One of the most common compliance questions small business owners in South Africa ask is: “Do I need to get my financials audited?” The short answer: it depends. The longer answer involves something called the Public Interest Score (PIS) and a few other considerations. Here's what you need to know.
What is the Public Interest Score?
The PIS is a scoring system introduced by the Companies Act to assess the “public interest” exposure of your company. It’s calculated annually, and the higher your score, the more transparency and oversight is required. Here's how it's scored:
1 point for every R1 million (or part thereof) in turnover
1 point for every employee (average over the year)
1 point for every R1 million (or part thereof) in third-party liabilities
1 point for each individual with beneficial ownership
The score is cumulative. So if your business has R5 million in turnover, 5 employees, R2 million in loans, and 3 shareholders, your PIS would be 15.
When Is an Audit Required?
Your company must have an audit if:
It is a public company or state-owned entity
It holds assets in a fiduciary capacity exceeding R5 million
It has a PIS of 350 or more
It has a PIS of 100–349, and its financials are internally compiled
Even if your PIS is under 100, an audit may be required if your Memorandum of Incorporation (MOI), shareholders, or any other regulatory body requires it.
When Is an Independent Review Required?
Most private companies and non-profits with a PIS between 100 and 349, and who use external accountants to compile their financials, must undergo an independent review instead of a full audit. This is a limited assurance engagement done by someone who is independent but not as in-depth or expensive as an audit.
If your PIS is less than 100, you're generally not required to have an audit or independent review - unless your MOI or shareholders say otherwise.
When Can You Skip Both?
In rare cases, owner-managed companies (where all shareholders are also directors) with a PIS under 100 and no legal or contractual obligation can opt out of both an audit and independent review. This exemption is often used by startups or family-run businesses to reduce administrative costs.
Just keep in mind: even if you're exempt, having reviewed financials can boost your credibility with banks, investors, and suppliers. Sometimes, choosing to review your books is just good business.