What is an Independent Review?
A company is allocated points according to the number of its employees, its annual turnover, its stakeholders and the level of third party liabilities at the end of the financial year.
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.
Any company, whatever its points score, that holds funds of R5m or more for a client in a fiduciary capacity, at any time during the year, is also required to have an audit.
Companies scoring between 100 – 350 points must have an independent review conducted by a registered auditor or an independent review, conducted by a certified accountant.
Companies scoring less than 100 points are required to have an independent review conducted by anyone who qualifies as an accounting officer, unless circumstances indicate otherwise (owner managed).
An audit is a thorough examination of a company’s financial status performed by a registered auditor. It involves verification and substantive procedures and carries far more weight than a review, as it results in the auditor expressing the highest level of assurance. Companies seeking loans may be required by their banks to have an audit before their application is considered. The decision to not have an audit may very well impair an entity’s ability to obtain external funding.
A review provides no assurance that a company’s financial statements do not have any known errors or misstatements.