Section in Bill

MATRIX OF PUBLIC COMMENTS TO THE AUDITING PROFESSION BILL

4 NOVEMBER 2005

Clause	Public Comment or Recommendation	Commentator	Amendments effected/ action taken.
Definitions, Section 1	•Definition Reportable irregularity – definition, "otherwise dishonest "is vague& too wide,	Delloitte, E&Y,KPMG, PAAB	- "otherwise dishonest" deleted on definition
	- fraud and theft to be linked to materiality	Deloitte, E&Y	No amendment made
	–Materiality provision too broad > limit to entity	E&Y, Telkom, PAAB, SAICA	Inserted "in respect of his, her or its dealings with that entity" to limit it.
	-reference to "any unlawful act " is too wide	ACCA, KPMG, PAAB, SAICA	No amendment made
	–Reportable irregularity definition should refer to materiality	PWC	No amendment made
	–Otherwise dishonest can have unintended consequencies	PWC	- "otherwise dishonest" deleted from the definition
	- Add definitions of "accreditation" and "recognition"	PAAB	Added definition of accreditation.
	- Amend definitions of a Registered auditor and firm	PAAB	No amendment made
	Definitions – "management board", "nominated registered auditor", "reportable irregularity" – lack of consistency and clarity	PAAB, SAICA	All three definitions have been amended for clarity.
	- Definition of public practice – reference to words "for a fee" problematic as some audits are for free	CPA	"for reward" was deleted to include free audits in the definition.

	•Definition of the audit per IFAC– part (b) is not appropriate	Delloitte, PWC,E&Y, ACCA,KPMG	Audit definition amended to bring it in line with accepted practice and to ensure that it stands the test of time.
	Definition of audit should be clarified as regards non financial consultancy services	ICSA, CFA	Audit definition amended to bring it in line with accepted practice and to ensure that it stands the test of time.
	Definition of audit should according to the Public Audit Act	ASB	Not accepted
	Definition of "nominated registered auditor" is unclear	KPMG, S Farber	Definition amended to make it more clearer.
S2	Add S2 (f) co-operative relationships with other international regulators	PAAB	Proposal accepted but included as part of section 4 ‘functions of the RB’
S4	S4- Additional function: RB to determine the need, nature & level of indemnity insurance for registered auditors	ASB	No amendment made
	- Add under S4 … to conduct inspection required…	PAAB	Proposal accepted and section amended as such.
	- Some functions with a must should be a may	PAAB	Proposal accepted and sections amended as such.
S7	S7(1)(a)- consideration for students when withdrawing recognition of educational institution (how to make it known)	KPMG	No amendment made
	- S7(1)(a)_ Partial accreditation should be allowed	PAAB	No amendment made
	- S 7(1)(b)- RB should not conduct exams as per s37.	ACCA	No amendment made
	- S7(1)(b)- RB to not be referee & player > RB set exams only if no accredited body is available	SAICA	No amendment made
	- S 7(1)(e)- provide for alternative supervision arrangement for auditor training > not just by registered auditors	ACCA	No amendment made
	- S7(1)(f)- RB to only prescribe competency requirements for RAs	BB Bolter	No amendment made
	- S 7(1)(g)- to be deleted –RB should not be involved in this level of detail	ACCA	No amendment made
	- S7(2) RBA should be allowed to recognise education and training programmes of an educational institution, in part or in full.	PAAB	No amendment made
	- s 7- Some functions with a must should be a may	PAAB	Proposal accepted and sections amended as such.
S8	S8(1)(d)- to be deleted-RB should not charge exam fees as it should not be setting exams.	ACCA	No amendment made
	- replace 8(1)(g) other fee or levy it considers necessary.	PAAB	No amendment made
S9	Add under S9(b) … and remuneration payable	PAAB	Proposal accepted as is. Added the words "remuneration or allowance"
S10	S 10 Auditing standards committee must have the power to issue standards	E&Y	No amendment made
	S10(1)- gives the RB powers and rights that are inappropriate.	SAIGA	No amendment made
	S10(2)(b)- Alteration of rule should be published for public comment in the Gazette	ICSA	No amendment made
S11	S11(2)- Minister must appoint competent , able and willing persons to RB	ICSA	Added the words "competent" in the section.
	- S 11(4)- Provide for a minimum no of RA in RB	PWC, E&Y, KPMG	Proposal accepted, provided specifically for the RB to include RA’s
	-Maximum 10% of RA’s on RB	SAIGA	Proposal not accepted,
	•- -operatives act call for audits and RB co should have reps of co-ops.	P Staasen	Proposal not accepted
	-RB should contain at least 2 academics.	A Du Toit	Proposal not accepted
	- S11 clarify or avoid the word "executive" in it’s context	PAAB	Proposal not accepted
S12	S12(1)- A third of members of RB must retire annually by rotation, and not after 2 years as per bill.	ASB	Proposal not accepted
	-S12(1) Consider 3 year term as opposed to 2 years	PAAB	Proposal not accepted
S13	•S 13(1)(f) – improper misconduct should be of a serious nature	Delloitte	Proposal not accepted
S15	S15-•Public should have full access to proceedings and records of board and records of RB, DC and ASC.	SAIGA	Proposal not accepted
	-Provide for minimum notice period of 14 days for RB meetings	ICSA	Proposal not accepted
	-Provide section on procedure for disclosure of conflict of interest by members of RB	ASB	Proposal not accepted
S16	S 16 – Should require an affirmative vote of two thirds instead of majority vote	PWC	Proposal not accepted
S19	•S 19(3) – IRBA not revoke DC decisions	Delloitte	Proposal not accepted
S20	•S20 Auditing standard setting and ethics committees should be separate bodies from the RB	PWC	Proposal not accepted
	- Add under S20 - (2)(f) an Inspection Committee	PAAB	Accepted, inspection committee has been added.
	- S20(2)- State composition of education and investigation committees -Outline functions and scope of committee.	SAIGA, Du Toit	Proposal not accepted.
	-RB must appoint competent , able and willing persons to committee.	ICSA	Proposed change accepted.
	-S20(5)- committee must operate under written terms of reference	ICSA	Proposal not accepted
S21	S21(1)-Ethics committee, restrict "practicing auditor" to one and introduce 2 academics.	SAIGA	Proposal not accepted
	-RB must appoint competent , able and willing persons to committee	ICSA	Proposed change accepted.
S22	S22(1)- Composition of auditing standards committee has inadequate representations of practising auditors	ACCA	Proposal not accepted
	-Reduce RAs in standards committee to one and increase academics	SAIGA, Du Toit	Proposal not accepted
	-RB must appoint competent , able and willing persons to committee	ICSA	Proposed change accepted.
	-Registrar of Banks and FSB to be excluded from auditing standards committee	ASB	Proposal not accepted
	-Clarify whether nominated alternates can be appointed or not	ASB	Proposal not accepted
S21, 22&24	Composition of committees to be specified in Regulations , not in APB	SAICA	Proposal not accepted
S24	S24- Section to indicate purpose, functions, and composition of committee	ASB	Proposal not accepted
	S 24(b) – reference to "non-registered auditor" must be clarified ,	Delloitte, BB Bolter	Amendment made, changed to not a registerd auditor.
	-presence of RA in DC required.	Delloitte, SAICA	Proposal accepted, DC composition must include RA’s
	-Minimum no of RAs required in DC	E&Y	Proposal accepted, DC composition must include RA’s
	-reference to non-registered auditors to be replaced with persons who are not registered auditors	ICSA	Amendment made, changed to not a registered auditor.
S25	-S 25 Funding – majority of funding ex parliament	PWC,KPMG	The bill already provides for funding from parliament
	- Funding of RB should allow for independence & reciprocity with international regulators	E&Y,KPMG	The bill already provides for funding from parliament
S28	- S28- RB should be listed as a public entity in terms of PFMA schedule 3a.	SAIGA	The bill already provide for the entity to be subject to the PFMA.
	- S28 clarify or avoid the word "executive" in it’s context	PAAB	Calrified, and now used in the same context as the PFMA
S30	S30(1)- term ‘auditing profession " should be defined	BB Bolter	Not accepted
S32	S 32 - Auditor general should be subject to accreditation requirements as well	E&Y	Not accepted
	S32(2)- RB must accredit interms of s33&S34 and not according to "its requirements"	ACCA	Accepted the drafting error
S33	S33- To add requirement that RAs must comply with pronouncements of committees of RB	ACCA	Not accepted,
	-Professional body that has been refused accreditation must be able to seek redress.	SAIGA	Not accepted
S34	S 34- review of accreditation by RB every 5 years not annually	ACCA	Not Accepted
S35	S35(2)(d)- term ‘auditing profession " should be defined	BB Bolter	Not accepted
S36	S36(2)(b)- cross reference continuing professional development requirements to S33(2)(b)	ACCA	Accepted in part
S37	S37(2)(a) – RB should determine whether or not a person meets the competency requirements	PAAB	Amendment done to clarify that RB must be satisfied that individual has complied with prescribed education, training & competency requirements for a RA.
	S37(2)(b)- completion of training contract should not be an absolute requirement for registration as an auditor	ACCA, SAIGA	Proposal not accepted.
	S37(2)(c)- RB not to set exams	ACCA	Proposal not accepted.
	S37(2)(c) Should be deleted	SAIGA	Subsection deleted because the requirement is outlined in S37(2)(a).
S38	S38- there is no specific subsection that deals with re-registration of individuals after termination of registration	PAAB, P Stassen	The section 40 (previously S38) which deals with renewal of registration has been amended to include a subsection that allows the re-registration of auditors.
S39	S 39(1) – Renewal of registration- 3months rule is unreasonable.	Delloitte	No amendment done
	S39(2)- To accommodate the renewal of registration of auditor that had been accredited by a body that has since lost its accreditation status	ACCA	No amendment required .This matter has been dealt with adequately in S36(1) &S36(2).
S40	•S 40(1)- Multi disciplinary practices should be allowed	Deloitte, E&Y,SAICA, SAIGA.	No amendment done, as the matter has not been finalized.
	S40(1)-Allow 75% RAs and 25% non-RAs in multidisciplinary practices	SAICA	No amendment done, as the matter has not been finalized.
S41	•S41(1) is discriminatory as name ‘auditor’ is a generic term.	SAIGA	No amendment done
	- bill should only regulate external company auditors.	SAIGA, CPA	Proposal not accepted
	- S41(1) discriminates against Certified Public Accountants (CPA)	GC Cloete	No amendment done
	- S 41 Amend other legislation to provide for all auditors to be registered in terms of this act	PAAB	No amendment made
	- S 41(1) Prohibition on the provision of accounting services is unacceptable.	CPA	No amendment made
	- S 41(1) Inclusion of CPA and term ‘accountant’ in bill irrelevant	CPA	No amendment made
	- S 41(1) The restriction on the usage of ‘public accountant ‘ must be removed	CPA	No amendment made
	- S 41(1) The bill should provide a comprehensive list of potentially confusing names	CPA	No amendment done.
	- s 41(2) audits of small companies should not only be open to CA’s	ICSA	Proposal not accepted
	•s 41(2)CPA’s should be allowed to conduct assurance engagements.	GC Cloete	Proposal not accepted.
	•S 41(3) implies a restriction on the use of term "accountant". The Bill shouldn’t restrict the use of term "accountant", as it is a generic description.	Delloitte	No amendment done.
	- S 41(4)( c)implies that RB requires RA’s to seek consent to employ any person who has applied for registration as per S37 instead of those persons that have committed serious misconduct	Delloitte	Have amended S41(4)(c) to indicate that consent is only required for those persons that were not allowed to register as per S37(3).
	- Auditor General to be subject to S41(2)(b) & S41(3)(c)	E&Y	No amendment done
	- S41(6)(c)-"Professional auditing services "should replaced with "audit services".	ICSA	Amendment done to replace with term’ audit’
S43	- An annual return of specific information should be submitted to the RB	PAAB	No amendment done
S44	S44(1) –the phrase ’ including an annexures thereto ‘ is misplaced	PWC	Amendment done to clarify the phrase to ‘any supplementary information attached thereto’
	S44(1) -‘Fair representation’ should be ‘fair presentation’	PWC	Amendment done
	‘Audit services’ should replaced with ‘audit.’ Throughout the section	Delloitte	Amendment done
	-Auditor duties should be linked to Auditing standards	E&Y	No amendment done
	S44(2)(a)–Use of term "without any restrictions" not right	PWC	No amendment done
	S44(2)(a)- Use of term "without any restrictions" is ambiguous	ACCA	No amendment done
	S44(2)(b)-Test existence of only material and not all assets & liabilities	PWC, E&Y	No amendment done
	S44(2)(c)- Add the fact that proper accounting records are to be kept in one of the official languages , using the currency of the Republic	PAAB	Amendment done
	S44(2)(f) -testing for compliance with all laws is impractical S44(4)-	KPMG	No amendment done
	S44(2)(g)- Use of the words truthfulness & correctness not IFAC compliant.	KPMG	Deleted the term ‘truth’.
	S44(2)(g)- Use of the words truthfulness & correctness not acceptable	PWC, Delloitte	Deleted the term ‘truth’
	S44(4)-RA’s who perform work in terms of s44(4) must disclose to shareholders.	SAIGA	No amendment done
	S44(5)–Conflict of interest should be as defined in IFAC	PWC,	No amendment done
	S44(5)Conflict of interest: 2 year look back unreasonable.	PWC, Deloitte, E&Y,KPMG,PAAB	Two-year look-back has been deleted.
	S44(5)-Include reference to independence of auditor	ACCA	No amendment done
S45	S45 Reportable irregularity _overlapping reporting with other legislation.	Delloitte,KPMG	No amendment done
	- S45-Reportable irregularity should be reported after 7 days to allow for consultation	ICSA	Proposal not accepted.
	- S45-Reportable irregularity should be reported after 30 days to allow for consultation	Telkom,PAAB,SAICA	No amendment done as S45(3) accommodates this proposal.
	- Reporting without delay removes the opportunity to discuss with client. This is not acceptable.	PAAB,SAICA	No amendment done
	–Reporting process for RI impractical & unclear	PWC, E&Y,KPMG	No amendment done
	–Transfer section 20(5) of PAA Act as is into the APB	PWC	Proposal not accepted.
	–Section will not achieve the serving of public interest	PWC	No amendment done
	-Reference to "appropriate regulator" to be clarified- does this include the police ?	ACCA	No amendment done. Police are the law enforcement agents.
	- Nominated registered auditor reference should be replaced with "engagement partner"	PWC	Term ‘nominated registered auditor’ has been deleted. Reference is made to an RA
	-usage of nominated registered auditor (read with the Companies Amendment Bill) suggests that the reporting of reportable irregularity would only be relevant for public interest companies	S Farber	Term ‘nominated registered auditor’ has been deleted. Reference is made to an RA.
S46	• s46 Limitation of liability – unlimited only for statutory audits	Delloitte	S46 has been amended to indicate that the unlimited liability of the auditor only applies to statutory audits. The RAs can limit their liability on other assignments.
	S46- Allow for limitation of auditor’s liability on statutory audits	KPMG	S46 has been amended to indicate that the unlimited liability of the auditor only applies to statutory audits. The RAs can limit their liability on other assignments.
	S46- Allow proportionate liability with management	PWC, E&Y, ACCA	S46 has been amended to indicate that the unlimited liability of the auditor only applies to statutory audits. The RAs can limit their liability on other assignments.
S47	•S47(1)(b) – Audit firms and not the public interest company should be inspected.	PWC, E&Y,KPMG	Amendment done to clarify that audit firms auditing public interest companies should be inspected.
	- Amend S47(1)(b) to require inspections to every three years instead of annually	PAAB	Amendment done
	S47- Inspections to be appropriate & transparent. -public reporting of results of inspections is required .	Delloitte	Amended S47(3)&(5) to state that the inspections will be subject to the constitution and any other law. This includes the PAIA.
	•S47(2) funding of the inspection costs not by RA.	PWC	No amendment done
	S47- inspections are not compliant with PAIA& principle of ‘legal privilege’	KPMG, ICSA	Have amended S47(3)&(5) to state that the inspections will be subject to the constitution and any other law. This includes the PAIA.
	S47 conflict with PAIA.	P Stassen	Have amended S47(3)&(5) to state that the inspections will be subject to the constitution and any other law. This includes the PAIA.
S48	•S 48 – requesting subpoena powers for the Investigation Committee	Delloitte	No amendment made
	S48 conflict with PAIA.	P Stassen, ICSA	No amendment done
S50	-allow for panel from which to choose the DC	Delloitte	No amendment made. Composition of DC is adequately dealt with in S24.
	- Disciplinary process must be speedy, fair, for public interest	SAICA	No amendment required
	-Disciplinary process: make it to be a regulation,	SAICA	Proposal not accepted.
	-Minor cases need simpler process - plea bargaining to be allowed	SAICA	Amendment done on S19(1) to ensure that minor cases are dealt with in an efficient manner. Powers are delegated to CEO or employee of RB to deal with minor cases.
	-erodes legal privilege of the witness	SAICA	No amendment done
	Self -incriminating evidence should be avoided. S50(4)(b)-	P Stassen, ICSA	No amendment required
	S50(4)(b)(iiii)-Subpoena powers of DC should not only be limited to registered auditors, must include ‘any person’	BB Bolter	Amendment made to allow a subpoena to be served on any person concerned.
	- S 50(9) – The witness’s right to remain silent when questioned should be guaranteed.	Delloitte, PAAB	No amendment required, adequately provided for in S50(9)
	-Need specific provision for complaint to be discharged quickly	Delloitte	Amendment done on S19(1) to ensure that minor cases are dealt with in an efficient manner. Powers are delegated to CEO or employee of RB to deal with minor cases.
	-Need provision to settle a complaint by consent order	PAAB	Amendment done on S19(1) to ensure that minor cases are dealt with in an efficient manner.
S51	-S51(3)(a)(ii)- Penalties to be clarified, may not be enough. RB should annually determine the penalties.	PAAB	Amended fine to be according to ratio for five years imprisonment instead of the one year’s imprisonment.
	•S51-Make provision for right of appeal on DC decisions required	ACCA, ICSA	Proposal not accepted
S52	•S52(1)(a) – Failure to "Knowingly or recklessly" report a reportable irregularity should be an offence. Amend section accordingly.	PWC	No amendment done.
	- S52(1)- failure by an auditor to sign an audit report as a "registered auditor" or list such status on stationery to be an offence	ACCA	Proposal not accepted.
	- S52(3)- penalty is too harsh	SAICA, PAAB	No amendment done
S54	S54- Impose penalty if firm doesn’t comply with RB inspection requirements	PAAB	No amendment required. Already catered for in S54.
	-Impose penalty if registered auditors share profits with persons not registered as auditors	PAAB	S41(6)(e) has been added to state that a RA may not share profits derived from performing audit with an person that is not a RA. The contravention of S41 is an offence.
S59	S59- Appropriate & workable system of accreditation to be set up within 12 months of passing of Bill.	ACCA	Proposal not accepted
	- Apartheid era and outdated PAAB policies and documents should not be recognized under the bill	SAIGA	No amendment made.