KEEP YOUR BRAND -
APPOINT A REGISTERED AND CREDIBLE AUDITOR
The appointment of a credible auditor is critical to the survival or collapse of a legal practice, says SIMTHANDILE KHOLELWA MYEMANE, because not every auditor out there has the best interest of the legal practice, third parties relying on the report of the auditor and the public at heart
R
ule 54.20 of the Rules as per ss 95(1), 95(3) and 109(2) of the Legal Practice Act 28 of 2014 (the Rules) requires each legal practice to appoint an auditor to discharge the duties assigned to the auditor in terms of the Rules. The Rules further require that the auditor produces a report to be submitted to the Council at specified intervals.
AN AUDITOR
AccountingTools defines an ‘auditor’ as an ‘individual who examines the accuracy of recorded business transactions. Auditors are needed in order to verify that processes are functioning as planned, and that the financial statements produced by an organisation fairly reflect its operational and financial results’. The auditor, while WHO IS THE ACCOUNTANT? appointed by the legal practice, is not AccountingTools defines an ‘accountant’ as accountable to the legal practitioner but a ‘person who records business transactions to the authority that relies on the report on behalf of an organisation, reports on produced by the auditor, the Legal Practice company performance to management, and Council (LPC) in the case of a legal practice. issues financial statements’. This person is From the foregoing definitions, it generally employed by the legal practice or becomes apparent that the accountant the service is outsourced to an entity that records the business transactions, and provides the service. Effectively, this person the auditor examines the recorded business is accountable to the legal practitioner. transactions, meaning they have different Both the accountant and the auditor fall roles. With this understanding, the two within the accountancy profession, but their functions should not be performed by roles may differ. There is often confusion the same person or by persons from the out there among some of the newer legal same entity, unless the entity can prove practitioners who cannot differentiate between that a Chinese Wall (‘a virtual barrier an accountant who prepares the books and intended to block the exchange of an auditor who examines the books, and the information between departments if it appointment of the auditor. This article will might result in business activities that are clarify this confusion, but mostly seeks to ethically or legally questionable’) has been communicate the importance of appointing built. It is often not easy to prove Chinese a registered and credible auditor. Walls convincingly.
REGULATORY REGIME FOR AUDITORS Auditors in South Africa (SA) are registered with and regulated by the Independent Regulatory Board for Auditors (IRBA), which is a statutory body for accountants and auditors in SA. The IRBA, among others, develops and maintains auditing and ethics standards that are internationally comparable. When appointing an auditor for purposes of fulfilling the requirements of r 54.20 it is important to seek the services of a credible auditor registered with IRBA. There are two types of auditors registered with IRBA, namely assurance providers and non-assurance providers. Auditors that provide assurance services reflect an assurance status of ‘Assurance’ and can be confirmed on IRBA’s website www.irba.co.za or directly with the IRBA. The LPC accepts reports issued by an auditor with an ‘Assurance’ status.
CODE OF PROFESSIONAL CONDUCT FOR REGISTERED AUDITORS
The IRBA, as already indicated in the foregoing paragraphs, develops, and maintains auditing and ethics standards for registered auditors. The IRBA developed a Code of Professional Conduct for Registered Auditors (the Code), which a registered auditor is expected to always observe.
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