Independent Reviews
An Independent Review is a review of historical financial statements which is a limited assurance engagement performed by a practitioner. The review is performed by a practitioner who expresses a conclusion, in accordance with the requirements of ISRE 2400, that is designed to enhance the degree of confidence of intended users regarding the preparation of an entity’s financial statements in accordance with an applicable financial reporting framework.
During the performance of an independent review, the reviewer primarily performs inquiry and analytical procedures (evaluating financial information through trend, ratio or reasonableness of data in relation to other financial and non-financial data), confirm assets and liabilities at year end with supporting documents, to obtain sufficient appropriate evidence as the basis for a conclusion on the financial statements.
An independent review of a company’s annual financial statements must not be carried out by an independent accounting professional who was involved in the preparation of the said annual financial statements.
An independent review of a company’s annual financial statements must be carried out-
(a) in the case of a company whose public interest score for the particular financial year was at least 100, by a registered auditor, or a member in good standing of a professional body that has been accredited in terms of section 33 of the Auditing Professions Act; or
(b) in the case of a company whose public interest score for the particular financial year was less than 100, by-
(i) a person contemplated in paragraph (a); or
(ii) a person who is qualified to be appointed as an accounting officer of a close corporation in terms of section 60(1), (2) and (4) of the Close Corporations Act, 1984 (Act No. 69 of 1984).
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How to determine public interest score
The Public Interest Score (PIS) is calculated as follows:
- 1 point for each employee or the average number of employees throughout the year.
- 1 point per million rand of third party liability. This is the money owed in terms of loans, debentures, and other financing.
- 1 point for each million rand of turnover during the financial year. If the turnover is half a million rand, score ½ point.
- 1 point for every individual who, at the end of the year, is known to have a direct or indirect beneficial interest in the company. This will include shareholders, beneficiaries of a trust where a trust is a shareholder and other stakeholders. Companies scoring 350 points or more are required to have an audit
Frequently Asked Questions
If your company is not owner managed it will be subject to an Independent Review. A company that is not owner managed is one where the directors of the company are not the shareholders and vice versa.