Having engaged a number of new audit clients over the last few months. it has become clear to Melissa Jacobs of MJ Chartered Accountants that a number of business owners do not understand the rules and requirements around their annual audit – so let’s unpack the high-level requirements.
In the old companies act, it was a requirement that every private company (Pty) had to be audited by a registered auditor. When the new companies act was introduced, it placed far less onerous assurance requirements on companies based primarily on whether an audit would be in the public interest or not. This gave rise to the PIS (Public Interest Score) calculation. The PIS is a calculation that must be done every year to determine:
- The type of engagement that is required (audit, independent review or compilation)
- The accounting framework that must be applied
The PIS is calculated based on the following four indicators:
- The average number of employees in the company
- The turnover of the business
- The value of third party liabilities
- The number of individuals having a beneficial interest
The detailed calculation of the PIS is beyond the scope of this article, but in essence the higher the PIS, the higher the level of assurance required. The three different levels of engagement are as follows:
- Audit
- Independent Review
- Compilation
An audit will provide the highest (but not absolute) level of assurance, an independent review a moderate level of assurance and a compilation no level of assurance. There are however pros and cons to each of these – including cost benefits. In addition to the PIS, whether or not your annual financial statements are prepared internally or independently will also have an impact on the type of engagement required.
MJ Chartered Accountants are Registered Auditors and are able to assist with your audit, independent review and compilation engagements.
Our services include the following:
- Bookkeeping
- Tax
- Monthly Management Accounts
- Company Secretarial
- Audits
- Independent Reviews
- Compilation of your Annual Financial Statements
OUR OFFER TO YOU
A free calculation of your public interest score to determine the level of assurance you are legally required to obtain, which could save you money, time and effort. Email Melissa Jacobs at melissa@mjacc.co.za to request your calculation.
FOR MORE INFO: 087 821 7110 | www.mjacc.co.za