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An independent Review is an alternative assurance engagement where the independent reviewer provides “Limited Assurance” on a set of annual financial statements when to them of the reasonable assurance provided by the external auditor.

The review studies performance related to previous years, ratio analysis and reasonability. The report states that it provides a reasonable basis for expressing limited assurance that there are no known material modifications that should be made to the financial statements to conform to the appropriate accounting framework.

An independent review is required for most companies in South Africa which are not owner-managed. In all but the smallest companies, a Registered Auditor is required to perform the review.

Independent Review Benefits

• Provide Limited Assurance
• Compilation of Annual Financial Statements
• Aimed at Small to Medium Enterprises
• Significantly less expensive than Traditional Audit
• Prepared with Appropriate Accounting Framework

Is it a Legal Requirement?

In terms of the new Companies Act, private companies in South Africa will be able to replace the annual audit with an Independent Review, Small business will be able to opt for the less onerous and costly way of having their financial statements independently reviewed rather than the traditional route of an audit. Under the new Companies act, only Public Companies are obliged to be audited. The objective of the new legislation is to simplify the regulation of the small to medium-size enterprises and make it less costly and more affordable to the business in South Africa

What are the Procedures for an Independent Review?

The review engagement is different in significant aspects from an audit, including reporting. The nature, extent and type of procedures performed in a review engagement are less than in the audit. The assurance obtained in a review engagement will also be less.

The procedures performed during a review provide all the evidence that would be required in an audit i.e. Compilation of Annual financial statements. The review engagement procedures are primarily of an inquiry and analytical nature, to obtain sufficient and appropriate evidence to support a limited conclusion on whether the financial statements are prepared in accordance with.