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Independent Review

Independent Review

The new South African Companies Act, 2008, which became effective on 1 May 2011, regulates companies on a differential basis. Larger companies, when measured by size, ownership structure and nature of activities, are subject to more stringent regulatory requirements than smaller companies. They are subject to mandatory annual audits, enhanced disclosure in financial statements, the appointment of company secretaries, auditor rotation, enhanced auditor independence, appointment of mandatory social and ethics committees, legal backing for the International Financial Reporting Standards (IFRS), plus a host of other specifications. Requirements for medium-sized companies include mandatory independent reviews, enhanced independent reviewer independence and legal backing for the International Financial Reporting Standards for Small and Medium Entities (IFRS for SME). Smaller companies are exempt from independent reviews but not the audit. They are required to prepare financial statements that are fairly presented.


All companies are subject to the same basic governance requirements. For example, they all have to keep accurate and complete accounting records in a manner that will ensure compliance with the Act, they have an obligation to protect their accounting records from falsification, and are required to prepare financial statements. It is an offence to prepare financial statements that are misleading or incomplete or not fairly presented. Any person who is party to the falsification of accounting records or of the presentation of misleading or incomplete financial statements, is guilty of an offence. If this misconduct is material the offence becomes a criminal offence.


An independent review is a limited assurance report that is a mandatory requirement for non-ownermanaged companies of a certain size. The size of a company refers to the public interest score attained by that particular company. This score is calculated by allocating one point to each of the following: average number of employees, number of shareholders, each million Rand of turnover, and each million Rand of debt. According to the Companies Regulations, 2011 an independent review is classified as a review engagement in terms of the International Standard on Review Engagements, ISRE 2400.


Paladin Advisory Services is certified to perform independent review engagements for certain types of companies.

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