An audit on a set of financial statements (with regards to a South African incorporated company or close corporation) can either be classified as a voluntary- or a statutory audit.
A voluntary audit refers to the situation where an entity is not required to be audited by either law or regulation, but a decision has been made by either the shareholders, directors or members to undertake an audit of the financial statements. A statutory audit refers to the situation where the entity is required to be audited in terms of the law, its Memorandum of Incorporation, or an Association Agreement in the case of a close corporation.
Section 90 of the Companies Act is applicable to statutory audits only. In summary, Section 90 prohibits an auditor from providing certain specified services for a client on which a statutory audit is performed. This article investigates Section 90(2) and these prohibited services in further detail.
Section 90(2)(b)(ii) and 90(2)(b)(iv) of the Companies Act states the following:
(b)” in addition to the prohibition contemplated in section 84(5), must not be—”
for more than one year in the maintenance of any of the company’s
financial records or the preparation of any of its financial statements;”
(iv) “a person who, alone or with a partner or employees, habitually or
regularly performs the duties of accountant or bookkeeper, or performs
related secretarial work, for the company;”
Examples of activities that would be classified as maintenance of financial records
Examples of activities that would be classified as preparation of financial statements
Examples of activities that would be classified as related secretarial work
From the above, it is evident that uncertainty might be encountered in interpreting the Act in order to determine which services are allowed and which services are indeed prohibited.
 As per the SAICA and IRBA guidance with regards to Section 90(2)
This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)