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Medical Schemes Act, 1998 (Act No. 131 of 1998)

Chapter 7 : Financial Matters

36. Auditor and audit committee


(1) A medical scheme shall appoint at least one auditor.


(2) The appointment of an auditor shall not take effect unless it has been approved by the Registrar, subject to such conditions as he or she may deem fit.


(3) A medical scheme shall not appoint as its auditor—
(a) a person who is a member of its board of trustees;
(b) a person who is otherwise engaged as an employee, officer or contractor of the medical scheme;
(c) a person who is an employee, director, officer or contractor of the medical scheme’s administrator, or of the holding company, subsidiary, joint venture or associate of its administrator;
(d) a person who is not engaged in public practice as an auditor; or
(e) a person who is disqualified from acting as an auditor in terms of section 275 of the Companies Act, 1973 (Act No. 61 of 1973).


(4) The approval of an auditor of a medical scheme by the Registrar shall not lapse if an auditor of a medical scheme is a firm as contemplated in the Public Accountants' and Auditors' Act, 1991, (Act No. 80 of 1991), whose membership of the firm has changed. if not fewer than half of the members after the change, were members when the appointment of the firm was last approved by the Registrar.


(5) Notwithstanding anything to the contrary contained in any other law, the auditor of a medical scheme shall—
(a) whenever he or she furnishes a report or other document of particulars as contemplated in section 20(5)(b) of the Public Accountants' and Auditors Act, 1991, also furnish a copy thereof to the Registrar;
(b) inform the Registrar in writing of any matter relating to the affairs of the medical scheme of which he or she became aware in the performance of his or her functions as auditor and which, in the opinion of the auditor, may prejudice the medical scheme's ability to comply with this Chapter;
(c) if his or her appointment is terminated for any reason—
(i) submit to the Registrar a statement of what he or she believes to be the reasons for that termination; and
(ii) if he or she would, but for that termination, have had reason to submit to the medical scheme a report as contemplated in section 20(5)(a) of the Public Accountants' and Auditors' Act, 1991, submit such a report to the Registrar; and
(d) if requested by the Registrar to do so, furnish him or her with written information relating to any matter referred to in this Chapter.


(6) An auditor who in terms of this section furnishes a report in good faith shall not contravene a provision of a law or breach a provision of a code of professional conduct, to which he or she is subject


(7) An auditor's failure, in good faith, to furnish a report or information in terms of this section shall not confer upon any person a right of action against the auditor which, but for that failure, that person would not have had.


(8) The auditor shall, in addition to the duties imposed upon the auditor of a medical scheme by any other Act—
(a) in respect of a return or statement which he or she is required to examine in terms of this Chapter, certify whether that return or statement complies with the requirements of this Act and whether the return or statement, including any annexure thereto, presents fairly the matters dealt with therein as if such return or statement were a financial statement contemplated in section 20 of the Public Accountants' and Auditors' Act, 1991; and
(b) carry out the other duties provided for in this Act.


(9) The Registrar may, notwithstanding the provisions of any other Act, appoint an auditor for a medical scheme if that medical scheme for any reason fails to appoint an auditor, and such an auditor shall be deemed to have been appointed by the medical scheme.


(10) The board of trustees of a medical scheme shall, subject to the provisions of subsection (13), appoint an audit committee of at least five members of which at least two shall be members of that board of trustees.


(11) The majority of the members, including the chairperson of the audit committee, shall be persons who are not officers of the medical scheme or the administrator of the medical scheme, the controlling company of the administrator or any subsidiary of its controlling company.


(12) The objects of the audit committee shall, inter alia, be to—
(a) assist the board of trustees in its evaluation of the adequacy and efficiency of the internal control systems, accounting practices, information systems and auditing processes applied by that medical scheme or its administrator in the day-to-day management of its business;
(b) facilitate and promote communication and liaison regarding the matters referred to in paragraph (a) or a related matter, between the board of trustees, principal officer, administrator and, where applicable, the internal audit staff of the medical scheme;
(c) recommend the introduction of measures which the committee believes may enhance the credibility and objectivity of financial statements and reports concerning the affairs of the medical scheme; and
(d) advise on any matter referred to the committee by the board of trustees.


(13) The Council may, if it is satisfied that the appointment of an audit committee, in a particular case, is inappropriate or impractical or would serve no useful purpose, subject to the conditions it deems fit to impose, exempt the medical scheme concerned from the requirements of subsection (10).