PSTM Chartered Accountants

GOVERNANCE AND REAL LIFE 📕 High-profile cases of financial mismanagement, such as the recent one involving artist Fat Joe, highlight the crucial role of governance in protecting financial interests. Fat Joe’s experience, where his accounting firm allegedly misappropriated his finances, leading to legal trouble and unpaid taxes, underscores the need for strong governance practices among all parties involved—accounting firms, employees, and clients. Effective governance structures help prevent mismanagement, ensure transparency, and promote accountability. Below are governance lessons for each key party: 👨⚖️ The Accounting Firm Internal controls and segregation of duties are fundamental governance tools. Different individuals should handle distinct financial tasks, ensuring no single employee has too much control, which promotes accountability. Transparent, regular reporting is also vital—clients should be kept informed of their finances through updates and meetings. Even if clients are difficult to reach, the firm must ensure that reporting obligations are honored. 👨⚖️ The Employee Ethical responsibility is key. As an employee, your fiduciary duty is to act in the client’s best interest, ensuring transparency and avoiding conflicts of interest. Insist that clients, not you, have final approval over payments to promote shared accountability. If governance protocols are bypassed, it’s crucial to speak up—and if needed, seek reassignment if the risk is too high. 👨⚖️ The Client Never fully relinquish control over your finances. Regularly review reports, ask questions, and, if necessary, conduct independent audits. Governance starts with choosing the right service provider—don’t rely solely on recommendations. Establish clear contracts detailing the accountant’s responsibilities, and most importantly, stay engaged in the financial process by asking questions and overseeing your affairs. Most importantly as a client, ensure you ask questions and always remain engaged in your own affairs, even if outsourced. 💰

Understanding Audit Opinions: Insights from the Gauteng Clean Audit Awards 2023/2024 The Gauteng government's recent Clean Audit Awards highlighted various audit outcomes for the 2023/2024 financial year, which reflect the financial health and governance of public entities. Here’s a quick breakdown of the types of audit opinions obtained and their brief explanations: Unqualified Opinion (65%): The best outcome, indicating that the financial statements are accurate and in compliance with regulations, suggesting strong internal controls and governance. Qualified Opinion (25%): Financial statements are mostly reliable, but some areas don’t fully meet standards, pointing to minor control weaknesses. Adverse Opinion (5%): A red flag, showing significant errors in financial reporting and serious governance issues. Disclaimer of Opinion (5%): Auditors couldn’t form an opinion due to insufficient evidence or transparency, signaling a lack of accountability. Why Should YOU Care? Understanding audit opinions matters because they reflect how responsibly public funds are managed. Unqualified opinions build public trust, while qualified, adverse, or disclaimed opinions may indicate potential mismanagement, which can affect essential services. By staying informed about these results, individuals can take responsibility for ensuring accountability in how their tax money is used. Conclusion With 65% of government entities receiving unqualified opinions, this demonstrates progress in transparency, though some areas still require improvement.