The deadline for South African property practitioners to submit their audit reports (also referred to as an ‘illustrative report on trust accounts’ per Annexure 2 of the Property Practitioners Regulatory Authority [PPRA]) is on the 31st of August 2023.
This report must be submitted on the PPRA’s Auditors Portal within six months after a business property practitioner’s financial year-end, which for the majority of businesses falls in February of each year.
On the 1st of March 2023, the Independent Regulatory Board for Auditors (IRBA)’s Committee for Auditing Standards approved new illustrative reports to be used by auditors of business property practitioners when reporting to the PPRA. In addition, the PPRA has also revised the Guideline on Audit, Accounting Records and Trust Account Requirements to include these new reports.
Michelle Dickens, CEO of PayProp, says that audit season can be confusing and stressful for rental agents, but the right guidance can make it go much more smoothly.
“By understanding your business’s compliance obligations, you can be confident that you have completed all of the necessary audits correctly – and get back to focusing on building your business.”
Exempt or not?
The audit process for business property practitioners that have been exempted from keeping their own trust accounts under the Property Practitioners Act is different from that of those that have not been exempted.
If a business property practitioner has been properly exempted, and if it is not subject to an annual audit in terms of the Companies Act, it may also be exempted from having to have its annual financial statements and other accounts audited and may only be required to have such accounting records independently reviewed by a registered accountant.
The process for non-exempted property practitioners
If not exempted, a mandating business property practitioner that works with a duly registered payment processing agent need only follow a much-simplified audit process. It will receive an agreed-upon procedures (AUP) letter from the payment processing agent’s auditor, which it must submit to its own auditor, who will use this letter to complete the prescribed illustrative report on trust accounts and then submit that report to the PPRA.
An AUP letter includes a schedule of information that verifies the balances and accrued interest of each mandating property practitioner’s Section 54 (1) and (2) trust accounts at year-end. It also confirms that the payment processing agent’s auditor has attended to additional agreed-upon audit procedures enabling the auditor to form an audit conclusion.
In such cases, a payment processing agent’s auditor is also required to submit an illustrative limited assurance report (as per Annexure 8 of the PPRA’s revised audit guideline) on the payment processing agent’s trust account environment to the PPRA.
The process for exempted property practitioners
Dickens warns that exempted business property practitioners should check their date of exemption. “It may still be necessary for the payment processing agent’s auditor to issue an AUP letter in respect of the part of the financial year that preceded their exemption,” she explains.
Exempted business property practitioners who mandated a payment processing agent will receive a copy of the payment processing agent’s auditor’s report on the payment processing agent’s overall trust account environment (as explained above), as well as this auditor’s proof of submission of this report to the PPRA.
These documents, as well as a copy of the exempted business property practitioner’s exemption letter, should be readily available if requested by PPRA or during an inspection, and must be submitted to their auditor, chartered accountant, or accounting officer (as applicable) to serve as evidence of such business property practitioner’s continued eligibility for exemption from keeping a trust account.
Dickens says while the new audit rules are complex, a basic knowledge of the rules and using a duly registered payment processing agent can give them much-needed peace of mind in this strenuous period.