As a business owner, you may find yourself facing the statutory requirement to have your company’s financial statements independently reviewed. This is no reason for concern, as an independent review can bring numerous benefits such as improving the reliability of your financial reporting and help you stay compliant with legal requirements.
Lee-Ann Nagel
Accountant
In simple terms, an independent review checks that your company’s financial statements meet the required standards, offering a level of confidence in their accuracy without the more extensive procedures involved in a full audit.
Section 30 of the Companies Act 71 of 2008 sets out the requirements for the annual financial statements (AFS) of a company and stipulates which companies require their AFS to be audited or independently reviewed.
While the thought of an audit or review may feel overwhelming, independent reviews are fairly commonplace. Understanding the process can help you prepare and ensure the experience runs smoothly.
Generally, an accountant will inform the client that they need an independent review, but ultimately it is the responsibility of the directors of the company to know whether or not it is required.
If a company meets the legal requirement for an independent review under the Companies Act, they need to have it performed or the accountant becomes bound by his/her professional code to report the client for not complying with legislation.
That being said, a company can opt to have an independent review done without being legally compelled to do so.
What is an Independent Review?
An independent review is a professional service that provides limited assurance on the accuracy and compliance of a company’s financial statements. During this process, the independent reviewer performs specific procedures to gather enough evidence and determine that the financial statements comply with the International Standard on Review Engagements 2400 (Revised), commonly known as ISRE 2400.
Key benefits of an Independent Review
An independent review can provide several advantages for your business:
When is an Independent Review required?
There are specific circumstances where an independent review is required, as well as situations where it is an alternative to an audit. Here are some key scenarios where an independent review might be necessary:
Owner-managed companies: what does it mean?
The concept of owner-management is important when considering the need for an independent review. If a company’s shares are owned by another company, it most likely will not be classified as owner-managed. However, if Company A owns 100% of the shares in Company B, and the director of Company B is also the sole shareholder of Company A, Company B is considered owner-managed and does not need an independent review.
Partner with the specialists
It is clear an independent review can bring numerous benefits to your business. If you are unsure whether your company requires an independent review or how to proceed, consulting with experts is the best way to ensure your business remains on the right side of the law.
By working with professionals who specialize in these services, such as the team at Tax Consulting South Africa, you can ensure that your business is fully compliant and prepared should any financial review or audit be required.
