Posted by: nicolaasvanwyk | May 14, 2014

Accountants – Acting in the public or private interest


Organs of State are constitutionally bound to act in the public interest. This seems fairly obvious. But what happens if the State licences or allows by way of tender a private company to offer constitutionally mandated services in its stead. Will this private entity also become subject to higher scrutiny, governance, transparency and accountability? 

What implications does this have for accountants and auditors – who by way of legislation receive a government licence to prepare and review client financial statements?

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Posted by: nicolaasvanwyk | July 19, 2013

The evil of good intentions

It ain’t what you don’t know that gets you into trouble. It’s what you think you know that just ain’t so                                                                                                                                                      Josh Billings, 1874

In a recent judgment issued by the England and Wales High Court an accountant was found liable for damages suffered by his client – for advise not given. The client argued that his accountant had a duty of care to advise him to consult a tax specialist, which would have enabled the client to avoid CGT. The accountant did not refer him to a specialist and was subsequently held liable for damages incurred.

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Posted by: nicolaasvanwyk | July 12, 2013

When will the actions of a company be invalid and voidable?

Capacity of a Company

In considering whether a transaction entered into by a company is valid we must consider the legal capacity of the company to enter into a transaction and the powers or authority of the directors to effect the transaction.

According to section 19(1)(b) of the Companies Act 2008 a company has all the legal powers and capacity of an individual. The power and capacity is however limited to the extent that they

–       Can be exercised by a juristic person or

–       Are limited by the companies MOI

The legal powers bestowed upon a company allow the company to enter into and enforce transactions with other parties for example a company may enter into contracts, sue or be sued and may own property.

Historically companies were required to provide for an objectives clause in its founding documents. Any act of the company that fell outside of the objects clause was considered to be an act beyond the powers of the company i.e. ultra vires. Any transaction entered into was therefore considered legally invalid[1] and hence unenforceable by either the company, shareholders of third parties. In the event that any benefits were transferred these had to be restored.

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Posted by: nicolaasvanwyk | November 15, 2012

What accountants can learn from Meerkats – keep it Simples!

Accountants are not good at marketing. This was the message from a recent debate on the topic. The profession is getting more competitive and clients are suffering from slow economic growth. But this does not mean our practices or firms should also decline. Dedicated marketing campaigns do work for our clients – they can also work for us.
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The AICPA will issue the first draft of their special purpose financial reporting framework for SMEs in October/November 2012. The framework is a self-contained special purpose framework for use by privately held SME’s in preparing financial statements. Similarly the EU recently issued a proposal to simplify the financial reporting requirements of micro entities.  According to reports the US model will consists of a blend of accrual income tax methods and other traditional methods of accounting. In contrast to these developments the role-players in South Africa recently decided not to issue a South African version of micro gaap.

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The Companies Act 2008 requires that all types of companies and close corporations should prepare financial statements that meet the following criteria

  • Be prepared in accordance with financial reporting standards if prescribed
  • Present fairly the state of affairs and business of the company, and explain the transactions and financial position of the business of the company
  • Not be false or misleading in any material respect
  • Not be incomplete in any material particular.

If companies and close corporations prepare financial statements that do not meet the above requirements they are criminally liable in terms of section 214.

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Posted by: nicolaasvanwyk | May 3, 2012

Van Wyk MAP Survey 2012

Managing an accounting practice is not easy. You need all the help you can get!

For this reason I have developed a comprehensive survey that focuses on the management of an accounting practice – the “Van Wyk MAP Survey 2012”.

The Van Wyk MAP survey is the only comprehensive survey focused on the management of an accounting practice (MAP). The survey covers management practices, salaries, billing rates, income, expenses, dress codes, partner compensation and more! This survey will enable you to benchmark your firm and improve your client service delivery.

Do you want to know what is the best method to obtain new clients? Do you want to know what the income per partner is of other firms? Do you want to know what the realization rate is of firms in your sector? Then this survey is for you! Click on more to read further.

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Posted by: nicolaasvanwyk | March 26, 2012

Ratio analysis made easy with this free download!

Ratio analysis is used to analyse business results and is also required in review engagements.
Analytical procedures are an important part of an independent review engagement. In applying analytical procedures both effectiveness and efficiency may be achieved by using the following approach:
  1. Identify immaterial account balances or classes of transactions. Apply no analytical procedures to them
  2. Identify account balances or classes of transactions to which other accounting services (bookkeeping or payroll services, for example) have been applied. Consider the evidence already obtained and whether any material errors are likely to remain. If sufficient evidence for those account balances has been obtained to provide limited assurance that they are not materially misstated do not apply analytical procedures to them
  3. For the remaining account balances develop expectations for them (for example, using historical trends adjusted for known changes)
  4. Consider how close the existing account balance or class of transaction comes to the expectation developed in item 3. If the differences are small, no additional evidence is needed
  5. If the differences are large, material errors could exist. Inquire about valid business reasons for the difference. If the results of inquiry are plausible and agree with other evidence, no additional evidence may be needed
  6. If additional evidence is needed, apply other analytical procedures or obtain other suitable evidence.

It is not always easy to calculate the different ratios needed. However internet and Excel resources can assist with performing these calculations.

A free downloadable Excel file is however  available that automates the ratio calculations. You are only required to input the data on the main worksheet and the programme calculates a myriad of ratios. To download the file click on more to continue.


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Posted by: nicolaasvanwyk | March 15, 2012

Review engagement – no limit to liability of reviewers

It is important that the letter provides for indemnity as the Companies Act 2008 and Regulations does not limit the liability of independent reviewers.

Section 46 of the Auditing Professions Act 2005 limits the liability of auditors. The auditor incur liability only if it is proved that the audit opinion was issued maliciously fraudulent or pursuant to negligent performance of auditors duties.

The reviewers engagement letter should therefore include provisions related to:

  • Use and distribution of report
  • Reproduction of review report
  • Preparation of schedules
  • Working papers
  • File inspection
  • Governing legislation
  • Dispute resolution
  • Indemnity

I have drafted an example engagement letter which can be used as a guide. This is your responsibility so get an attorney to review this sample.

It is available here:  Case study – 983 Engagement letter-Review-New client – Updated 2020315

The potential unlimited liability is another reason that reviewers should seriously consider obtaining legal cover. For more on this read the article “accountants liability” and visit this website:


Posted by: nicolaasvanwyk | October 5, 2011

The Accountant’s Legal Liability

The accountant has the following duties:

  • common law duties of care and skill,
  • duties as specified in a contract
  • duties specified in any code of conduct requirements of a professional body
  • duties as per the requirements of section 29 and 214 of the Companies Act, 2008

Section 29 and 214 ascribes possible criminal liability to the preparer of financial statements of companies and close corporations. Furthermore compliance will be monitored by a Companies Commission and a Companies Tribunal.

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