When a South African company must be audited

How the public interest score under Companies Regulations 26 and 28 decides audit or independent review, and how Achekam has it prepared and reviewed.

By Achekam · 11 October 2026 · 5 min read · For Accountants & audit firms in South Africa

Every year-end, a few South African clients drift towards the line between an independent review and an audit without anyone noticing. A trading company takes on more supplier credit and a bigger overdraft, a franchisee opens another store and adds staff, a family company brings new shareholders onto the register. Each change moves the public interest score, and the score decides which engagement the firm may accept.

The arithmetic is not hard. What goes wrong is the input: a year-end headcount used instead of an average, turnover rounded down, liabilities taken from the wrong year, or a score copied forward from an old file. This article sets out how the score is built and where the audit thresholds sit at the time of writing, then shows how Achekam has a score prepared, reviewed and turned into an engagement decision.

The four parts of the score

Companies Regulation 26(2), made under the Companies Act 71 of 2008, adds up four things for the financial year:

• Employees: one point for each employee, measured as the average over the year.
• Third-party liabilities: one point for every R1 million, or part of R1 million.
• Turnover: one point for every R1 million, or part of R1 million.
• Beneficial interests: one point for each individual who holds a beneficial interest in the company.

The words "or part of" matter. A company whose turnover runs a little past a round million earns a point for that part, so a working paper that rounds down understates the score. The same goes for liabilities. A holding company with no staff and modest turnover can still score heavily through its borrowings, and a company with a wide base of individual owners collects points from beneficial interests alone.

Where the audit thresholds sit

At the time of writing, Regulation 28(1) sets two audit thresholds. The 350 test applies whoever prepared the statements; the 100 test applies only where the statements were compiled internally.

The table shows why the compiler matters as much as the score. Two companies with identical scores can land on opposite sides of the line because one prepares its statements in-house and the other has them compiled independently. Where Regulation 28 does not call for an audit, the question becomes whether an independent review under ISRE 2400 (Revised) is required, and that answer should come from working through the Act and its regulations, not from habit.

The Companies Act is administered by CIPC, and the auditors who carry out the resulting audits are regulated by IRBA. CIPC's page on financial statements and independent reviews sets out which private companies must have their annual financial statements audited or independently reviewed. The score itself is the client's and the firm's to get right before the engagement letter goes out.

Preparing the score from the client's records

In Achekam the score belongs to the client record: CLIENTS > Client 360 > Profile. Staff prepare a score for a named financial year from the client's own records, and every input that is missing is named on the screen rather than assumed. A blank employee count stays visibly blank; it is not quietly treated as nought.

The thresholds the assessment applies come from Achekam's approved rule book, not from a figure someone typed into a spreadsheet. A firm's partners and administrators can read those rules, including the public interest score thresholds and their change log, under QUALITY & GOVERNANCE > Regulatory Rule Book. Only Achekam's platform administrators can change a rule, and never one person alone, so a threshold cannot drift because a staff member edited it before a busy season.

A second person, then the partner

A prepared score goes to a different person for review. Only after that review does Achekam say whether an audit or an independent review is required for that year. The split matters most where a score sits near a threshold, which is exactly where optimism creeps in. A good reviewer goes back to the payroll records, the trial balance and the register of owners rather than ticking the totals.

The assessment does not create an engagement on its own. A partner records the engagement type, choosing from types such as annual financial statements compilation, independent review or statutory audit, or one of the firm's own named types. The decision stays with the person who will put their name to the report.

Old scores of exactly 120

Some clients carry scores recorded long before anyone could see how they were worked out. An old score of exactly 120 cannot be told apart from a former default value, so the record alone does not show whether anyone ever calculated it.

Achekam flags every such score under QUALITY & GOVERNANCE > Legacy PIS 120 Reviews, and a person either recalculates it or confirms it with a reason. The original value is kept beside the outcome, which gives a reviewer or inspector the history instead of a silently corrected number.

This list deserves attention before the next round of engagement letters. A score of 120 on internally compiled statements is above the 100 threshold, so a default that was never a real calculation could have driven an audit decision, or hidden the absence of one.

A checklist for clients near the line

1. Fix the financial year the score is for, and use that year's figures throughout.
2. Take the average number of employees from payroll records for the whole year, not the headcount on the last day.
3. Agree third-party liabilities and turnover to the trial balance, and count every part of a million.
4. Get the individuals with a beneficial interest from the company's own records of ownership.
5. Establish who compiles the annual financial statements: the company's own people or an independent accountant.
6. Have someone other than the preparer review the score against the source documents.
7. Let the partner record the engagement type before the engagement letter is drafted.

Before the engagement letters go out

List the South African clients whose scores sit near a threshold, or were never properly calculated, and prepare this year's score for each from current records. The partner who signs the resulting audit report needs the right registration behind them, and how far Achekam checks that is set out in who checks the signing partner's IRBA registration. Firms that also audit in Nigeria face a different gate, described in the FRC firms register and signing a Nigerian audit.

General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.