Does my company need an auditor?

Published by Peet Pieterse

January 7, 2020

Not all companies registered in South Africa need to appoint an auditor. According to Section 90 of The Companies Act, 71 of 2008, only a Public Company or a State-owned company is required to appoint an auditor. For these two classes of companies the appointment of an auditor is mandatory and will always apply. However, in some instance you would need to appoint an auditor even if you are not a Public Company. 

Classes of companies

State Owned Company: This is a company that falls within the meaning of ‘‘state-owned enterprise’’ in terms of the Public Finance Management Act, 1999 (Act No. 1 of 1999) or is owned by a municipality, as contemplated in the Local Government Municipal Systems Act, 2000 (Act No. 32 of 2000)

Public Company: This is a company (listed on a stock exchange or not) whose shares is available to the general public and where there is no restriction o n the transfer of shares

Private Company: This is a company, excluding a state-owned company whose shares is not available to the general public.

Public Interest (PI)

A Private company may still require an audit if such an audit is in the public interest. To calculate if it is in the public interest, the Companies Act has a point-based calculation. These points are based on the company’s turnover, debt, employees and parties that have a vested interest. All companies that hold more than R5mil in a fiduciary capacity also require an audit since such an audit will be in the public interest.

If no audit is required what should be done

All companies must have Annual Financial Statements compiled in line with IFRS (International Financial Reporting Standards). If your PI score is less than 100 and all directors are shareholders and all shareholders are directors, then the company is not required to have any report issued by an independent party on the financial statements.

If the company’s PI score is between 100 and 350 an independent review must be performed and if the PI score is more than 350 an audit is compulsory.

Independent Review

If your PI score is below 350 an Independent Review is usually enough. This is a review by an independent professional of the financial statements but not as onerous (and expensive) as an audit. This will also apply to those companies whose PI score is below 100 but where all the directors are not shareholders, and vice versa. 

Close corporations (CC)

A close corporation has an Accounting Officer. The Close Corporation Act requires such an Accounting Officer to issue a report irrespective of the PI score of the CC. Such a CC may require an audit in addition to the Accounting Officer Report if the PI score is more than 350 or where more than R5mil is held in a fiduciary capacity.

Memorandum of Incorporation (MOI)

When a Company is registered a MOI is drafted as part of such a registration process. The MOI may require an audit, irrespective of the PI score. Companies registered under the Old Companies Act of 1973 and who did not update their MOI will also require an audit. A company’s MOI cannot be changed retrospectively.


Often companies have appointed auditors, but they are not required to have an audit performed. In most instances the auditor will only perform the service as required by the relevant legislation and not an audit unless the company request specifically that an audit is performed. By not having an audit performed the company enjoys a significant saving in cost but must way this up with the added risk that an audit may have uncovered.

If you are unsure what report your business need, please contact us for guidance. We’ve got this and will assist you in staying compliant.

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