REPORT OF THE AUDITOR-GENERAL TO PARLIAMENT ON THE
FINANCIAL STATEMENTS AND PERFORM4NCE INFORMATION OF THE SOUTH AFRICAN STATE
THEATRE
For the year ended 31 March 2007
2.3 REPORT OF THE AUDITOR GENERAL
ON THE FINANCIAL STATEMENTS
Introduction
1. I have audited the accompanying financial statements of the South
African State Theatre
which comprise the "statement of financial position as at 31 March 2007,
statement of financial performance, statement of changes in net assets and cash
flow statement for the year then ended, and a summery of significant accounting
policies and other explanatory notes, as set out on page [29] to [49].
Responsibility of the accounting authority for the
financial statements
1. The accounting authority is responsible fort the preparation and
fair presentation of these financial statements in accordance with Generally
Acceptance Accounting Practice and in the manner required by the Public Finance
Management Act, 1999 (Act No.1 of 1999). This responsibility includes:
·
designing, implementing and maintaining internal
control relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether due to fraud or
error
·
selecting and applying appropriate accounting policies
·
making accounting
estimates that are reasonable in the circumstances.
Responsibility of the
Auditor-General
2. As required by section 188 of the Constitution of the
Republic of South Africa, read with section 4 of the Public Audit Act, 2004
(Act No. 25 of 2004) my responsibility is to express an opinion on these
financial statements based on my audit.
3. I conducted my audit in accordance International Standards on Auditing,
General Notice 647 of 2007, issued in Government Gazette No. 29912 of May 2007.
Those standards required that I comply with requirements and plan and perform
the audit to obtain reasonable assurance whether the financial statements are
free from material misstatement.
4. An audit involves performing procedures to obtain audit evidence about the
amounts and disclosures in the financial statements. The procedures selected
depend on the auditor's judgement, including the
assessment of the risk of material misstatement of the financial statements,
whether due to fraud or error. In making those risk assessments, the auditor
considers internal controls relevant to the entity's preparation and fair
presentation of the financial statements in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the entity's internal controls.
5. An audit also includes evaluating the:
·
appropriateness of accounting policies used
·
reasonableness of accounting estimates made by
management
·
overall presentation of the financial statements
6. I believe that the audit evidence I have obtained is sufficient
appropriate to provide a basis for my audit opinion.
Basis of accounting
7. The entities policy is to prepare financial statements on the
basis of accounting determined by the
National Treasury, as set out in note 1 to the financial statements.
2S
Opinion
8. In my opinion, the financial statements present fairy, in all material
respects, the financial
position of the South African State Theatre as at 31 March 2007 and its
financial performance and cash flows for the year then ended, in accordance
with the basis of accounting determined by the National Treasury of South
Africa, as set out in note 1 to the financial statements, and in the manner
required by the PFMA.
Emphasis of matters
I draw attention to the following matters:
9.
Lack of control over parking income
It is not feasible for The South African State Theatre
to institute accounting controls over parking income and refreshment sales
prior to the initial entry of such income in the accounting records.
Accordingly, it was impracticable for us to extend the examination beyond
receipt actually recorded. Monthly rental received from contracts could be
verified.
OTHER MATTERS
I draw attention to the following matters that
are ancillary to my responsibilities in the audit of the financial statements:
10. Material non-compliance with applicable
legislation
10.1 Non-compliance with PFMA and Treasury Regulations
·
Section 51(1)(b): Effective
and appropriate steps were not taken to collect revenue due to the entity and
managing liabilities as debts have been outstanding for a period longer than 90
days and creditors for a period of 180 days.
10.2 Non-compliance with Generally Accepting Standards
·
Useful lives of assets were
not assessed for the year as requested by South African Statements of Generally
Accounting Practice, [AS 16 (AC 134) Property,
plant and equipment, and as a result certain assets are
disclosed in the financial statements at R1, while still in use.
11. Internal audit
I did not plan to place any reliance on the work
performed by internal audit section due to the internal audit work planned for
2006-07 only being done in March 2007. The reliance placed on the work
performed by internal audit will be revisited during the audit to be conducted in the 2007-08 financial year.
12. Material corrections made to the financial
statements submitted for auditing
Non-compliance with Generally Accepted Accounting
Practice (GAAP) regarding various accounting balances emanated from manager's
failure to properly assess the impact that accounting pronouncements have on
the entity and as a result the financial statements had to be amended.
The financial statements, approved by
the accounting authority, as submitted for auditing on 31 May 2007, have been significantly revised in
respect of the following misstatements identified during the audit:
·
Bonus provision were
understated by R71 807
·
South African Statements of
Generally Accepted Accounting Practice, IAS 39(AC 133) Financial
Instruments, requires that the receivable be initially recognises at its fair
value. Payables/receivables were not discounted, resulting in an adjustment of
R290 000
·
Short-term portion of deferred income was overstated
by R3 926 627
13. Progress on SCOPA resolutions
As previously reported, in terms of SCOPA resolution
137 of 2003, various organs of state were requested to take action to resolve
the outstanding issues relating to the loss of investments by the State Theatre
in 1999. Details of the progress are reflected on page 28 of the annual report.
OTHER REPORTING RESPONSIBILITIES
Reporting on performance information
14.
I have audited the performance information as set out on page 14 to 16
15.
The accounting authority has additional responsibilities as required by section
55(2)(a) of the PFMA to ensure the annual report and
audited financials statements fairly present the performance against
predetermined objectives of the public entity.
Responsibility of the Auditor-General
16. I conducted my engagement in accordance with section 13 of the
Public Audit Act, 2004 (Act No. 25 of 2004) read with General Notice 646 of
2007, issued in Governments Gazette No. 29919 of 25 May 2007.
17. In terms of the foregoing my engagement included performing procedures of
an audit nature to obtain sufficient appropriate evidence about the performance
information and related systems, processes and procedures. The procedures selected depends on the auditor's judgement.
18.
I believe that the evidence I have obtained is sufficient and appropriate to
provide a basis for the audit finding reported below.
Audit findings
19. A formal policy to govern the reporting against measurable
objectives has not been drafted or implemented.
APPRECIATION
20. The assistance rendered by the staff of the South African State
Theatre during the audit is sincerely appreciated.
A H Muller for Auditor-General
Pretoria
31 July 2007