The sectional title industry in South Africa: enhancing accounting and auditing practices

[摘要] English: South Africa has a long and complex history of land and housing problems, and from the late1800s the South African government administrations spent considerable time and energy onadopting and implementing numerous pieces of land-related legislation in order to addressthese problems. Sectional title property plays a vital role in addressing this high-priorityproblem, and can assist in providing much needed residential accommodation for householdsof all income levels, within commuting distance of employment centres. Close to one millionhouseholds in South Africa reside in sectional title property schemes.The new so-called third generation sectional title legislation became effective in the secondhalf of 2016. The amendments effected by the new legislation not only remove a substantialnumber of obsolete provisions, extend consumer protection, and propose to eliminate variousproblems, but also bring about a number of entirely new requirements, such as theestablishment and maintaining of reserve funds. Many of these new legislative changes willhave far-reaching implications for the governance, budgeting and financial management ofsectional title schemes. Also, many legislative aspects relating to governance, accounting andauditing of sectional title schemes remain contradictory and confusing. Role players in theSouth African sectional title industry face a number of unique challenges.In the problem statement of this study it is argued that governance-, accounting- and auditingrelatedresearch on the sectional title industry is relevant, topical and imperative if currentgovernance, accounting and auditing practises is to be enhanced. Following this argument,this thesis aimed to give in-depth overviews of three aspects; firstly, an in-depth overview ofrisks associated with sectional title for various stakeholders (i.e. owners, trustees, managingagents, auditors and accountants and EAAB-appointed inspectors) from an accounting,governance and auditing perspective; secondly, an in-depth overview of auditing- andgovernance-specific problems relating to sectional title; and thirdly an in-depth overview ofaccounting-specific problems relating to sectional title. More specifically, the researchobjectives were threefold; firstly, to find possible solutions to the above-mentioned problemsand to make recommendations in this regard; secondly, to set benchmarks from the analysisof the annual financial statements of respondents over a three-year period that can be ofassistanceas an industry standard for owners, trustees, managing agents, auditors andaccountants rendering a professional service, and so enhance accounting and auditingpractices; and thirdly, to identify future research opportunities that falls outside the scope ofthe study.The literature review of this study covered various legislative aspects relating to the functioningof bodies corporate, boards of trustees, trustee chairpersons, managing agents, sectional titlegovernance, and accounting and auditing of bodies corporate. The literature review paved theway for a detailed analysis of the governance, auditing and accounting aspects relating to asample of body corporate financial statements. An empirical study was also performed on thesectional title industry in South Africa by way of interviewing a sample of role players in theindustry, namely body corporate trustee chairpersons, managing agents of bodies corporate,sectional title accounting and auditing practitioners and EAAB-appointed inspectors.The results of the empirical study and data analysis revealed a great number of risks, practicalproblems, contradictory and confusing legal aspects as well as uncertainties in the industry.Various solutions to the identified problems and concerns were suggested and practicalrecommendations were made of which the industry should take note. The empirical findingscan also be used as a valuable basis for further research.

[发布机构] University of the Free State