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Pt2 REGULATION OF THE AUDITOR - Coggle Diagram
Pt2
REGULATION OF THE AUDITOR
DUTIES OF AN AUDIT COMMITTEE
Ensure that the appointment of the auditor complies with the provisions of the Companies Act and any other legislation relating to the appointment of auditors;
Determine the fees to be paid to the auditor and the audit terms of engagement;
Determine, the nature and extent of any non – audit services that the auditor may provide;
Nominate for appointment as auditor of the company, a registered auditor who in the opinion of the committee is independent of the company;
Pre approve any proposed agreement with the auditor for the provision of non audit services;
Prepare a report to be included in the financial statements:
Stating whether the audit committee is satisfied that the auditor was independent of the company;
Commenting in any way the committee considers appropriate on the financial statements, accounting practices and the internal financial control of the company;
Describing how the audit committee carried out their functions;
Receive and deal appropriately with any concerns or complaints, whether from within or outside the company, or on its own initiative, relating to –
Content or auditing of the company financial statements;
Internal financial controls of the company; and
Accounting practices and internal audit of the company;
Any related matter.
Make submissions to the board on any matter concerning the company`s accounting policies, financial control, records and reporting, and
Perform such other oversight functions as may be determined by the board
AUDITOR`S INDEPENDENCE
In considering the independence of the auditor, the audit committee will ascertain:
Consider whether the auditor`s independence may have been prejudiced as a result of any previous appointment as auditor or having regard to the extent of any consultancy or other work undertaken by the auditor of the company;
Consider compliance with other criteria relating to the independence or conflict of interest.
Ascertain that the auditor does not receive any direct or indirect remuneration or other benefit from the company except as auditor or for rendering other services;
Ethical principles of accountants and auditors
The fundamental Principles that are supposed to be adhered to according to SAICA:
Professional Competence & Due Care
It also includes continuing awareness and understanding of relevant technical, professional and business developments
A professional accountant will be required to:
Act diligently and in accordance with applicable technical and professional standards;
Attain and maintain professional knowledge and skill at the level required;
Confidentiality; and
Maintain confidentiality within the firm or organisation of employment;
Maintain confidentiality of information disclosed by a prospective client or employing organisation;
Should be alert to possibility of inadvertent disclosure;
Mot disclose information acquired from business or professional relationships outside;
A professional accountant should respect the confidentiality of information acquired as a result of professional or business relationships;
Not use confidential information for personal gain
Objectivity
A professional accountant should not undertake a professional activity if a circumstance or relationship unduly influences the professional judgement of the professional accountant regarding that activity.
A professional accountant should not compromise professional or business judgement because of bias, conflict of interest or undue influence of others;
Professional Behaviour.
A professional accountant should comply with all laws and regulations and avoid any conduct that the professional accountant knows or should know that it can discredit the profession;
Integrity
It implies fair dealing and truthfulness;
Professional accountant shall not be associated with reports, returns, communication or other information where the professional accountant believes that the information;
Contains statements or information provided recklessly; or
Omits or obscures required information where such omission or obscurity would be misleading.
Contains a materially false or misleading statement;
An accountant is required to be straightforward and honest in all professional and business relationships;
When a professional accountant provides a modified report in respect of such a report, return, communication, or other information, the professional accountant is not in breach of these provisions; and
When a professional accountant becomes aware of having been associated with information described above , the professional accountant shall take steps to be disassociated from that information.
Conceptual framework
The professional accountant should do the following:
Evaluate the threats;
Address threats
Identify threats;
The professional can do the following to address threats:
Apply safeguards to reduce the threats to an acceptable level;
Declining or ending specific professional activity;
Eliminate the circumstances that create the threat, for example disposing interests
Conflicts of interest
Conflict of interest can arise from the following:
The interests of the professional accountant and the interests of the party for whom the assignment is done conflict;
Serving on boards of two organisations and acquire confidential information from one party which might be required by the other party
A professional accountant undertakes a professional activity related to a particular matter for two or more parties;
Preparing financial statements for management of employing organisation planning a buyout;
Conflict of interest creates threat to objectivity and might even affect other principles;
Selecting a provider of service of goods when you or immediate family member may benefit
OTHER FACTORS AFFECTING ETHICAL PRINCIPLES
Inducements, gifts and hospitality;
Professional appointments;
Financial interests, compensation and incentives linked to Financial reporting and decision making;
Fees and other types of remuneration;
Acting with insufficient expertise;
Custody of client assets;
Types of threats
Advocacy threat;
Familiarity threat;
Self review threat;
The threat that a registered auditor will not appropriately evaluate the results of a previous judgement made or service performed by the registered auditor, or by another individual within the registered auditor's firm
Intimidation threats
Self interest threats;
Threats arising from financial or other interests which might inappropriately influence judgement;