Region

Jurisdiction

Regulator

2018-03-26

CISCA Circular No. 1: Audit Committees

The Financial Services Board and the Collective Investment Schemes Advisory Committee mandate that managers of collective investment schemes establish efficiently functioning audit committees to assist boards in overseeing internal controls, accounting practices, and auditing processes. The circular outlines specific guidelines requiring committees to comprise at least three members with a majority of non-employees, while granting exemptions to subsidiaries covered by a group-level audit committee. Managers must notify the Registrar of Collective Investment Schemes within thirty days regarding their current committee status or implementation plans and ensure their external auditors receive a copy of the directive.

South Africa

Financial Sector Conduct Authority

Ongoing dynamic changes in the financial services industry have greatly increased the already onerous responsibilities of the boards of directors of all institutions involved in the industry. As the objectives of such institutions are set by the board of directors and responsibility for control over the achievement of these objectives rests with the board of directors, the control function requires that such a board at all times satisfies itself about: a) the integrity and ability of the management that it has appointed: and b) the adequacy and efficiency of internal financial and other controls, accounting practices, information and reporting systems and the auditing process. [See also the provisions of the Financial Institutions (Protection of Funds) Act, 2001 (Act No. 28 of 2001). Such a board can either involve itself directly in exercising this control or it can utilise an audit committee to carry out the necessary examinations and verifications and to report its findings on a regular basis to the board.
The purpose of this circular is to encourage the establishment of an audit committee for every manager of a Collective Investment Scheme* and to propose guidelines for determining the powers, responsibilities and operations of such a committee. It is the view of the Financial Services Board and the Collective Investment Schemes Advisory Committee that every manager of a collective investment scheme should have an efficiently functioning audit committee, to assist the board of directors in exercising its functions as set out above. However, an audit committee will not serve any useful purpose unless it functions effectively as part of the overall control process and gains appropriate authority and credibility within the manager of a collective investment scheme concerned.
Guidelines for the envisaged audit committee are as follows: a) Subject to the provisions of subparagraph [c] and [d] below, the board of directors of a manager of a collective investment scheme should appoint at least three of its members to form an audit committee.

Any reference in this circular to a manager of a collective investment scheme must be construed so as to include also a collective investment scheme.

Board Members: : Dr CDR Rustomjee (Chairperson) AM Sithole (Deputy Chairperson) BM Hawksworth Ms JV Mogadime Ms CWN Molope Prof PJ Sutherland Ms LM Mojela Ms HS Wilton Board Secretary: SB Makgalemele Executive Officer: RJG Barrow C:\DOCUMENTS AND SETTINGS\GLORIAN\LOCAL SETTINGS\TEMPORARY INTERNET FILES\OLKA\CISCA CIRCULAR NO 1.DOC b) The functions of the audit committee should be to: i. assist the board of directors in its evaluation of the adequacy and efficiency of the internal control systems, accounting practices, information systems and auditing processes applied within that manager of a collective investment scheme in the day-to-day management of its business: ii. facilitate and promote communication, regarding the matters referred to in (i) above or any other related matter, between the board of directors and the executive officers of, the external auditor for, and the employee charged with the internal auditing of the transactions of the manager of a collective investment scheme: and iii. introduce such measures as in the committee’s opinion may serve to enhance the credibility and objectivity of financial statements and reports prepared with reference to the affairs of the manager of a collective investment scheme. (c) All of the members of the audit committee may be, and the majority of such members should be, persons who are not employees of a manager of a collective investment scheme. (d) The board of directors of a manager of a collective investment scheme will be exempt from the duty to appoint an audit committee if such institution is a member of a group of companies in respect of which group annual financial statements are required to be made out in terms of section 288(1) of the Companies Act, provided an audit committee has been appointed for the holding company in that group and such audit committee has assumed the responsibilities of an audit committee in respect of all the subsidiaries in that group. 4. It would be appreciated if you could inform this Office within 30 days from date of approval of the scheme: a) whether you have an audit committee in operation and if so, submit in summary form, details of the composition, responsibilities and operations thereof; and b) if you do not have an audit committee in operation, what steps do you contemplate, in accordance with this circular, for the implementation thereof and the proposed operative date. 5. A copy of this circular is enclosed for the information of your auditor. Please acknowledge receipt and confirm that a copy of this circular has been handed to the auditor. REGISTRAR OF COLLECTIVE INVESTMENT SCHEMES

I acknowledge receipt of a copy of CISCA Circular No. 1

Signature Name of Manager

Date 2. I acknowledge receipt of a copy of CISCA Circular No. 1

Auditor

Name of Firm of Auditors

Date Please return to: Registrar of Collective Investment Schemes P.O Box 35655 Menlo Park Pretoria 0102