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Discuss whether the entry made by Mr. Bright Spark in his diary for 15 June 2019, constitutes a reportable irregularity in terms of section 45
Discuss whether the entry made by Mr. Bright Spark in his diary for 15 June 2019, constitutes a reportable irregularity in terms of section 45 of the Auditing Profession Act No. 26 of 2005.
Up until 28 February 2019, Mr. Bright Spark, a CA(SA) and a registered auditor (RA), worked as the financial manager for Robust Construction Ltd, a construction company with branches all over South Africa. On 1 March 2019, Mr. Bright Spark resigned and opened his own accounting and auditing practice named Earnest Inc., where he will be focusing on auditing clients in the construction industry. The following is an extract from Mr. Bright Spark's diary: 15 June 2019 During my review of the financial statements of one of my audit clients, Builders (Pty) Ltd (hereafter Builders), a journal entry to a suspense account was identified. The journal entry was as follow: Account Debit Credit Suspense account R1 000 000 Bank account R1 000 000 | enquired from management regarding the nature of the transaction that occurred. Management explained to me that the payment was made by cheque to a construction company called BrickIT and was made without any apparent services or goods rendered. The cheque was signed by the Chief Executive Officer (CEO), of Builders, Mr. AK Clever. Builders was subsequently awarded a material supply contract by BrickIT and Mr. AK Clever also received a performance bonus for obtaining the contract with BrickIT. Builders has a public interest score (PIS) of below 350, but requested my audit firm, Earnest Inc., to audit their financial statements for the year ended 30 June 2019. SUIDStep by Step Solution
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