The Companies Act of South Africa (the Act) requires all companies to prepare financial statements within 6 months after the end of its financial year. A very popular question among business owners with regards to financial statements is whether the statements should be independently audited, reviewed or compiled. In determining the engagement type, the Act prescribes the following criteria to be applied:
Audited financial statements
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Independent review of financial statements
The Act prescribes that an independent review of a company’s annual financial statements must be performed if the following apply and the company does not select to be voluntarily audited:
If, with respect to a company, every person who is a holder of, or has a beneficial interest in, any securities issued by that company is not a director of the company, that financial statements should be independently reviewed.
A company and its directors may choose to be voluntarily audited or reviewed if they wish to engage in an assurance engagement, although it has not been prescribed by the Act.
Compiled financial statements:
If none of the above-mentioned requirements has been met, the financial statements may be compiled.
With compilations, or compiled financial statements, the outside accountant converts the data provided by the client into financial statements without providing any assurances or auditing services.
If you need any assistance with your engagement in financial statements, do not hesitate to contact our friendly staff.
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)