Do the Amended Codes make provision for the use of Management Accounts?
The Codes themselves do not refer specifically to the use of Management Accounts, however the “Draft” Verification Manual states under the Definitions: 1.1.15. …” In the case where audited financial statements are not available for the Measurement Period, management accounts for the same period will be used.”
This suggests that only the company’s registered financial period may be used for the BEE audit & only if signed off AFS are not available, then Management Accounts can be utilised.
In the interim, while we are waiting for the Draft of the Verification Manual to be signed off by the DTI & promulgated, the only source document that remains in force regarding verification methodology is the “old” verification manual.. which does permit the use of Management Accounts for any 12-month period.
The verifying agent would have to determine (based on their policy & level of risk) whether they would accept Management Accounts for an Amended Codes audit (for a period other than the entity’s registered financial year per CIPC).
For now (in our opinion) it is permissible and we believe it will arguably still be permissible even if the Draft Amended Verification Manual is gazetted in its current form since the Definition for “Measurement Date” states: “… last day of the Measurement Period or such a date agreed upon with the Measured Entity that is close as practically possible to the verification date.”
Representatives of the DTI (and others including SAICA) have stated at various workshops on the new codes that you cannot verify a period other than the registered financial year, but in our opinion,the legislation is not clear or definitive on this particular point.
Article by Reg Glutz, BEE4Business, 03 Nov 2016