NATIONAL TREASURY ADDITIONAL PROPOSED AMENDMENTS

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AUDITING PROFESSION BILL

[B 31-2005]

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CLAUSE 1

1. On page 4, from line 31, to insert before the definition of "appropriate regulator":

"accreditation" means the status afforded to a professional body in accordance with Part 1 of Chapter III, which status may be granted in full or partially;

2. On page 4, from line 39, to omit the definition of "audit" and to substitute:

"audit" means the examination of -

(a) financial statements with the objective of expressing an opinion with a high level of assurance as to their fairness and as to their compliance with an identified financial reporting framework and any applicable statutory requirements, as required by law; or

(b) financial and other information, prepared in accordance with identified suitable criteria, with the objective of expressing an opinion with a high or moderate level of assurance on the financial and other information, and [‘‘auditing service’’ has a similar meaning];

3. On page 5, from line 1, to omit the definition of "auditing pronouncements" and to substitute:

‘‘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 an audit [auditing services];

4. On page 5, from line 7, to omit the definition of "client" and to substitute:

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

5. On page 5, from line 16, to omit the definition of "improper conduct" and to substitute:

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

6. On page 5, from line 19, to omit the definition of "management board" and to substitute:

‘‘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 responsible for [having control of] the management of the business of the entity;

7. On page 5, from line 23, to omit the definition of "nominated auditor".

8. On page 5, from line 34, to omit the definition of "public practice" and to substitute:

‘‘public practice’’ means the practice of a registered auditor who places professional services at the disposal of the public [for reward], and ‘‘practice’’ has a similar meaning;

9. On page 5, from line 37, to omit the definition of "Public Accountants’ and Auditors’ Board" and to substitute:

‘‘Public Accountants’ and Auditors’ Board’’ means the board established under the Public Accountants’ and Auditors’ Act, 1951 (Act 51 of 1951) and which continued to exist under section 2 of the Public Accountants’ and Auditors’ Act, 1991 (Act No. 80 of 1991);

10. On page 5, from line 49, to omit the definition of "reportable irregularity" and to substitute:

‘‘reportable irregularity’’ means any unlawful act or omission committed by any person responsible for [in the conduct of] the management [or control] of an entity, which—

(a) has caused or is likely to cause material financial loss to the entity or to any partner, member, shareholder, creditor or investor [client] of the entity; or

(b) is fraudulent or amounts to theft [or is otherwise dishonest]; or

(c) represents a material breach of any fiduciary duty owed by such person to the entity or any partner, member, shareholder, creditor or investor [client] of the entity under any law applying to the entity or the conduct or management thereof;

11. On page 5, from line 59, before the definition of "training contract" to insert:

"this Act" means includes any regulations promulgated under section 55;

CLAUSE 2

1. On page 6, from line 2, to omit section 2 and to substitute:

2. The objects of this Act are -

(a) to protect the public in the Republic by regulating audits performed [auditing services rendered] by registered auditors;

(b) to provide for the establishment of an Independent Regulatory Board for Auditors;

(c) to improve the development and maintenance of internationally comparable ethical standards and auditing standards for auditors that promote investment and as a consequence, employment in the Republic;

(d) to set out measures to advance the implementation of appropriate standards of [qualification and] competence and good ethics in the auditing profession; and

(e) to provide for procedures for disciplinary action in respect of improper conduct.

CLAUSE 3

1. On page 6, from line 23, to omit subsection (2) and to substitute:

(2) The Regulatory Board is subject to -

(a) the Constitution and the law, specifically the Public Finance Management Act ; and

(b) any directive issued by the Minister in terms of section 30.

CLAUSE 4

  1. On page 6, from line 29, to omit section 4 and to substitute:

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

(a) take steps to promote the integrity of the auditing profession, including -

(i) investigating alleged improper conduct;

(ii) conducting disciplinary hearings; [and]

    1. imposing sanctions for improper conduct; and

    2. conducting practice reviews or inspections;

(b) take steps it considers necessary to protect the public in their dealings with registered auditors;

(c) prescribe standards of professional [qualifications,] competence, ethics and conduct of registered auditors;

[(d) participate in the activities of international bodies whose main purpose is to develop and set auditing standards and to promote the auditing profession;

(e) publish a journal or any other publication, and issue newsletters and circulars containing information and guidelines relating to the auditing profession;]

(f) encourage education in connection with, and research into, any matter affecting the auditing profession; and

(g) prescribe auditing standards.

[(g) take any measures it considers necessary for the proper performance and exercise of its functions or duties or to achieve the objects of this Act.]

(2) The Regulatory Board may -

(a) participate in the activities of international bodies whose main purpose is to develop and set auditing standards and to promote the auditing profession;

(b) publish a journal or any other publication, and issue newsletters and circulars containing information and guidelines relating to the auditing profession;

(c) cooperate with international regulators in respect of matters relating to audits and auditors; and

(d) take any measures it considers necessary for the proper performance and exercise of its functions or duties or to achieve the objects of this Act.

CLAUSE 5

1. On page 7, in line 1, to omit paragraph (b) and to substitute:

(b) consider and decide any application for accreditation and grant such accreditation in full or partially;

CLAUSE 6

1. On page 7, from line 20, to omit paragraphs (e) and (f) and to substitute:

(e) ensure that the register of registered auditors is at all reasonable times open to inspection by any member of the public; [and]

(f) terminate the registration of registered auditors in accordance with this Act; and [.]

(g) prescribe minimum requirements for the renewal of registration and re-registration.

CLAUSE 7

1. On page 7, from line 24, to omit section 7 and to substitute:

7. (1) The Regulatory Board must -

(a) either partially or fully [conditionally or unconditionally], recognise or withdraw the recognition of the [educational institutions and their] educational qualifications or programmes or continued education, training and professional development programmes in the auditing profession of educational institutions and accredited professional bodies;

(b) recognise or withdraw the recognition of any accredited professional body to conduct any qualifying examination contemplated in section 37 or conduct any such examination for the purposes of section 37;

(c) prescribe requirements for and conditions relating to and the nature and extent of continued education, training and professional development;

(d) prescribe training requirements, including, but not limited to, the period of training and the form for training contracts;

(e) approve and register training contracts entered into by prospective registered auditors;

(f) prescribe competency requirements; and

(g) either conditionally or unconditionally, recognise or withdraw the recognition of registered auditors as training officers. [;

(h) establish mechanisms for registered auditors to gain recognition of their qualifications and professional status in other countries;

(i) enter into an agreement with any person or body of persons, within or outside the Republic, with regard to the recognition of any examination or qualification for the purposes of this Act; and

(j) give advice to, render assistance to, consult with or interact with any organ of state, statutory body, educational institution, professional body or examining body with regard to educational facilities for and the education, training and professional development of registered auditors and prospective registered auditors.]

(2) The Regulatory Board may -

(a) establish mechanisms for registered auditors to gain recognition of their qualifications and professional status in other countries;

(b) enter into an agreement with any person or body of persons, within or outside the Republic, with regard to the recognition of any examination or qualification for the purposes of this Act;

(c) 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[.]; and

(d) give advice to, render assistance to, consult with or interact with any organ of state, statutory body, educational institution, professional body or examining body with regard to educational facilities for and the education, training and professional development of registered auditors and prospective registered auditors.

(3) (a) The Regulatory Board must, prior to withdrawing of recognition referred to in subsection (1)(a) or (b), give notice in writing to the educational institution or accredited professional body concerned of its intention to withdraw and the reasons on which it is based, and must afford the educational institution or accredited professional body a period of not less than 21 days and not more than 30 days in which to submit grounds for not proceeding with withdrawal.

(b) If the Regulatory Board considers that withdrawal of recognition would not be in the best interests of the public, the auditing profession or the members of an accredited professional body, it may extend the recognition of the educational institution or accredited professional body concerned on such conditions as it considers appropriate.

(c) The Regulatory Board must publish the withdrawal of recognition in terms of this subsection.

CLAUSE 8

1. On page 8, from line 2 to omit section 8 and to substitute:

8. (1) The Regulatory Board must prescribe—

(a) accreditation, [and] registration, registration renewal and re-registration fees;

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

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

(d) the fees payable in respect of any examination referred to in section 37, conducted by an accredited professional body or the Regulatory Board.[;

(e) any fees payable for the purposes of the education fund referred to in section 7(2);

(f) fees payable for an inspection or review undertaken by the Regulatory Board in terms of section 47; or

(g) fees payable for any other service rendered by the Regulatory Board.]

(2) The Regulatory Board may prescribe -

(a) any fees payable for the purposes of the education fund referred to in section 7(2);

(b) fees payable for an inspection or review undertaken by the Regulatory Board in terms of section 47; and

(c) fees payable for any other service rendered by the Regulatory Board.

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

CLAUSE 9

1. On Page 8, from line 22 to omit paragraph (b) and to substitute:

(b) determine the remuneration and allowances payable [expenses reimbursable] to its members or the members of any committee of the Regulatory Board, in consultation with the Minister of Finance;

CLAUSE 11

1. On page 9, from line 7 to omit subsection (1) and to substitute:

(1) The Regulatory Board consists of not less than 6 but not more than 10 non-executive members appointed by the Minister.

2. On page 9, from line 9 to omit subsection (2) and to substitute:

(2) The Minister must appoint competent persons [with suitable qualifications] to effectively manage and guide the activities of the Regulatory Board, based on their knowledge and experience.

CLAUSE 12

1. On page 9, after line 52, to insert subsection (6):

(6) In the event of the dismissal of all the members of the Regulatory Board, the Minister may appoint persons to act as caretakers until such time that suitable persons are appointed in terms of section 11.

CLAUSE 13

1. On page 9, from line 54 to omit subsection (1) and to substitute:

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

(a) is not a South African citizen; [and]

(b) is not [ordinarily] resident in the Republic;

(c)[(b)] is an unrehabilitated insolvent;

(d)[(c)] has been convicted of an offence in the Republic, other than an offence committed prior to 27 April 1994 associated with political objectives, and was sentenced to imprisonment without an option of a fine or, in the case of fraud, to a fine or imprisonment or both;

(e)[(d)] subject to subsection (2), has been convicted of an offence in a foreign country and was sentenced to imprisonment without an option of a fine or, in the case of fraud, to a fine or imprisonment or both;

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

(g)[(f)] has in terms of this Act been found guilty of improper conduct.

2. On page 10, from line 27, to omit paragraph (a) and to substitute:

(a) If a member of the Regulatory Board dies or vacates his or her office before the expiration of his or her term of office, the Minister must consider appointing [may appoint] a person to fill the vacancy for the unexpired portion of the period for which that member was appointed.

CLAUSE 14

1. On page 10, from line 40 to omit subsection (3) and to substitute:

(3) If both the chairperson and deputy chairperson are absent or for any reason unable to preside at a Regulatory Board meeting, the members present must elect another member to act as chairperson at that meeting, who while he or she so acts has all the powers and must perform all the duties of the chairperson.

CLAUSE 15

1. On page 10, from line 44, to omit subsection (1) and to substitute:

(1) The Regulatory Board meets as often as circumstances require, but at least four times [twice] every year, at such time and place as the Regulatory Board may determine.

CLAUSE 17

1. On page 11, from line 21, to omit paragraph (d) and to substitute:

(d) deal with the Minister, any ministerial representatives, professional bodies, [and] registered auditors and all other persons in good faith; and

CLAUSE 19

1. On page 11, from line 31, to omit subsection (1) and to substitute:

19. (1) The Regulatory Board must develop a system of delegation that will maximise administrative and operational efficiency and provide for adequate checks and balances, and, in accordance with that system -

(a) may -

(i)[(a)] in writing delegate appropriate powers, excluding the power to prescribe rules to a [any of its powers to a] committee, the chief executive officer, an employee or any member of the Regulatory Board [or any other person or body of persons established in terms of this Act but may not delegate the power to prescribe rules]; and

(ii)[(b)] assign any committee, the chief executive officer, any employee or member of the Regulatory Board to perform any of its duties; and [.]

(b) must, in respect of sections 48 to 51, with due regard to the varying nature and seriousness of matters arising from these sections, in writing delegate appropriate powers, and oblige the investigating and disciplinary committees to delegate appropriate powers to the chief executive officer, any employee or any member of the Regulatory Board.

CLAUSE 20

1. On page 11, from line 52, to omit subsection (2) and to substitute:

(2) The Regulatory Board must, at least, establish [appoint] the following permanent committees:

(a) A committee for auditor ethics in accordance with section 21;

(b) a committee for auditing standards in accordance with section 22;

(c) an education, training and professional development committee;

(d) an inspection committee;

(e)[(d)] an investigating committee; and

(f)[(e)] a disciplinary committee.

2. On page 12, from line 6, to omit subsection (3) and to substitute:

(3) (a) A committee consists of as many members as the Regulatory Board considers necessary.

(b) The Regulatory Board, subject to sections 21, 22 and 24 and taking into account, amongst other factors, the need for transparency and representivity within the broader demographics of the South African population, may appoint any person as a member of a committee, for the period determined by the Regulatory Board.

(c) The Regulatory Board may terminate the membership of any member of a committee if -

(i) if the performance of the member is unsatisfactory;

(ii) if the member, either through illness or for any other reason, is unable to perform the functions of committee effectively; or

(iii) if the member has failed to comply with or breached any legislation regulating the conduct of members, including any applicable code of conduct.

(d)[(c)] If the Regulatory Board does not designate a chairperson for a committee, other than a disciplinary committee, the committee may elect a chairperson from among its members.

CLAUSE 21

1. On page 12, from line 21, to omit subsection (1) and to substitute:

(1) The committee for auditor ethics must consist of at least the following members appointed by the Regulatory Board [, taking into account, amongst other factors, the need for transparency and representivity within the broader demographics of the South African population]:

(a) Three registered auditors;

(b) three persons representing users of audits [audit services];

(c) one person representing an exchange which is the holder of a stock exchange license issued under the Securities Services Act, 2004 (Act No. 36 of 2004); and

(d) one advocate or attorney with at least 10 years’ experience in the practice of law.

CLAUSE 22

1. On page 12, from line 42, to omit the words preceding paragraph (a) and substitute:

(1) The committee for auditor ethics must consist of at least the following members appointed by the Regulatory Board [, taking into account, amongst other factors, the need for transparency and representivity within the broader demographics of the South African population]:

2. On page 13, from line 3, to omit subsection (2) and to substitute:

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

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

(b) to consider relevant international changes by monitoring developments by other auditing standard-setting bodies and sharing information where requested; and

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

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

(ii) liaising with the other committees of the Regulatory Board on standards to be maintained by registered auditors and by receiving feedback from such committees on areas where auditing pronouncements are needed;

(iii) ensuring the greatest possible consistency between auditing pronouncements and accepted international pronouncements; and

(iv) consulting with professional bodies on the direction and appropriateness of auditing pronouncements.[; and

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

(i) preparing comment on exposure drafts or discussion papers and replies to questionnaires prepared by the International Assurance and Auditing Standards Board or a successor body; and

(ii) nominating representatives to committees of the International Assurance and Auditing Standards Board or a successor body when requested to do so by the Regulatory Board.]

2. On page 13, after line 23, to insert subsection (3):

(3) The committee for auditing standards may assist the Regulatory Board to influence the nature of international auditing pronouncements by -

(a) preparing comment on exposure drafts or discussion papers and replies to questionnaires prepared by the International Auditing and Assurance Standards Board or a successor body; and

(b) nominating representatives to committees of the International Auditing and Assurance Standards Board or a successor body when requested to do so by the Regulatory Board.

CLAUSE 24

1. On page 13, from line 40, to omit section 24 and to substitute:

Investigating and Disciplinary committees

24. (1) The investigating committee must include individuals with significant legal experience.

(2) The [A] disciplinary committee—

(a) must be chaired by a retired judge or senior advocate;

(b) must consist of a majority of non-registered auditors; and

(c) may include [consist of] other suitably qualified persons [that are not associated with the auditing profession].

CLAUSE 28

1. On page 14, from line 11, to omit subsection (1) and to substitute:

(1) The Minister is the [exercises] executive authority of [over] the Regulatory Board in terms of the Public Finance Management Act and the Regulatory Board is accountable to the Minister.

2. On page 14, from line 12, to omit the words preceding paragraph (a) and substitute:

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

CLAUSE 29

1. On page 14, from line 36, to omit paragraph (b) and to substitute:

(b) A ministerial representative must act in accordance with the instructions of the Minister and may be reimbursed by the Minister for expenses in connection with his or her duties as a ministerial representative, but may not receive any additional compensation or salary for such duties.

CLAUSE 30

1. On page 14, after line 45, to insert subsection (2):

(2) The Minister must prior to issuing a directive referred to in subsection (1) -

(a) inform the Regulatory Board in writing of his or her intention to issue a directive and the reasons therefore; and

(b) afford the Regulatory Board an opportunity to submit grounds to the Minister as to why the directive should not be issued.

2. On page 14, from line 46, to omit subsection (2) and to substitute:

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

3. On page 14, after line 48, to insert subsection (4):

(4) Any directive issued or investigation undertaken in terms of this section does not supersede the independence and functions of the Regulatory Board.

CLAUSE 32

1. On page 15, from line 14, to omit subsection (1) and to substitute:

(1) A professional body must apply, on the prescribed application form, to the Regulatory Board for accreditation[.] in terms of section 33 or 34 .

CLAUSE 36

1. On page 16, from line 36, to omit paragraph (b) and to substitute:

(b) have made arrangements for their continuing professional development[.] , as recognized or prescribed by the Regulatory Board.

CLAUSE 37

1. On page 16, from line 47, to omit the heading and substitute:

Registration [Application for registration] of individuals as registered auditors

2. On page 16, from line 49, to omit subsection (1) and substitute:

(1) An individual [A person] must apply on the prescribed application form to the Regulatory Board for registration.

3. On page 16, from line 50, to omit subsection (2) and substitute:

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

(a) has [been certified by an accredited professional body as having] complied with the prescribed education, training and competency requirements for a registered auditor;

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

(c) has passed any qualifying examinations prescribed, recognised or conducted by the Regulatory Board;]

(b)[(d)] has arranged for his or her continuing professional development if the applicant is not a member of an accredited professional body;

(c) is resident within the Republic;

(d)[(e)] is a fit and proper person to practise the profession; and

(e) has met any additional requirements for registration as prescribed under section 6,

[(f) is competent to practise as a registered auditor if a period of more than five years has elapsed between the date on which the applicant complied with the education, training and professional development requirements for a registered auditor and the date of the application,]

the Regulatory Board must, subject to subsections (3) and (5), 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.

4. On page 17, from line 26, to omit subsection (5) and substitute:

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

CLAUSES 38 TO 40

[Sequence of clauses amended]

1. On pages 17 to 19 to change the numbering of sections 38 to 40:

38[40]. Registration of firms

39[38]. Termination of registration

40[39]. Renewal of registration and re-registration

2. On page 17, from line 30, to omit section 38 (now 39) and to substitute:

(1) Subject to subsection (3)[(4)], the Regulatory Board must cancel the registration of any registered auditor that is an individual and -

(a) who subsequent to registration becomes subject to any of the disqualifications mentioned in section 37(3);

(b) whose registration was made in error or on information subsequently proved to be false; or

(c) who prior to registration has been guilty of improper conduct because of which the registered auditor is in the opinion of the Regulatory Board not a fit and proper person to be registered.

[(2) The registration of a registered auditor automatically lapses if such auditor fails to pay a prescribed fee or portion thereof within the period prescribed by the Regulatory Board.]

(2)[(3)] Subject to subsection (3)[(4)], the Regulatory Board may cancel the registration of any registered auditor that is an individual and -

(a) whose estate is sequestrated or provisionally sequestrated or who enters into a compromise with creditors; or

(b) who ceases to be a member of an accredited professional body and does not within six months of such cessation provide written proof to the satisfaction of the Regulatory Board that such auditor has made arrangements for his or her continuing professional development.

(3)[(4)] Prior to cancelling a registration, 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 with cancellation.

(4) The registration of a registered auditor that is a partnership, sole proprietor or company automatically lapses if it no longer complies with section 38(1).

(5) The registration of a registered auditor automatically lapses if such auditor fails to pay a prescribed fee or portion thereof within the period prescribed by the Regulatory Board.

(6)[(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.

(7)[(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.

(8)[(7)] As soon as practicable after a 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.

3. On page 18, from line 4, to omit section 39 (now 40) and to substitute:

Renewal of registration and re-registration

40[39]. (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) A registered auditor whose registration was terminated in terms of section 39 or cancelled in terms of section 51(3)(a)(iv) may apply for re-registration in the prescribed manner to the Regulatory Board. [The Regulatory Board may prescribe conditions for the renewal of registration.]

4. On page 18, from line 9, to omit the heading and substitute:

Registration of firms as registered auditors

5. On page 18, from line 13, to omit paragraph (b) and to substitute:

(b) sole proprietors where the proprietor is a registered auditor; and

6. On page 18, from line 18, to omit the words preceding paragraph (a) and substitute:

(3) The Regulatory Board must register a company as a registered auditor on the payment of the prescribed fee if -

7. On page 18, from line 52, to omit subsection (4).

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

8. On page 18, from line 55, to omit subsection (5) and to substitute:

(4)[(5)] In its application to a company which is a registered auditor, section 20 of the Companies Act, 1973 (Act No. 61 of 1973), has effect with the exception of subsection (1)(b).

CLAUSE 41

1. On page 19, from line 4, to omit subsection (1) and substitute:

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

2. On page 19, from line 10, to omit paragraph (a)(i) and to substitute:

(i) perform any audit [auditing services];

3. On page 19, from line 17 to omit paragraph (b) and to substitute:

(b) Paragraph (a)(i) may not be construed as prohibiting any individual [person] from performing an audit [services identified in terms of this section,] if such audit [services] are performed in the service of or by order of and under the direction, control, supervision of or in association with a registered auditor entitled to perform the audit [auditing services] identified and who must assume responsibility for any audit [auditing services] so performed.

4. On page 19, from line 26, to omit paragraph (b) and to substitute:

(b) any member of a not-for-profit club, institution or association from acting as auditor for that club, institution or association if he or she receives no fee or other consideration for such audit [auditing services]; or

5. On page 19, from line 29, to omit paragraph (c) and to substitute:

(c) the Auditor-General from appointing any person who is not a registered auditor to carry out on his on her behalf any audit [auditing services] which he or she is in terms of the Public Audit Act, 2004 (Act No. 25 of 2004), required to undertake.

6. On page 19, from line 33, to omit subsection (4) and to substitute:

(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] -

(a) any person who is for the time being suspended from public practice under any provision of this Act; or

(b) any person who is no longer registered as a registered auditor as a result of the termination of his or her registration in terms of section 39(1)(c) or the cancellation of his or her registration in terms of section 51(3)(a)(iv) [name of the person having been removed from the register or being disqualified from registration by virtue of a finding of misconduct and sanction imposed on the person under section 51]; or

(c) any person who applied for registration under section 37(3), but whose application the Regulatory Board declined.

7. On page 19, from line 46, to omit subsection (6) and to substitute:

(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

(ii) in the case of a partnership, at least the present first names, or initials, and surnames of the managing partners or, if there are no managing partners, of the active partners or, where such a letterhead is used only by a branch office of the partnership, at least the present first names, or initials, and surnames of the managing partners at that branch office or, if there are no such resident partners, of the partners assigned to that branch office; or

(iii) in the case of a company, the names of the directors as required by section 171 of the Companies Act, 1973 (Act No. 61 of 1973);

(b) sign any account, statement, report or other document which purports to represent an audit [auditing services] performed by that [the] registered auditor, unless the audit [auditing services] were performed by that [the] registered auditor, under the personal supervision or direction of that [the] registered auditor or by or under the personal supervision or directions of that registered auditor and one or more of the partners, co-directors or co-members of the registered auditor, as the case may be, in accordance with prescribed auditing standards;

(c) perform audits [professional auditing services] unless adequate risk management practices and procedures are in place; [or]

(d) engage in public practice during any period in respect of which the registered auditor has been suspended from public practice; or[.]

(e) share any profit derived from performing an audit with a person that is not a registered auditor.

8. On page 20, from line 11, to omit subsection (7) and to substitute:

(7) The provisions of subsection (6)(b) do not apply in respect of an audit [auditng performed by another registered auditor in a partially services -

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

(b)] completed assignment which the previous registered auditor was unable to complete as a result of death, disability or other unforeseen [fortuitous] cause not under the control of the previous registered auditor, and which assignment the successor registered auditor is engaged to complete.[; or

(c) performed outside the Republic by a member of a professional body of registered auditors outside the Republic whose status, in the opinion of the Regulatory Board, is at least equal to that demanded by the Regulatory Board for the profession in the Republic.]

CLAUSE 43

1. On page 20, from line 41, to omit paragraph (a) and to substitute:

(a) Every firm’s name or title under which the registered auditor [or the registered firm practices] practices;

2. On page 20, in line 49, to omit subsection (3) and to substitute:

(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.

CLAUSE 44

1. On page 20, from line 54, to omit section 44 and to substitute:

Duties [General obligation] in relation to audit [services]

44. (1) (a) Where a registered auditor that is a firm is appointed by an entity to perform an audit, that firm must immediately after the appointment is made, take a decision as to the individual registered auditor or registered auditors within the firm that is responsible and accountable for that audit.

(b) The first name and surname of the individual registered auditor referred to in paragraph (a) must be made available to the entity on taking of the decision and to the Regulatory Board on request.

(2)[(1)] 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 or any supplementary information attached thereto [, including any annexure thereto,] which relates to the entity –

(a) fairly presents [represents] in all material respects the financial position of the entity and the results of its operations and cash flow; and

(b) are properly prepared in all material aspects in accordance with the basis of the accounting and financial reporting framework as disclosed in the relevant financial statements,

unless a registered auditor who is conducting the audit [auditing services] of an entity is satisfied about the criteria specified in subsection (3)[(2)].

(3)[(2)] The criteria referred to in subsection (2)[(1)] are—

(a) that the registered auditor has carried out the audit [auditing services] free from any restrictions whatsoever and in compliance, so far as applicable, with auditing pronouncements relating to the conduct of the audit;

(b) that the registered auditor has by means of such methods as are reasonably appropriate having regard to the nature of the entity satisfied himself or herself of the existence of all assets and liabilities shown on the financial statements;

(c) that proper accounting records in at least one of the official languages of the Republic have been kept in connection with the entity in question so as to reflect and explain all its transactions and record all its assets and liabilities correctly and adequately;

(d) that the registered auditor has obtained all information, vouchers and other documents which in the registered auditor’s opinion were necessary for the proper performance of the registered auditor’s duties;

(e) that the registered auditor has not had occasion, in the course of the audit [auditing services] or otherwise during the period to which the auditing services relate, to send a report to the Regulatory Board under section 45 relating to a reportable irregularity or that, if such a report was so sent, the registered auditor has been able, prior to expressing the opinion referred to in subsection (1), to send to the Regulatory Board a notification under section 45 that the registered auditor has become satisfied that no reportable irregularity has taken place or is taking place;

(f) that the registered auditor has complied with all laws relating to the audit [auditing services] of that entity; and

(g) that the registered auditor is satisfied, as far as is reasonably practicable having regard to the nature of the entity and of the audit [auditing services] carried out as to the fairness or the truth or the correctness, as the case may be, of the financial statements.

(4)[(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.

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

(6)[(5)] A registered auditor may not conduct the audit [auditing 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 a conflict of interest in respect of that entity, as prescribed by the Regulatory Board.

CLAUSE 45

1. On page 21, from line 47, to omit subsection (1) and to substitute:

(1) (a) A [nominated] registered auditor referred to in section 44(1)(a) of an entity that is satisfied or has reason to believe that a reportable irregularity has taken place or is taking place in respect of that entity must, without delay, send a written report to the Regulatory Board.

(b) The report must give particulars of the reportable irregularity referred to in subsection (1)(a) and must include such other information and particulars as the [nominated] registered auditor considers appropriate.

2. On page 21, from line 53, to omit paragraph (a) and to substitute:

(a) The [nominated] registered auditor must within three days of sending the report to the Regulatory Board notify the members of the management board of the entity in writing of the sending of the report referred to in subsection (1) and the provisions of this section.

3. On page 21, from line 58, to omit the words preceding paragraph (a) and substitute:

(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 -

4. On page 22, from line 6, to omit the words preceding paragraph (c)(i)(aa) and substitute:

(i) a statement that the [nominated] registered auditor is of the opinion that -

5. On page 22, from line 23, to omit the words preceding paragraph (a) and substitute:

(6) Where any entity is sequestrated or liquidated, whether provisionally or finally, and a [nominated] registered auditor referred to in section 44(1)(a) at the time of the sequestration or liquidation -

6. On page 22, from line 30, to omit the words preceding paragraph (b)(i) and to substitute:

(b) has not sent a report referred to in subsection (1) or (3), and is requested by a provisional trustee or trustee, or a provisional liquidator or liquidator, as the case may be, to send a report, the [nominated] registered auditor must as soon as reasonably possible -

CLAUSE 46

1. On page 22, from line 39, to omit section 46 and substitute:

46. (1) (a) This section applies to an audit performed within the meaning of paragraph (a) of the definition of "audit" in section (1) only.

ALTERNATIVE

(1) (a) The application of this section is limited to an audit performed within the meaning meaning of paragraph (a) of the definition of "audit" in section (1).

(b) Despite section 44(1)(a), for purposes of this section registered auditor means both the individual registered auditor and the firm referred to in that section.

(2)[(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, fraudulently or pursuant to a negligent performance of the registered auditor’s duties.

(3)[(2)] Despite subsection (2)[(1)], a registered auditor incurs liability to third parties who have relied on an 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 -

(a) knew, or could in the particular circumstances reasonably have been expected to know, at the time when the negligence occurred in the performance of the duties pursuant to which the opinion was expressed or the report or statement was made -

(i) that the opinion, report or statement would be used by a client to induce the third party to act or refrain from acting in some way or to enter into the specific transaction into which the third party entered, or any other transaction of a similar nature, with the client or any other person; or

(ii) that the third party would rely on the opinion, report or statement for the purpose of acting or refraining from acting in some way or of entering into the specific transaction into which the third party entered, or any other transaction of a similar nature, with the client or any other person; or

(b) in any way represented, at any time after the opinion was expressed or the report or statement was made, to the third party that the opinion, report or statement was correct, while at that time the registered auditor knew or could in the particular circumstances reasonably have been expected to know that the third party would rely on that representation for the purpose of acting or refraining from acting in some way or of entering into the specific transaction into which the third party entered, or any other transaction of a similar nature, with the client or any other person.

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

(5)[(4)] For the purposes of subsection (3)[(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

(b) the third party would act as contemplated in paragraph (a)(ii) or paragraph (b) of that subsection.

(6)[(5)] Subsections (2) or (3) [(1) and (2)] do not affect any additional or other liability of a registered auditor arising from -

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

(b) any other statutory provision or the common law.

(7)[(6)] A registered auditor may incur liability to any partner, member, shareholder, creditor or investor [client] of an entity [or to any third party] if the registered auditor fails to report a reportable irregularity in accordance with section 45.

(8)[(7)] A registered auditor may not through an agreement or in any other way limit or reduce the liability that such auditor may incur in terms of this section.

CLAUSE 47

1. On page 23, from line 36, to omit paragraph (b) and substitute:

(b) Despite the generality of paragraph (a), the Regulatory Board, or any person authorised by it, must at least every three years [annually] inspect or review the practice of a registered auditor that audits [firm registered as] a public interest company as defined in the Companies Act, 1973 (Act No. 61 of 1973).

2. On page 23, from line 42, to omit subsection (3) and substitute:

(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 Constitution [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 about a client.

3. On page 23, from line 52, to omit subsection (5) and substitute:

(5) Subject to the Constitution and any other law, no [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 this Chapter;

[(b) to a person authorised for the purpose by the Regulatory Board and who of necessity requires it for the performance of functions under this Act;]

(b)[(c)] if the person of necessity supplies it in the performance of functions under this Act;

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

(d)[(e)] at the written request of, and to, any appropriate regulator which requires it for the institution, or an investigation with a view to the institution, of any disciplinary action or criminal prosecution; or

(e) at the written request of, and to, any appropriate international regulator of audits and auditors, that requires such for the purpose of inspection with the consent of the registered auditor .

CLAUSE 48

1. On page 24, from line 6, to omit subsection (1) and substitute:

(1) The Regulatory Board must refer a [any] matter [brought against a registered auditor] to the investigating committee appointed under section 20 if the Regulatory Board -

(a) on reasonable grounds suspects that a registered auditor has committed an act which may render him or her guilty of improper conduct; or

(b) is of the opinion that a complaint[, charge] or allegation of improper conduct, whether prescribed or not, which has been made [brought] against a registered auditor by any person appears to be justified.

2. On page 24, from line 25, to omit paragraph (b) and substitute:

(b) obtain evidence to determine whether or not in its opinion the registered auditor concerned should [may] be charged and, if so, recommend to the Regulatory Board the charge or charges that may be preferred against that registered auditor.

CLAUSE 49

1. On page 24, from line 56, to omit section 49 and substitute:

49. (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, she or it [he or she] must, in writing, admit or deny the charge;

(c) that he, she or it [he or she] may, together with the admission or denial, submit a written explanation regarding the improper conduct with which he or she is charged; and

(d) of the period, which must be reasonable but may not exceed 60 days, within which his or her plea in terms of paragraph (b) must be submitted to the Regulatory Board.

(4) [(a)] If a registered auditor charged admits that he, she or it [he or she] is guilty of the charge, he or she is considered to have been found guilty of improper conduct as charged.

[(b) The Regulatory Board may, subject to section 51(2), impose a penalty contemplated in section 51(3)(a) or (b) on a registered auditor who has admitted guilt in terms of paragraph (a).]

(5) The Regulatory Board must on the expiry of the period referred to in subsection (3(d) refer the charge sheet and any plea received to the disciplinary committee to be dealt with in accordance with section 50, or, where the registered auditor admitted that he, she or it is guilty of the charge, to be dealt with in accordance with section 51.

(6)[(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.

CLAUSE 50

1. On page 25, from line 24, to omit section 50 and substitute:

50. (1) A disciplinary hearing must be conducted by the disciplinary committee constituted in accordance with section 24.

(2) (a) The disciplinary committee, for the purposes of this section, must [may] appoint a person to present the charge to the disciplinary committee, which person may be a member of the investigating committee [assist it in the performance of its functions].

(b) The disciplinary committee may at any time prior to or during the disciplinary hearing terminate and replace a person referred to in paragraph (a), if the committee is of the opinion that that person is not fulfilling his or her obligations.

(3) The disciplinary committee may at any time prior to the conclusion of a disciplinary hearing amend the charge sheet or a charge on the grounds that an error exists in its formulation or that a charge is not properly articulated in the original charge sheet.

(4)[(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.

(5)[(4)] (a) The disciplinary committee may, for the purposes of a hearing, subpoena any person -

(i) who may be able to give material information concerning the subject of the hearing; or

(ii) who it suspects or believes has in his or her possession or custody or under his or her control any information, including but not limited to any working papers, statements, correspondence, books or other documents, which has any bearing on the subject of the hearing, to appear before the disciplinary committee at the time and place specified in the subpoena, to be questioned or to produce any information, including but not limited to any working papers, statements, correspondence, books or other documents.

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

(i) be in the prescribed form;

(ii) be signed by the chairperson of the disciplinary committee or, in his or her absence, by any member of the disciplinary committee; and

(iii) be served on the registered auditor concerned personally or by sending it by registered mail.

(6)[(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 (5)[(4)], for the duration of the hearing.

(7)[(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 (5)[(4)].

(8)[(7)] At a hearing the registered auditor charged—

(a) (i) may personally be present at the hearing of the proceedings;

(ii) may be assisted or represented by another person in conducting the proceedings;

(iii) has the right to be heard;

(iv) may call witnesses;

(v) may cross-examine any person called as a witness in support of the charge; and

(vi) may have access to documents produced in evidence; and

(b) (i) may admit at any time before conviction that he or she is guilty of the charge despite the fact that he or she denied the charge or failed to react in terms of section 49(3)(b) or (c); or

(ii) may, in the case where he or she makes an admission in terms of subparagraph (i), be regarded as [deemed to be] guilty of improper conduct as charged.

(9)[(8)] The person referred to in subsection (2) may during a hearing—

(a) lead evidence and advance arguments in support of the charge and cross-examine witnesses;

(b) question any person who was subpoenaed in terms of subsection (5)[(4)]; or

(c) call anyone to give evidence or to produce any information, including but not limited to any working papers, statements, correspondence, books or other documents in his or her possession or custody or under his or her control, which such person suspects or believes to have a bearing on the subject of the hearing.

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

(i) without sufficient cause, fail to attend the hearing at the time and place specified in the subpoena;

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

(iii) without sufficient cause, fail to answer fully and satisfactorily to the best of his or her knowledge to all questions lawfully put to him or her; or

(iv) fail to produce any information, including but not limited to any working papers, statements, correspondence, books or other documents in his or her possession or custody or under his or her control, which he or she has been required to produce.

(b) A witness who has been subpoenaed must remain in attendance until excused by the chairperson of the disciplinary committee from further attendance.

(c) A witness who has been subpoenaed may request that the names of the members of the disciplinary committee be made available to him or her.

(d) The law relating to privilege, as applicable to a witness subpoenaed to give evidence or to produce a book, document or object in a civil trial before a court of law may, with the necessary changes, apply in relation to the examination of any information, including but not limited to any working papers, statements, correspondence, books or other documents, or to the production of such information to the disciplinary committee by any person called in terms of this section as a witness.

(e) A witness may not, after having been sworn in or having been affirmed as a witness, give a false statement on any matter, knowing that answer or statement to be false.

(f) A person may not prevent another person from complying with a subpoena or from giving evidence or producing any information, including but not limited to any working papers, statements, correspondence, books or other documents, which he or she is in terms of this section required to give or produce.

(11)[(10)] 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

(b) the certificate certifies that the investigation was lawful, reasonable and procedurally fair.

(12)[(11)] 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.

CLAUSE 51

1. On page 27, from line 10, to omit subsection (3) and substitute:

(3) (a) If the registered auditor charged is found guilty of improper conduct, or if he or she admits that he or she is guilty of the charge, the disciplinary committee must either -

(i) caution or reprimand the registered auditor;

(ii) impose on him or her a fine not exceeding the amount calculated according to the ratio for five [one] year’s imprisonment prescribed in terms of the Adjustment of

Fines Act, 1991 (Act No. 101 of 1991);

(iii) suspend the right to practice as a [registration of the] registered auditor [concerned] for a specific period; or

(iv) cancel the registration of the registered auditor concerned and remove his or her name from the register referred to in section 6.

(b) The disciplinary committee may impose [take decisions under] more than one of the sanctions referred to in [subparagraphs of] paragraph (a).

2. On page 27, from line 23, to omit subsection (4) and substitute:

(4) A disciplinary committee may [which makes a finding of guilty as mentioned in subsection (3) must] order any person -

(a) who admitted guilt in terms of section 49(4); or

(b) whose conduct was the subject of a hearing under section 50, [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.

3. On page 27, from line 28, to omit subsection (5).

4. On page 27, from line 36, to omit subsection (6).

5. On page 27, from line 42, to omit paragraph (b) and substitute:

(b) Where an order as to costs has been made under subsection (4) [or (5)], the amount thereof shall be recoverable by the Regulatory Board from the person concerned, and any amount so recovered must be paid into the funds of the Regulatory Board.

CLAUSE 52

1. On page 27, from line 50, to omit paragraph (b) and substitute:

(b) for the purposes of, or in connection with, the audit [auditing services] of any financial statement knowingly or recklessly expresses an opinion or makes a report or other statement which is false in a material respect,

2. On page 27, from line 54, to omit subsection (2) and substitute:

(2) Where the registered auditor failing to report a reportable irregularity or conducting the audit [auditing services] is a firm, subsection (1) applies to the individual registered auditor referred to in section 44(1)(a) [member of the firm conducting the auditing 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 referred to in section 44(1)(a) [conducting the auditing services].

CLAUSE 54

1. On page 28, from line 27, to omit subsection (1) and substitute:

(1) Any person who contravenes sections 41, 43 or 44 [section 41] 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 fine and such imprisonment.

CLAUSE 59

1. On page 30, in from line 42, to omit paragraph (b) and substitute:

(b) The Disciplinary Regulations as contained in the said Manual (excluding paragraphs 2.1 to 2.1.21, inclusive, thereof) must be deemed to have been prescribed by the Regulatory Board, to the extent that the Disciplinary Regulations are consistent with this Act.