There is confusion around who can audit financial statements of a public school and what kind of engagement they must perform.
The South African Schools Act (SASA) requires that the governing body of a public school must appoint a person registered as an auditor in terms of the Auditing Profession Act, 2005 (Act No. 26 of 2005), to audit the records and financial statements of the school.
Where this is not reasonably practicable, SASA provides that the governing body of a public school must appoint a person, who is qualified to perform the duties of an accounting officer in terms of section 60 of the Close Corporations Act, 1984 (Act No. 69 of 1984); or is approved by the Member of the Executive Council (MEC) for this purpose, to examine and report on the records and financial statements.
Circular M1 of 2017 issued by the National Department of Education states that School Governing Bodies (SGBs) can only appoint an Accounting Officer if approval has been obtained from the MEC based on the justification provided for not being able to appoint an auditor.
All auditors must be registered with the Independent Regulatory Board for Auditors (IRBA) and their registration can be confirmed on IRBA’s website at www.irba.co.za.
All accounting officers must be registered with at least one of the following accountancy bodies:
- Independent Regulatory Board for Auditors (IRBA) – irba.co.za
- South African Institute of Chartered Accountants (SAICA) – saica.co.za
- South African Institute of Professional Accountants (SAIPA) – saipa.co.za
- South African Institute of Government Auditors (SAIGA) – saiga.co.za
- South African Institute of Business Accountants (SAIBA) – saiba.org.za
- Southern African Institute of Chartered Secretaries and Administrators (ICSA) chartsec.co.za
- Chartered Institute of Management Accountants (CIMA) - cimaglobal.com
- Chartered Institute of Business Management (MCIBM) - chartsec.co.za
- Institute of Accounting and Commerce (IAC) - iacsa.co.za
“SGBs should insist on letters from accounting bodies to confirm the registration of the auditors and accounting officers as the use of unqualified individuals and firms result in shady work being performed and the issuance of reports that are not in line with required standards,” says Julius Mojapelo, SAICA Senior Executive: Public Sector. “Such reports are misleading to parents, donors and the departments of education and denies such parties the information required to hold the governing body accountable for the management of school funds”.
With regards to the type of engagement that can be performed the confusion is mainly when it comes to the interpretation of the word “Examination”.
“An examination is not defined in SASA. Practitioners who are engaged to examine financial statements of public schools have the option of conducting a review engagement or an agreed-upon procedures engagement. It is important to note, however, that an agreed-upon procedures engagement brings with it some challenges, as the provincial Departments of Basic Education in most instances require that an opinion or a conclusion be expressed based on the engagement performed on the financial statements of a public school. This is not possible with an agreed-upon procedures engagement, as the auditor or examiner is engaged to carry out procedures of an audit nature to which the auditor and the entity and any appropriate third parties have agreed and to report on factual findings,” he adds.
Mojapelo further notes that, “an engagement to compile financial statements will not meet the criteria to be classified as an examination of financial statements as it is an engagement in which a practitioner applies accounting and financial expertise to assist management in the preparation and presentation of financial information of an entity in accordance with the applicable financial reporting framework. Thus a compilation engagement is conducted to assist the school in complying with the requirements for keeping records of funds received and spent and of its assets, liabilities, and financial transactions and drawing up of financial statements as required by section 42 of SASA.”