Most owner-managed South African companies need neither an audit nor an independent review. If every shareholder is also a director, the Companies Act generally exempts the company from both. Beyond that exemption, the answer turns on your public interest score: 350 or more means an audit, 100 to 349 means an audit if you compiled the statements yourself or a review if someone independent did, and below 100 means a review at most.
The number of small South African companies paying for audits they were never required to have is considerable. It is worth spending ten minutes working out which category you are actually in.
TL;DR
| Your situation | What you need |
|---|---|
| Every shareholder is also a director | Neither — generally exempt |
| Public interest score 350+ | Audit |
| PI score 100–349, statements internally compiled | Audit |
| PI score 100–349, statements independently compiled | Independent review |
| PI score under 100 | Independent review at most |
| Public or state-owned company | Audit, always |
| Holds assets in a fiduciary capacity over R5 million | Audit |
Your Memorandum of Incorporation can require an audit even where the Act does not.
You still need annual financial statements either way. The question is only who checks them.
Start here: the owner-managed exemption
Before working out any score, check this.
Section 30(2A) of the Companies Act provides that where every person who is a shareholder is also a director of the company, the company is exempt from the audit and independent review requirements.
That covers a very large share of South African small companies — the single-owner Pty Ltd, the two-founder business where both are directors, the family company where all the shareholders sit on the board.
Three things to check before relying on it:
Is it genuinely every shareholder? One passive shareholder who is not a director breaks the exemption.
Does another rule catch you anyway? The exemption does not override a requirement that arises from the regulations — for instance holding assets in a fiduciary capacity above R5 million.
What does your MOI say? Your Memorandum of Incorporation can voluntarily require an audit. If it does, that governs.
If the exemption applies, you still prepare annual financial statements. You simply do not have to pay for them to be audited or reviewed.
The public interest score
If the exemption does not apply, everything turns on your public interest score — a number calculated at the end of each financial year under Regulation 26(2).
The formula — add these together:
| Component | Points |
|---|---|
| Average number of employees during the year | 1 point each |
| Third-party liability at year end | 1 point per R1 million, or part thereof |
| Turnover during the year | 1 point per R1 million, or part thereof |
| Individuals with a direct or indirect beneficial interest in the company's issued securities, at year end | 1 point each |
Worked example. A company with 12 employees, R3.4 million of third-party liabilities, R18.6 million turnover and 3 shareholders:
| Points | |
|---|---|
| Employees | 12 |
| Liabilities — R3.4m rounds up to 4 | 4 |
| Turnover — R18.6m rounds up to 19 | 19 |
| Shareholders | 3 |
| Public interest score | 38 |
At 38, that company falls in the "under 100" band.
Note "or part thereof". R18.6 million counts as 19 points, not 18. Always round up.
"Third-party liability" means amounts owed to people outside the company — loans, creditors, finance. Shareholder loans from the company's own shareholders are generally not third-party liabilities, which materially reduces the score for many owner-funded businesses.
The decision tree
Work through in order and stop at the first match.
1. Is it a public company or state-owned company? → Audit.
2. Does it hold assets in a fiduciary capacity for unrelated persons exceeding R5 million at any time during the year? → Audit. This catches attorneys' trust arrangements, certain estate agencies and some financial services businesses.
3. Is it a non-profit company incorporated by the state, or by a person exercising fiduciary powers? → Audit.
4. Is every shareholder also a director? → generally neither, subject to the checks above.
5. Is the PI score 350 or more? → Audit.
6. Is the PI score 100 to 349?
Financial statements internally compiled → Audit
Financial statements independently compiled → Independent review
7. Is the PI score below 100? → Independent review, unless exempt under step 4.
8. Does the MOI require an audit regardless? → Audit.
The 100–349 band is a genuine decision
Notice what happens in that band. The same company needs an audit if it prepared its own statements, but only an independent review if an independent accountant compiled them.
"Independently compiled and reported" broadly means the annual financial statements were prepared by an independent professional, on the basis of financial records provided by the company, and in accordance with a relevant financial reporting standard.
The economics are usually obvious. An audit typically costs several times what an independent compilation plus a review costs. For a company sitting in that band, having an independent accountant compile the statements is normally far cheaper than doing it in-house and then paying for an audit.
If your PI score is between 100 and 349 and you are currently preparing your own statements, this is worth a conversation with your accountant before year-end — not after.
Audit vs independent review: what actually differs
| Audit | Independent review | |
|---|---|---|
| Level of assurance | Reasonable assurance — the higher standard | Limited assurance |
| What it involves | Testing transactions, verifying balances, confirming with third parties, evaluating internal controls | Primarily enquiry and analytical procedures |
| The opinion given | A positive opinion that the statements fairly present the position | A negative-form conclusion — nothing came to our attention suggesting they are materially misstated |
| Who may perform it | A registered auditor | Depends on PI score — see below |
| Relative cost | Substantially higher | Substantially lower |
| Time it takes | Weeks | Days |
Who may perform an independent review:
PI score 100 or above — a registered auditor, or a member of a professional body accredited by IRBA
PI score below 100 — any person qualified to be appointed as an accounting officer of a close corporation, which includes members of the recognised professional accounting bodies
What if your MOI requires an audit?
Your Memorandum of Incorporation can voluntarily impose an audit requirement even where the Act would not. Shareholders may also resolve to have the company audited.
This catches companies more often than you would expect — particularly those that used the standard MOI without reading it, or whose MOI was drafted years ago when the requirements were different.
If you are paying for an audit you do not think you need, check the MOI first. Amending it requires a special resolution and a filing with CIPC, but it is a one-off cost against a recurring saving.
Note also that some external parties impose their own requirement contractually — banks, funders, franchisors and certain large customers. That is a commercial obligation rather than a statutory one, but it has the same practical effect.
What you still have to do either way
Being exempt from audit and review does not mean being exempt from everything.
Annual financial statements are still required. Every company must prepare AFS within six months of its financial year end.
They must still be prepared to a standard. Which standard applies depends on your PI score and whether the statements are audited.
CIPC still wants information. Companies that do not submit AFS with their annual return must complete the Financial Accountability Supplement (FAS) instead.
SARS still needs them. Your ITR14 is built from the financial statements, and SARS can request them.
Frequently asked questions
Does my company need to be audited in South Africa? Only if it is a public or state-owned company, holds assets in a fiduciary capacity for unrelated persons exceeding R5 million, has a public interest score of 350 or more, has a score of 100 to 349 with internally compiled statements, or its Memorandum of Incorporation requires it. Most owner-managed companies need neither an audit nor a review.
What is the small company audit exemption? Section 30(2A) of the Companies Act exempts a company from audit and independent review requirements where every person who is a shareholder is also a director. A single passive shareholder who is not a director breaks the exemption.
What is the difference between an audit and an independent review? An audit provides reasonable assurance through testing of transactions and balances and gives a positive opinion. An independent review provides limited assurance through enquiry and analytical procedures and gives a negative-form conclusion. A review costs substantially less.
What public interest score requires an audit? 350 or more requires an audit. Between 100 and 349, an audit is required only if the financial statements were internally compiled; if they were independently compiled, an independent review suffices.
Who can perform an independent review? Where the public interest score is 100 or above, a registered auditor or a member of a professional body accredited by IRBA. Below 100, any person qualified to be appointed as an accounting officer of a close corporation.
Do I still need financial statements if I am exempt from audit? Yes. Every company must prepare annual financial statements within six months of its financial year end. The exemption relates only to whether they must be audited or reviewed.
Can my MOI require an audit even if the Act does not? Yes. The Memorandum of Incorporation can impose an audit requirement, and shareholders can resolve to have the company audited. If you are paying for an audit you believe is unnecessary, check the MOI first.
Does a dormant company need an audit? A dormant company generally falls well below the thresholds and is usually exempt, particularly where every shareholder is also a director. It still needs to prepare annual financial statements and file its CIPC annual return.
Check before you pay for another one
We regularly meet companies paying five figures a year for an audit that the Companies Act never required — sometimes because of an MOI clause nobody read, sometimes because the requirement was true five years ago and nobody rechecked.
Smartbook calculates your public interest score annually, confirms which assurance level actually applies, and prepares independently compiled annual financial statements — which for companies in the 100 to 349 band is usually the difference between a review and an audit.
Last reviewed: 26 July 2026. Written by the Smartbook team — SAIPA and SAICA accredited, SARS registered tax practitioners. Assurance requirements are set out in the Companies Act and Companies Regulations and involve fact-specific application — confirm your own position before relying on an exemption. General guidance, not advice on your circumstances.
Primary sources: Companies Act 71 of 2008 and Companies Regulations 2011 · CIPC · IRBA