Audit, review and compilations – differences and Companies Act requirements

The Companies Act No. 71 of 2008 together with amendments and companies’ regulations, stipulates requirements whether a company’s financial statements should be audited, independently reviewed or only compiled. As a business owner, it is important to understand the requirements together with the differences in these services provided.

To understand what category applies to your company, see the below decision tree. Important to note, if an audit is not required, a voluntary audit can still be applied.

The above diagram refers to PIS, which is the Public Interest Score (PIS) as stated by the Companies Act. This is a point system based on the below criteria which determines the outcome of what options there are for your firm, thus the final step is to understand how this is calculated:

• one point per employee of the company (includes executive directors), calculated on the average employees during the year,
• one point for every R 1 million (or portion thereof) in third party liability of the company, at the financial year end,
• one point for every R1 million (or portion thereof) in turnover during the financial year,
• one point for every natural person who holds a beneficial interest in the company’s issued securities / if a non-profit for every member who is a natural person.

There are certain requirements and restrictions triggered per bracket of Public interest score that needs to be complied with, between 100 and 350, higher than 350.  For example, the accounting standards applicable and possible committees the company needs to have functional. When the Public interest score reaches more than 350, it is imperative to note that the same company providing audit services, is not allowed to provide any other services whatsoever to the company being audited.

If you have any further queries or would like assistance in determining what services are applicable and most suitable to your situation, you are welcome to contact our office where we can consult you on the best possible approach.