10 Most critical steps for accounting officers

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Broadly speaking, to qualify, as an accounting officer a person should be a member of a recognised professional body, which, as a condition of membership, requires relevant subjects in accounting, enforces a code of conduct, and requires its members to maintain CPD hours.

An accounting officer is a person who meets the qualification requirements as detailed in section 60 of the Close Corporations Act, 1984 and as a result, may issue an accounting officer and other reports on the financial statements and information of close corporations and other entities.

SAIBA issued a comprehensive guide to their members that perform accounting officer work. This guide is available at www.saiba.org.za

Below we have highlighted the 10 most important things accounting officers should do when performing accounting officer engagements:

Number 1

Accounting officers are not bookkeepers or accountants. They are accounting officers. This sounds silly but it is the one thing that many of us forget. Bookkeepers do the books, accountants prepare financial statements, and accounting officers issue accounting officer reports.

Number 2

Accounting officers have to report to their clients in terms of a statutory requirement. You cannot add or subtract anything from this requirement. It is therefore a mistake to report on the internal controls of the entity or to not consider the accounting policies. As an accounting officer, the Close Corporation Act does not require you to verify internal controls or the existence of assets. You are require to state whether the financial statements agree with the accounting records, conclude whether the accounting policies are appropriate, and report a contravention of the Act if you become aware of this.

Number 3

Always interview the client before starting your work. Interviewing is one of the four pillars on which you base your final report. This interview will reveal the type of client you are working with, and with give you an impression whether the client has a formal bookkeeping system in place, whether you can rely on this system, whether the client is a going concern, whether you need to refer to source documents or whether you need only to rely on the prepared trial balance and ledgers.

Number 4

Agree with the client the procedures you will need to do to issue an accounting officer report. These procedures because they are limited, will never allow you to issue an audit or review opinion. They are also not prescribed in any statute or standard. This means you and the client can pretty much agree the extent of the procedures to perform. Usually accounting officers agree to do the following:

  1. Read the financial statements and trial balance to identify obvious mistakes
  2. Agree the trial balance, ledgers, and financial statement
  3. Agree various reconciliations or balances with the ledgers. These may include the bank recon, VAT returns and recons, and PAYE and other tax recons
  4. Agree the various registers with the ledgers. These include the assets, inventory, debtors and creditors register.
  5. Agree the largest debtor and creditor invoice to confirm inclusion in the registers
  6. Agree the calculation of the lease payments and interest with the contract amounts and the ledger amounts
  7. Consider the appropriateness of the accounting policies by considering the clients pubic interest score and if a financial reporting standard is prescribed by the Companies Act. In addition consider who will be the users of the financial statements as this may require the use of a specific financial reporting standard and consider going concern as this impact disclosure.
  8. Review the work that you performed and consider if anything indicates to you that the client contravened the Act. If this occurred report the fact to the client and include in your report

Number 5

Accounting officer do not have to be independent of the client. They can act as bookkeeper, accountant and accounting officer to the client.

Number 6

Not all statutes that require the appointment of an accounting officer require you to do the same thing that you would do for a close corporation. For example the Non Profit Organisation Act (NPO) requires you to assess compliance to the NPO Act. This is a unique process that requires knowledge of ISAE 3000 and/or ISRS 4400.

Number 7

You are required as an accounting officer to keep records of the evidence that you gather whilst performing the agreed upon procedures. The evidence is used to form your conclusion on which you base your report. Without evidence you wont be able to defend your conclusion. Evidence is gathered in working papers. Working papers document the procedures that you performed, the evidence gathered and the conclusion you reached. Documentation is the second pillar of a successful accounting officer engagement.

Number 8

Obtain a representation letter from your client. This letter is issued by the client to you and is a confirmation by the client that he has disclosed all necessary information to you, that he is responsible for the bookkeeping system and the selection of the accounting policies and the preparation of the financial statements. The client also confirms and verifies all the assets and liabilities and taxes paid as represented in the financial statements. Obtaining a representation letter is the third pillar of a successful accounting officer engagement.

Number 9

Review your work and decide on the type of report that you will issue. Accounting officer cannot qualify their reports, as they do not give opinions. Accounting officers report to the entity based on factual findings. The process of making factual findings is agreed to with the client. This means you do not do any substantive testing, risk assessments or materiality calculations. Your accounting officer report merely states facts based on your findings. Either the financial statements agree with the records, the accounting policies are appropriate, or they are not. If there is no agreement or the policy is not appropriate then this usually implies a contravention of the Act. You will then list in your report the relevant section of the Act that was contravened. Issuing a correct report is the fourth pillar of a successful accounting officer engagement

Number 10

Ensure that your engagement letter, your working papers, the representation letter and the final report are in agreement. You have to show that the procedures that you agreed to in the engagement letter is actually reported on, in you accounting officer report.