Audit firms, individual auditors, IFRS advisors, reporting accountants and reporting account specialists play a fundamental role in the regulation of the JSE and its listings requirements. Their work enables the JSE to maintain the integrity of the market which it administers. The JSE has, however, identified the need to enhance those requirements to ensure fairness, transparency, and objectivity of the current listings criteria.
That is why several amendments to the JSE listings requirements have recently been proposed and published for comment.
Auditors, reporting accountants and IFRS will be required to be accredited with the JSE in order to audit or report accounts of listed and applicant issuer companies.
At present, the listings requirements do not make a clear distinction between registration with the IRBA and registration with the JSE. The proposal to remedy this ambiguity is to remove the requirement that auditors "register" with the JSE. Instead, auditors will be required to be "accredited" on the JSE List of auditors and advisors.
The proposed requirements for accreditation do not, by and large, differ from the present requirements for registration. In order to be accredited by the JSE, applicants will have to complete the prescribed application form, including the necessary supporting annexures; pay the prescribed fees; meet the eligibility criteria set out in Schedule 15 to the listing requirements (which includes being IRBA registered) and satisfy the JSE as to the applicant's competency to discharge its responsibilities.
These responsibilities include the obvious requirement that the registered auditor should act with due care and skill. Further responsibilities include monitoring compliance with the disclosure requirements of the JSE regarding interim, preliminary, provisional, abridged and annual reports, and reporting matters of non-compliance directly to the JSE.
It is not unusual for certain regulated industries to impose specific requirements to ensure that auditors who provide services in their sector have the necessary resources, knowledge and understanding of the industry they audit. JSE accreditation requires, in addition to knowledge of the business of the listed company, a working knowledge of the listings requirements. This is purely to protect investors who rely on the services of the auditor.
Under the proposed amendments, the JSE will no longer give an auditor a private sanction, public sanction or a fine for non-compliance with the listings requirements. Rather, the JSE will be allowed to withdraw the accreditation of the auditor, and the contravention will more appropriately be referred to the IRBA for further enquiries and necessary discipline.
A further notable proposed amendment is the deletion of the requirement that auditors of 'major subsidiaries' be accredited by the JSE. A 'major subsidiary' is defined as a subsidiary that represents 25% or more of gross assets or revenue of the consolidated group, on its most recent published financial results.
This amendment would bring relief, particularly to smaller company groups, who would no longer be compelled to appoint a JSE accredited auditor to perform the statutory audit or a review of a major unlisted subsidiary of a listed holding company. Auditors of overseas based major subsidiaries of South African JSE listed holding companies would therefore not require accreditation by the JSE. Foreign auditors would thus be able to perform their functions without falling foul of legislation in their own countries. Auditors of foreign entities will only have to be accredited if the foreign entity has a primary listing on the JSE.
Interested parties have until 23 October 2009 to comment on the proposed amendments, which are accessible on the JSE website at http://www.jse.co.za.
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