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The Corporate Laws Amendment Bill, B6/2006
© 2006 Deloitte Touche Tohmatsu Corporate Laws Amendment Bill, B6/2006 – 29 May 2006 Introduction Presenting on behalf of Deloitte & Touche: Phillip Austin – Reputation and Risk Leader - Audit, at Deloitte & Touche Mark Crisp – Reputation and Risk Leader - Tax, at Deloitte & Touche Broadly we agree with the Companies Act amendments proposed Place on record our thanks to the Ministry for the positive response received to our comment on the Bill as published in August 2005
© 2006 Deloitte Touche Tohmatsu Corporate Laws Amendment Bill, B6/2006 – 29 May 2006 Agenda Highlight our key submission points: Section 275A : Independence of Auditors Public Interest Entities Attendance by an auditor at annual general meeting Strict penalties on individuals who mislead or frustrate the audit process Financial Statement Investigation response period
© 2006 Deloitte Touche Tohmatsu Corporate Laws Amendment Bill, B6/2006 – 29 May 2006 Section 275A : Independence of Auditors Independence should not be in legislation Auditors regulated by the Auditing Professions Act Companies Act regulates companies The Independent Regulatory Board for Auditors should determine the appropriate ethical and independence standards through the Committee for Auditor Ethics Legislation cannot be amended quickly to respond to new circumstances Independence matters are complex requiring substantial guidance, such that cannot be readily expressed in legislation We recommend that sections of the act including 275A be deleted to the extent they deal with auditor independence. The Independent Regulatory Board for Auditors can be instructed by National Treasury to develop such independence rules
© 2006 Deloitte Touche Tohmatsu Corporate Laws Amendment Bill, B6/2006 – 29 May 2006 Section 275A : Tax Advisory Services If our recommendation is not accepted, section 275A should be amended with regard to Tax Advisory Services: The inclusion was made in April 2006 only The inclusion was made in response to a comment from the South African Revenue Services, which we understand was meant only to apply to the individual signing the audit opinion and not to the audit firm In any event, tax advisory services are not defined – There will be a lack of consistency in compliance – Other jurisdictions (UK and USA) have carefully defined those tax related services which are: –Prohibited –Restricted –Permitted We recommend that Tax Advisory Services be deleted from section 275A, or if retained that the section be amended to be more clear in its meaning
© 2006 Deloitte Touche Tohmatsu Corporate Laws Amendment Bill, B6/2006 – 29 May 2006 Public Interest Entities We agree with the definition of a Public Interest Company We believe additional size criteria should apply to all companies, irrespective of the other criteria We believe a broader definition addressing entities other than companies should be developed and applied within South Africa
© 2006 Deloitte Touche Tohmatsu Corporate Laws Amendment Bill, B6/2006 – 29 May 2006 Attendance by Auditor at AGM The obligation on auditor to amend and answer questions relating to the conduct of the audit is too broad, lack definition and does not carry adequate legal protection Section should be removed
© 2006 Deloitte Touche Tohmatsu Corporate Laws Amendment Bill, B6/2006 – 29 May 2006 Penalties Auditors rely on transparent, open and full disclosure Parties who mislead or frustrate the audit process should be exposed to criminal and civil sanction
© 2006 Deloitte Touche Tohmatsu Corporate Laws Amendment Bill, B6/2006 – 29 May 2006 Financial Statement Investigation Period provided for preparer to respond (18 – business days) to an investigation should be extended to 2/3 months
© 2006 Deloitte Touche Tohmatsu Corporate Laws Amendment Bill, B6/2006 – 29 May 2006 Legal description Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, its member firms, and their respective subsidiaries and affiliates. Deloitte Touche Tohmatsu is an organization of member firms around the world devoted to excellence in providing professional services and advice, focused on client service through a global strategy executed locally in nearly 150 countries. With access to the deep intellectual capital of 120,000 people worldwide, Deloitte delivers services in four professional areas—audit, tax, consulting and financial advisory services—and serves more than one-half of the world’s largest companies, as well as large national enterprises, public institutions, locally important clients, and successful, fast-growing global growth companies. Services are not provided by the Deloitte Touche Tohmatsu Verein, and, for regulatory and other reasons, certain member firms do not provide services in all four professional areas. As a Swiss Verein (association), neither Deloitte Touche Tohmatsu nor any of its member firms has any liability for each other’s acts or omissions. Each of the member firms is a separate and independent legal entity operating under the names “Deloitte”, “Deloitte & Touche”, “Deloitte Touche Tohmatsu”, or other related names.
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