What is an Independent Review?
An Independent Review is an alternative assurance engagement in which an independent reviewer offers “Limited Assurance” on a set of annual financial statements, providing a different level of assurance compared to what an external auditor would deliver.
Benefits of an Independent Review
- Provides Limited Assurance
- Compiles Annual Financial Statements
- Tailored for Small to Medium Enterprises
- Significantly less expensive than a Traditional Audit
- Aims to Simplify Regulations
- Prepared using an appropriate Accounting Framework
Is it a Legal Requirement?
According to the new Companies Act, private companies in South Africa can substitute the annual audit with an Independent Review. This allows small businesses to choose a less burdensome and cost-effective method for having their financial statements reviewed, rather than following the traditional audit path. Under the new legislation, only Public Companies are required to undergo audits. The aim is to simplify regulations for small to medium-sized enterprises, making compliance less costly and more manageable for businesses in South Africa.
What are the Procedures for an Independent Review?
The review engagement differs significantly from an audit, particularly in terms of reporting. The nature, extent, and type of procedures conducted during a review are less comprehensive than those in an audit. Consequently, the assurance obtained from a review engagement is also limited.
During the review, procedures are performed to gather all necessary evidence typically required in an audit, such as the compilation of annual financial statements. The review engagement primarily involves inquiry and analytical procedures to obtain sufficient and appropriate evidence to support a limited conclusion on whether the financial statements comply with the designated accounting framework. Thus, an independent review contrasts with a traditional audit.
Financial Management Summary
An independent review serves as an alternative assurance engagement in which the independent reviewer offers “Limited Assurance” on a set of annual financial statements, providing a different level of assurance compared to the reasonable assurance given by the external auditor.
.