FAITH NGWENYATECHNICAL & STANDARDS EXECUTIVE

SOUTH AFRICAN INSTITUTE OF PROFESSIONAL ACCOUNTANTS

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AcknowledgementThe South African Institute of Professional

Accountants (SAIPA) commends the Department of Trade and Industry in particular the Co-operatives unit for the progressive amendments to the Co-operatives Act of 2005

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SAIPA

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SAIPA represents in excess of 7000 professional accountants in practice, business and academia

It is on this premise that our comments will concentrate more on the financial aspects and financial reporting aspects of the Amendment Act

Positive elements of the billWe commend the broader financial reporting

requirements which are an improvement from the “audit” only as per the existing Act

This will improve compliance and reduce the costs of operating a Co-op

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Section 1(b) Definitions Annual Accounting Report

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Section 1(b)The Act nor the amendments have not

defined A management decision report

There needs to be clarity on the definition of the management decision report.

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Existing regulations: Form CR7This is the lodgment of financial statements

to CIPC, What would these comprise; should these be the entire

Annual report orFinancial statements onlyRecommendationDepending on the contents the title of

Form CR7 may need to be reviewed

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Definition of “Audit”Audit means objectively examining and

evaluating the annual accounting report, in accordance with the prescribed or applicable auditing standards with an objective of expressing an opinion as to the fairness or compliance with an identified reporting framework and applicable statutory standards;

ProblemAnnual accounting report includes a social

report and a management decision report. Cannot express an opinion on a social report as there is no framework that derives such a report

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Recommendation The definition of audit should be as defined in

the Audit Professions Act No . 26 of 2005Cannot refer to an “audit” if it is not

performed by an auditorThe regulations should clearly distinguish

between an (i) audit(ii) an independent review(iii) non audited financial statements

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Section 1(c) Definition of auditorThis definition is correct as it refers to the

APA however when seen in context of the other sections of the Act and regulations it poses a conflict. Hence the recommendations made above.

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Section 1(d) DefinitionAuditor’s annual accounting report

ProblemThis is confusing, in the light of the definition

of audit

RecommendationThis should refer to the audited financial

statements or audit report

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Section 1(j) Definition of independent reviewRecommendIndependent review means an assessment

of the financial statements with an objective to conclude, through performing primarily inquiry, and analytical procedures, and evaluating the sufficiency and appropriateness of evidence obtained, whether anything has come to the attention of the practitioner that causes the practitioner to believe the financial statements are not prepared in all material respects, in accordance with an applicable financial reporting framework.

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Section 1(j) definition of independent reviewer

Problem: Section refers to a person registered with an accredited professional body contemplated in Chapter III of the Auditing Profession Act

RecommendationThe section should refer to the

Independent reviewer as per the Companies Act 71 of 2008 Regulation 29(1)(a) and should define the levels in Section 26 of the Bill (Section 29 of the principal act) 13

Additions to Section 1(j)ProblemThis Act in Section 26(b)(aA) refers to the

“appointment of an independent accounting officer” but there is no definition of this anywhere in the act

RecommendationIt is recommended that the Act uses the

term consistent with the Companies Act 71 of 2008 which uses “Independent Accounting Professional”

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Definition of Independent accounting professional

“independent accounting professional” when used with respect to any particular cooperative, means a person who––

i) is––(aa) a registered auditor in terms of the

Auditing Profession Act; or(bb) a member in good standing of a

professional body that has been accredited in terms of section 33 of the Auditing Profession Act; or

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Definition continued(cc) qualified to be appointed as an accounting

officer of a close corporation in terms of section 60 (1), (2) and (4) of the Close Corporations Act, 1984 (Act No. 69 of 1984); and

(ii) does not have a personal financial interest in the cooperative or a related or inter-related entity; and

(iii) is not–– (aa) involved in the day to day management of the

cooperative’s business, nor has been so involved at any time during the previous three financial years; or

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Definition continued(cc) qualified to be appointed as an accounting

officer of a close corporation in terms of section 60 (1), (2) and (4) of the Close Corporations Act, 1984 (Act No. 69 of 1984); and

(ii) does not have a personal financial interest in the cooperative or a related or inter-related entity; and

(iii) is not–– (aa) involved in the day to day management of the

cooperative’s business, nor has been so involved at any time during the previous three financial years; or

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Section 3 (a)(e)The removal of the specified 5% reserve fund

guideline is commended; as this allows for the Co-op to stipulate the non distributable percentage in its own constitution

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Section 3 (b)The removal of one vote per member is

commendable and the subsections (a)-(c) is also welcome as it controls the controlling interests of members by putting a cap on maximum number of percentage holding

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(35) Section 47 of the principal ActReference to the Auditor’s annual accounting

report should refer to the “Audit report” as per our recommendation

The section introduces different Categories of co-operatives which have not been defined in the Act.

Will the Regulations define Categories A; B and C?

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(35) Section 47 of the principal Act(3) Category A primary co-operatives must

produce an annual accounting report to the Registrar in respect of each financial year

Problems1. The Act does not state who should

prepare this annual accounting report2. Registrar of co-operatives or CIPC

form CR7 is lodged with CIPC, is there a difference?

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37 Amendment to section49 of the principal actProblem“A person is disqualified from being an auditor or

independent review of a co-operative if that person-

(ii) is not registered with the South African Institute of Chartered Accountants or does not satisfy the requirements for registration as an auditor as contemplated in Chapter III of the APA”

RecommendationThe Companies Act 71 of 2008 includes

Accounting officers as approved in the Close Corporations Act as independent reviewers

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CONCLUSIONWe thank the Portfolio committee for

providing the platform to raise our concerns and suggest our recommendations

Thank you

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