SAICA: Materiality Guidelines for Banking Regulatory Assurance Engagements

SAICA: Materiality Guidelines for Banking Regulatory Assurance Engagements

• 29 August 2024
• Auditing and Assurance
• South African Accounting Academy

The Guide contains references to “industry practice” with regard to these regulatory assurance engagements. These references are based on the experience of the audit firm representatives on the SAICA Basel Task Group and provides users with context when applying this Guide. The Guide, however, does not prescribe the use or application of any stated “industry practice” information. The requirements of the applicable standards include the application of professional judgement in determining materiality for the regulatory assurance engagement and documentation of the auditor’s considerations.

This Guide is intended to provide auditors performing regulatory assurance engagements for Banks or Mutual Banks with guidance that may be applied in the determination of materiality for the regulatory assurance engagement, and in evaluating identified or possible misstatements and their impacts on the auditor’s reports, when reporting on the Banks Act Returns (“BA Returns”) in terms of Regulation 46 of the Regulations Relating to Banks or when reporting on the Depository Institutions returns (“DI Returns”) in terms of Regulation 6 of the Regulations relating to Mutual Banks (collectively “the Regulations”).

This Guide provides guidance in respect of the following as it relates to a regulatory assurance engagement:

1. Applying professional judgement in determining regulatory overall materiality and specific materiality;
2. Determining the clearly trivial threshold to be applied when accumulating identified misstatements;
3. Applying professional judgement in evaluating identified or possible misstatements and their impact on the auditor’s reports; and
4. Reporting of other matters in the regulatory assurance engagement reports.

The Guide also focuses on the practical application of the materiality principles in evaluating misstatements in a regulatory assurance engagement through the use of the flowcharts as set out in Appendix C.

This Guide does not prescribe the benchmark or the percentage to be applied in the regulatory assurance engagements and the use of this Guide should therefore not be used as a reference in documenting the materiality judgements made. Instead, the auditor should document why the materiality applied would be appropriate with reference to the PA as the primary user of the statutory returns.

The determination of performance materiality is not addressed in this Guide as it was regarded that this topic was sufficiently dealt with by the applicable standards and the audit firms’ methodologies.

Contents:

• Preface
• Introduction
• Scope
• Definitions
• Requirements of the applicable standards in relation to the determination of materiality and evaluating misstatements in a regulatory assurance engagement
• Determining regulatory overall materiality for the regulatory assurance engagement
• Evaluating misstatements in a regulatory assurance engagement
• Reporting of Other Matters in the Regulation 46 and Regulation 6 reports
• Practical application of the materiality principles in evaluating misstatements
• Other considerations
• Appendix A: Categorisation of the returns
• Appendix B: Relevant requirements (for purposes of this Guide) contained in the applicable standards
• Appendix C: Flowcharts

Click here to download the 23-page Guide:

https://saicawebprstorage.blob.core.windows.net/uploads/resources/SAICA_Banking_materiality_guide_Final_August_2024.pdf

Relevance to Auditors, Independent Reviewers & Accountants:

• Practitioners should adhere to the ISA on Materiality, amongst other ISAs.
• Auditors, Independent Reviewers and Accountants should always be aware of the latest publications issued by regulators, professional bodies and standard-setting boards, such as SAICA, as well as the contents of any practical considerations contained within this guide.

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