CIDB Registration Requirements: Focus on Financial Statements
The Construction Industry Development Board (CIDB) sets out specific requirements for entities seeking registration. One of the critical aspects of the registration process involves the submission of financial statements. This article aims to clarify who should compile these financial statements and the auditing requirements based on the type of entity.
Who Should Compile Financial Statements?
The compilation of financial statements varies depending on the type of entity:
Sole Trader: A bookkeeper may compile the financial statements, but they must adhere to Generally Accepted Accounting Principles (GAAP) to be acceptable.
Public Company: Annual financial statements must be audited by a registered auditor.
Private Company: The need for an audit depends on the company's public interest score. Companies with a high public interest score must have their financial statements audited, while others may only require a review or could be exempt from both audit and review.
Other Companies: These can choose to have their financial statements audited voluntarily or independently reviewed according to the regulations set by the Minister.
Audit Requirements Based on Public Interest
The requirement for auditing private companies depends on the public interest score, which reflects the level of public interest in the company’s operations. Companies operating in sectors that involve significant public interaction or impact typically need their financial statements audited. Those falling outside this scope may opt for a review or even be exempt from audit requirements.
Public Interest Score
To determine an entity’s Public Interest Score section 29 of the Companies Act, 71 of 2008 the following must be considered in calculating the number of points:
Turnover: One point for every R1m in turnover, plus
3rd Party liabilities: One point for every R1m owed in 3rd party liabilities either that equity, plus
Employees: One point for every employee in an average year, plus
Beneficial interest owners: One point for every beneficial interest owner
Timing of Financial Statements
When applying for CIDB registration within six months after the end of the company’s financial year, applicants can use the previous year’s financial statements. This allowance acknowledges that the latest financial statements might not yet be available.
Institutions for recognised for Accounting Officers
The accounting officer compiling the financial statements must be registered with one of the following institutions:
The Chartered Institute of Management Accountants (CIMA)
The South African Institute of Chartered Accountants (SAICA)
The Southern African Institute of Chartered Secretaries and Administrators (ICSA)
The Association of Certified Chartered Accountants (ACCA)
The Southern African Institute for Business Accountants (SAIBA) renamed Chartered Institute for Accountants (CIBA)
The South African Institute of Professional Accountants (SAIPA)
The Institute of Administration and Commerce in South Africa (IAC)
Accountants and auditors registered in terms of the Auditing Profession Act 26 of 2005, with (IRBA)
Why Only These Institutions?
The Minister of Trade and Industry periodically publishes a list of institutions whose members are qualified to perform the duties of an accounting officer. Only members of these specific institutions are accepted to ensure a high standard of financial reporting and compliance. Assessors confirm the practice numbers of the accounting officers and auditors with their respective institutions to maintain the integrity of the financial statements.
Audit and Accounting Officer Reports
For audited financial statements, the auditor’s report must clearly specify the audited pages. If compiled by an accounting officer, their report must confirm adherence to the framework used or generally accepted accounting principles. This ensures transparency and consistency in financial reporting.
Checklist for Preparing and Submitting Financial Statements
When preparing and submitting financial statements for CIDB registration, ensure the following:
Provide Details of Your Accounting Officer: Include the required details in Section D of the application form. This section is crucial.
Correct Accounting Officer’s Details: Section D must contain the details of the accounting officer who compiled your financial statements. Any other person's details will make your application non-compliant.
Registered Accounting Officer: Use an accounting officer registered with a recognised accounting body. Do not use a tax practitioner.
Good Standing of Accounting Officer: Ensure your accounting officer is in good standing with their registered accounting body. If not, your application will be deemed non-compliant.
Adherence to GAAP: Compile financial statements according to a framework relevant for the entity (IFRS/IFRS for SME’s )or Generally Accepted Accounting Principles (GAAP).
Submit Proper Financial Statements: Do not submit draft statements. CIDB does not accept them. Management accounts are also not acceptable.
Supporting Documents for Non-Audited Statements: If your financial statements are not audited, provide supporting documents such as bank statements or VAT returns (VAT 201 and VAT statements of account).
Correct Financial Year: Submit financial statements for the correct financial year, including any supporting documents. The correct financial year is the 12 months preceding your application for registration.
Complete Bank Statements or VAT Returns: Submit all pages of the statements. Partial statements will render your application non-compliant.
Bank Stamp on Bank Statements: Ensure your bank statements have a bank stamp.
Tax Accounting: Make sure your accountant has accounted for tax in your financial statements.
Accurate Figures: Ensure the accountant has transferred figures correctly in the financial statements.
Conclusion
Understanding the CIDB's requirements for financial statements is crucial for entities seeking registration. Properly compiled and/or audited financial statements not only fulfill regulatory obligations but also instill confidence in stakeholders.
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