AGSA AUDIT COMMITTEE REPORT TO SCoAG
4 November 2016
Overview
• Purpose
• Committee composition
• Activities for noting
• Decisions
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Purpose of Report of Audit Committee
Report done in compliance with section 40(6) of the Public
Audit Act (Act No. 25 of 2004) (PAA), and in line with the King
Code of Governance Principles (King III) as adopted by the
AGSA
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Committee composition
• Current Committee composed of: Mr P Moyo
(Chairperson), Mr J Biesman-Simons and Ms. C Roskruge
Cele
• The following changes to the membership of the
committee were made:
– Ms Mthombeni resigned as an Audit Committee member
effective 31 August 2015
– New member, Ms Carol Roskruge Cele was appointed in
April 2016, to replace Ms Mthombeni
– Mr S Gounden resigned as an Audit Committee member
effective 29 September 2016
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Activities for noting - Additional duties
• Additional committee duties
– Mr J Biesman-Simons serves on the AGSA’s Quality
Control Assessment Committee (responsible for the
system of Quality Control in the AGSA)
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Activities for noting
Over the period under consideration, the committee received
and interrogated information from management e.g. Integrated
Annual Report; other relevant organisational structures and
independent assurance providers. This information affords us the
confidence that the organisation’s:
• resources and financial expertise are adequate and effective
• systems of internal controls was deemed adequate and
partially effective with an overall risk factor of medium
• no critical issues came to our attention that can render the
systems of internal control unreliable
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Activities for noting
EFFECTIVENESS OF INTERNAL CONTROLS
• The committee is responsible for ensuring that there is
adequate oversight of the system of internal controls and risk
management.
• The committee is able to conclude, after having reviewed
submission by internal and external audit assurance
providers, that the systems of internal controls of the
organisation can be relied upon for the integrity and reliability
of financial reporting; the safeguarding, verification and
maintenance of the organisation’s assets and the detection of
fraud and error and compliance with laws and regulations.
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Activities for noting
EVALUATION OF FINANCIAL STATEMENTS
• The audit committee reviewed the financial statements and
noted management’s confirmation of going concern for the
2016-17 financial year.
• The committee is satisfied that the AGSA will maintain the
ability to trade as a going concern for the foreseeable future.
• The committee is satisfied that the system of internal controls
is sound and that the integrated annual report including
financial statements were prepared in accordance with the
appropriate standards – including IFRS and GRI.
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Activities for noting
INTERNAL AUDITORS
• The internal audit function, SizweNtsalubaGobodo, is
mandated to independently apprise the committee of the
existence, adequacy and effectiveness of the organisation’s
risk management, internal controls and governance processes
as directed in its approved charter.
• The committee notes that the internal audit plan was
successfully executed for the year under review. The
recommendations and corrective actions reported to
management, if implemented, will further enhance the internal
control environment.
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Activities for noting
EXTERNAL AUDITOR’S APPOINTMENT AND
INDEPENDENCE
In line with section 39(2) of the PAA, the committee is satisfied
that the external auditor appointed by SCoAG, Kwinana and
Associates Inc. (Kwinana), was independent of the AGSA and
was not conflicted as required in section 39(2)(c) of the PAA. In
arriving at this determination, the committee reviewed and took
the following into consideration:
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Activities for noting
EXTERNAL AUDITOR’S APPOINTMENT AND
INDEPENDENCE
• Representations made by the external auditors to the
committee, on their independence. Assessed the external
auditor against the criteria on objectivity and independence as
specified by IRBA and considered the external auditor’s
previous appointments as external auditors to the AGSA;
• The quantum of other work undertaken by the external auditor
for the AGSA. The external auditor did not, except as external
auditor or in rendering permitted non-audit services, receive
any other remuneration/ benefit from the organisation;
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Activities for noting
EXTERNAL AUDITOR’S APPOINTMENT AND
INDEPENDENCE
• Based on the outcome of the above activities, the committee
can conclude that the external auditor’s independence was
not impaired, prejudiced nor influenced during their dealings
with the AGSA.
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Activities for noting
EXTERNAL AUDITOR’S ACTIVITIES
• Reviewed and approved the external audit plan, the budgeted
external audit fee for the reporting period and the terms of
engagement of the external auditors
– including pre-approving all non-audit services that the
external auditor provided;
• Considered the external auditor and the quality of the external
audit process, and found it to be satisfactory;
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Activities for noting
CONSIDERATION OF SUSTAINABILITY CONTROLS,
PERFORMANCE AND INFORMATION
• With respect to sustainability controls, performance and
information, the committee considered that the responsibility
to ensure that processes are in place for sustainability
initiatives and reporting rests with the leadership of the
organisation;
• The committee considered and approved audit plans relating
to the review of performance and sustainability information by
the internal auditors;
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Activities for noting
CONSIDERATION OF SUSTAINABILITY CONTROLS,
PERFORMANCE AND INFORMATION
• The committee considered the limited assurance for selected
sustainability indicators as provided by external auditors and
the observations made by the internal auditors in their reports;
thus receiving the necessary assurances that material
disclosures were reliable and did not conflict with the financial
information.
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Decisions
• The Standing Committee on the Auditor-General (SCoAG) to
approve the recommendation for the reappointment of
Kwinana and Associates Inc. (Kwinana) as the independent
external auditor of the Auditor-General of South Africa (AGSA)
for a further period of three (3) years; after having considered
the terms proposed herein.
• Kwinana served the AGSA as independent external auditors
since the 2010-11 financial year. Since then, their contract has
been renewed once (being in the 2013-14 financial year).
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Decisions
• Since then Kwinana has duly been annually appointed to
continue providing their services as independent external
auditors.
• The contract between Kwinana and the AGSA expired at the
conclusion of the audit for the year ended 31 March 2016.
After having gone through the process of deliberating on
whether to advertise and request bids for the impending
vacancy or reappointing the existing independent external
auditors; the committee was comfortable with the
reappointment.
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Decisions
• There are conditions attached to the proposal for
reappointment of Kwinana & Associates, the key condition
requires that Kwinana must have 5 partners by 31 March
2017.
• If the condition is not met, the external auditor’s reappointment
will be limited to one year, with requests for bids issued for the
Financial Year ending March 2018.
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Decisions
• The Audit Committee confirms to SCoAG that an appointment
has to be made by the end of November 2016 to enable the
audit firm to commence work. The AGSA would struggle to
meet its reporting obligations if SCoAG does not approve the
appointment of an external audit firm by the end of November
2016.
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Questions
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