Once again we take a look at the legal and regulatory changes over the last month as they apply to auditors and accountants. This report was compiled with the assistance of technical advisor Lettie Janse van Vuuren.
Order the recording here for the 30 October webinar where Lettie will guide you through the key changes for the last month.
Here’s a snapshot:
- IRBA adopts new ISA 540 standard for the audit of accounting estimates
- SARS issues Employer Reconciliation guide
- Financial Sector Regulation Act introduces ombud for the sector
- Comments for National Health Insurance Bill extended to 29 November
- RICA Act declared unlawful
- Joburg High Court outlines ways for over-indebted customers to rehabilitate themselves
- Special investigating unit appointed to look at maladministration at Passenger Rail Agency of SA (Prasa)
The Big 5 changes:
- Financial Sector Regulation Act repealed the Financial Services Ombud Schemes Act and came into effect in stages, with the latest being implemented on 1 September 2019. This latest change introduces an ombud system for the financial sector and requires affected companies to pay fees and levies for the upkeep of the ombud)
- Draft Housing Consumer Protection Bill 2019 is open for comment. The bill is controversial in that it seeks to improve building quality standards by extending the powers of the National Homebuilders Registration Council (NHBRC). Here’s an explanation of the bill’s possible impact.
- National Health Insurance Bill. This bill aims to provide universal health coverage free at the point of care, but has been widely criticised as a bill that the country cannot afford. The deadline for comments has been extended to 29 November 2019. Here is the bill.
- National Regulator for Compulsory Specifications Act (affecting canned meat products). The purpose of this act is to set up a regulator for compulsory specifications and technical regulations to protect human health and the environment.
- Special Investigating Units and Special Tribunals Act: in terms of a government gazette notice issued last month, a special investigating unit has been set up to examine improper conduct and maladministration at Prasa and recover any misappropriated monies.
Other Acts and articles:
- Director duties and Generally applicable laws / Legal register / Regulatory universe: SA Institute of Professional Accountants provides a handy summary of the laws that govern what is confidential information and what isn’t.
- Reduction in the Prescribed rate of interest to 10% (from 1 September 2019). According to the Prescribed Rate of Interest Act, interest on debts where no rate is prescribed is calculated at the repo rate plus 3.5%. The prescribed rate of interest applies to all debts unless a different rate is set by law, by trade custom or by agreement between the parties. Here’s a link with more detail.
- Why the RICA Act (Regulation of Interception of Communications and Provision of Communication-Related Information Act) was found unlawful. This was after a journalist’s phone was unlawfully intercepted during an investigation into former President Jacob Zuma. The court found the Act failed to provide procedures for notifying subjects of state surveillance that their communications were being intercepted).
- Investor’s remorse: Can you take action against your investment broker for a failed investment? In the case of one duped Sharemax investor, it seems the answer is no. But that is not always the case. See here:
IRBA adopts new ISA 540 standard for the audit of accounting estimates
The International Auditing and Assurance Standards Board (IAASB) issued the International Standard on Auditing (ISA) 540 (Revised), Auditing Accounting Estimates and Related Disclosures, on 3 October 2018.
The Independent Regulatory Board for Auditors (IRBA) has approved ISA 540 (Revised) for adoption, which sets new standards for the audit of accounting estimates.
Banks, insurers and other financial service providers have seen revolutionary changes in their accounting practices as they have moved to new accounting standards that transformed the way they deal with loan provisions (International Financial Reporting Standard (IFRS) 9, Financial Instruments) and insurance contracts (IFRS 17, Insurance Contracts). ISA 540 (Revised) reflects this rapidly evolving business environment and ensures that the standard continues to keep pace with the changing market.
Some of the significant revisions include:
• An enhanced risk assessment that requires auditors to consider complexity, subjectivity and other inherent risk factors in addition to estimation uncertainty. This will drive auditors to think more deeply about the risks inherent to accounting estimates.
• A closer link between the enhanced risk assessment and the methods, data and assumptions used in making accounting estimates, including the use of complex models.
• A requirement for a separate assessment of inherent risk and control risk.
• Specific material to show how the standard is scalable to all types of accounting estimates.
• Emphasis on the importance of applying appropriate professional scepticism when auditing accounting estimates to foster a more independent and challenging sceptical mind-set in auditors. An example is the introduction of a ‘stand-back’ requirement or ‘overall evaluation based on audit evidence obtained’ that requires auditors to take into account all relevant audit evidence obtained, whether corroborative or contradictory.
SARS issues Employer Reconciliation guide
SARS has issued an Employer Reconciliation guide to assist employers with their reconciliation submission to fulfil their tax responsibilities and to ensure a smooth Employer Reconciliation period (interim and annual).
The Income Tax Act requires employers to:
- Deduct the correct amount of tax from employees
- Pay this amount to SARS monthly
- Reconcile these deductions and payments during the annual and the interim reconciliation, and
- Issue tax certificates to employees.
- The guide is intended to assist employers in this process. It can be accessed here.
Employment Equity online reporting portal now open
In terms of the Employment Equity Act, designated employers must their annual employment equity report by 1 October. The electronic submission of the employment equity report is open until 15 January 2020 and can be accessed here.
A designated employer means:
- an employer who employs 50 or more people,
- an employer who employs less than 50 people but has a total annual turnover that is equal to or above the applicable turnover of a small business in terms of Schedule 4 of the Act (see the turnover thresholds below),
- organs of state (unless exempted)
- employers bound by collective agreements in terms of the Labour Relations Act.
Joburg High Court lays out path for exiting debt review
A September judgment by a full bench of the Johannesburg High Court paves the way for thousands of consumers under debt review to rehabilitate themselves. The judgment is good news for those who went under debt review without magistrates making it an order of court. Provided they have settled their short-term debt obligations, but not their mortgage or other long-term debts, they can ask their debt counsellors to issue a so-called clearance certificate and have their credit records sanitised at the credit bureaus. This means they can once again access the credit markets.
The applicants in the case were Hermanus Janse van Vuuren and Fabrian Nel, both of them consumers who ended up under debt review but whose circumstances had changed and they were now able to service their original credit agreements. Their debt counsellor, however, refused to issue them clearance certificates so they decided to seek clarity from the court.