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Independent Reviews

What is an Independent Review? An Independent Review consist of Analytical Review procedures. enquiries and discussions. The Reviewer uses his or her knowlegde and experience to identitfy risk areas in the financial statements that are most likely to contain material misstatements. The Reviewer may perform additional procedures if the analytical procedure, enquiries and discussion indicate that an area may contain a material misstatement.

An independent review involves less procedures than an audit and therefore provides less assurance.
When is an independent review not required by the Companies Act (Act 71 Of 2008)?

All of the following requirements need to be met

  1. the company is not a public company
  2. the company is managed by the owners and all shareholders are directors.
  3. there is no requirement in the Memorandum of Incorporation of the company to have the financial statements independently reviewed
  4. the company meets the public interest score requirement (see below how this is calculated). The public interest score need to be less than 350 when the financial statements are independently compiled. If the financial statements are internally compiled the score need to be less than 100.

Non owner managed companies will need either an independent review or an audit depending on their score. Audits are required for Public Companies, Private companies with a public interest score more than 350 . or private companies in control of fiduciary assets greater than R5 million.

How is the public interest score calculated?

One point is awarded for

  1. every employee of the company. The average number of employees during he year are used.
  2. every R1 million (or portion thereof) in turnover
  3. every R1 million (or portion thereof) in third party liability at year end
  4. each individual having directly or indirectly a beneficial interest in any of the.

So if the turnover of your company is R80,5 million per annum, there are three shareholders, the company has debt owing to third parties of R20 million and employed an average of 20 employees during the year the public interest score would be 124.