Mandatory Rotation of Auditors

Mandatory Rotation of Auditors

Over the past few years the audit industry has been under significant scrutiny where the independence of auditors has been questioned.

In response to this and to further drive auditor independence, the Independent Regulatory Board for Auditors (IRBA) issued a rule prescribing that auditors of public interest entities (PIEs) in South Africa must comply with mandatory audit firm rotation (MAFR) with effect from 1 April 2023.

So what is a PIE?

PIEs are:

    a) All listed entities; and
    b) Any entity defined by regulation or legislation as a public interest entity or for which the audit is required by regulation or legislation to be conducted in compliance with the same independence requirements that apply to the audit of listed entities. Such regulation may be promulgated by any relevant regulator, including an audit regulator such as the Board.

In general, entities, as classified under point b above, has a large number and wide range of stakeholders and are therefore more likely to be considered PIEs, for example, banks, insurers, collective investment schemes, pension fund administrators etc.

What do the new rules entail?

In the past, after a period of five years, it was mandatory for the audit partners to rotate, but the same audit firm could be used. Going forward, additionally to the partner rotation, all PIEs must rotate their audit firms as well (including network firms) after a period of ten consecutive financial years, after which that firm will only be eligible for reappointment after at least five consecutive financial years.

The new rules come into effect on 1 April 2023. For example, if you have a February yearend and your auditors have performed the audit since the 2013 financial year, you would need to rotate your audit firm for the 2024 financial year.

What is the impact of MAFR?

For PIEs, this means that every ten years a new audit firm with new audit teams that has to get to know the business and internal workings. This could result in increased audit fees.

The process is widely contested in the market, with many firms stating that the impact of this new rule has not yet been fully assessed and will not increase independence and enhance audit quality, whereas the JSE responded by being one of the first entities to rotate their auditors to support the motion.

What you need to do

If your company is a PIE, it is time to start planning when would be best to rotate your auditors, which would give you sufficient time to obtain quotes from other firms.

You are also most welcome to contact our audit department to discuss any questions you may have in this regard.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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When should financial statements be audited, reviewed or compiled?

The Companies Act of South Africa (the Act) requires all companies to prepare financial statements within 6 months after the end of its financial year. A very popular question among business owners with regards to financial statements is whether the statements should be independently audited, reviewed or compiled. In determining the engagement type, the Act prescribes the following criteria to be applied:
Audited financial statements

    1. Any profit or non-profit company that, in the ordinary course of its primary activities, holds assets in a fiduciary capacity for persons who are not related to the company, and the aggregate value of such assets held at any time during the financial year exceeds R5 million;
    2. Any non-profit company, if it was incorporated:

a. directly or indirectly by the state, a state-owned company, an international entity or a company; or

b. primarily to perform a statutory or regulatory function in terms of any legislation, a state-owned company, an international entity, or a foreign state entity, or for a purpose ancillary to any such function;

    1. Any other company whose public interest score in that financial year is:

a. 350 or more; or

b. at least 100, but less than 350, if its annual financial statements for that year were internally compiled.

How to calculate your public interest score, to determine if you exceed 350 points or not:

  1. a number of points equal to the average number of employees of the company during the financial year;
  2. one point for every R1 million (or portion thereof) in third-party liabilities of the company, at the financial year end;
  3. one point for every R1 million (or portion thereof) in turnover during the financial year; and
  4. one point for every individual who, at the end of the financial year, is a member of the company, or a member of an association that is a member of the company.

Independent review of financial statements

The Act prescribes that an independent review of a company’s annual financial statements must be performed if the following apply and the company does not select to be voluntarily audited:

If, with respect to a company, every person who is a holder of, or has a beneficial interest in, any securities issued by that company is not a director of the company, that financial statements should be independently reviewed.

A company and its directors may choose to be voluntarily audited or reviewed if they wish to engage in an assurance engagement, although it has not been prescribed by the Act.

Compiled financial statements:

If none of the above-mentioned requirements has been met, the financial statements may be compiled.

With compilations, or compiled financial statements, the outside accountant converts the data provided by the client into financial statements without providing any assurances or auditing services.

If you need any assistance with your engagement in financial statements, do not hesitate to contact our friendly staff.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Registration of a trust as a taxpayer

The frustration experienced by taxpayers and the complexity of registering a trust as a taxpayer with the South African Revenue Service (SARS), has been widely publicised in recent years. Despite calls from industry bodies for a simplified approach (like companies and individuals), registering a trust as a taxpayer remains an overly complex process.

The inconsistency of information received by taxpayers between the SARS website and different branch offices is one of the areas of major concern. SARS’ website, for example, indicates that either certified or uncertified copies of identity documents are acceptable, whereas branch officers only accept certified copies. Another frustration is requirements that are seemingly not in line with legislation. As an example, SARS requires the appointment, by resolution, of a so-called “main trustee”, whereas the concept of a “main trustee” does not exist in the Trust Property Control Act 57 of 1998. The same act requires that a separate bank account must be used for deposits received by persons in their capacity as trustees of a trust, but SARS seemingly requires some trusts to have bank accounts while not imposing this requirement on others during registration.

Based on recent interactions with SARS, the following guidelines should assist taxpayers in registering trusts as a taxpayer. Although many of the requirements do not seem to agree with what is required by legislation (or sometimes common sense), a call on such formal matters at a branch office will not assist taxpayers and they should rather ensure that the documents below are at hand. All the documents indicated below must be in a certified form:

    • A completed IT77TR form (available on the SARS website);
    • A resolution appointing one of the trustees a “main trustee”. Even if this is indicated in a trust deed, it must be specifically resolved. It is suggested that it is this “main trustee”
      that represents the trust at the SARS branch office;
    • A resolution authorising the said “main trustee” to sign all documents on behalf of the trust for purposes of registering it as a taxpayer with SARS;
      Identify documents of all trustees (if you use the new smartcard ID document, ensure that both the front and the back are copied). Note that the trustee doing the registration, must also have their original identity document at the branch;
    • Proof of address for all trustees (ensure that this address on the proof agrees to what is completed on the IT77TR form);
    • Proof of address of the trust. For these purposes, use the CRA01 available on the SARS website to accompany the proof of address. It is suggested that two versions of the CRA01 are completed. One by the “main trustee” and one by a different trustee, since different branch offices require different trustees to complete the form;
    • Proof of banking details. If the bank account is less than one month old, then a letter from the bank confirming that the details are in order. In all other cases, a bank statement is required;
    • The trust deed; and
    • The letter of authority from the Master’s Office.

For good measure it is suggested, if possible, to take all original documents along to the branch as well (only present these if required and ensure it is returned). Also, ensure that a proof of registration and the taxpayer reference number of the trust is obtained after successful registration.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Awesome Award Details

Employee Details Partner Group Award Information
1 Kagiso Ramokgadi Mauritz Jankowitz Excellent team work and dedication in meeting all the deadlines whilst Laura out on maternity leave.
2 Rafeeah Razak Mauritz Jankowitz Excellent team work and dedication in meeting all the deadlines whilst Laura out on maternity leave.
3 Kayla Jagaroo Mauritz Jankowitz Excellent team work and dedication in meeting all the deadlines whilst Laura out on maternity leave.
4 Shivendran Moodley Mauritz Jankowitz Excellent team work and dedication in meeting all the deadlines whilst Laura out on maternity leave.
5 Yamkela Mnotoza Mauritz Jankowitz Excellent team work and dedication in meeting all the deadlines whilst Laura out on maternity leave.
6 Roberto De Almeida Mauritz Jankowitz Excellent team work and dedication in meeting all the deadlines whilst Laura out on maternity leave.
7 Carla Texeira Brian Neale Always pleasant and cheerful, is able to deal with the most difficult clients
8 Sharlotte Modibedi Brian Neale Always helpful, makes the most amazing food and keeps Roy from starvation
9 Muhammed Khan Professor Mafela For working hard to get the audit of Simon Pies done
10 Shaista Ebrahim Professor Mafela For working hard and meeting the deadlines
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Objecting to an assessment

One of the risks of not using a tax professional to attend to one’s tax affairs arises when SARS assesses an individual’s income tax return.  Quite often, a return submitted is assessed incorrectly, or on a basis in terms of which SARS is disputing certain submissions made by the taxpayer in filing his or her (or even a family trust or company’s) income tax return.

It is then important to have an experienced tax professional at your disposal who is aware of the specifically legislated and prescribed dispute resolution rules that are required to be followed in order to object to an assessment with which the taxpayer disagrees.  The benefit of using a tax professional becomes even more pronounced when considering that individuals without tax experience and knowledge very often do not understand correspondence issued by SARS (and which would be informing the taxpayer of an adverse assessment for example being issued), and further that they can check assessments issued to ensure that these have indeed been issued on the basis on which the relevant return has been filed.

Various requirements would exist for a valid objection to be lodged with SARS.  These include that the objection be lodged in the prescribed format and by using the correct form, and that the objection be lodged within 30 business days from the date of the assessment issued.

If a taxpayer is unsure of the basis on which SARS would have issued an assessment, he or she is further entitled to first request reasons from SARS for the assessment issued in order to allow them to consider whether lodging an objection would be necessary or not to dispute the assessment.  These reasons, if requested, must be clear enough to allow the taxpayer to understand why SARS would have issued an adverse assessment and to then be able to lodge an objection against the assessment in question if required.  A request for reasons too (as is the case for an objection) needs to be submitted to SARS within 30 business days from the date of the assessment, whereafter the objection must be lodged within 30 business days of these reasons being provided to the taxpayer (and which SARS is obliged to provide, if requested, within 45 business days from receipt of the request for reasons from the taxpayer).

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Nwanda internal news (October)

1Awesome Rewards:

Renier Smit and Nishani Bhagwager – Submitting of good work to their managers.

2. Office closure:

We wish to notify our clients that our offices will be closed from 21 December 2015 and will reopen on 4 January 2016.

3. Annual team building:

Our offices will be closed on the 20th of November 2015 for our annual team building event.

4. Engagement

Congratulations to Carmen Risk and Paul Maroun who got engaged on the 11th of October 2015.

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 5. Examinations –Undergraduates:

Best of luck to all our staff writing examinations during the month of October and November 2015.

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6. CTA Students:

Welcome back from study leave to all our CTA students, you were missed.

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Nwanda Internal news (Sept)

1. Paul Bloch
It is with great regret that we need to inform you that Paul Bloch, our much loved partner, is no longer a practicing partner in Nwanda.

Earlier this year, Paul suffered a brain stem stroke after surgery to remove a benign brain tumour.  He has bravely fought to recover from this horrific incident and although he has made a remarkable recovery so far, he is not able to practice as a Chartered Accountant at this time.

We wish to stress that the current partners remain committed to Paul’s clients and assure you of a smooth transition during this trying time.

We continue to pray for Paul’s complete recovery in the hope that he will rejoin Nwanda in the future

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2. New employees
We would like to welcome Chistopher Botha (Audit manager) whom joined our team as from 2 September 2013 from PricewaterhouseCoopers – Welkom Office.

Christopher Botha

3. Study leave
Best wishes to all our staff with their examinations in October and November!

4. Casual Day – 6 September
We had a great day and would like to thank staff whom participated in our hat competition! The best prize was awarded to Jonathan Cohen.

Jonathan Cohen & Malyssa Hattingh

5. Office closure
We wish to notify our clients that our offices will be closed from 23 December 2013 and will re-open on 6 January 2014.

6. Completion of Training Contract (Articles)
Congratulations to Jean-Pierre Oosthuizen (JP) on the successful completion of his Training Contract!

JP Oosthuizen

7. Awesome Rewards – R500!
Congratulations to the following trainee accountants whom successfully completed 5 or more subjects in the first semester this year or obtained their degree:
Jean-Pierre (completing his DEGREE), Carmen (completing her DEGREE), Rozelda, Sadiya, Rukudzo, Logan, Kedibone, Jamie-Lee and Andre!

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Some pointers for planning your estate

Blog_Retirement‘Estate planning’ has been defined as the process of creating and managing a programme that is designed to:

  1. Preserve, increase and protect your assets during your lifetime;
  2. Ensuring the most effective and beneficial distribution thereof to succeeding generations.

It is a common misconception that it revolves solely around the making of a Last Will and Testament, or the structuring of affairs so as to reduce estate duty.

Each person’s estate is unique and should be structured according to his/her own unique set of circumstances, goals and objectives.

The lack of liquidity on the date of death may cause for the deceased’s family members and dependants to suffer hardship, as certain assets might be sold by the executor to generate the cash needed.

Liquidity means that there should be enough cash funds to provide for:

  1. Paying estate duty;
  2. Settling estate liabilities and administration costs;
  3. Providing for other taxation liabilities that may arise at death, such as capital gains tax.

Technically the estate is frozen until such time as the Master of the High Court has issued Letters of Executorship.

Dying without executing a valid Last Will and Testament, your estate will be dealt with as an intestate estate, and the laws relating to intestate succession will apply. The Intestate Succession Act determines that the surviving spouse will inherit the greater of R125, 000 or a child’s share. A child’s share is determined by dividing the total value of the estate by the number of the children and the surviving spouse.

If the spouses were married in community of property, one half of the estate goes to the surviving spouse as a consequence of the marriage, and the other half devolves according to the rules of intestate succession. If there is no surviving spouse or dependants, the estate is divided between the parents and /or siblings. In the absence of parents or siblings, the estate is divided between the nearest blood relatives.

An executor is entitled to the following remuneration:

  1. remuneration fixed by the deceased in the Last Will and Testament, or
  2. 3,5% of gross assets;
  3. 6% on income accrued and collected from date of death.

Executor’s remuneration is subject to VAT where the executor is registered as a vendor.

Where the value of the estate exceed R3,5 million, estate duty will become payable on the balance in excess of R3,5 million, with the exception of the property bequeathed to  a surviving spouse, which are exempt from estate duty and /or capital gains tax.

Section 3 of the Subdivision of Agricultural Land Act, prevents the subdivision of agricultural land, and such land being registered in undivided shares in more than one person’s name is subject to Ministerial approval.

A minor child is a person under the age of 18 years of age, and any funds bequeathed to a minor child will be held by the Guardian’s Fund, which falls under the administration of the Master of the High Court. These funds are not freely accessible, and are usually invested at below market interest rates. It is thus advisable to provide for minors by means of a trust.

The Close Corporations Act provides that, subject to the association agreement, where an heir is to inherit a member’s interest (in terms of the deceased’s Will), the consent of the remaining members (if any) must be obtained. If no consent is given within 28 days after it was requested by the executor, then the executor is forced to sell the members interest.

Section 3(3)(d) of Estate Duty Act determines that where an asset is transferred to a trust during an estate planner’s lifetime, yet the estate planner, as trustee of the trust retains such power as would allow him to dispose of the trust asset(s) unilaterally for his own or his beneficiaries benefit during his lifetime, then such asset(s) may be deemed to be property of the estate planner and included in his estate for estate duty purposes.

Where the parties are married in community of property, the surviving spouse will have a claim for 50% of the value of the combined estate, thus reducing the actual value of the estate by 50%. The estate is divided after all the debts have been settled in a deceased estate (not including burial costs and estate duty, as these are the sole obligations of the deceased and not the joint estate). Only half of any assets can be bequeathed.

The proceeds from life insurance policies can be used to:

  1. Generate income to maintain dependants while the estate is dealt with;
  2. Pay estate expenses: funeral, income tax, estate administration, estate duty.

All proceeds of South African “domestic” policies taken out on the estate planner’s life, where there is no beneficiary nominated on the policy, will fall into his estate on his death.

Where a beneficiary is nominated on the policy, the proceeds will be deemed property for estate duty purposes, even and although they are paid directly to the beneficiary (subject to partial exemptions based on policy premiums).

Policies which are exempted from inclusion for estate duty purposes are buy and sell, key man policies, and those policies ceded to a spouse or child in terms of an antenuptial contract.

Certain assets in a deceased estate are excluded from capital gains tax.

  1. Assets for personal use (with certain exceptions);
  2. Assets that accrue to the surviving spouse;
  3. Assets bequeathed to approved public benefit organisations;
  4. The proceeds from life assurance policies; Interests in pension, provident or retirement annuity funds;
  5. The first R2 million in respect of a primary residence;
  6. The first R750,000 in respect of small business assets.

Currency, excluding gold and platinum coins.

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.

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Co-ownership of land

Blog_PropertyA co-owner who holds a share in land does not hold title to a defined piece of land even if by arrangement with his co-owners they might have agreed to give him occupation of a specific portion of land.  The title he has is to an undivided share only, in the whole of the land, held in joint ownership.  The portion he occupies is owned jointly by him and his co-owners in the whole thereof. If he should build a house on the portion he occupies, the house will be owned jointly.

When X, Y and Z are co-owners of a farm, they are not each entitled to a physical part of the farm but each of them has an undivided share in the whole of the farm. The shares will not always be equal. One person can have half a share while the other two can each have a twenty five percent share.

However, co-ownership unfortunately leads to disputes between the owners.

Co-operation between the co-owners

It is advisable that co-owners enter into an agreement which regulates the relationship between them. Unfortunately this agreement will have no bearing against third parties.

The consent of all the co-owners is required when administrative decisions have to be made. No owner is entitled to change or improve the property without the consent of the other owners. All the owners have to agree to the use of the property, e.g. they have to agree to the chopping down of trees, the erection of a storage facility/building, or to let cattle graze in the field.

If co-owners are not consulted they may request an interdict from the court. The court may even order that buildings that have been erected, be removed. However, in instances where the aim is to preserve the property, it is not always necessary to obtain the consent of the co-owners.

The profits and losses

All the co-owners must contribute proportionally to necessary and also useful expenses for the preservation of the property. Such expenses include taxes and expenses to maintain the property in good condition, but do not include luxury expenses. Losses and charges must be shared by the co-owners, except those attributable to negligence of one of the owners.

As with expenses, fruits and profits must be divided amongst the co-owners according to each owner’s shareholding.

Alienation of a share

A co-owner may alienate his share or even bequeath it to his heirs, without the consent of the other owners, even against their will. A co-owner’s share may also be attached by the sheriff.

Use of the property

Each co-owner may use the property in accordance with his undivided share. He must however use it with due regard to the rights of the other co-owners. Each co-owner, his employees and guests are entitled to free entry to any part of the property, except if the co-owners have agreed that a portion of the property is reserved for the exclusive use of one co-owner.

Partition

Co-owners may decide to partition the property, usually if they cannot agree on the utilisation of the property. The property will then be divided physically in accordance with the value of the property and each owner’s share in it. When it is uneconomic, which is usually the case with a farm, the property can be awarded to one co-owner, but he must then compensate the other co-owners.

The court may also order that the property be sold by public auction and the proceeds divided amongst the co-owners. There is strict statutory control over the subdivision of land and also the actual physical division and use of land, so that partition may not always be possible.

Co-ownership is an excellent vehicle to becoming an owner of a property that one otherwise might not be able to afford. However, be aware of the pitfalls, choose your co-owners wisely, and draw up an agreement to regulate payment of the bond and rates, the day-to-day expenses and house rules.

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.

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Zero-rated VAT: Exports and services to foreigners

Blog_VatIt is often confusing to determine when to charge Value Added Tax (VAT) on goods or services at a zero rate (0%) instead of the standard rate of 14%. Below are some basic examples to illustrate the charging of the correct rate by South African VAT vendors. These are general examples and it is prudent to contact your tax practitioner if there is any uncertainty in this regard.

1.       Direct Export of Goods – 0%

A direct export is the delivery of moveable goods to a recipient at an address outside of the Republic of South Africa (RSA), by a South African VAT vendor. The vendor must therefore physically deliver the goods to the recipient at the address outside the RSA, or arrange for the delivery of the goods on behalf of the vendor by a cartage contractor (who must be a resident of the RSA as well as a registered VAT vendor). VAT at 0% may then be charged on these sales.

Strict documentation requirements are set by the South African Revenue Service (SARS) for the charging of  0% VAT, and the exports must take place through any of the 43 designated ports.

 2.       Indirect Export of Goods – 14%

An indirect export occurs when the South African VAT vendor sells moveable goods to a foreign recipient and the recipient removes or arranges for the removal of the goods from the RSA to the foreign address. In such a case, the vendor will charge VAT at the standard rate of 14%.

However, the foreign recipient may be able to claim a VAT refund from the VAT Refund Administrator (Pty) Ltd at the exit of the goods from the RSA from any of the 43 designated commercial ports. The foreign recipient must be a qualifying purchaser (as defined) and the goods must be exported within 90 days from the date of the tax invoice. Strict documentation requirements must be complied with in order to claim the VAT refund.

The only exception to this is if the supply is made in terms of Part Two of the VAT Export Scheme. In this case, VAT may be charged at 0%.

3.       Local Services to Foreigners – 0%

Services delivered locally to non-residents by a South African VAT vendor will generally be subject to VAT at 0%. It is important to remember that the non-resident recipient of these services must not be physically present in the RSA at the time of the delivery of the service.

The exceptions to this (and therefore subject to 14% VAT) will be where the services are supplied:

  1. in respect of fixed property in the RSA;
  2. in respect of moveable property in the RSA, unless the property is destined for export or forms part of a supply to a registered vendor; or
  3. to a recipient who is in the RSA when the services are rendered (unless it relates to a restraint of trade).

4.       Services Delivered outside the RSA – 0%

Services that are physically delivered outside the RSA will be subject to VAT at 0%.

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.

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