Independent Reviews – Companies Act 71 of 2008
As businesses grow and expand, it becomes increasingly important to ensure that their financial statements accurately reflect their financial position. The Companies Act 71 of 2008 uses a public interest score “PI Score” to determine when a company must be audited of have an independent review.
Public Interest Score (PI Score)
The Public Interest Score is a numerical value used to determine the level of public interest in a company. The PI Score is calculated based on a company’s annual turnover, the number of employees, and the extent to which the company has access to the public through its shareholders and long term loans.
The PI Score is used to determine certain requirements and regulations that a company must adhere to. For example, companies with a PI Score of less than 350 are exempt from having to appoint an auditor however a company is required to obtain an independent review if its PIS is greater than or equal to 100 but less than 350.
According to section 30(2) of the Companies Act 71 of 2008, a company that meets this threshold must have its annual financial statements reviewed by an independent accounting professional who is registered with a recognized professional body. The independent review must be conducted in accordance with the International Standards on Review Engagements.
Independent reviews of financial statements are an essential tool to ensure the accuracy and reliability of these statements. In South Africa, independent reviews are conducted in accordance with the Companies Act 71 of 2008 and recognized accounting standards
What is an Independent Review
An independent review is a limited assurance engagement that provides a moderate level of assurance on the accuracy of financial statements. Unlike a full audit, an independent review does not require extensive testing of financial information or a detailed analysis of internal controls. Instead, the focus is on identifying any material misstatements that may exist in the financial statements.
Independent reviews in South Africa are typically conducted by registered accountants who have the necessary expertise to provide a professional and objective assessment of the financial statements. The accountant must adhere to recognised accounting standards in carrying out the review.
The review process involves obtaining an understanding of the business and its operations, performing analytical procedures, and making inquiries of management. The accountant will then prepare a report that provides an opinion on the accuracy of the financial statements. If material misstatements are identified, the accountant will work with management to resolve these issues.
Independent reviews are an important part of the financial reporting process in South Africa. They provide stakeholders with the confidence that the financial statements are accurate and reliable. In addition, they can identify potential areas for improvement in the financial reporting process, allowing businesses to improve their operations and provide more transparent and reliable financial information.
If you are a business owner, it is important to engage a registered accountant to perform an independent review of your financial statements to ensure compliance with the Companies Act 71 of 2008.
Should you require any further information contact us now.
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