annrep 1011 1 to 148.qxp - Department of Defence

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D E P A R T M E N T O F D E F E N C EDepartment of Defence and Military VeteransVote 21Chapter 2REPORT OF THEAUDITOR-GENERAL TOPARLIAMENT ONVOTE N o. 21: DEPARTMENTOF DEFENCE AND MILITARYVETERANSR E P O R T O N T H E F I N A N C I A L S T A T E M E N T SI n t r o d u c t i o nI have audited the accompanying financial statements of the department of Defence and Military Veterans, which comprise theappropriation statement, statement of financial position as at 31 March 2011, the statement of financial performance, statementof changes in net assets, cash flow statement for the year then ended, and a summary of significant accounting policies and otherexplanatory information as set out on pages 183 to 269.A c c o u n t i n g o f f i c e r ' s r e s p o n s i b i l i t y f o r t h e f i n a n c i a l s t a t e m e n t sThe accounting officer is responsible for the preparation of the financial statements in accordance with the DepartmentalFinancial Reporting Framework prescribed by the National Treasury and the requirements of the Public Finance ManagementAct of South Africa, 1999 (Act No. 1 of 1999) (PFMA), and for such internal control as management determines necessary toenable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.A u d i t o r -G e n e r a l ' s r e s p o n s i b i l i t yAs required by section 188 of the Constitution of the Republic of South Africa, 1996 (Act No. 108 of 1996) and, section 4 of thePublic Audit Act of South Africa, 2004 (Act No. 25 of 2004) (PAA), my responsibility is to express an opinion on these financialstatements based on my audit.I conducted my audit in accordance with International Standards on Auditing and General Notice 1111 of 2010 issued in GovernmentGazette 33872 of 15 December 2010. Those standards require that I comply with ethical requirements and plan and performthe audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of thefinancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevantto the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriatein the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control.An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimatesmade by management, as well as evaluating the overall presentation of the financial statements.I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my qualified audit opinion.178ANNUAL REPORT FY 2010/2011
D E P A R T M E N T O F D E F E N C EDepartment of Defence and Military VeteransVote 21REPORT OF THE AUDITOR-GENERAL TO PARLIAMENTON VOTE NO. 21: DEPARTMENT OF DEFENCEAND MILITARY VETERANSB a s i s f o r q u a l i f i e d a u d i t o p i n i o nM o v a b l e a n d i m m o v a b l e t a n g i b l e c a p i t a l a s s e t sThese assets are now stated at R 76.9 billion (no disclosure in prior years) in disclosure notes 32, 33 and 34 to the financial statements.Although the department has commenced addressing some of the prior year qualification matters, the process is unfinished,in that the department could not provide sufficient appropriate audit evidence to support the amount disclosed, and therecords did not permit the application of alternative procedures.Q u a l i f i e d o p i n i o nIn my opinion, except for the possible effects of the matter described in the Basis for qualified opinion paragraph, the financialstatements present fairly, in all material respects, the financial position of the department of Defence and Military Veterans as at31 March 2011 and its financial performance and cash flows for the year then ended, in accordance with the DepartmentalFinancial Reporting Framework prescribed by the National Treasury and the requirements of the PFMA.E m p h a s i s o f m a t t e rI draw attention to the matters below. My opinion is not modified in respect of these matters:R e s t a t e m e n t o f c o r r e s p o n d i n g f i g u r e sAs disclosed in note 25 to the financial statements, the corresponding figures for operating leases for 31 March 2010 have beenrestated as a result of an error discovered during 2010-11 financial year.I r r e g u l a r e x p e n d i t u r eAs disclosed in note 27 to the financial statements, irregular expenditure to the amount of R 799,349 million, mainly comprisingprocurement not in terms of Treasury Regulations, was incurred by the department.A d d i t i o n a l m a t t e rI draw attention to the matters below. My opinion is not modified in respect of these matters:F i n a n c i a l r e p o r t i n g f r a m e w o r kThe financial reporting framework prescribed by the National Treasury and applied by the department is a compliance framework.Thus my opinion would have reflected that the financial statements had been properly prepared instead of fairly presentedas required by section 20(2)(a) of the PAA, which requires me to express an opinion on the fair presentation of the financialstatements of the department.ANNUAL REPORT FY 2010/2011 179
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annrep 1011 1 to 148.qxp - Department of Defence

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