AGSA AUDIT COMMITTEE REPORT TO SCoAG 4 November 2016

Overview Purpose Committee composition Activities for noting Decisions

Purpose of Report of Audit Committee Report done in compliance with section 40(6) of the Public Audit Act (Act No. 25 of 2004) (PAA), and in line with the King Code of Governance Principles (King III) as adopted by the AGSA

Committee composition Current Committee composed of: Mr P Moyo (Chairperson), Mr J Biesman-Simons and Ms. C Roskruge Cele The following changes to the membership of the committee were made: Ms Mthombeni resigned as an Audit Committee member effective 31 August 2015 New member, Ms Carol Roskruge Cele was appointed in April 2016, to replace Ms Mthombeni Mr S Gounden resigned as an Audit Committee member effective 29 September 2016

Activities for noting - Additional duties Additional committee duties Mr J Biesman-Simons serves on the AGSA’s Quality Control Assessment Committee (responsible for the system of Quality Control in the AGSA)

Activities for noting Over the period under consideration, the committee received and interrogated information from management e.g. Integrated Annual Report; other relevant organisational structures and independent assurance providers. This information affords us the confidence that the organisation’s: resources and financial expertise are adequate and effective systems of internal controls was deemed adequate and partially effective with an overall risk factor of medium no critical issues came to our attention that can render the systems of internal control unreliable

Activities for noting EFFECTIVENESS OF INTERNAL CONTROLS The committee is responsible for ensuring that there is adequate oversight of the system of internal controls and risk management. The committee is able to conclude, after having reviewed submission by internal and external audit assurance providers, that the systems of internal controls of the organisation can be relied upon for the integrity and reliability of financial reporting; the safeguarding, verification and maintenance of the organisation’s assets and the detection of fraud and error and compliance with laws and regulations.

Activities for noting EVALUATION OF FINANCIAL STATEMENTS The audit committee reviewed the financial statements and noted management’s confirmation of going concern for the 2016-17 financial year. The committee is satisfied that the AGSA will maintain the ability to trade as a going concern for the foreseeable future. The committee is satisfied that the system of internal controls is sound and that the integrated annual report including financial statements were prepared in accordance with the appropriate standards – including IFRS and GRI.

Activities for noting INTERNAL AUDITORS The internal audit function, SizweNtsalubaGobodo, is mandated to independently apprise the committee of the existence, adequacy and effectiveness of the organisation’s risk management, internal controls and governance processes as directed in its approved charter. The committee notes that the internal audit plan was successfully executed for the year under review. The recommendations and corrective actions reported to management, if implemented, will further enhance the internal control environment.

Activities for noting EXTERNAL AUDITOR’S APPOINTMENT AND INDEPENDENCE In line with section 39(2) of the PAA, the committee is satisfied that the external auditor appointed by SCoAG, Kwinana and Associates Inc. (Kwinana), was independent of the AGSA and was not conflicted as required in section 39(2)(c) of the PAA. In arriving at this determination, the committee reviewed and took the following into consideration:

Activities for noting EXTERNAL AUDITOR’S APPOINTMENT AND INDEPENDENCE Representations made by the external auditors to the committee, on their independence. Assessed the external auditor against the criteria on objectivity and independence as specified by IRBA and considered the external auditor’s previous appointments as external auditors to the AGSA; The quantum of other work undertaken by the external auditor for the AGSA. The external auditor did not, except as external auditor or in rendering permitted non-audit services, receive any other remuneration/ benefit from the organisation;

Activities for noting EXTERNAL AUDITOR’S APPOINTMENT AND INDEPENDENCE Based on the outcome of the above activities, the committee can conclude that the external auditor’s independence was not impaired, prejudiced nor influenced during their dealings with the AGSA.

Activities for noting EXTERNAL AUDITOR’S ACTIVITIES Reviewed and approved the external audit plan, the budgeted external audit fee for the reporting period and the terms of engagement of the external auditors – including pre-approving all non-audit services that the external auditor provided; Considered the external auditor and the quality of the external audit process, and found it to be satisfactory;

Activities for noting CONSIDERATION OF SUSTAINABILITY CONTROLS, PERFORMANCE AND INFORMATION With respect to sustainability controls, performance and information, the committee considered that the responsibility to ensure that processes are in place for sustainability initiatives and reporting rests with the leadership of the organisation; The committee considered and approved audit plans relating to the review of performance and sustainability information by the internal auditors;

Activities for noting CONSIDERATION OF SUSTAINABILITY CONTROLS, PERFORMANCE AND INFORMATION The committee considered the limited assurance for selected sustainability indicators as provided by external auditors and the observations made by the internal auditors in their reports; thus receiving the necessary assurances that material disclosures were reliable and did not conflict with the financial information.

Decisions The Standing Committee on the Auditor-General (SCoAG) to approve the recommendation for the reappointment of Kwinana and Associates Inc. (Kwinana) as the independent external auditor of the Auditor-General of South Africa (AGSA) for a further period of three (3) years; after having considered the terms proposed herein. Kwinana served the AGSA as independent external auditors since the 2010-11 financial year. Since then, their contract has been renewed once (being in the 2013-14 financial year).

Decisions Since then Kwinana has duly been annually appointed to continue providing their services as independent external auditors. The contract between Kwinana and the AGSA expired at the conclusion of the audit for the year ended 31 March 2016. After having gone through the process of deliberating on whether to advertise and request bids for the impending vacancy or reappointing the existing independent external auditors; the committee was comfortable with the reappointment.

Decisions There are conditions attached to the proposal for reappointment of Kwinana & Associates, the key condition requires that Kwinana must have 5 partners by 31 March 2017. If the condition is not met, the external auditor’s reappointment will be limited to one year, with requests for bids issued for the Financial Year ending March 2018.

Decisions The Audit Committee confirms to SCoAG that an appointment has to be made by the end of November 2016 to enable the audit firm to commence work. The AGSA would struggle to meet its reporting obligations if SCoAG does not approve the appointment of an external audit firm by the end of November 2016.

Questions