Issue: December 2006/ January 2007
Getting ready for first-time audits is only one way that these checks can help boards of trustees. There are other benefits too.
The withdrawal by the Financial Services Board (FSB) of audit exemption for all financial year-ends from 2006 means that certain underwritten retirement funds (those classified as ‘large’ and ‘small’) will be subject to audit for the first time.
Large funds will be subject to a full audit while small funds – those with annual contributions of less than R350 000 and total assets not exceeding R6m – will be subject to a limited assurance audit.
As part of good governance and in the preparation for the 2006 audit requirements, boards of trustees may wish to have their funds subject to an independent ‘health check’ now that the FSB’s deadline for submission of the 2005 annual financial statements, in the new format, has passed. Such a ‘health check’ can provide the trustees with an independent assessment as to the status of the fund and its readiness for the 2006 audit requirement.
The report can also be used to assess whether your fund is being effectively administered. Components of a ‘health check’ can vary, depending on the circumstances of a fund or the trustees’ specific requirements. The board of trustees could be provided with independent feedback based on agreed procedures for such areas as:
On completion of the ‘health check’, a formal report on findings will be presented to the board of trustees. Format and content of the report would be prepared around the terms of reference as agreed with the board.
While there is cost to the fund associated with carrying out an independent ‘health check’, this cost needs to be weighed against the benefits which the board of trustees would obtain by having a clear view on how its fund will shape against the requirement of a full audit for the 2006 financial year.
It can serve to highlight at an early stage whether there are likely to be any potential issues -- for example, accuracy of underlying member records -- and to afford the administrator the opportunity to take remedial action.
For more information contact:
Robin Lydall, Director: