This article was prepared with the assistance of Lettie Janse van Vuuren, technical specialist at the SA Accounting Academy.
It’s been another busy month with regulatory and statutory changes stacking up in accountants’ in-trays. Here’s a brief rundown of some of the major changes. These will be covered in detail in the Monthly Compliance and Legislation Update webinar, hosted by Lettie Janse van Vuuren, on 22 May.
You can book the webinar and claim your CPD hours here: https://accountingacademy.co.za/events/compliance-and-legislation-update-may-2019
The Financial Matters Amendment Bill
The Financial Matters Amendment Bill was introduced in February, resulting in key changes to the Auditing Profession Act (APA) intended to strengthen independence and increase penalties for non-compliance. These are some of the key changes:
- No auditors in public practice can serve on the governing structure (ie. the Independent Regulatory Board for Auditors, or IRBA), thus strengthening independent regulation in the public interest.
- Clients cannot dismiss their auditor while the auditor is in the process of reporting a reportable irregularity, thereby strengthening the independence of the auditor and facilitating reporting of irregularities.
- The Investigating Committee has the power of subpoena, search and seizure to facilitate speedier investigations.
- The limitation on maximum fines have been removed.
- The disciplinary process has been adapted to facilitate a speedier response to auditors who have been referred to a hearing.
Fines imposed by the Financial Sector Conduct Authority
The Financial Sector Conduct Authority (FSCA) imposed an administrative penalty of R350,000 on 36ONE Asset Management for contravening section 65 (3) of the Collective Investment Schemes Act.
The FSCA found that from August 2015 to 1 March 2018, 36ONE promoted investment into two unapproved funds: the 36ONE Hedge Portfolio and the 36ONE Offshore Portfolio. During the period of the contraventions, both these funds were registered in the Cayman Islands and were not approved by the FSCA to be marketed to the South African public.
The FSCA also imposed an administrative penalty of R487,000 on Global Credit Rating for contravening the Credit Rating Agency Rules when it was found to have issued a favourable rating to a prospective client in a clear conflict of interest. Global subsequently won a tender from the client, which the FSCA demanded be disgorged to the tune of R487,000.
An administrative penalty of R300,000 was also imposed on NKC African Economics for issuing a credit rating when it was not authorised to do so. NKC submitted to the FSCA that the contravention of the Credit Rating Services Act was unintentional and was rectified when brought to its attention.
Yes, Sars can make you pay for your audit
In Purlish Holdings versus SA Revenue Services (Sars), the Supreme Court of Appeal found that Purlish had earned revenue between 2011 and 2014 but had not at that time registered as a VAT vendor. The company submitted “nil returns”, but Sars conducted an audit and found that the company owned substantial VAT. The company argued that Sars had not been prejudiced as it had paid provisional tax due to SARS in excess of its assessed tax liability by about R1.3 million, which could simply have been set off against the outstanding VAT amount. Penalties were also imposed by Sars for negligence.
In its ruling, the SCA confirmed that taxpayers may be held to account for the additional time and human capital employed by SARS when it conducts an audit.