Financial Statements: Audit or Review in terms of the New Companies Act?
Whilst companies are still required to prepare annual financial statements within six months after the end of each financial year, it is no longer compulsory for all companies to have their annual financial statements audited.
Pursuant to section 30(2) of the Companies Act, 2008, read with regulation 28(2) of the Regulations, the annual financial statements of public companies and state owned companies must be audited, but in respect of profit companies (and non-profit companies that are not related to the state), an audit of the annual financial statements would only be required if:
- in the ordinary course of the company's primary activities it holds assets in a fiduciary capacity for persons who are not related to the company, in excess of R5 million
- the company's memorandum of incorporation so requires
- the company's public interest (PI) score in that financial year is:
- 350 or more
- at least 100, if the annual financial statements were prepared internally.
The PI score is calculated as the sum of the average number of employees, one point for every R1 of third party liability, one point for every R1 million in turnover and one point for every individual with a beneficial interest in the company.
In our next post we will look at audit exemptions.