Members of the South African Institute of Professional Accountants (SAIPA) need to be aware of the legislation involved when accepting an engagement from a public school. There are several risks involved with self-review and SAIPA members with clients in the education sector must take note of the potential pitfalls of doing the school’s “audit”.
A Professional Accountant (SA) may not audit financial statements, says Faith Ngwenya, Technical and Standards Executive at SAIPA. An audit may only be done by a registered auditor and conducted in terms of the Audit Professions Act. The only form of assurance service that may be offered by a SAIPA member is an independent review.
“Many times, a school doesn’t have the resources to prepare their own financial statements. If they have appointed a member of SAIPA for this task, the SAIPA professional must take precautionary measures to address the threat that exists when the client expects them to handle the preparation of the establishment’s financial statement as well as conduct an independent review on those same financial statements,” says Ngwenya.
Legalities involved with separation of duties
According to the South African Schools Act, the governing body of a public school must draw up annual financial statements in accordance with the guidelines determined by the Member of the Executive Council within three months of the end of each financial year. Within six months of the end of each financial year, a copy of the annual audited financial statements must be submitted to the heads of the regional education department.
The auditor/independent reviewer should not do the bookkeeping of the school, other than the year-end journals and adjustments. According to the International Standard of Review Engagements (ISRE 2400), the audit/review of the school’s financial statements must not be carried out by the same accounting professional who was involved in the preparation of the statements.