Abstract:
One of the provisions in the Companies Act 2008 which is particularly significant to the auditing profession in
South Africa is the introduction of the independent review of financial statements of certain non-public interest
companies as an alternative to the conventional audit of financial statements which is currently required for all
companies. The Companies Act 2008 provides for regulations regarding independent reviews to be drawn up
by the Minister. This article presents a background study and analysis of what constitutes an independent
review in order to provide a better understanding of this alternative to an audit of a company’s annual financial
statements.
It seems that the Draft Regulations regarding which companies should be audited and which independently
reviewed will achieve the Act’s primary objective of the protection of the public interest as they are primarily
based on a company’s activities and not on quantitative thresholds such as turnover and assets. A robust and
well designed set of assurance standards for independent reviews is needed to provide the necessary
guidance to practitioners who will conduct independent reviews. Contrary to the requirements in the Draft
Regulations, it is suggested that an independent review should be performed by a person who is a member in
good standing of a professional body accredited by the Independent Regulatory Board for Auditors, and not
the International Federation of Accountants.
