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With the annual tax filing season well underway, the South African Revenue Service (SARS) seems to be pulling all the stops to get back on track and to collect taxes in an efficient and effective way, says Ettiene Retief, Chairman of the National Tax and SARS Committee at SAIPA.
The near disastrous changes to the operating model of the tax authority under the management of suspended commissioner Tom Moyane has led to a decline in tax morality and revenue collections. Acting commissioner Mark Kingon has however vowed to tweak things to collect the taxes government needs. Tweaking the model Retief says structural changes made under Moyane include the dismantling of the Large Business Centre (LBC) which focussed on large and multinational companies and high net worth individuals. These two categories of taxpayers are responsible for a large chunk of the tax revenue collected by SARS. Their tax affairs are generally complex and hold risks for the fiscus if it is not managed properly. The reasoning behind the dismantling of the LBC was the unnecessary duplication of resources. “The LBC has a clear role to play in operational efficiency and effectiveness,” says Retief. Transfer pricing practices in cross border transactions offer opportunities for base erosion and profit shifting. “Surely a transfer pricing unit that can focus at that level is a far more efficient use of resources and the management of tax risks,” says Retief. “Any large business will tell you how frustrating the process has become when dealing with complex matters with officials who do not have the experience to deal with it properly.” Retief says SAIPA fully supports the refocus on the LBC and the re-establishment of certain functionalities which will allow SARS to collect revenue in a far more efficient and effective way. The tax affairs of rich South Africans equally require specialised skills since the risks are vastly different to that of an average taxpayer. They generally have complex trust structures, deductions for venture capital company investments, loans and beneficial ownerships that requires a different set of auditing skills. Auditing capabilities Retief says there is sufficient causal evidence that there has been a deterioration of auditing efficiency. The audit of an average taxpayer is not supposed to take more than four months. “There has to be a balance between an efficient auditing process and happy taxpayers who are not unduly frustrated or disadvantaged.” Retief says SARS will have to restore the faith taxpayers had in the tax authority and how it collects taxes. Government needs to gain taxpayer’s trust in how it is spending their money. There must be a change in the ethos of the business. Taxpayers who are complaint should be respected. However, painting everyone with the same non-compliant brush serves nobody. Shorter time to file SARS has proposed a shorter filing season for non-provisional taxpayers to enable it sufficient time to complete its verification and audit processes. Filing season will close at the end of October for taxpayers who are using the electronic filing platform offered by SARS. Provisional taxpayers still have until the end of January. Retief supports the shorter filing season, saying it will lead to a natural increase in compliance and collections. ENDS MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za For more information on SAIPA please visit: Website: www.saipa.co.za Twitter: @SAIPAcomms LinkedIn: South African institute of Professional Accountants Company Facebook: South African Institute of Professional Accountants
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Members of the South African Institute of Professional Accountants (SAIPA) need to be aware of the legislation involved when accepting an engagement from a public school. There are several risks involved with self-review and SAIPA members with clients in the education sector must take note of the potential pitfalls of doing the school’s “audit”.
A Professional Accountant (SA) may not audit financial statements, says Faith Ngwenya, Technical and Standards Executive at SAIPA. An audit may only be done by a registered auditor and conducted in terms of the Audit Professions Act. The only form of assurance service that may be offered by a SAIPA member is an independent review. “Many times, a school doesn’t have the resources to prepare their own financial statements. If they have appointed a member of SAIPA for this task, the SAIPA professional must take precautionary measures to address the threat that exists when the client expects them to handle the preparation of the establishment’s financial statement as well as conduct an independent review on those same financial statements,” says Ngwenya. Legalities involved with separation of duties According to the South African Schools Act, the governing body of a public school must draw up annual financial statements in accordance with the guidelines determined by the Member of the Executive Council within three months of the end of each financial year. Within six months of the end of each financial year, a copy of the annual audited financial statements must be submitted to the heads of the regional education department. The auditor/independent reviewer should not do the bookkeeping of the school, other than the year-end journals and adjustments. According to the International Standard of Review Engagements (ISRE 2400), the audit/review of the school’s financial statements must not be carried out by the same accounting professional who was involved in the preparation of the statements. It is also important to note that the registered auditor performing the audit function to a school must not compile the annual financial statements. The compilation must be done by an accountant who will not be responsible for the audit or review of the same financial statements. To reduce the self-review threat that exists, members can help the school to find another accounting firm to prepare their financial statements or refer the accounting work to another professional accountant. “There needs to be a clear separation of responsibilities to reduce the threat of an accountant preparing the financial statements and providing assurance on the same documents. Separate entities need to be appointed for each task, which may be challenging for small companies and sole practitioners,” says Ngwenya. Collaboration is key to minimising risks The governing body of a public school must appoint a person registered as an auditor in terms of the Audit Professions Act of 2005. If this is not reasonably practicable, it must appoint a person who is qualified to perform the duties of an accounting officer of Close Corporations (section 43(2)(a) of SASA). “I believe many accounting officers will need to reduce and minimise the threat that exists if they are preparing financial documents for schools as well as providing independent reviews. Collaboration is key to protecting yourself professionally and to ensure that your client – the public school – is receiving the due diligence that is needed in South Africa. SASA’s goal is to ensure that all learnings have access to quality education without discrimination and a large part of this responsibility resides with ensuring that financial documents are correct, transparent and correct. I would like to urge SAIPA members to work together and refer to each other to separate responsibilities to help minimise risks and stay in line with the new legislation,” concludes Ngwenya. ENDS MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za For more information on SAIPA please visit: Website: www.saipa.co.za Twitter: @SAIPAcomms LinkedIn: South African institute of Professional Accountants Company Facebook: South African Institute of Professional Accountants Author: Professor Rashied Small, Executive: Education and Training at SAIPA
The International Federation of Accountants (IFAC) recently released its 2017 Global Status Report which measures the progress of its members in adopting its international accounting standards. IFAC found that, although member organisations are committed to meeting their SMO’s (statement of member obligations) for each standard, the process is complex and progress is rarely quick. In fact, full implementation may take years. As the report notes, professional organisations typically share responsibility for adoption with external stakeholders like government and educational institutions. Their ability to win the cooperation of these parties is therefore vital in achieving their end. Why South Africa leads It is encouraging that South Africa has been ranked number one in implementing IFAC standards over the previous five years, except for 2017. As a member of the South African Institute of Professional Accountants (SAIPA), I can attest that the country’s status as an early adopter is due in no small part to the organisation’s focus on relationship building and collaboration. The same is true of any of the nation’s various professional accounting organisations (PAO’s). Education Adoption of IFAC standards starts in the country’s education system. Courses for accounting must meet government regulations and address the needs of industry. It is therefore appropriate that SAIPA, like most professional bodies, sits on the advisory committees at South Africa’s various universities. These panels review current curricula to evaluate if they are still relevant to industry requirements and incorporate international standards. The Institute also consults with other tertiary education providers. In addition, SAIPA works with the South African Qualifications Authority (SAQA), the Council of Higher Education and the Quality Council for Trades and Occupations. Government Government plays a key role in the adoption of IFAC standards and SAIPA’s relationship with them is extremely good and positive. The Institute has worked hard to win the right to positively influence regulation by being involved in and adding value to the legislation development process. The Institute provides representation to government in parliament on matters like tax and the Companies Act and is a member of the recognised controlling body (RCB) with SARS. Government is also entrusting professional bodies with more responsibility to ensure that regulations and standards are embraced by their members . Professional bodies A country’s regulators can greatly accelerate adoption of IFAC standards by working together towards this goal. Fortunately, the many professional bodies in South Africa maintain a good working relationship with one another. This has contributed to our success. For standards that govern the field, SAIPA is represented with each stakeholder to ensure correct interpretation and implementation of the standards. These include the Financial Reporting Technical Committee, Accounting Standards Board and Ethics Standards Board. Other countries If some of South Africa’s trade partners do not fully implement IFAC standards, this can reduce the benefits of our own adoption. To address the issue, SAIPA joined several African accounting bodies, most notably the Pan African Federation of Accountants (PAFA) and the Southern African Community Institutes of Accountant (SACIA) a sub-structure of PAFA that promotes collaboration and co-operation amongst regional PAO’s. This gives us the opportunity to help ensure standards are fully adopted across the continent. For unaffiliated countries, SAIPA has signed memorandums of understanding (MOU) with several who wish to adopt the standards but lack the guidance or resources to do so. Currently, we offer our services to seven African professional bodies to assist them with adoption and developing a curriculum of minimum competencies. Non-regulated accountants All auditors in South Africa must belong to a professional body, but not all practicing accountants. This is of concern because non-regulated practitioners are under no material obligation to adhere to IFAC standards. Through the Forum of Accounting Bodies, SAIPA is working with Treasury on new regulations to compel all accountants to join a professional body. This will give their employer or clients the assurance that they are fully compliant, being bound by our code of conduct, investigation and disciplinary processes, and continuous professional development programmes. Treasury should begin rolling out a new regulatory framework by 2020. Setting the pace In adopting IFAC’s international standards, South Africa has become a yardstick for the rest of the world. International bodies are investigating our implementation frameworks, educational curricula and professional programmes as blueprints for their own endeavours. While collaboration is the key to making adoption happen, the secret ingredient is the hard work of relationship building that makes close cooperation possible. ENDS MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za For more information on SAIPA please visit: Website: www.saipa.co.za Twitter: @SAIPAcomms LinkedIn: South African institute of Professional Accountants Company Facebook: South African Institute of Professional Accountants The South African Institute for Professional Accountants (SAIPA) says applications to its Project Achiever programme, which is geared to assist those writing the November 2018 SAIPA Professional Evaluation (PE) examination, will close on May 30th and has urged entrants to not miss this deadline.
Classes are set to start on June 2nd. New entrants to the professional accountancy profession are mandated to pass the PE examination, which ensures they adhere to international education standards. This is done by assessing whether an aspiring professional accountant meets the minimum competence or proficiency level to be assigned the designation of Professional Accountant (SA). The designation is one of the few authorised by the South African Revenue Service to provide services as a tax practitioner. A Professional Accountant (SA) can also perform numerous functions, including issuing reports in terms of the Companies Act, Close Corporations Act, and Micro lending industry regulations, Sectional Titles Act, Non-Profit Organisations Act, and Schools Act. Inception For many aspiring Professional Accountants (SA), the PE examination can be both an important step in the development of a Professional Accountant (SA) and a potential roadblock for those who are unable to pass the exam. From here Project Achiever was born in 2015, a programme funded by Finance and Accounting Services Sector Education and Training Authority (FASSET) that assists candidates in successfully completing the examination and becoming designated SAIPA professional accountants. Although the programme was implemented to facilitate the transformation agenda of the profession, in other words particularly aimed at helping newly qualified black accountants, it is open to all candidates. Last year SAIPA also launched the online version of Project Achiever to reach interested candidates in outlying areas. The 12-week, competency-based and learner-centered programme that focusses on the holistic development of the young professional. It is not a content-based programme designed to get people through an examination. Rather it exposes candidates who have completed the professional development and practical experience component of their development to the ‘soft’ skills components required to become ethical and proficient professionals. This enables them to develop into professional accountants able to provide solutions to the issues brought to them by their clients. Candidates are encouraged to consolidate their knowledge through self-study and research and to apply this to develop practical and implementable solutions to business scenarios and problems in a multi-disciplinary manner through group discussions. The PE examination is further aligned with the International Education Standards 6 (IES 6) Assessments, with an emphasis on the principles of competency-based assessment. “The benefit for future employers or clients is that they will benefit sooner from the combined competence and expertise of the Professional Accountant (SA) beyond the preparation of financial statements for compliance purposes,” explains Ngobese. For more information regarding requirements and applications for Project Achiever please click here. ENDS MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za For more information on SAIPA please visit: Website: www.saipa.co.za Twitter: @SAIPAcomms LinkedIn: South African institute of Professional Accountants Company Facebook: South African Institute of Professional Accountants The South African Institute of Professional Accountants (SAIPA) invites all universities to enter their Tax & Accounting Thesis competition, by submitting the top three completed thesis/dissertations for 2017/2018 in fulfilment of the Honours, Masters or Doctoral degrees in either accounting or taxation on or before 30 June 2018.
“The competition is aimed at promoting good research in accounting and taxation by rewarding candidates whose thesis/dissertation have been selected through an adjudication process as the best in their degree level,” said SAIPA’s Technical and Standards Services Executive Faith Ngwenya. Requirements
SAIPA reserves the right to verify with the university the eligibility of the candidate. Adjudication process All thesis/dissertations that have been submitted will be marked by a panel of experts in line with an agreed rubric. Each paper will be marked by at least two independent markers and further independently moderated. Ngwenya points out that the submitted thesis/dissertations will only be used for the competition and will not be published otherwise. There will be one winner in each of the degree levels for accountancy and taxation. Altogether, six winners will be awarded prizes as follows: Doctoral degree winners R20 000 Master’s degree winners R15 000 Honours degree winners R10 000 Electronic copies of the thesis/dissertation must be emailed to: thesis@saipa.co.za. The winning thesis/dissertations will be announced at the SAIPA Top Achievers Awards 2018 ceremony no later than 31 August 2018. ENDS MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za For more information on SAIPA please visit: Website: www.saipa.co.za Twitter: @SAIPAcomms LinkedIn: South African institute of Professional Accountants Company Facebook: South African Institute of Professional Accountants Amid recent media reports of the South African Revenue Service uncovering a trend of non-compliance among tax practitioners in the country, the South African Institute of Professional Accountants (SAIPA) has urged its tax practicing members to annually submit their tax clearance certificates, along with a declaration that they have not been found guilty of any criminal offences; and comply with the required continuing professional development (CPD).
SAIPA Technical Executive Faith Ngwenya says failure to comply with these requirements means the Institute will not be able to activate a practitioner as a member, thus not being able to service their clients for tax purposes. The Tax Administration Act (TAA) requires since 2013 that tax practitioners register with a recognised controlling body and the South African Revenue Service (SARS). To register a practitioner must belong to or fall under the jurisdiction of a recognised controlling body, have the minimum qualifications and experience set by the controlling body and have no criminal convictions for certain offences set out in the act. Threat of deregistration National Treasury proposed in the February 2018 budget an amendment to the TAA to have non-compliant tax practitioners deregistered. Treasury said if a practitioner has not complied on a continuous or repetitive basis and does not correct their behaviour after being notified by SARS, they will be deregistered as a practitioner. In recent weeks, SARS held a meeting with the leadership of the recognised controlling bodies and proposed a two-day workshop to address some of the issues raised during the meeting, including the deregistration of tax practitioners, says Ngwenya. “Deregistration is not happening yet, and the process of how it will be done must still be developed.” Whilst it remains unclear how many of our members are non-compliant from the SARS side, SAIPA has already excluded +/- 1 000 members from the list of tax practitioners in good standing as they have not met our annual compliance test which includes payment of their subscription fees, tax clearance status, criminal record declaration and compliance with CPD. Impact of deregistration A member who has been deregistered or is not activated as a member of SAIPA due to non-compliance will not be able to offer tax services. One of the complaints that SAIPA receives from members involves the withholding of taxpayer profiles by the former tax practitioner when a new one has been engaged by the taxpayer. Ngwenya adds that the Institute’s legal and compliance division will investigate these complaints. She notes that practitioners are required to release the profile once the taxpayer has switched to a new practitioner. In some cases, they decline to release the taxpayer’s profile due to, amongst others, alleged non-payment for services rendered. This process can be extremely frustrating for taxpayers. Area of concern Ngwenya says although SAIPA and other recognised controlling bodies are required to meet stringent registration requirements, tax practitioners who are not registered still slip through the system. Some tax practitioners can “circumvent” the system by registering multiple profiles pretending to be an individual filing his own return, or a company doing its own submissions. “We have raised the issue and it has to be addressed by SARS otherwise it simply makes a mockery of the tax practitioner registration process.” ENDS MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za For more information on SAIPA please visit: Website: www.saipa.co.za Twitter: @SAIPAcomms LinkedIn: South African institute of Professional Accountants Company Facebook: South African Institute of Professional Accountants Author: Darren Gorton, Finance Executive at the South African Institute of Professional Accountants (SAIPA)
Cryptocurrencies are dominating the media. This one has collapsed, that one is on the rise, and a new one is around the corner. Their flavour isn’t quite as piquant today as it was yesterday thanks to fraud, an upsurge in Initial Coin Offerings (ICO) and the challenges that face its legislation and regulation across country and government. In April the South African Revenue Service (SARS) announced that it will be treating cryptocurrencies using normal income tax rules. Affected taxpayers will, therefore, be expected to declare cryptocurrency gains or losses as part of their taxable income in the tax year in which it is accrued. Cryptocurrencies are also often confused with blockchain which is a complex, layered technology that provides the backbone of cryptocurrency, but has the potential to deliver so much more to enterprise, industry and the consumer. Cryptocurrencies may be getting all the airtime, but blockchain is the underlying technology, and this application of the technology is only a small part of what this technology can enable. Blockchain itself is largely unexplored, even though it has been around for nine years now. To fully understand the potential of blockchain, it’s worth understanding precisely what it is and what it is not. According to Deloitte, blockchain is defined as a ‘digital and distributed ledger of transactions, recorded and replicated in real time across a network of computers or nodes’. It is already being used as a way of replacing databases thanks to its secure, centralised network – taking the vulnerable database of today and turning it into something that can be trusted. If a bank runs its own database, they can change information without anyone knowing. With blockchain, it is impossible to do so without leaving a digital trail. This means it provides a system that all parties can trust inherently, and the applications of this high level of transparency and security aren’t limited to just the finance industry. Removing the middleman By implementing blockchain, the business can cut out the middlemen who originally provided the verifications needed for transactions. There is even talk of it being implemented in security exchanges where the exchange is currently the middleman between the investor and the company they want to invest in. While the technology may not have an immediate and profound impact on the man on the street, for the accountant it potentially offers an additional layer of trust to the numbers. Blockchain provides the certification between two parties in a transaction, acting as the verification in itself. There is increased emphasis on the validity and accuracy of the information. The Professional Accountant (SA) can lean on the security afforded by blockchain to focus on adding value to the enterprise across financial reporting, analysis and insights. Of course, this does mean that the accounting industry needs an understanding of the technology, how it supplies the verification and the reasoning behind its security and validity. Businesses are set to adopt this technology, of that there is no doubt. It won’t happen overnight, and the middlemen are going to push for a lot of legislation to delay the advance of blockchain technology as far as possible or even make some of the applications unlawful. It is a battle that technology will most likely win in the long run, and the Professional Accountant (SA) needs to know how this will impact on clients and the industry they are working in. For the Professional Accountant (SA), the pressure is on. By understanding how blockchain works and the impact it has, they can provide clients with exceptional insight into everything from the latest regulations to innovative applications. The circle of success In South Africa, we still have a way to go, but that doesn’t mean that the Professional Accountant (SA) can put their head in the sand and ignore it. As cryptocurrency fluctuates and organisations such as the Reserve Bank, SARS and other government departments implement regulation to manage the movement of money around the globe, blockchain is going to evolve at a rapid pace. Another aspect to consider is information. The POPI Act and other similar forms of legislation that control information are set to impact on the development and adoption of blockchain. It connects to the digital lives that people are leading, the regulation around what companies can or cannot maintain, and how blockchain can support compliance. It is difficult to say how blockchain and cryptocurrencies are going to play out. The Professional Accountant must be aware of how cryptocurrencies are declared in business records and monitor regulation. They have to know what to look out for, the risks that are involved and the impact on the business. And they need to recognise that these technologies aren’t going to leave any time soon. ENDS MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za For more information on SAIPA please visit: Website: www.saipa.co.za Twitter: @SAIPAcomms LinkedIn: South African institute of Professional Accountants Company Facebook: South African Institute of Professional Accountants By: Marnus Broodryk, Founder of The Beancounter accounting firm
About the author: In addition to being a Professional Accountant (SA) and a member of the South African Institute of Professional Accountants, Marnus was asked in 2016 to participate in M-Net’s reality series Shark Tank South Africa and he hosts a weekly insert on kykNET’s Winslyn, where he shares advice and tips with aspiring and established entrepreneurs on how to start, manage and grow a business. http://marnusbroodryk.com/about/ I can’t tell you exactly what 2018 has in store for you as a professional accountant. But I can say with great certainty that how you approach business this year will determine how successful you are. Here’s my advice for staying ahead of the curve. Don't get ahead of yourself Too many accountants worry about maturing technologies like Blockchain, AI and robotics stealing away their income. Some of you have weathered radical changes in the business environment for decades. What’s different now? Sure, we know these developments will be disruptive, but we don’t even know when or to what extent. Instead of fretting over what might happen in the unforeseeable future, I suggest that you rather focus on imminent changes we can expect over the next three years, by which time they’ll be considered the new normal. Research those certainties and decide how you can start preparing for them today. Stop time If you haven’t heard, hourly billing is dead. Fixed fees are the future. You can kick against it all you want but clients who have tasted fixed fee services won’t be coming back ... ever. They like knowing what they’ll pay upfront because nobody enjoys a bill loaded with unexpected charges. Some forward-thinking firms saw an opportunity early on and introduced fixed fees as their competitive advantage. Now it’s becoming the standard and your only option is to follow suit, so start switching over now. Rather than worrying about how much income you’ll lose, think of how many grateful customers you’ll gain. Evict the vampires Keeping customers happy is worth every effort most of the time. But not all clients are right for you and those who aren’t will quickly suck the energy and fortunes from your business. They demand the best service at a discount, but their account is always in 60 days. Or they’re just never happy, even with quality everyone else raves about. Do yourself a favour: run a Pareto analysis on your debtors, identify the 20% that causes 80% of your problems, and cut them loose. Then spend more time on the 20% that brings in 80% of your sales. These days we shop, bank, socialise and even hail taxis online. Yet, when it comes to accounting, many practitioners still use legacy desktop software and transport data from and back to their clients on a flash drive, sometimes interrupting business for days. With cloud-based accounting systems gaining traction, employees can work from any location at any time. Organisations who have switched over will expect their accountants to follow suit. My advice is to get up to speed or risk losing clients. Learning popular systems will take time but the payoff in customer retention and satisfaction is worth it. Feed your chefs Accounting is a very personal service. You can automate the basic bookkeeping and reporting functions all you like but your clients still want to deal with people they trust to advise them on their financial management concerns. The ones who do a great job will gain their personal confidence and loyalty. We’re talking about your employees here. If you treat them poorly and they resign, the clients who believe in them may follow. So, don’t just give them a fair deal. Incentivise them to stay and perform to their best ability. If you look after them, they’ll look after your clients. The best way to handle change in the business world is to develop a mindset that embraces it. Those who do will survive and thrive. Think of it as a rollercoaster. If you try to stand in its way, you’re going to get hurt. So why not jump on and enjoy the ride? Former industry leaders like BlackBerry and Nokia lost massive market share because they refused to accept the new direction consumers were heading in or adapt their approach accordingly. But the true entrepreneur remains flexible, expects change and keeps an eye out for the opportunities that accompany it. As you progress through 2018, keep these simple but powerful ideas in mind, especially the last one. There’s no challenge that can’t be improved by our willingness to accept it and our flexibility in dealing with it. ENDS MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za For more information on SAIPA please visit: Website: www.saipa.co.za Twitter: @SAIPAcomms LinkedIn: South African institute of Professional Accountants Company Facebook: South African Institute of Professional Accountants Author: Faith Ngwenya, Technical Executive at the South African Institute of Professional Accountants (SAIPA)
The proposed inclusion of professional accountants into a schedule of the Financial Intelligence Centre Act (FICA), making them accountable institutions, will have major repercussions for the accountancy industry. The Financial Intelligence Centre has identified the sector as being “vulnerable” to money laundering and terror financing activities. Accountable institutions Institutions identified in Schedule 1 to the FICA include lawyers, estate agents and banks and in Schedule 3 include motor vehicle dealers and dealers in Kruger rands. The act requires that accountable institutions register with the Financial Intelligence Centre (FIC), that they disclose the identity of their clients to the centre, train their employees, appoint a compliance officer, draw up a risk register and plans to mitigate the risks, give them additional recordkeeping duties, and oblige them to report to the FIC. SAIPA has raised concerns in terms of the compliance burden that will now go way beyond the existing obligation to report suspicious transactions or activities. The latest proposals will impact on the administrative and financial burden of especially small practices and people running their own businesses. Legislative alignment The “overly broad” wording of the proposal is upsetting. It also appears to be in conflict with existing legislation such as the Companies Act. In terms of the act a person can register his own company by simply registering with the Companies and Intellectual Properties Commission. SAIPA is not shunning its responsibility as a regulatory body, but it does request much more clarity on some of the wording, to understand the impact of the proposals. Questions which beg answers are whether there will be monetary thresholds or number of employees which may exclude some of the smaller firms from this heavy compliance burden, whether there will be financial or administrative assistance if smaller firms are not excluded, and what exactly defines “assisting” a client. Who will be an accountable institution According to the FIC any person who carries on a business of preparing for or carrying out transactions for a client concerning the following activities will be considered an accountable institution: * assisting a client in the planning or execution of the buying or selling of immovable property; the buying or selling of a business; the opening or management of a bank, investment or securities account; the organisation of contributions necessary for the creation, operation or management of a company outside South African; the organisation of contributions necessary for the operation or management of a close corporation; the creation, operation or management of a company or a close corporation; and the creation, operation or management of a trust outside the country. * representing a client in any financial transaction; * assisting a client in disposing of, transferring, receiving, retaining, maintaining control of or in any way managing any property; or * assisting a client in the management of any investment. Money launderers and accountants According to the FIC professional accountants are “particularly useful” for money launderers when it comes to the seeking of financial and tax advice to reduce their tax liabilities or to place vast amounts of proceeds. They also approach professional accountants to help with the setting up of companies and trusts to hide the proceeds of crime and the perpetrator of crime. They also use property transfers as a cover to move illegal funds and they use accountants to get access to financial institutions. SAIPA believes there are solutions to deal with concerns raised by the FIC, but that the current proposal is a kneejerk reaction to the behaviour of unscrupulous practitioners. However, if the proposal is accepted as it is accountants who are awarded the professional accountant designation by the institute must be aware that they will be considered an accountable institution. They will have to comply with the requirements set out in the FICA schedule. However, SAIPA is of the view that the obligations that will be placed on a professional account is to become a forensic investigator and an auditor – all in one. The FIC is of the opinion the inclusion of professional accountants will improve its capability for producing “better quality and more substantive financial intelligence reports” for use in solving crime. A concern is whether the FIC will have the capacity to give due regard to all the new sources of information. ENDS MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za For more information on SAIPA please visit: Website: www.saipa.co.za Twitter: @SAIPAcomms LinkedIn: South African institute of Professional Accountants Company Facebook: South African Institute of Professional Accountants Author: Faith Ngwenya, Technical Executive, South African Institute of Professional Accountants (SAIPA)
“We need to recreate the traditional risk management process entirely if we are to sufficiently break down silos and become truly fluid,” our Institute’s Western Region Chairman Hashiem Salie once stated. Reflecting on his statement, I believe there are two aspects to risk with which accountants must come to terms. First, with the many developments taking place in the profession, their own survival will depend on their ability to look past accounting as their primary service and create value for their clients as strategic partners. Second, with greater competition, disruption and uncertainty across the market environment, businesses are turning to their internal and external financial officers for answers. In reality, they’re positioned as the best candidates to rewrite the rules of risk management and it therefore behoves them to take up the challenge. Adding value The media is awash with articles about how Artificial Intelligence and Robotic Process Automation are taking over basic accounting functions, performing the same tasks with greater efficiency and at a lower cost. By no stretch of the imagination does this news signal the end of the profession, but it does herald in a future where the compilation, checking and formatting of financial data is no longer a key value proposition. Rather, the focus is moving to the practitioner’s interpretation of that information and their ability to transform it into practicable business strategy. The silo accountants must therefore escape the notion that they are isolated to a limited set of activities and responsibilities. By looking beyond the numbers, they will recognise many areas to which their unique talents can be applied. At SAIPA, we believe that risk management and business rescue are two extended services that accountants should already be introducing to their clients. And this is just the start. Preparing for expanded service Why are accountants a company’s best strategic partner? Let’s draw a comparison between their thinking and that of production managers. When contemplating the purchase of a new machine, for example, production managers may see a means to rapidly complete their work in progress jobs and so clear their production queue. However, accountants are aware of the bigger picture. Not only do they consider the utility the machine provides but also what that utility means in terms of corporate financial goals, its profitability, maintenance costs, and even how else its funds could be used to realise a better return on investment. This expanded view of matters is what makes the accountant unique among the management functions and it is why they’re seen as business enablers. However, risk management and business rescue both go further than just the finances of the business. It’s therefore imperative that the consulting accountant takes cognisance of risks in the macroeconomic environment, the market environment and the business environment. While many risks can be revealed from an organisation’s financial ratios, they cannot predict the effect of the CEO being unable to attend to their duties for an extended period. In this case, the risk must be thoroughly researched and a sensible succession plan should be developed. This is also true in the case of NOCLAR (Non-compliance with Laws and Regulations), another kind of risk that companies face. A new international Code of Ethics clears the way for accountants to deal decisively with non-compliance with laws and regulations, even allowing them to report unresolved issues to the appropriate authorities without breaching client confidentiality. So, practitioners must address non-compliance even if it occurs outside their direct area of responsibility. Closer relationships Proper risk management and business rescue require an intimate knowledge of the inner workings and unique traits of the client’s organisation. An accountant who prepares financials once a year will not be in a position to offer the best guidance. So, they must adjust their mindset and strive to build good rapport with the customer in need of these services. Accountants are indeed in the best qualified function to revise the rules of risk management. They must, however, expand their horizons and look beyond the numbers. ENDS MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za For more information on SAIPA please visit: Website: www.saipa.co.za Twitter: @SAIPAcomms LinkedIn: South African institute of Professional Accountants Company Facebook: South African Institute of Professional Accountants |
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