# General Business Category > Accounting Forum >  Attorney accounts and director personal expense questions

## Imp

Hi there

I have two questions for those of you that don't mind assisting.

The first is does an attorney fit into the new companies act regulations, for example being owner managed = no audit and the public interest score?  Or are they all required to be audited?

Then

I have a very small pty client (owner managed), 1 director and shareholder.  He has clearly been trying to get anything and everything through the business.  Some of the expenses look like legitimate expenses such as entertainment and company clothing, but others just are blatant personal expenses.  How would you handle these.  Should i put them to a loan account? and draw up a loan agreement, or should i put directly to directors emoluments as a salary item?  He hasn't paid any PAYE and would therefore have to be taxed in his personal IT return.

Thank you.

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## wynn

Can one of the tax boffins answer the above question?

I am under the impression that a cc does not need to be audited anymore so what is the instance where you cannot register a cc you have to register a pty, am I right and what do you have to do?

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## Imp

wynn if the PTY is owner managed - ie Shareholders = Directors, it doesn't need to be audited, the AFS just need to be independently compiled by an accountant who is governed by a body recognised in the Act.  If the PTY internally compiled their AFS they would need an indendent review.  If they are not owner managed then their audit status is decided on by their Public Interest Score as to whether they can be independtly reviewed or audited.

My query above relates specifically to attorney accounts which I think may be dealt with differently that "normal" companies due to the legal council that they have to report to.

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## geraldenek

> Hi there
> 
> 
> The first is does an attorney fit into the new companies act regulations, for example being owner managed = no audit and the public interest score?  Or are they all required to be audited?
> 
> 
> Thank you.


The only thing applicable to trust accounts of attorneys, estate agents etc. in the new company act is:

All public companies, and companies (or CC’s) holding assets in fiduciary capacity worth more than R5m. 

The fact that it is a cc/pty does not change if they have to be audited or not as they have to comply with the Law Society who requires an audit.  
Even in the past if it was a partnership/sole proprietor they still had to have to get a trust account audit done.

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Dave A (11-May-12)

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## Imp

Thanks Geraldene, I know the trust account has to be audited but not sure about the attorney's themselves.

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## CLIVE-TRIANGLE

Quite a few misconceptions here, which I will try to help clarify:

*A. General*
1. There is no difference between companies and cc's when it comes to determining whether they require an independent review or an audit.
2. The trust accounts of attorneys require an audit regardless of whether they are incorporated, a partnership or a sole proprietor.
3. The criteria in (1) above apply equally to personal liability companies (like attorneys, designated "inc.")
4. The trust accounts of estate agents are required to be audited, regardless of whether they are incorporated as a company, or cc, or a partnership or a sole proprietor.

*B.Companies / cc's that are required to be audited*
1. Any company whose PIS is 350 or more, is required to be audited.
2. Any company that holds assets in a fiduciary capacity for persons who are not related to the company and that exceeds R5m
3. _Any company with a PIS of 100 or more; if it's annual financial statements are internally compiled._

*C. Exemption criteria*
1. Companies will be exempt from independent review if all shareholders in the company are also directors of the company
2. Cannot be exempt from audit if required by Act
3. Cannot be applied by non-profit companies
4. Cannot be applied in companies where shareholders are juristic persons (cc's, companies, trusts etc), regardless of PIS ** not sure about this yet **

*D. Who may do what*
1. Audit – must be performed by a registered auditor.
2. Independent review, a member of an IRBA accredited professional body (presently only SAICA) or an auditor.

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## CLIVE-TRIANGLE

> I have a very small pty client (owner managed), 1 director and shareholder.  He has clearly been trying to get anything and everything through the business.  Some of the expenses look like legitimate expenses such as entertainment and company clothing, but others just are blatant personal expenses.  How would you handle these.  Should i put them to a loan account? and draw up a loan agreement, or should i put directly to directors emoluments as a salary item?  He hasn't paid any PAYE and would therefore have to be taxed in his personal IT return.
> 
> Thank you.


Normally debit his loan account, then at the end of the year determine director's remuneration sufficient to prevent the loan account from becoming a "loan to" instead of "loan from".
For tax purposes, directors are employees and their monthly salaries are subject to paye.
Remember directors are automatically provisional taxpayers, so he should be able to sort it.

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## CLIVE-TRIANGLE

Summary of frs audit and review v1.pdf

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Dave A (15-May-12), Imp (14-May-12)

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## eitnob

Thanks Clive, very useful indeed. 
A company that does not require an audit under the new act needs to file a new Memo of Incorporation before it can claim  the audit expemption, not true?

i.e. Even if you meet the requirements, you will need to jump through a few hoops first.

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## Imp

Hi Eitnob that is right, you have to convert your MOI before you can get the audit exemption - if your current version states you need an audit.  And  I believe (perhaps Clive can confirm this) it has to be done before the end of the said Financial Year?

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## CLIVE-TRIANGLE

There are a few inconsistencies with regards to old / new MOI provisions:
- With regards to the exemption from audit, a resolution is needed in the interim. Actually this is also needed for a new MOI company, even if its PIS and other factors indicate a review. Conversion is not required.
- Unissued par value shares cannot be issued until they are converted to no par value shares. It follows then that the company must adopt a new MOI because the old one makes no provision for no par value shares.
- Similarly, the company cannot buy-back any issued par value shares.

By the way, the deadline for no-cost conversion is 30 April 2013.

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Dave A (17-May-12)

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## geraldenek

> *D. Who may do what*
> 1. Audit  must be performed by a registered auditor.
> 2. Independent review, a member of an IRBA accredited professional body (presently only SAICA) or an auditor.


Sorry just want to add here - A member of a professional body that has obtained accreditation with the companies commission and is qualified to be appointed as an accounting officer of a close corporation may perform independent review for non-owner managed companies with an PIS score of less than 100.  And also perform an independant review for owner-mananged companies.

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Dave A (17-May-12)

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## CLIVE-TRIANGLE

Correct. Refer the chart I posted in the follow up post; much better than my pointers lol

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