Am i correct that exempted Micro enterprises can either be a level 4 or 3 contributor where turnover is less than R5m p.a. In terms of govt gazette no 29617, an EME can qualify for a level 3 status if further the entity is more than 50% black or woman owned(apart from R5 threshold). My question is can accountants confirm a level 3 as well or is this reserved only for verification agencies.
An Exempt Micro Enterprise is an entity with turnover of R5 million or less. To qualify as an EME, you would need a certificate from an Auditor, accountign officer or verification agency. An EME receives a level 4 status. However, if the EME wants to achieve a level 3 status by proving it has more then 50% black or women owned, it would need a verification agency to verify this.
On the 31 August this year (2010) SAICA Standards sent out an email updating us that auditors could provide BBEE Verification of Exempted Micro-Enterprises. However I refer you to an answer you provided on your technical query website that:
"Auditors cannot confirm or certify income or solvency. If auditors were to report on income or solvency this could be done in terms of an agreed-upon procedures engagement agreed between the bank/third party, client and auditor. But the requirement to confirm or certify the income amount implies a higher level of assurance, which cannot be given by the auditor".
By allowing auditors to now issue certificates for Exempted Micro Enterprises not contradict your answer (ie do agreed upon procedures need to be performed)?
I can see where the confusion between the two answer lies but it is difficult for me to explain in writting.
Firstly, any work that you as the auditor intend to do for your client should be put in an engagament letter. You should also know the output for that service (for example: what type of report you are going to issue etc)
If the bank or other third party approached your client and requested audited confirmation about something specific like a bank balance or valuation of property or whatever the case is, this must be seen as a separate engagement from the audit. During the audit, you report to the shareholders of the company and NO ONE ELSE. In the above situation, you would be reporting to Managemant but you are aware of relaince to be placed on that report etc. The reason for the answer in the FAQ was due to auditors signing off on reports for their clients and thinking that they have to do this as part of the audit since their clent is required by specific statute to have auditors sign off on certain reports.
This issue was brought to my attention by the IRBA who pointed out that in an audit engagement, auditors are only required to sign off on the audit report. If the client requires any other report to be issued by the auditor, this must be seen as another separate engagament and not part of the audit.
It was also noted by the IRBA that some auditors were signing off certain "standard" reports required by certain government bodies. The wording of these reports were incorrect in many instances and were sometimes contradictory to what work was actually peformed. In many situations, some of the reports requested the auditor to sign off on work that was impossible to actually verify. It for these reasons that we placed this FAQ on the website to ensure that when auditors are approached by their clients to provide other assurance services, that they do so following the International standards applicable to auditors in South Africa in order to comply with the work effect required as well as report in an acceptable manner.
Now the certificate to be issued to exempted micro enterprises is also a report that will be requested by management and should not be seen as part of the audit process. The certificate to be issued in this case is specifc and can be found on the assurance webpage of the SAICA website. The link is:
However, the answer provided in the FAQ does not change in principle. Even though the end result, been a specific type of certificate provided is different to the one provided in the audit standards, the auditor is still required to see this as a separete engagement and will be required to perform some sort of work to verify that the turnover is less then R5million before the certificate can be signed and issued by the auditor. Therefore, there will still be agreed upon procedures performed. The auditor CANNOT sign something unless he has done work to ensure that what he is putting his name against is correct to the best of his knowledge.
I am not sure if I have answered your question. As I mentioned earlier, this is very difficult for me to explain in writting and to understand your confusion without having you verbally explain it to me.