Engagements on Attorneys Trust Accounts - IRBA

1 Proposed revised Guide November 2016 Comments requested by 31 January 2017 Proposed revised Guide for Registered Auditors Engagements on Attorneys Trust Accounts Page 2 of 94 REQUEST FOR COMMENTS The Committee for Auditing Standards (CFAS) of the Independent Regulatory Board for Auditors (IRBA) approved this Proposed revised Guide for Registered Auditors: Engagements on Attorneys Trust Accounts (proposed revised Guide) in November 2016 for exposure for a period of 60 days for comment. The proposed revised Guide may be modified in light of comments received, before being issued in final form. This proposed revised Guide has been updated by a CFAS Task Group comprising representatives of the relevant Law Societies, technical staff from the IRBA, and auditors with experience in reporting on Attorneys Trust Accounts .

2 The proposed revised Guide may be downloaded free-of-charge from the IRBA website at: Respondents are requested to submit their comments electronically in a Word and PDF format to All comments will be considered a matter of public record and will be posted on the IRBA website, Comments should be submitted by 31 January 2017. Should you have any queries, or experience any technical difficulties in downloading the documents, please e-mail the Standards Department at: The mission of the IRBA is to endeavor to protect the financial interests of the South African public and international investors in South Africa through the effective and appropriate regulation of audits conducted by registered auditors, in accordance with internationally recognised standards and processes.

3 In line with the IRBA s legislative mandate, the IRBA objectives are to create the framework and principles to contribute to the protection of the public who rely on the services of registered auditors and to support registered auditors who carry out their duties competently, fearlessly and in good faith. The goal is to help create an ethical, value-driven financial sector that encourages investment, confidence and promotes sound practices by developing and maintaining auditing standards which are internationally comparable. The statutory responsibility of the Committee for Auditing Standards (CFAS) is to assist the IRBA to: develop, maintain, adopt, issue or prescribe auditing pronouncements; consider relevant international changes by monitoring developments by other auditing standard-setting bodies and sharing information where requested; and promote and ensure the relevance of auditing pronouncements.

4 Copyright November 2016 by the Independent Regulatory Board for Auditors (IRBA). All rights reserved. Permission is granted to make copies of this work, provided that such copies, in whichever format, are for the purpose of registered auditors discharging their professional duties, for use in academic classrooms or for personal use; and provided such copies are not sold for income and provided further that each copy bears the following credit line: Page 3 of 94 Copyright by the Independent Regulatory Board for Auditors. All rights reserved. Used with permission of the IRBA. Otherwise, written permission from the IRBA is required to reproduce, store or transmit this document except as permitted by law.

5 TABLE OF CONTENTS Page 4 of 94 Contents Page Explanatory Memorandum Introduction 5 Background 5 Project timetable and effective date 5 Guide for respondents 5 Request for specific comments 5 Exposure Draft Proposed revised Guide for Registered Auditors: Engagements on Attorneys Trust Accounts 6 EXPLANATORY MEMORANDUM Page 5 of 94 EXPLANATORY MEMORANDUM Introduction This memorandum provides background to and an explanation of this Proposed revised Guide for Registered Auditors: Engagements on Attorneys Trust Accounts (this proposed revised Guide). The Committee for Auditing Standards (CFAS) approved this proposed revised Guide in November 2016. Background This proposed revised Guide provides guidance to a registered auditor when performing a reasonable assurance engagement on whether an attorney s Trust Accounts were maintained in compliance with Sections 78(1), 78(2)(a) and (b), 78(2A), 78(3), 78(4) and 78(6) of the Attorneys Act, No.

6 53 of 1979 (the Act) and the Rules for the Attorneys Profession, and also when reporting on the attorney s Annual Statement on Trust Accounts . This proposed revised Guide has been updated for amendments to the International Standard on Assurance Engagements (ISAE) 3000, Assurance Engagements Other than Audits or Reviews of Historical Financial Information and the Rules for the Attorneys Profession as published in the Government Gazette No. 39740 on 26 February 2016 (effective from 1 March 2016). Project timetable and effective date Subject to comments received on exposure of this proposed revised Guide, the CFAS intends to finalise the guide in the first quarter of 2017. If so, a possible effective date for implementation of the revised Guide may be applicable to financial periods commencing on or after 1 March 2016.

7 Guide for respondents The CFAS welcomes comments on all matters addressed in the exposure draft. Comments are most helpful when they refer to specific paragraphs, include the reasons for the comments, and where appropriate, make specific suggestions for any proposed changes to wording. When a respondent agrees with the proposals in this exposure draft it will be helpful for the CFAS to be made aware of this view. Request for specific comments Comments on any aspects of this proposed revised Guide are welcome. Respondents are requested, in particular, to comment on the following: 1. Are there any aspects of this proposed revised Guide that respondents disagree with? Please provide details and suggestions for correction and/or improvements.

8 2. Do respondents believe that the proposed effective date to be applied by auditors, for financial periods commencing on or after 1 March 2016, will enable sufficient time for implementation of the guidance contained herein? If not, what effective date will be practicable? TABLE OF CONTENTS Page 6 of 94 PROPOSED revised GUIDE FOR REGISTERED AUDITORS Engagements ON Attorneys Trust Accounts (Effective for financial periods commencing on or after 1 March 2016) Contents Page Introduction .. 9 Scope of this 9 Purpose of an engagement on Attorneys Trust Accounts .. 9 Nature of an engagement on Attorneys Trust Accounts .. 10 Effective Date .. 10 Definitions .. 10 The Act and the Rules .. 12 Characteristics of an attorney s Trust account and compliance with the Act and the Rules.

9 12 The engagement and the auditor .. 13 Respective Roles and Responsibilities .. 14 attorney .. 14 Auditor .. 14 Relevant Law Society .. 15 Law Society of South Africa .. 15 Attorneys Fidelity Fund .. 15 Internal control .. 15 Nature and Extent of the Auditor s Work .. 16 Ethical requirements and quality control .. 16 Acceptance and continuance .. 17 Agreeing the terms of the engagement .. 17 Emphasis on professional competencies .. 17 Emphasis on professional scepticism and professional judgement .. 18 Materiality .. 18 Emphasis on special considerations applicable to fraud and theft .. 18 Compliance with laws and regulations .. 21 Written representations by an 22 Subsequent events .. 22 Auditor s documentation .. 23 Auditor Reporting .. 23 Assurance report content.

10 23 Illustrative reasonable assurance reports .. 24 TABLE OF CONTENTS Page 7 of 94 Report on attorney s Annual Statement on Trust Accounts .. 24 Report on other legal and regulatory requirements .. 25 Other reporting responsibilities .. 25 Appendix 1: Rule Requirements, Identified Assurance engagement Risk and Illustrative Procedures/Responses .. 26 Appendix 2: Illustrative engagement letter .. 69 Appendix 3: Illustrative representation letter .. 74 Appendix 4: Illustrative Auditor s Report (Unmodified opinion) .. 77 Appendix 5: Illustrative Auditor s Report (Qualified opinion) .. 81 Appendix 6: attorney s Annual Statement on Trust Accounts .. 85 Appendix 7: Relevant Extracts from the Act and Summary of Rules Affecting Auditors Appointment, Rights and Duties.