of office becomes disqualified on a ground mentioned in subsections (1) or (3), such person ceases to be a board member from the date of becoming disqualified.

(2) The deputy chairperson must, if the chairperson is for any reason unable to act as chairperson, perform all the functions and may exercise all the powers of the chairperson.

16. (1) The chief executive officer is accountable to the board of the Regulatory Board for the management of the Regulatory Board.

(2) The chief executive must enter into a performance agreement with the Regulatory Board on acceptance of his or her appointment.

2. may authorise sub-delegation; and
3. subject to subsection (2), does not divest the Regulatory Board of the responsibility concerning the exercise of the delegated power or the performance of the assigned duty.

(2) The Regulatory Board may confirm, vary or revoke any decision taken by a committee as a result of a delegation, but the decisions of a disciplinary committee may not be varied or revoked.

18. (1) The Regulatory Board meets as often as circumstances require, but at least twice every year, and at such time and place as the Regulatory Board may from time to time determine.

(2) The chairperson of the Regulatory Board may at any time convene a special meeting of the Regulatory Board at a time and place determined by the chairperson.

(3) Upon a written request signed by not less than three board members of the Regulatory Board, the chairperson concerned must convene a special meeting of the Regulatory Board to be held within three weeks after the receipt of the request, and the meeting must take place at a time and place determined by the chairperson.

(4) At any meeting of the Regulatory Board, a majority of the board members of the Regulatory Board constitutes a quorum.

19. (1) A decision of a Regulatory Board requires the support of a majority of the board members of the Regulatory Board at a meeting where a quorum for the meeting is present.

(2) No decision taken by or act authorised by the Regulatory Board is invalid by reason only of –

(a) a casual vacancy; or

20. The board of the Regulatory Board is the accounting authority of the Regulatory Board within the meaning of the Public Finance Management Act and must, in addition to the duties and responsibilities provided for in the Public Finance Management Act, -

21. (1) The Regulatory Board, subject to subsection (2), may establish one or more committees to assist it in the performance of its functions and it may at any time dissolve or reconstitute any such committee.

(2) The Regulatory Board must appoint at least the following permanent committees –

(d) an investigating committee; and

(e) a disciplinary committee.

(4) The Regulatory Board must provide funding to its committees in such a way that the committees can perform their functions effectively.

(5) The provisions of sections 18 and 19 relating to meetings and decisions of the Regulatory Board, respectively, shall with the necessary changes apply in respect of any committee.

(i) three registered auditors;

(ii) three persons representing users of audit services;

(2) The committee for auditor ethics must assist the Regulatory Board -

6. one person nominated by any stock exchange licensed under the Stock Exchange Control Act, 1985 (Act 1 of 1985);
7. the Commissioner of the South African Revenue Services established in terms of the South African Revenue Services Act, 1997 (Act No. 34 of 1997), or a person nominated by that incumbent; and

(2) The committee for auditing standards must assist the Regulatory Board -

(a) to develop, maintain, adopt, issue or prescribe auditing pronouncements;

(c) to promote and ensure the relevance of auditing pronouncements by -

(i) considering the needs of users of audit reports;

(d) to influence the nature of international auditing pronouncements by -

24. (1) When the need for an appointment to the committees for auditor ethics or auditing standards arises and the appointment depends on a nomination, the committees for auditor ethics or auditing standards must provide the Regulatory Board with the name of the nominated person, the name of any nominated alternate and any further relevant information, whereupon the Regulatory Board must in writing appoint the nominated persons within three months of receipt of the nominations.

(2) Where any person's appointment to the committees for auditor ethics or auditing standards is dependent on a nomination, the Regulatory Board may make the duration of the appointment terminable on notice given by the nominating office-holder to the Regulatory Board that the nominated person has left its employment.

(3) A member of the committees for auditor ethics or auditing standards whose term has expired continues to serve until a successor has been appointed.

25. A disciplinary committee -

26.   The Regulatory Board is funded from -

(a) the collection of prescribed fees;

27. The annual budget and strategic plan of the Regulatory Board to be submitted to the Minister in terms of the Public Finance Management Act.

28. The financial management and the preparation and submission of financial statements and annual reports must comply with the Public Finance Management Act.

29. (1) The Minister exercises executive authority over the Regulatory Board and the Regulatory Board is accountable to the Minister.

(2) In exercising executive authority over the Regulatory Board the Minister must, in addition to the matters provided for in the Public Finance Management Act –

1. ensure that the Regulatory Board comply with the Act, the Municipal Finance Management Act and any other applicable legislation; and
2. ensure that the Regulatory Board is managed responsibly and transparently, and meets its contractual and other obligations;
3. establish and maintain clear channels of communication between him or her and the Regulatory Board;
4. must monitor and annually review the performance of the Regulatory Board.

30. (1) The Minister may designate officials of the National Treasury as his or her representatives on the board of the Regulatory Board.

(2) Ministerial representatives appointed in terms of subsection (1) represents the Minister as participating observers at meetings of the board of the Regulatory Board.

(3) The Minister or his or her designated representative or representatives may at any time call or convene a meeting of the Regulatory Board in order for the board to give account for actions taken by it.

(i) to undertake a specific function -

(b) The Regulatory Board must comply with any directive given by the Minister.

(2) The Minister, at any time, may investigate the affairs or financial position of the Regulatory Board and may recover reasonable costs incurred because of an investigation from the Regulatory Board.

32. A Regulatory Board must provide the Minister or his or her Ministerial representative with access to any information as may be reasonably requested.

33. In order to qualify for accreditation, a professional body must demonstrate, to the satisfaction of the Regulatory Board that –

34. (1)  (a) A professional body must apply, on the prescribed application form, to the Regulatory Board for accreditation.

(2) If the Regulatory Board is satisfied that the professional body complies with its requirements for accreditation, it must grant the application on payment of the prescribed fee.

35. In order to retain its accreditation, an accredited professional body must at least once a year at a time prescribed by the Regulatory Board, satisfy the Regulatory Board in the prescribed manner that it continues to comply with the requirements for accreditation listed in section 33.

36. (1) The accreditation of an accredited professional body lapses automatically if –

(3) A professional body may by written notice to the Regulatory Board renounce its accreditation.

2. On the termination of the accreditation of a professional body, the Regulatory Board must publish a notice informing all the registered auditors who were members of the professional body at the time of the termination –

(5) A professional body, which is no longer accredited, is not relieved of any outstanding financial obligation towards the Regulatory Board.

37. (1) The fact that the accreditation of a professional body has ended as in terms of section 36, does not affect the registration under this Act of any registered auditor who was a member of the professional body at the time of the termination.

(2) Registered auditors referred to in subsection (1) whom where members of the professional body referred to in subsection (1) must within six months of the termination of the accreditation of the professional body, or within such other period as may be prescribed by the Regulatory Board provide written proof to the satisfaction of the Regulatory Board that they -

(a) have become members of another accredited professional body; or

(3) Where a registered auditor referred to in subsection (1) fails to comply with the requirements of subsection (2), the Regulatory Board, subject to subsection (4) may cancel the registration of the registered auditor under this Act.

(4) The Regulatory Board must prior to the cancelling the registration of a registered auditor give notice in writing to the registered auditor concerned of its intention to cancel and the reasons on which it is based, and afford the registered auditor a period, of not less than 21 days and not more than 30 days, in which to submit grounds for not proceeding to cancellation.

38. (1)  (a) A person must apply, on the prescribed application form, to the Regulatory Board for registration.

(2) If, after considering an application, the Regulatory Board is satisfied that the applicant -

(b) has served under a registered training contract for the prescribed period;

then, subject to subsections (3) and (4), the Regulatory Board must register the applicant, enter the applicant's name in the register, and issue to the applicant a certificate of registration on payment of the prescribed fee.

(3) The Regulatory Board may not register an individual if that individual -

(3) For the purposes of subsection (2) (b), the Regulatory Board must take cognisance of the prevailing circumstances in a foreign country relating to a conviction.

(4) The Regulatory Board may decline to register a person who is an unrehabilitated insolvent, has entered into a compromise with creditors or has been provisionally sequestrated.

39. (1) Subject to subsection (3), the Regulatory Board must cancel the registration of any registered auditor -

(2) The registration of a registered auditor automatically lapses if he, she or it fails to pay any prescribed fee, levy or portion thereof within the period as prescribed by the Regulatory Board.

(3) Subject to subsection (4), the Regulatory Board may cancel the registration of any registered auditor –

(4) Prior to cancelling a registration under subsection (1) or (2), the Regulatory Board must give notice in writing to the registered auditor concerned of its intention to cancel and the reasons on which it is based, and afford the registered auditor a period, of not less than 21 days and not more than 30 days, in which to submit grounds for not proceeding to cancellation.

(5) At the written request of a registered auditor, the Regulatory Board must remove the registered auditor’s name from the register, but the removal does not affect any liability incurred by the registered auditor prior to the date of the removal.

(6) The fact that a registered auditor's registration has been cancelled or removed does not prevent the Regulatory Board from instituting disciplinary proceedings for conduct committed prior to the cancellation or removal.

(7) As soon as practicable after an registered auditor's registration has been cancelled or removed the Regulatory Board must publish a notice of the cancellation or removal, specifying the registered auditor's name.

40. (1) A registered auditor must, at least three months prior to the prescribed expiry date of his or her registration, apply in the prescribed manner to the Regulatory Board for the renewal of his or her registration.

(2) The Regulatory Board may prescribe conditions for the renewal of registration.

41. (1) The only firms that may become registered auditors are -

(c) companies, which comply with, subsection (3).

(2) On an application by a firm which is a partnership fulfilling the conditions in subsection (1)(a) or a sole proprietor, on the prescribed application form, the Regulatory Board must register the firm as a registered auditor on payment of the prescribed fee.

(3) The Regulatory Board must register a company as a registered auditor if, and only if, the following conditions are fulfilled -

1. no voting rights attach to any share contemplated in paragraph (c)(i) and (ii); and
2. a shareholder mentioned in that paragraph does not act as a director of the company or receive, directly or indirectly, any director’s fees or remuneration or participate in the income of or profits earned by the company in its business; and

(4) A company, subject to subsection (3)(c), must immediately ceases to engage in public practice when it ceases to conform to subsection (3), and the Regulatory Board must cancel the registration of that firm.

(5) In its application to a company, which is a registered auditor, section 20 of the Companies Act, 1973, has effect with the omission of subsection (1)(b).

42. (1) Only a registered auditor may engage in public practice or hold out as an registered auditor in public practice or use the description "public accountant", "certified public accountant", "registered accountant and auditor", "accountant and auditor in public practise" or any other designation or description likely to create the impression of being an registered auditor in public practice.

(2) (a) A person who is not registered in terms of this Act may not—

(i) perform any audit services;

3. Nothing in this section prohibits –

(4) Except with the consent of the Regulatory Board, a registered auditor may not knowingly employ in connection with the public practice of the registered auditor -

(5) A registered auditor who is not in public practice as an individual practitioner may practise as a member of a firm only if, by virtue of section 41, the firm is itself a registered auditor.

(6) A registered auditor may not -

(a) practise under a firm name or title unless on every letterhead bearing the firm name or title there appears -

(i) the registered auditor’s present first names, or initials, and surname; or

(7) The provisions of subsection (6)(b) do not apply in respect of audit services -

(a) performed on behalf of a registered auditor by another registered auditor; or

(8) Nothing in subsection (7)(b) prevents any registered auditor from signing the firm name or title under which the registered auditor practises.

(9) For the purposes of section 171 of the Companies Act, 1973, in relation to such a company as is described in section 41, it must be regarded as sufficient if a catalogue, circular or letter to which the said section 171 applies and which emanates from a branch office of any company contains the required particulars in respect of directors attached to that branch office.

(10) In order to engage in public practice, a registered auditor must have paid all applicable prescribed fees.

43. All registered auditors must comply with rules prescribed by the Regulatory Board.

44. (1) Every firm that is a registered auditor must notify the Regulatory Board of any change in its name, composition or address not later than 30 days after the date on which the change takes place.

(2) Within fourteen days of the receipt of a written request from any client for whom a registered auditor acts as auditor or person who proposes to appoint the registered auditor as its auditor, the registered auditor must furnish the following information -

(a) every firm name or title under which the registered auditor or the registered firm practises;

(3) In subsection (2) "the auditor's firm" means the partnership or company of which the registered auditor is a partner or member; and where, under that subsection, a registered auditor is required to supply information relating to a firm, the supply of the information in the name of the firm must be a sufficient compliance with the obligation of the individual registered auditor.

45. (1) Unless a registered auditor who is conducting the audit services of an entity is satisfied about the criteria specified in subsection (2), the registered auditor may not, without such qualifications as may be appropriate in the circumstances, express an opinion to the effect that any financial statement, including any annex thereto, which relates to the entity, fairly represents, in all material respects, the financial position of the entity and the results of its operations and cash flow.

(2) The criteria referred to in subsection (1) are –

(3) If a registered auditor or, where the registered auditor is a member of a firm, any other member of that firm was responsible for keeping the books, records or accounts of an entity, the registered auditor must, in reporting on anything in connection with the business or financial affairs of the entity, indicate that the registered auditor or that other member of the firm was responsible for keeping those accounting records.

(4) For the purpose of subsection (3), a person must not be regarded as responsible for keeping the books, records or accounts of an entity by reason only that that person makes closing entries, assists with any adjusting entries, or frames any financial statements or other document from existing records.

(5) A registered auditor may not conduct the audit services of any financial statements of an entity, whether as an individual registered auditor or as a member of a firm, if, at any time during a period to which those financial statements relate or at any time during the two years ending at the beginning of that period the registered auditor has or had an conflict of interest in respect of that entity as prescribed by the Regulatory Board.

(3) The nominated registered auditor must as soon as reasonably possible but no later that 30 days from the date on which the report referred to in subsection (1) was sent to the Regulatory Board -

1. take all reasonable measures to discuss the report referred to in subsection (1) with the members of the management board of the entity;
2. afford the members of the management board of the entity an opportunity to make representations in respect of the report; and
3. send another report to the Regulatory Authority, which report must include -

1. a statement that the nominated registered auditor is of the opinion that –

(aa) no reportable irregularity has taken place or is taking place; or

(bb) the suspected reportable irregularity is no longer taking place and that adequate steps have been taken for the prevention or recovery of any loss as a result thereof, if relevant; or

(cc) the reportable irregularity is continuing; and

2. detailed particulars and information supporting the statement referred to

(4) The Regulatory Board must as soon as possible after receipt of a report containing a statement referred to in paragraph (i)(cc) of subsection (3), notify any appropriate regulator in writing of the details of the reportable irregularity to which the report relates and provide it with a copy of the report.

(5) For the purpose of the reports referred to in subsections (1) and (3), a registered auditor may carry out such investigations as the registered auditor may deem fit and, in performing any duty referred to in the preceding provisions of this section, the registered auditor must have regard to all the information which comes to the knowledge of the registered auditor from any source.

(6) Where any entity is sequestrated or liquidated (whether provisionally or finally) and a nominated registered auditor at the time of the sequestration or liquidation -

2. send the report together with a motivation as to why a report was not sent; or
3. submit a notice that in the registered auditor’s opinion no report needed to be submitted together, together with a motivation of the opinion.

47. (1) In respect of any opinion expressed or report or statement made by a registered auditor in the ordinary course of duties the registered auditor does not incur any liability to a client or any third party, unless it is proved that the opinion was expressed, or the report or statement made, maliciously or pursuant to a negligent performance of the registered auditor's duties.

(2) Despite subsection (1), a registered auditor incurs liability to third parties who has relied on a opinion, report or statement of that registered auditor, for financial loss suffered as a result of having relied thereon, only if it is proved that the opinion was expressed, or the report or statement was made pursuant to a negligent performance of the registered auditor's duties and the registered auditor -

(3) Nothing in subsections (1) and (2) confers upon any person any right of action against a registered auditor which, but for the provisions of those subsections, the person would not have had.

(4) For the purposes of subsection (2) the fact that a registered auditor performed the functions of a registered auditor is not in itself proof that, the registered auditor could reasonably have been expected to know that -

(a) the client would act as contemplated in paragraph (a)(i) of that subsection; or

(5) The provisions of subsections (1) and (2) do not affect any liability of a registered auditor arising from -

(i) a contract between a third party and the registered auditor; or

(ii) any statutory provision.

(6) A registered auditor may incur liability to any partner, member, shareholder, creditor, or client of an entity or to any third party if the registered auditor failed to report a reportable irregularity in accordance with section 46.

2. Despite the generality of paragraph (1), the Regulatory Board, or any person authorised by it, must at least annually inspect or review the practice of a firm registered as a public interest company, as defined in the Companies Act, 1973 (Act No, 61 of 1973).

(3) A registered auditor must, at the request of the Regulatory Board, or the person authorised by it, produce any information, including, but not limited to, any working papers, statements, correspondence, books or other documents, and, subject to the provisions of the common law or any other law, may not refuse to produce such information even though the registered auditor is of the opinion that the information contains confidential information of a client.

(4) A registered auditor who acts in good faith during an inspection of the public practice of the registered auditor, and who produces information under subsection (3) may not be held liable criminally or under civil law because of the production of the information.

(5) No person who is or was concerned with the performance of any function under this section may disclose any information obtained in the performance of that function except –

(a) for the purpose of an investigation or a hearing under Chapter V;

(d) when required to do so by order of a court of law; or

49. (1) The Regulatory Board must refer any matter brought against a registered auditor to the investigating committee appointed under section 25 if the Regulatory Board –

(3) At the request of the Regulatory Board, the investigating committee must—

(a) investigate the matter; and

(4) The investigating committee may not question the registered auditor concerned unless the investigating committee informs that registered auditor that he or she -

(a) has the right to be assisted or represented by another person; and

(5) (a) In investigating a charge of improper conduct the investigating committee may -

(6) Nothing in this section affects the right of any professional body to take disciplinary or other action against any of its members in accordance with its constitution and rules.

(7) The investigating committee must, after the conclusion of the investigation, submit a report making its recommendations to the Regulatory Board regarding any matter referred to it in terms of this section.

50. (1) The Regulatory Board must charge a registered auditor with improper conduct if the investigating committee recommends that sufficient grounds exist for a charge to be preferred against such a registered auditor.

(2) The Regulatory Board must furnish a charge sheet to the registered auditor concerned by hand or registered mail.

(3) A charge sheet must inform the registered auditor charged—

(a) of the details and nature of the charge;

(b) that he or she must, in writing, admit or deny the charge;

(5) The acquittal or the conviction of a registered auditor by a court of law on a criminal charge is not a bar to proceedings against him or her under this Act on a charge of improper conduct, even if the facts stated in the charge of improper conduct would, if proved, constitute the offence stated in the criminal charge on which he or she was acquitted or convicted or any other offence of which he or she might have been acquitted or convicted at his or her trial on the criminal charge.

51. (1) The disciplinary hearing must be conducted by the disciplinary committee appointed in accordance with section 25.

(2) The disciplinary committee, for the purposes of this section, may appoint a person to assist it in the performance of its functions.

(3) A hearing before the disciplinary committee is open to the public except where, in the opinion of the chairperson of the disciplinary committee, any part of the hearing should be held in camera.

(b) A subpoena issued in terms of paragraph (a), must—

(i) be in the prescribed form;

(5) The disciplinary committee may retain any information, including, but not limited to, any working papers, statements, correspondence, books or other documents produced in terms of subsection (4) for the duration of the hearing.

(6) The chairperson of the disciplinary committee may call upon and administer an oath to, or take an affirmation from, any witness at the hearing who was subpoenaed in terms of subsection (3).

(7) At a hearing the registered auditor charged—

(8) The registered auditor may during a hearing—

(b) question any person who was subpoenaed in terms of subsection (3); or

(9)   (a) A witness who has been subpoenaed may not—

(ii) refuse to be sworn in or to be affirmed as a witness;

(9) The record of evidence which has a bearing on the charge before the disciplinary committee, and which was presented before any committee which investigated an event or conduct is admissible without further evidence being led if—

(a) the record is accompanied by a certificate from the chairperson; and

(10) If the improper conduct with which the registered auditor is charged amounts to an offence of which he or she has been convicted by a court of law, a certified copy of the record of his or her trial and conviction by that court is, on the identification of the registered auditor as the person referred to in the record, sufficient proof of the commission by him or her of that offence, unless the conviction has been set aside by a superior court.

52. (1) After the conclusion of the hearing the disciplinary committee must, within 30 days—

(2) A registered auditor found guilty of improper conduct in terms of this section may—

(a) address the disciplinary committee in mitigation of sentence; and

(i) caution or reprimand the registered auditor;

(b) The disciplinary committee may take decisions under more than one of the subparagraphs of paragraph (a).

(4) A disciplinary committee which makes a finding of guilt as mentioned in subsection (3) must order any person upon whom any sanction is imposed under that subsection to pay such reasonable costs as have been incurred by an investigating committee and the disciplinary committee in connection with the investigation and hearing in question, or such part thereof as the disciplinary committee considers just.

(5) In any case where -

the disciplinary committee may nevertheless order that person to pay any costs unnecessarily incurred by the disciplinary committee or the investigating committee because of the conduct of that person.

(6) At the conclusion of the hearing the disciplinary committee must notify the Regulatory Board of its finding.

(7) The Regulatory Board may, if it deems it appropriate, publish the finding and the sanction imposed in terms of subsection (3).

(b) where an order as to costs has been made under subsections (4) or (5),

53. (1) A registered auditor who –

(a) fails to report a reportable irregularity in accordance with section 46; or

(2) Where the registered auditor failing to report a reportable irregularity or conducting audit services is a firm, subsection (1) applies to the member of the firm conducting the audit services, but nothing in this subsection prevents the taking of disciplinary action under Chapter V in respect of the firm concerned, in addition to or instead of the individual registered auditor conducting the audit services.

(3) A person convicted of an offence under this section is liable to a fine or to imprisonment for a term not exceeding ten years or both.

54. (1) Subject to section 51(4), a person is guilty of an offence if -

(2) A witness before a disciplinary committee who, having been duly sworn or having made an affirmation, gives a false answer to any question lawfully put to the witness or makes a false statement on any matter, knowing the answer or statement to be false, is guilty of an offence.

(3) Any person who wilfully hinders any person acting in the capacity of a member of a disciplinary committee in the exercise of any power conferred upon that person by or under section 51 is guilty of an offence.

(4) A person convicted of an offence under this section is liable to a fine liable to a fine calculated according to the ratio prescribed for a period of five years’ imprisonment in terms of the Adjustment of Fines Act, 1991.

55. (1) Any person who contravenes section 42, is guilty of an offence and on conviction liable to a fine or in default of payment, to imprisonment not exceeding five years, or to both such fine and such imprisonment.

(2) Any person who -

(a) contravenes any provision of section 48; or

is guilty of an offence and liable on conviction to a fine, or to imprisonment for a period not exceeding one year.

56. (1) The Minister may, by notice in the Gazette, make regulations regarding—

(2) The Minister may delegate any of his or her powers in terms of this Act, excluding the power to appoint the board members of the Regulatory Board, to the Director-General or any other official of the National Treasury.

57. Neither the Regulatory Board or any board member or employee or chief executive thereof, nor a committee of the Regulatory Board or any member thereof, nor the Public Accountants’ and Auditors’ Board or any member thereof, incurs any liability in respect of any act or omission performed in good faith under or by virtue of a provision in this Act, unless that performance was grossly negligent.

58. Subject to the provisions of this Act, where the Regulatory Board takes any decision or any other step of an administrative nature under this Act that affects the rights and duties of any other person, the Regulatory Board must –

59. (1) The laws mentioned in the Schedule are hereby, subject to section 60, repealed to the extent set out in the third column of that Schedule.

(2) With effect from the date on which this subsection come into force, and in respect of damages suffered by any person as a result of an act or omission of a registered auditor committed on or after that date, the reference in section 1 of the Apportionment of Damages Act, 1956 (Act No 34 of 1956), to "damage" must be construed as a reference also to damage caused by a breach, by the registered auditor, of a term of a contract concluded with the registered auditor.

60. (1) (a) On and after the date this section comes into force, the Regulatory Board must be regarded as the successor to the Public Accountants' and Auditors' Board.

(b) In order to give effect to that succession -

(2) Subject to subsection (3), any unfinished business of the Public Accountants’ and Auditors’ Board on the date of promulgation of this Act, which is dealt with by that Board under a provision of the Public Accountants’ and Auditors’ Act, 1991, and for which no corresponding provision appears in this Act, must be completed by that Board during the period between that date and the commencement date.

(4) The Education and Training Committee of the Public Accountants’ and Auditors’ Board, as it exists immediately prior to the commencement date, is deemed to be a committee established by the Regulatory Board under section 21 to determine the requirements for the professional development and achievement of professional competence.

(5) Any committee performing, immediately prior to the commencement date, an investigating or disciplinary function under the Public Accountants’ and Auditors’ Act, 1991, remains validly constituted and must complete its functions after that date as if this Act has not been passed.

(6) Any person who immediately prior to the commencement date was registered as an accountant and auditor under the Public Accountants’ and Auditors’ Act, 1991, is deemed to be registered as an auditor under this Act.

(7) Any training contract registered, any recognition of educational institutions or recognition of training officers under the Public Accountants’ and Auditors’ Act, 1991, is deemed to a registration or recognition under this Act.

(9) Subject to the provisions of this Act, on and after the commencement date, anything which was done under a provision of a law repealed by section 59 and which could be done under a corresponding provision of this Act, is deemed to have been done under that corresponding provision.

(10) A reference in any of the preceding subsections to the commencement date is a reference to the date that subsection comes into force.

61. (1) This Act is called the Auditing Profession Act, 2005.

(2) (a) This Act takes effect on a date to be prescribed by the Minister by notice in the Gazette.

(b) Different dates may in terms of subsection (1) be prescribed for different provisions of the Act.

2. In South Africa the auditing profession is currently regulated under the Public Accountants’ and Auditors’ Board Act, 80 of 1991 ("PAAB Act"). The need has arisen to replace this Act and to improve the integrity of South Africa’s financial sector and financial reporting by introducing a more comprehensive and modern legislative framework for overseeing and regulating the auditing profession.
3. The Bill addresses the auditing profession as a whole, while the recently introduced Companies Act Amendment Bill, 2005 enhances the objects of the Bill by entrenching and safeguarding the independence of auditors within the corporate environment. This Bill and the Companies Act Amendment Bill, 2005 should thus be read together.

2.1 The Bill seeks to –

3. provide for the recognition of educational institutions;
4. provide for the accreditation of professional bodies;
5. provide for the registration of auditors;
6. prescribe standards for auditor ethics in the promotion and maintenance of internationally comparable standards of professional ethics by registered auditors;
7. prescribe standards for auditing in the development and maintenance of internationally comparable auditing standards in the Republic in a manner that is responsive to the expectations of business, financial institutions and the general public;
8. ensure the implementation of appropriate standards of qualification and competence and good ethics in the auditing profession;
9. regulate the conduct of registered auditors; and
10. ensure disciplinary action in respect of improper conduct.

The following institutions commented on the Bill during the public consultation process that took place during from December 2004 to February 2005 –

A number of additional institutions, such as the Department of Trade and Industry, the Financial Services Board, the Banking Supervision Department of the South African Reserve Bank, the Office of the Auditor General, the South African Institute of Chartered Accountants and the like, have also been consulted on the Bill.

The Bill will have financial implications for the State as it provides for the partial funding of the Independent Regulatory Board for Auditors by government. This is necessary to enhance the independence of the Board.