Our regulatory and professional obligations
Non-Compliance with Laws and Regulations
The Independent Regulatory Board of Auditors Code (“IRBA Code”) includes, amongst other sections, section 225 that address Responding to Non-Compliance with Laws and Regulations, for members and associates in public practice.
We have a professional obligation to act in the public interest, and to act in order to (i) enable you to rectify, remediate or mitigate the consequences of the identified or suspected non-compliance with law or regulation; or (ii) deter the commission of the non-compliance or suspected non-compliance with law or regulation where it has not yet occurred.
“Non-compliance with law or regulation” (non-compliance) refers to an act of omission or commission, intentional or unintentional, committed by you or by those charged with governance, by management or by other individuals working for or under your direction which are contrary to a prevailing law or regulation.
Where we encounter non-compliance or suspected non-compliance we will seek to obtain an understanding of the matter and where appropriate will discuss the matter with you, the appropriate people, or those charged with governance in order for them to take appropriate action to rectify, remediate or mitigate the consequences of the non-compliance, deter the commission of non-compliance where it has not yet occurred or disclose the matter to appropriate authority where required by law or regulation or where considered necessary in the public interest.
We, in encountering non-compliance or suspected non-compliance, are also obliged to comply with applicable legislation or professional standards, which may require us to disclose the matter to an appropriate authority.
We also have a professional responsibility to consider whether your response to the instance of non-compliance or suspected non-compliance is adequate, and may determine that further action is necessary. Such further action may include, amongst other actions, the disclosure of the matter to an appropriate authority. We will disclose the matter to an appropriate authority only where, in our professional judgment, the extent of the actual or potential harm that is or may be caused to investors, creditors or employees or the general public is sufficient to justify the disclosure.
In exceptional circumstances, we may be required to immediately disclose the matter to an appropriate authority where we have become aware of actual or intended conduct that we have reason to believe would constitute an imminent breach of law or regulation that would cause substantial harm to investors, creditors, employees or the general public. In such circumstances we will discuss the matter with you as management or those charged with governance where it is appropriate to do so.
Notwithstanding the reporting requirements set out above, where our Engagement is for us to perform an audit of the sort referred to in paragraph (a) of the definition of “audit” in Section 1 of the Auditing Professions Act, 26 of 2005, as amended, or a review of financial statements as defined in Regulation 29 (4) of the Companies Act, 71 of 2008 we also have a reporting requirement towards Reportable Irregularities.
A reportable irregularity in terms of the Auditing Profession Act (“APA”) is any unlawful act or omission committed by any person responsible for the management of an entity, which: (i) has caused or is likely to cause material financial loss to the entity or to any partner, member, shareholder, creditor or investor of the entity in respect of his, her or its dealings with that entity; or (ii) is fraudulent or amounts to theft; or (iii) represents a material breach of any fiduciary duty owed by such person to the entity or any partner, member, shareholder, creditor or investor of the entity under any law applying to the entity or the conduct or management thereof.
In considering whether a person is responsible for managing an entity an auditor will have due regard both to the published details of the management structure thereof and to the de facto exercise of the requisite characteristics of control and management.
We are required by the APA to send a written report to the Independent Regulatory Board of Auditors (“IRBA”) if we are satisfied or have reason to believe that a reportable irregularity (as defined in the APA) has taken place or is taking place.
We undertake to notify the directors of such action within three days of sending a report to the IRBA. We will subsequently take all reasonable steps to discuss the report with the directors who will be afforded the opportunity to make representations in respect thereof.
We are also required to send a second report to the IRBA, within 30 days from the date on which the initial report was sent, which should contain a statement that we are of the opinion that:
a) no reportable irregularity has taken place; or
b) the suspected reportable irregularity is no longer taking place and that adequate steps have been taken for the prevention or recovery of any loss as result thereof, if relevant; or
c) the reportable irregularity is continuing.
If the IRBA receives a report that a reportable irregularity is continuing, they are required to notify any appropriate regulator of the details of the reportable irregularity to which the report relates and provide the regulator with a copy of the report.
Should a reportable irregularity have taken place or be taking place our audit report on the financial statements is required to be appropriately qualified.