Audit exemptions help small firms
THE SA Institute of Chartered Accountants welcomed the new Companies Act as good for small business.
Small and medium-sized companies that had previously been obliged to bear the cost of an audit might now be exempted as the act introduced new criteria, Saica said.
The decision would depend on a newly introduced public interest score.
"Under this system, a company is allocated points according to the number of its employees, its annual turnover, its stakeholders and the level of third-party liabilities at the end of the financial year," Saica spokesman Ashley Vandiar said.
Points are given for the average number of employees throughout the year, one point per million rand of debt financing, one point for each million rand of turnover, and one point for every individual with a beneficial interest, including shareholders.
Companies with 350 points or more must be audited.
Any company, regardless of point scores, with more than R5m held for a client in a fiduciary capacity also had to be audited.
Companies scoring between 100 and 350 points must have an independent review conducted by a registered auditor or a chartered accountant.
Those scoring less than 100 are required to have an independent review conducted by anyone who qualifies as an accounting officer, unless circumstances indicate otherwise. Close corporations are treated the same way as companies.
The cost savings for companies exempted from an audit should be ploughed back into the business or used to reduce debt, said Vandiar. - Sapa