The Johannesburg Stock Exchange (JSE) requirement 3.84(k) stipulates that the Chief Executive Officer (CEO) and the Financial Director (FD) sign a responsibility statement that they have implemented the necessary internal financial controls to ensure the financial statements are fairly presented and no facts have been omitted or untrue statements made.

The JSE listing requirements includes specific responsibilities in respect of:

• Audited annual financial statements
• Establishment and maintenance of internal controls.

The CEO and the FD responsibility statement must be made by them after due, careful and proper consideration of:

• “The directors, whose names are stated below, hereby confirm that…

1. The annual financial statements set out on pages […] to […], fairly present in all material respects the financial position, financial performance and cash flows of the issuer in terms of IFRS;
2. No facts have been omitted or untrue statements made that would make the annual financial statements false or misleading.
3. Internal financial controls have been put in place to ensure that material information relating to the issuer and its consolidated subsidiaries have been provided to effectively prepare the financial statements of the issuer.
4. The internal financial controls are adequate and effective and can be relied upon in compiling the annual financial statements, having fulfilled our role and function within the combined assurance model pursuant to principle 15 of the King Code. Where we are not satisfied, we have disclosed to the audit committee the auditors the deficiencies in design and operational effectiveness of the internal financial controls and any fraud that involves directors, and have taken the necessary remedial action”

The above statements should be signed by the CEO and FD.

To ensure that the requirements of 3.84(k) are adhered to, the following should be considered:

1. Calculate materiality for reporting purposes – Materiality in paragraph (1) must be interpreted in the context of IFRS.
2. Review adequacy of the control environment and policies over financial reporting controls.
3. Identify the business processes and controls that could affect your reporting environment.
4. Perform a risk assessment on these processes and determine what can go wrong from a financial reporting perspective.
5. Design and implement key controls to address the risks identified, as well the responsible parties to initiate and review.
6. Design a combined assurance programme to test the design and effectiveness of financial reporting controls.
7. Implement monitoring process to confirm that the control procedures have been implemented, and to identify and report deficiencies.
8. Implement a plan for control remediation.
9. Track the deficiencies with remediation based on materiality and risk assessment and report deficiencies to audit committee and external auditors.

For more information, contact:

Maryke Van Deventer
Nexia SAB&T, South Africa
T: (+27) 83 230 2874
E: Maryke@nexia-sabt.co.za
W: www.nexia-sabt.co.za