This guidance will not only be useful to auditors, but also to accountants, directors of companies, financial managers, chief financial officers, and audit committee members, as it deals with information that is relevant and useful to all the parties involved in the appointment of auditors.
Section 90 of the Companies Act contains provisions applicable to the appointment of an auditor of a company or close corporation when a company or close corporation is required to be audited by the Act or when audited voluntarily if the company's memorandum of incorporation requires so. The provision of this section must be complied with in addition to those of the IRBA's Code of Professional Conduct for Registered Auditors.
In summary, section 90 prohibits an auditor from being appointed where certain specified services such as duties of an accountant, bookkeeper or related secretarial work of a company, were rendered to the same client.
According to Juanita Steenekamp, project director of Governance and non-IFRS Reporting at SAICA, it is important for directors and audit committee members to take note of the provisions in section 90 as it is not possible to contract out of this requirement and directors/audit committees cannot request the auditor to accept the appointment even though these services were provided in the previous year.
"The requirements promote and strengthen the principle of auditor independence, which is critical if investors and the public are to place reliance on auditors' reports. Reliance enhances confidence in our financial markets which, in turn, stimulates investment," says Bernard Agulhas, CEO of the IRBA.
The provisions of this section became effective from 1 May 2011 and guidance was first issued by the IRBA and SAICA in May 2013 in response to concerns expressed by the auditing profession, and to assist auditors to comply with the Companies Act.
