Section 29 of the Estate Agency Affairs Act (EAAA), Number 112 of 1976, states that every estate agent shall keep such accounting records as are necessary to fairly reflect and explain the state of affairs of all monies received or expended, including monies deposited to a trust account or interest-bearing account.
It is further required in the same section that every estate agent shall have such accounting records audited by a registered auditor within four months after the date of the estate agent’s financial year end, and an audit report in the prescribed format is to be submitted to the Estate Agency Affairs Board (EAAB) within that period.
It is irrelevant whether the estate agency business is conducted as a sole proprietor, or through a legal person, such as a close corporation or a private company, as the audit requirement is placed on the estate agent business.
The accounting records referred to in Section 29, and which are subject to the audit requirement, include records of the following:
- All monies received or expended, including monies deposited to a trust account or invested in a savings or other interest-bearing account;
- All assets and liabilities; and
- All financial transactions and the financial position of the business.
It is the interpretation of the EAAB and IRBA that the records described above include financial statements. These financial statements are therefore subject to an audit, and the findings of the auditor on the financial statements are also described in the audit certificate prescribed by the EAAB.
In addition to the above, Section 32 further requires every estate agent to open one or more separate trust accounts (which shall contain a reference to the section) with a bank and such an estate agent shall forthwith deposit therein all trust money held or received by or on behalf of such estate agent. The estate agent shall keep separate accounting records of all monies deposited by him in his trust account and all monies invested by him in any savings or other interest-bearing account. These records and books must be balanced at intervals of not more than one month, and cause them to be audited by an auditor within four months after the end of the financial year of the estate agent.
A further requirement is that all estate agents need to be registered in terms of the Financial Intelligence Centre Act (FICA) and the FICA registration number needs to be reflected on the audit report.
From the above it is evident that both the business and trust records of an estate agent are subject to an audit by a registered auditor. It is therefore important that an estate agent should ensure that his records, both business and trust, are properly kept as required by the Act to ensure that an unqualified audit report is issued. Should an estate agent fail to fulfil these requirements, he will be disqualified from receiving a Fidelity Fund Certificate, and will face disciplinary action and a fine of up to R25 000.00.
This article is a general information sheet. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.