All companies, large and small must prepare annual financial statements. All companies must maintain accurate accounting records. All companies must have a financial year. It is an offence to falsify or fail to keep proper records or to publish false financial statements. All financial statements given to another person must bear a disclosure statement.

The Commission will direct private companies to prepare audited Financial Statement if a certain threshold is attained. All companies must file annual returns with the Commission. A company must prepare annual financial statements within 6 (six) months after the end of its financial year end. 

 

Category of companies, which must be audited

 

  • Public Companies.
  • Profit and non-profit companies, that in the ordinary course of its primary activities, holds assets in a fiduciary capacity for persons who are not related to the company, and the aggregate value of such assets held at any time during the financial year exceeds R 5 million.
  • A non-profit company, if it was incorporated: directly or indirectly by the state, an organ of state, a state-owned company, an international entity, a foreign state entity or a company; or to primarily perform a statutory or regulatory function in terms of any legislation, or to carry out a public function at the direct or indirect initiation or direction of an organ of the state, a state-owned company, an international entity, or a foreign state entity, or for a purpose ancillary to any such function.
  • A company that is required by its memorandum of incorporation to have its annual financial statements audited.
  • An owner-managed company if its public interest score qualifies it to be audited.
  • The extent to which the annual financial statements of private companies will have to be professionally reviewed or audited will depend on the company’s “Public Interest Score” (a measure of “economic or social significance”), which will be determined broadly as follows: –

1. 1 point per employee (take the average number of employees for the year)

2. 1 point for every R1m or part thereof turnover

3. 1 point for every R1m or part thereof “third party liability”

4. 1 point for every shareholder (and anyone else with a direct or indirect “beneficial interest” in the issued shares and other securities).

Where your score is –

• 350 or more – a full audit is required

• 100 – 349, and the financials are prepared internally by your staff – a full audit is required

• 100 – 349, and the financials are prepared independently – they are subject to “independent

review” by an auditor or CA

• Under 100 – “independent review” is required, and it can be carried out by anyone qualified to be “accounting officer” of a close corporation.

 

Transitional arrangements

 

Companies with financial year end before 1 April 2011 – completion of audit in terms of the old companies Act, the new Act will apply to all financial year ends after 1 April 2011.

 

Doing away with audits ‘could expose companies to fraud’