This article only deals with companies which have to use the public interest score (“PI Score”) per Regulation 28 to determine if an audit needs to be performed in respect of a financial year.
Regulation 26(2) defines the manner in which such a company shall determine its PI Score at the end of each financial year. The following framework is provided:
- PI Score below 100 > owner managed > no audit or independent review required;
- PI Score below 100 > non owner-managed > independent review required;
- PI Score above 100 but below 350 > owner-managed > books of account and annual financial statements internally compiled > independent review required;
- PI Score above 100 but below 350 > owner-managed > books of account internally compiled > annual financial statements independently compiled – neither audit nor independent review required;
- PI Score above 100 but below 350 > non owner-managed > books of account and annual financial statements internally compiled – audit required;
- PI Score above 100 but below 350 > non owner-managed > books of account internally compiled > annual financial statements independently compiled > independent review required;
- PI Score above 350 > audit required.
- PI Score above 500 > company must have a Social and Ethics Committee of the board.
The phrase “independently compiled and reported” per Regulation 26(1)(e) creates a complexity.
Basically two instances exist where neither an audit nor an independent review is required. No doubt many companies will endeavour to fall into one of these categories.
Interestingly, a company may from one year to the next be subject to an audit, then to an independent review and in the third year perhaps neither, based upon the above analysis. It will be interesting to see how auditors approach such a situation, but company directors can rest assured – it will cost more in audit fees if no audit is done during a particular year, but again needs to be done in the second year.