Additional requirements for Independent Reviewers
The CIPC issued practice note 3 of 2022
The Companies and Intellectual Property Commission issued Practice Note 3 of 2022 on the 13th of May 2022. The practice note refers to additional reporting requirements which are in line with regulation 29(12) of the Companies Act 71 of 2008 (hereinafter 'the Companies Act'). Regulation 29 of the Companies Act deals with the independent review of financial statements.
For the purpose of this regulation there are two important definitions;
'independent reviewer', means a person referred to in regulation 29(4) and who has been appointed to perform an independent review under this regulation; and
'reportable irregularity', means any act or omission committed by any person responsible for the management of a company, which-
Unlawfully has caused or is likely to cause material, financial loss to the company or to any member, shareholder, creditor or investor of the company in respect of his, her or its dealings with that entity; or
Is fraudulent or amounts to theft; or
Causes or has caused the company to trade under insolvent circumstances.
Regulation 29(4) of the Companies Act states when a company's annual financial statements must be independently reviewed.
The first instance is where a company has a public interest score of at least 100 during the particular financial year. In this case, it must be done by a registered auditor or a member in good standing of a professional body that has been accredited in terms of section 33 of the Auditing Professions Act.
The second instance is in the case of a company with a public interest score of less than 100 during a particular financial year. In this case, the independent review can be done by;
A registered auditor or a member in good standing of a professional body that has been accredited in terms of section 33 of the Auditing Professions Act, or
A person who is qualified to be appointed as an accounting officer of a close corporation in terms of sections 60(1), (2) and (4) of the Close Corporations Act, 1984 (Act 69 of 1984).
Regulation 29(12) and an additional requirement
Regulation 29(12) requires that recognised Accounting Professional Bodies demonstrate that they have proper mechanisms for ensuring that their members participate in continued professional development (CPD) and achievement of professional competence.
Recognised Accounting Professional Bodies have been doing so and the additional requirement referred to by the Practice Note 3 of 2022 further requests that Independent reviewers be subject to additional measures. The Accounting Professional Bodies have requested that a sample of the work of independent reviewers be submitted for review and inspection n to ensure that they are complying with the prescribed standards and regulations when engaging in the independent review process.
Who and how will these reviews be done?
The recognized Accounting Professional Bodies will be required to conduct the reviews mentioned above and inspections and the outcomes of these reviews and inspections should form part of their annual reports that are submitted to CIPC from the 2023 reporting period.
The reviews will be done by requesting independent reviewers to submit two to five samples of their work to the recognized Accounting Professional Bodies.