IRBA: Proposed SAAPS 7_Transparency reports re PTEs

IRBA: Proposed SAAPS 7_Transparency reports re PTEs

• 15 March 2024
• Auditing and Assurance
• South African Accounting Academy

The proposed SAAPS 7 was drafted with a view of a firm that is considering the 8 components of a system of quality management (SoQM), as outlined in International Standard on Quality Management (ISQM) 1, in its preparation of a transparency report. This approach was followed because it is principles-based.

Paragraph 6 of ISQM 1 lists the 8 SoQM components as:

• The firm's risk assessment process;
• Governance and leadership;
• Relevant ethical requirements;
• Acceptance and continuance of client relationships and specific engagements;
• Engagement performance;
• Resources;
• Information and communication; and
• The monitoring and remediation process.

Therefore, related aspects in ISQM 1 have been incorporated into this proposed SAAPS with references where appropriate.

ISQM 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements, requires that a firm communicates relevant and reliable information to external parties. This is informed by an increased need for external parties to understand a firm's SoQM. For certain firms, transparency reports may be an appropriate tool to achieve that ISQM 1 objective. Examples of transparency reports are available at https://www.irba.co.za/guidance-for-ras/technical-guidance-for-ras/transparency-reporting-and-audit-quality-indicators-aqis

The proposed SAAPS 7 is aimed at assisting firms that audit financial statements of publicly traded entities to achieve compliance with paragraphs 33(d)(ii) and A114 of ISQM 1 and the regulatory requirement applicable to firms in South Africa, relating to the content and format of a firm's transparency report.

The firm or auditor will have to exercise professional judgement to determine the extent to which any of the guidance provided in the proposed SAAPS 7 may be appropriate, in light of the requirements of ISQM 1 and the IRBA's Rule 2 (Transparency Reports) of the IRBA Rules Arising from the International Standards on Quality Management, available at https://www.irba.co.za/upload/BN 512 of 2023 - IRBA Rules on QM.pdf – as published in Government Gazette No. 49757 of 24 November 2023 (pursuant to Sections 9 and 10, read with Sections 1, 2 and 3 of the Auditing Profession Act 26 of 2005, as amended).

Proposed Effective Date

Depending on the comments received, the plan is for the CFAS to approve the final SAAPS in August 2024 and issue the final version thereafter. The final SAAPS 7 will be effective for transparency reports prepared and published on or after 15 December 2025, with early adoption permitted.

The submission deadline for comments to the IRBA is 15 June 2024.

Click here to download the Proposed SAAPS 7:

https://www.irba.co.za/upload/Proposed%20SAAPS%207%20ED_approved%20by%20CFAS_6%20March%202024.pdf

Relevance to Auditors, Independent Reviewers & Accountants:

• Members of IRBA should stay up-to-date with the latest developments and pronouncements that affect registered auditors.
• Transparency reports will apply to all firms with Publicly Traded Entities clients.
• Practitioners must be aware of the content of any guidance issued by IRBA in this regard.
• All Registered Auditors, Independent Reviewers and other Independent Assurance Practitioners must comply with the IRBA Pronouncements that affect their reporting on relevant engagements.
• As an Auditor, you need to comply with the relevant reporting requirements, and must therefore refer to the latest requirements in respect of Transparency reports published in the pronouncements for your relevant client engagements.

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