Does your business require an audit?

Financial statement compilation is standard practice for almost all businesses, but when it comes to annual audits there’s a great deal of confusion among entrepreneurs: does your company need one or not?

Aside from a compilation which is a very basic summary of your business’s financial statements, there are two types of assurance processes that are used to ensure the accuracy of a company’s financial statements: an audit or independent review.

The size of your company as well as its turnover will determine which of these your business must undergo to ensure compliance.

Does your company need a financial statement audit?

You can determine your audit and assurance requirements by using the criteria below:

• Public companies (those listed on the JSE) must be audited in line with the Companies Act requirements and International Auditing
• Private companies with assets of R5 million or more and turnover in excess of R20 million will need to determine their Public Interest Score with the help of their auditor in order to know whether an audit or financial review is needed.
• SMEs and owner-managed businesses do not require an audit or review but must submit financials to SARS and annual returns to CIPC in terms of SA commercial legislation.

Business audits vs SARS audits: what’s the difference?

It’s important to distinguish between an audit that’s required for tax compliance and carried out by a professional auditing firm like West Evans and a SARS audit which is carried out when a taxpayer’s returns are flagged for irregularities.

• Unless your business is listed on the JSE, it probably won’t require an independent audit and a financial review should suffice. In the case of small businesses, these procedures may not be required.
• Receiving a notice from SARS that your business is being audited is a serious tax accounting issue and you should consult a professional tax accountant without delay. Our team handles enquiries of this kind routinely to give clients peace of mind.

With penalties for noncompliance becoming more severe by the year, the safest way to determine what type of financial statement verification your business needs is to consult with an external audit and assurance professional.

Contact the West Evans team today for an in-depth auditing consultation that will give you an independent insight into your company’s financial records and a renewed level of confidence to guide you in making informed decisions.