FAITH NGWENYA
TECHNICAL & STANDARDS EXECUTIVE
SOUTH AFRICAN INSTITUTE OF PROFESSIONAL
ACCOUNTANTS
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Acknowledgement
 The South African Institute of Professional
Accountants (SAIPA) commends the Department of
Trade and Industry in particular the Co-operatives unit
for the progressive amendments to the Co-operatives
Act of 2005
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SAIPA
 SAIPA represents in excess of 7000 professional
accountants in practice, business and academia
 It is on this premise that our comments will
concentrate more on the financial aspects and
financial reporting aspects of the Amendment Act
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Positive elements of the bill
 We commend the broader financial reporting
requirements which are an improvement from the
“audit” only as per the existing Act
 This will improve compliance and reduce the costs of
operating a Co-op
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Section 1(b) Definitions Annual
Accounting Report
• Annual accounting
report means a
document
containing
financial
statements, a
social report and
the management
decision report.
• Problem
• A social report
and management
decision report
are not
accounting
reports
• Recommendation
• Section should
refer to: ANNUAL
REPORT means a
document
containing
financial
statements, a
social report and
a MANAGEMENT
REPORT
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Section 1(b)
 The Act nor the amendments have not defined
A management decision report
There needs to be clarity on the definition of the
management decision report.
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Existing regulations: Form CR7
 This is the lodgment of financial statements to CIPC,
What would these comprise; should these be the
entire
 Annual report or
 Financial statements only
 Recommendation
 Depending on the contents the title of Form CR7
may need to be reviewed
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Definition of “Audit”
 Audit means objectively examining and evaluating the
annual accounting report, in accordance with the
prescribed or applicable auditing standards with an
objective of expressing an opinion as to the fairness or
compliance with an identified reporting framework
and applicable statutory standards;
 Problem
 Annual accounting report includes a social report
and a management decision report. Cannot
express an opinion on a social report as there is no
framework that derives such a report
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Recommendation
 The definition of audit should be as defined in the
Audit Professions Act No . 26 of 2005
 Cannot refer to an “audit” if it is not performed by an
auditor
 The regulations should clearly distinguish between an
(i) audit
 (ii) an independent review
 (iii) non audited financial statements
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Section 1(c) Definition of auditor
 This definition is correct as it refers to the APA
however when seen in context of the other sections of
the Act and regulations it poses a conflict. Hence the
recommendations made above.
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Section 1(d) Definition
 Auditor’s annual accounting report
 Problem
 This is confusing, in the light of the definition of audit
 Recommendation
 This should refer to the audited financial
statements or audit report
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Section 1(j) Definition of
independent review
 Recommend
 Independent review means an assessment of the
financial statements with an objective to conclude,
through performing primarily inquiry, and analytical
procedures, and evaluating the sufficiency and
appropriateness of evidence obtained, whether
anything has come to the attention of the practitioner
that causes the practitioner to believe the financial
statements are not prepared in all material respects, in
accordance with an applicable financial reporting
framework.
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Section 1(j) definition of
independent reviewer
 Problem: Section refers to a person registered with
an accredited professional body contemplated in
Chapter III of the Auditing Profession Act
 Recommendation
 The section should refer to the Independent
reviewer as per the Companies Act 71 of 2008
Regulation 29(1)(a) and should define the levels
in Section 26 of the Bill (Section 29 of the
principal act)
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Additions to Section 1(j)
Problem
This Act in Section 26(b)(aA) refers to the
“appointment of an independent accounting officer”
but there is no definition of this anywhere in the act
Recommendation
It is recommended that the Act uses the term
consistent with the Companies Act 71 of 2008
which uses “Independent Accounting
Professional”
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Definition of Independent
accounting professional
 “independent accounting professional” when used
with respect to any particular cooperative, means a
person who––
 i) is––
 (aa) a registered auditor in terms of the Auditing
Profession Act; or
 (bb) a member in good standing of a professional body
that has been accredited in terms of section 33 of the
Auditing Profession Act; or
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Definition continued
 (cc) qualified to be appointed as an accounting officer
of a close corporation in terms of section 60 (1), (2)
and (4) of the Close Corporations Act, 1984 (Act No.
69 of 1984); and
 (ii) does not have a personal financial interest in the
cooperative or a related or inter-related entity; and
 (iii) is not––
 (aa) involved in the day to day management of the
cooperative’s business, nor has been so involved at any
time during the previous three financial years; or
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Definition continued
 (cc) qualified to be appointed as an accounting officer
of a close corporation in terms of section 60 (1), (2)
and (4) of the Close Corporations Act, 1984 (Act No.
69 of 1984); and
 (ii) does not have a personal financial interest in the
cooperative or a related or inter-related entity; and
 (iii) is not––
 (aa) involved in the day to day management of the
cooperative’s business, nor has been so involved at any
time during the previous three financial years; or
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Section 3 (a)(e)
 The removal of the specified 5% reserve fund guideline
is commended; as this allows for the Co-op to stipulate
the non distributable percentage in its own
constitution
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Section 3 (b)
 The removal of one vote per member is commendable
and the subsections (a)-(c) is also welcome as it
controls the controlling interests of members by
putting a cap on maximum number of percentage
holding
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(35) Section 47 of the principal Act
 Reference to the Auditor’s annual accounting report
should refer to the “Audit report” as per our
recommendation
 The section introduces different Categories of co-
operatives which have not been defined in the Act.
 Will the Regulations define Categories A; B and C?
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(35) Section 47 of the principal Act
 (3) Category A primary co-operatives must produce an
annual accounting report to the Registrar in respect of
each financial year
 Problems
 1. The Act does not state who should prepare this
annual accounting report
 2. Registrar of co-operatives or CIPC form CR7 is
lodged with CIPC, is there a difference?
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37 Amendment to section49 of the
principal act
 Problem
 “A person is disqualified from being an auditor or
independent review of a co-operative if that person (ii) is not registered with the South African Institute of
Chartered Accountants or does not satisfy the
requirements for registration as an auditor as
contemplated in Chapter III of the APA”
 Recommendation
 The Companies Act 71 of 2008 includes Accounting
officers as approved in the Close Corporations Act as
independent reviewers
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CONCLUSION
 We thank the Portfolio committee for providing the
platform to raise our concerns and suggest our
recommendations
 Thank you
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