The Process to be Followed for Independent Reviews of Annual Financial Statements
Independent reviews are an auditing function that forms part of the accounting process. According to Regulation 29 of the Companies Act, No. 71 of 2008, independent review of financial statements should be carried out in certain situations where irregularities are suspected. The process is managed by an independent reviewer who is a qualified individual appointed to do so. A company manager who behaves in a certain manner or omits information that leads to material and financial loss to the company or a member / shareholder / investor, or carries out fraudulent activity or theft, must be reported, along with the details of the reportable irregularity.
Understanding what an independent review is is one thing, but knowing when it needs to be carried out, and how, is different matter altogether. If a reportable irregularity is suspected, the review must be carried out by an accounting officer, registered auditor, or a member in good standing of a professional body (which is accredited according to Section 33 of the Auditing Professions Act).
If a reportable irregularity is uncovered, the reviewer must write an official first report to the commission, stating the details. The reviewer must then notify in writing the company’s board and provide them with the details of the report. The reviewer must also ensure that a copy of the letter presented to the board is included in the first report sent to the CIPC.
The job of the independent reviewer thereafter can be complex. Within 20 days of notifying the board of the reportable irregularity and the first report sent to the commission, he or she must / will:
- Discuss the first report with board members;
- Ensure that the board is given ample opportunity to make necessary representations in terms of the report and its findings;
- Send a follow-up report to the commission to state whether or not the reportable irregularity had or is taking place, and that the correct steps have been taken to recover losses and prevent such an occurrence in the future. If the reportable irregularity is still continuing, the details and supporting information to the findings must be presented to the commission.
If your company is in need of a qualified, experienced, and skilled independent review professional to assist and provide advice, our team at Tax Leaders is standing by to help. Simply get in touch with us to discuss your needs and requirements. We are available via email and telephone and look forward to simplifying your independent review of your business’ annual financial statements.