Auditing Profession Act, 2005 (Act No. 26 of 2005)

Board Notices

Independent Regulatory Board for Auditors

New Rules Regarding Improper Conduct and Code of Professional Conduct for Registered Auditors

Code of Professional Conduct for Registered Auditors

Part B : Registered Auditors in Public Practice

Section 270 : Custody of Client Assets

Purchase

270.1

A registered auditor shall not assume custody of client monies or other assets unless permitted to do so by law and, if so, in compliance with any additional legal duties imposed on a registered auditor holding such assets.

270.2

The holding of client assets creates threats to compliance with the fundamental principles. For example, there is a self-interest threat to professional behaviour and may be a self interest threat to objectivity arising from holding client assets. A registered auditor entrusted with money (or other assets) belonging to others shall therefore:

(a)	Keep such assets separately from personal or firm assets;

(b)	Use such assets only for the purpose for which they are intended;

(c)	At all times be ready to account for those assets and any income, dividends, or gains generated, to any persons entitled to such accounting; and

(d)	Comply with all relevant laws and regulations relevant to the holding of and accounting for such assets.

270.3

As part of client and engagement acceptance procedures for services that may involve the holding of client assets, a registered auditor shall make appropriate inquiries about the source of such assets and consider legal and regulatory obligations. For example, if the registered auditor has reason to believe that the assets were derived from illegal activities, such as money laundering, a threat to compliance with the fundamental principles would be created. In such situations, the registered auditor shall not accept or hold the client monies and may consider seeking legal advice, inter alia, with regard to regulatory reporting responsibilities.

270.4

When a registered auditor in the course of providing professional services is entrusted with client monies, or property other than monies belonging to others, the registered auditor shall—

(a)	for all clients monies which come into the registered auditor’s possession or under the registered auditor’s control, and for which the registered auditor is liable to account to a client or any other person;

(i)	maintain one or more bank accounts with an institution or institutions registered in terms of the Banks Act, 1990 (Act 94 of 1990) that are separate from the registered auditor’s own bank account; and

(ii)	appropriately designate such accounts (which account or accounts may be a general account in the registered auditor’s name or specific accounts operated in the names of the relevant clients or any other person to whom the registered auditor is accountable); and

(iii)

deposit client monies without delay to the credit of such client account indicated in (a)(i) and (a)(ii) above; and

(b)

for property other than money which comes into the registered auditor’s possession or under the registered auditor’s control and for which the registered auditor is liable to account to a client or to any other person (including, but without limitation, trust property which is expressly registered in the name of the registered auditor, or jointly in the name of the registered auditor and any other person, in their capacity as administrator, trustee, curator or agent, as the case may be), the registered auditor shall—

(i)	maintain such records as may be reasonably expected to ensure that the property can readily be identified as being the property of such client or other person; and

(ii)	if the property is in the form of documents of title to money, or documents of title that can be converted into money, shall make such arrangements as may be appropriate in the circumstances to safeguard such documents against unauthorised use.