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Broad-Based Black Economic Empowerment Act, 2003 (Act No. 53 of 2003)

Verification Manual

1. Definitions



1.1 For the purposes of the Verification  Manual  the following terms have the meanings attributed below and all other definitions remain as detailed in the Codes:


1.1.1 Admissible/ Appropriate Evidence" refers to the measure of the quality of evidence in respect of its relevance and reliability in providing support for or detecting misstatements affecting individual scorecard elements. The reliability of evidence is influenced by its source and its nature and is dependent on the individual circumstances  under which it is obtained.


1.1.2 B-BBEE Codes" refers to Codes of Good Practice on Broad-Based Black Economic Empowerment gazetted on 9 February 2007 as part  of  the  Broad-Based Black  Economic Empowerment Act, Act No. 53 of 2003 and any amendments  thereto.


1.1.3 Black People" are defined as set-out in the Codes of Good Practice for B-BBEE.


1.1.4 Control risk" The risk that a misstatement that could occur in an assertion  from which the elements of the scorecard of the measured entity are derived and B-BBEE Status determined, will not be prevented or detected and corrected on a timely  basis by the measured entity's internal control.


1.1.5 Debt" An amount owed to a  person  or  organisation  for  funds  borrowed.  Debt can be represented by a loan note, bond, mortgage or other form stating repayment terms and, if applicable, interest requirements. These different forms all imply intent to pay back an amount owed by a specific date, which is set forth in the repayment terms.


1.1.6 Detection risk" refers to the risk that the Verification Agency's procedures will not detect a misstatement that exists in an assertion from which the elements of the scorecard of the measured entity are derived and B-BBEE Status determined


1.1.7 Evidence"  refers  to  all  the  information used to establish  a fact in issue. Including information supplied by the Measure Entity and used by the Verification Agency  in determining  the scores  allocated  to  individual  B-BBEE Scorecard Elements and B-BBEE Status for the measured entity. Evidence includes the information   contained  in  the  accounting  records   underlying   the  financial statements  and  other  information  relating  to  the  measured  entity's  B-BBEE Scorecard Elements obtained through inquiry, inspection of records or documents or written confirmations,  recalculation and analytical procedures.


1.1.8 Inherent risk" refers to the  susceptibility  material  misstament  of  an  assertion from which the elements of the scorecard of the measured entity are derived and B-BBEE Status determined to misstatement that could be material assuming that there were no related internal controls.


1.1.9 Intended User': persons within,  or  external  to the  measured  entity, for  whom the Verification Agency prepares the Verification Certificate on the Scorecard elements and B-BBEE status report.


1.1.10 Materiality" refers the extent to which the omission or misstatement of information could influence the determination of the individual scorecard elements or the overall rating and B-BBEE status. Materiality depends on the impact of the item or error judged in the particular circumstances of its omission or misstatement. Thus, materiality provides a threshold or cut off point rather than being a primary qualitative characteristic which information must have if it is to be useful.


1.1.11 Professional scepticism" refers to questioning approach coupled with critical assessment of information.


1.1.12 Random Sampling" means the application of  verification  procedures  to  less than 100% of items selected within a group or class of transactions in a manner which provides  all units of a group (''the population'') with an equal chance of selection. This will enable the Verification Agency to obtain  and  evaluate evidence about some characteristic of the items selected in order to  form,  or assist in forming, a conclusion concerning the population from which the sample is drawn.
The "population" in a B-BBEE Engagement may refer to underlying information for each scorecard element being verified and may comprise financial or non-financial  information.
Sampling can use either a statistical or non-statistical approach.
1.1.13 Responsible Party" refers to person/s in the Measured Entity responsible for the collation and preparation of the B-BBEE information to be verified.


1.1.14 Sufficiency of evidence" refers to the measure of the quantity and quantity of evidence. The quantity of evidence required is affected by the risk of misstatement (the greater the risk of misstatement the more evidence is likely to be required) and also by the quality of such evidence (the higher the quality, the less evidence may be required).


1.1.15 Verification Certificate" refers to the B-BBEE Verification Certificate issued by the Verification Agency which reflects the overall B-BBEE Status of a Measured Entity and Scoring allocated for each Scorecard Element verified in respect of the measured entity (refer Appendix 1).


1.1.16 Verification Report" refers to the Report issued  by  the  Verification  Agency which provides the detailed scores of each element reflected in the Verification Certificate and B-BBEE Status awarded to the measured entity.


1.1.17 Verification Risk" The risk that the Verification Agency could arrive at an inappropriate conclusion in determining the scores based on one or more scorecard elements being materially misstated. This is the risk that the scorecard elements are materially misstated prior to verification and  the risk that the Verification Agency will not detect such misstatement.


1.1.18 Verification" means the process and activities conducted by a  verification agency to assess, verify and validate that the score awarded  to  a  Measured Entity is a result of individual scorecard elements supplied by a Measured Entity, and to evaluate BEE transactions in order to provide an indicative B-BBEE score and Certification based on the principles of the Broad-Based BEE Codes of Good Practice.