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"Reporting on a set of financial statements with limited assurance."


    Most SMEs and companies are no longer required to have their financial statements audited. This has created an opportunity for many smaller accounting firms to provide alternatives.

    Alternative reports have the potential to be an attractive and fast growing service offering to SMEs. Clients may not need an audit, but may greatly benefit from a alternative engagement to satisfy banking or vendor needs.

    These alternative reports are:

    • compilations,
    • agreed-upon-procedures, and
    • reviews.

    A Review Engagements (RE) can be considered as an audit-lite. It drops a lot of the detailed testing and substantive procedures required from an audit. So it is less time consuming and cost less.

    In a RE the practitioner provides a report based on primarily inquiry and analysis, focussed on:

    • an understanding of the entity and its environment, and
    • the applicable financial reporting framework according to which the financial statements are prepared.

    The report may be distributed publicly, and is not restricted to those parties that have agreed to the review. It provides an opinion by the practitioner and hence increases the risk of professional liability.

    Opportunities for Business Accountants in Practice (SA)

    The standard applied when performing REs is the International Auditing and Assurance Standards Board (IAASB)’s International Standard on Review Engagements (ISRE) 2400 (Revised), Engagements to Review Historical Financial Statements.

    BAP(SA)s with the RE license may perform REs for any of the following entities on a mandatory basis:

    • Companies classified as non-owner managed with a PI score of less than 100.

    BAP(SA)s with the RE license may perform REs for any of the following entities on a voluntary basis:

    • Sole-proprietor,
    • Partnership,
    • Close corporation,
    • Company,
    • Trust,
    • Body corporate,
    • etc.

    ISRE 2400 is issued by the IAASB but prescribed by SAIBA when a BAP(SA) reviews financial statements

    Mandatory independent reviews as per the Companies Act, 2008

    Most companies are exempt from audit and review engagements based on the ownership structure of the company i.e. owner managed.

    For those companies that do require an audit or review the Act applies differentiated criteria based on: type, activity and size. (Companies Act, 2008, Section 30(7), Companies Regulations, 2011, Regulation 29(4)).

    All companies that are not required to have audited financial statements must have their financial statements independently reviewed (with the exception of companies where all the shareholders are also directors and therefore are not required to obtain an audit or a review). An independent review of a company’s annual financial statements must be carried out based on:

    • Ownership: Companies where all the shareholders are also directors are not required to obtain an audit or a review, unless they are of a certain type, or perform certain activities or size. (see audit)
    • Public interest score: Any other company whose public interest score in that financial year is:

      Category 1: at least 100, but less than 350, if its annual financial statements for that year were independently compiled. Financial statements will be internally compiled, unless it was “independently compiled and reported”. In terms of the Regulations “independently compiled and reported” means that the annual financial statements are prepared:

      • by an independent accounting professional
      • on the basis of financial records provided by the company, and
      • in accordance with any relevant financial reporting standards.

      Category 2: in the case of a company whose public interest score for the particular financial year was less than 100, then:

    Independent reviews under category 1 may be performed by a registered auditor or a member of a professional body accredited by the IRBA for audit purposes.

    Independent reviews under category 2 may be performed by a persons recognised under section 60 of the Close Corporations Act as an accounting officer due to membership of SAIBA.

    What SAIBA needs to do

    SAIBA is a legislative controlling body for accountants, accounting officers and independent reviewers. As a controlling body we are required to monitor and sanction compliance to standards of member conduct. We perform this function by ensuring compliance by our members to the IAASB’s engagement standards. We offer CPD and training courses to help guide members with their everyday challenge in the workplace. We lobby government and SME associations to allocate work to business accountants.

    What you need to do

    The firm should study ISRE 2400 and ensure that all RE are performed in terms of this standard. If the review is performed in terms of the Companies Act, 2008 and Regulations the practitioner should also be aware, and include those requirements (Independent Reviews). The firm should study any relevant laws, regulations, founding documents or contract terms to determine the qualifications of the persons required to perform the engagement, prior to performing the engagement.

    Members are required to register with www.saiba.academy and read www.accountingweekly.com to stay updated and do a specialist license to unlock additional advisory work.

    • Do a google search to identify the types of companies that are likely to need this particular service.
    • Write an email or letter to them and explain how you can help them.
    • Do the SAIBA CPD and relevant license related to the particular service.
    • Perform the service for your new client.
    • Alternatively contact a SAIBA Strategic Alliance partner.

    Additional resources

    SAIBA has provided a number of guides, videos and PowerPoint slides that will assist accountants with understanding their responsibilities in terms the various types of engagements: