Report of Audit Committee to SCoAG

Report of Audit Committee to SCoAG 1Page 1

Reputation promise/mission The Auditor-General of South Africa has a constitutional mandate and, as the Supreme Audit Institution (SAI) of South Africa, it exists to strengthen our country’s democracy by enabling oversight, accountability and governance in the public sector through auditing, thereby building public confidence. 22

Summary of Report • Financial Report and Report on Performance finalised within the required time frames • External Auditors have issued an unmodified report • Audit Committee engaged with both External and Internal Auditors • In the management letter from External Auditors no material issues raised. Only house keeping issues raised 33

Summary of Report • Internal Auditors raised some issues that have been adequately dealt with by management. The financial impact of these was not material to affect the audit opinion • The audit committee is satisfied with the management’s attitude towards dealing with the reported issues no matter how small they are 44

Summary of Report • Audit committee discharged its duties in accordance with the PAA • We confirmed with both external and internal audit that there were no scope restrictions • We had separate meetings with auditors without management. Both are comfortable with the attitude of management relative to controls 55

Summary of Report • We are satisfied that the control environment is conducive to the preparation of reliable financial information 66

External Audit • Moore Stephens have since merged with BDO • BDO cannot be appointed as auditors – time barred (not more than 10 consecutive years) and they are also now contracted in • We have to appoint new auditors • Require permission from SCoAG to proceed with new appointment on the same terms as the previous one 77

External Audit • Previous process • The appointment of AGSA’s external auditors is the responsibility of SCoAG but the Audit Committee was requested to oversee the process and make recommendations to SCoAG • Audit Committee recommended Moore Stephens as external auditors based on agreed criteria • Once recommendation was made, SCoAG approved recommendation subject to confirmation of IRBA results which was done 88

External Audit • Set of “hurdle” criteria used to arrive at the short-listed firms: • Audit firm should have five partners, with at least three of those partners, including the engagement partner and key audit team members responsible for the AGSA’s audit, being based in Gauteng. • In the event of a joint audit proposal, both firms must have at least three partners, with the engagement partner from each firm and key audit team members responsible for the AGSA’s audit from each firm, being based in Gauteng. 99

External Audit • The firm should be prepared to forsake any contract work during the duration of the audit appointment. The firm should, therefore declare its interest upfront when tendering. • The firm must demonstrate that they: o Have sufficient in-house capacity to perform the audit o Will not be over-reliant on the AGSA audit fee (i.e. audit fees from the AGSA not exceeding 10% of its total revenue). In other words, the firm should be a going concern without depending on the AGSA’s audit fee. • . 1010

External Audit • The firm must provide evidence of a satisfactory result on their latest IRBA review results for the firm and for the engagement partner. • The firm should be able to meet the AGSA’s BEE 10% procurement requirement; and • The firm should be prepared to rotate partners responsible for the AGSA’s external audit every five years and the appointment will be for a period not exceeding 10 consecutive years, which is subject to annual review and confirmation. 1111

Internal Audit • Appointed Gobodo to replace Deloitte and Touche • Appointment from April 2011. • Work will commence in November 2010 1212

Audit Committee • Comprised of 3 independent members • Will be moving to 4 members later this year 1313

Report of Audit Committee to SCoAG