THE AUDITOF FINANCIAL STATEMENTS

Departments, legislatures and public entities (hereafter referred to as auditees) are required by the Public Finance Management Act, 1999 (Act No. 1 of 1999) (PFMA) to compile and submit for audit annual financial statements that fairly present their state of affairs, performance against their budgets, their management of revenue, expenditure, assets and liabilities, their business activities, their financial results, and their financial position as at the end of March, annually.

Financial statements submitted for audit are therefore required to be free from material misstatements (i.e. material errors or omissions). The objective of an audit of financial statements is to express an opinion on whether the financial statements fairly present the financial position of the auditee at financial year-end and the results of their operations for that financial year.

Clean audit:
The financial statements of the auditees are free of material errors or omissions (financially unqualified audit opinion) and there are no material findings on reporting by them on their performance objectives or compliance with laws and regulations.

Financially unqualified with findings:
The financial statements contain no material misstatements. Unless a clean audit outcome, findings have been raised on predetermined objectives and/or compliance with laws and regulations.

Qualified audit opinion:
The financial statements contain material misstatements in specific amounts or there is insufficient evidence for the auditor to conclude that specific (identified) amounts included in the financial statements are not materially overstated or understated.

Adverse audit opinion:
The financial statements contain misstatements that are not confined to specific amounts or the misstatements represent a substantial portion of the financial statements.

Disclaimer of audit opinion:
The auditee provided insufficient evidence (documentation) on which to base an audit opinion. The lack of sufficient evidence is not confined to specific amounts or represents a substantial portion of the information contained in the financial statements.

Misstatements refer to incorrect information in or information omitted from the financial statements. Examples include the incorrect or incomplete classification of transactions or incorrect values placed on assets, liabilities or financial obligations and commitments.

The AGSA's 'other reporting responsibilities' are auditing the reporting of the auditees on their predetermined (service delivery) objectives and their compliance with laws and regulations.

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