Abstract:
The sectional title industry has been a part of the property landscape in South Africa for almost
half a century, and plays a profound role in addressing the housing problem in the country.
Stakeholders such as owners and investors in sectional title property are in most cases not
directly involved in the management thereof, and place reliance on the audited annual financial
statements of bodies corporate for decision-making purposes. Although the industry seems to
be highly regulated, the legislation regarding accounting and auditing of sectional title property
is vague and ambiguous. Furthermore, there are no industry-specific auditing and accounting
standards to guide accounting and auditing practitioners in performing their work and industry
financial benchmarks are not readily available. In addition, financial pressure on sectional title
schemes is often very high due to the fact that some owners exercise unrealistic pressure to
keep monthly levies as low as possible. Very little academic research has been undertaken on the
sectional title industry in South Africa from an accounting and auditing perspective. The aim of
this article is threefold: Firstly, to discuss the findings of a literature review on uncertainties,
ambiguity and confusing aspects in legislation regarding the audit of sectional title property that
may cause or increase the audit expectation gap. Secondly, to discuss the empirical findings of
accountancy-related aspects of a sample of body corporate financial statements and
accompanying audit reports, in order to identify current benchmarks, challenges, trends,
deficiencies in reporting and possible norms for the sectional title industry. Specific reference
will be made to the difference between the bodies corporate in the Mangaung and Matjhabeng
areas. Thirdly, practical recommendations will be made on possibilities of closing the
expectation gap, and further research opportunities in this regard will be discussed.
