Understanding Independent Review Services: What You Need to Know

For many companies in South Africa, ensuring financial statements are accurate and meet legal requirements is a priority. One effective way to achieve this is through an Independent Review. But what exactly is an Independent Review, and why is it important?

What Is an Independent Review?

An Independent Review is a limited assurance engagement, where a company’s financial statements are reviewed by an independent professional. Unlike an audit, which provides reasonable assurance, an independent review offers limited assurance that the financials are free from material misstatement.

The goal is to identify any issues that might affect the accuracy or reliability of the financial statements. This process is less extensive than an audit but still provides significant insight and peace of mind for stakeholders.

Why Is an Independent Review Important?

According to the Companies Act (Act 71 of 2008), certain companies are required to perform either an audit or an independent review based on their Public Interest Score (PIS). The Companies and Intellectual Property Commission (CIPC) requires that private companies with a PIS under 350, who do not require an audit, must undergo an independent review if their financial statements are not independently compiled.

This process helps ensure that financial statements are prepared accurately, reflecting the company’s financial position. It also helps identify areas for improvement and strengthens the company’s compliance with legal and regulatory requirements.

The Benefits of an Independent Review

There are several key benefits to having an independent review conducted:

• Cost-Effective Assurance: An independent review provides a level of assurance without the higher cost of a full audit. This makes it an attractive option for small to medium-sized companies.
• Compliance with the Law: The CIPC and Companies Act require companies to maintain proper financial records. Independent reviews help companies meet these regulatory requirements, avoiding penalties and ensuring good standing.
• Objective Perspective: Having a qualified, independent professional review your financials brings objectivity. This third-party review helps catch potential errors or inconsistencies that may have been overlooked internally.
• Stakeholder Confidence: Investors, creditors, and other stakeholders gain confidence knowing that the company’s financials have been independently reviewed and found to be in order.

Who Is Qualified to Perform an Independent Review?

An independent review must be conducted by a registered accountant who meets the qualifications laid out in the Companies Act. Typically, a registered auditor, chartered accountant, or an individual registered with a professional body like SAIPA (South African Institute of Professional Accountants) or CIMA (Chartered Institute of Management Accountants) can perform these reviews.

It’s essential to choose a qualified and experienced professional to conduct the review, ensuring that the process is thorough and in compliance with all relevant regulations.

Conclusion

An independent review is not only a legal requirement for many companies but also a valuable tool for ensuring financial accuracy and building stakeholder trust. If your company falls within the threshold for an independent review, it’s vital to engage a qualified professional to guide you through the process. This will not only help you remain compliant with CIPC and Companies Act requirements but also provide valuable insights into your financial health.

If you’d like more information on independent reviews or need assistance, feel free to reach out to our team of qualified professionals at GAS Accounting (hello@gasaccounting.co.za). We are here to help ensure your business stays compliant.