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To answer your question, one must look at what the Companies Act 71 of
2008 (“Companies Act“) determines in respect of auditing and accounting
requirements for a private company like yours. Unlike the previous Companies
Act of 1973 which required all companies to be audited, the current Companies
Act is less onerous in that it only requires certain categories of companies to be
audited.

Whether a company must be audited by a registered auditor or simply be
independently reviewed by an accountant will depend on the type of company.
Commercial companies. With profit companies, the Companies Act further distinguishes
The Companies Act classifies companies as either profit companies or non-profit
between four different types of companies, namely, private companies, personal
liability companies, state owned companies and public companies. In your
case, we are dealing with a private profit company, which is a company that
is not a state-owned company, has a Memorandum of Incorporation (“MOI”)
prohibiting it from offering any of its securities to the public and restricts the
transferability of its securities.
So, the question then is - when will a private profit company need to appoint
an auditor?
The Companies Act states that private companies must have their financial
statements audited if it is in the ‘public’s interest’ to do so. Regulation 28 of the
Companies Act provides the framework to determine when it is in the public’s
interest to have the financials of a company audited, by requiring that a private
profit company must be audited if it meets any one of the following criteria:

• If such a company, in the ordinary course of its primary activities, holds
assets in a fiduciary capacity for persons who are not related to the
company, and the aggregate value of such assets held at any time during
the financial year exceeds R5 million; or
• Any other company whose public interest score in that financial year is 350
or more; or
• Any other company whose public interest score in that financial year is at
least 100 (but less than 350) and whose annual financial statements for that
year were internally compiled.
The Companies Act provides for a public interest point system which is aimed
at calculating the extent of the stake which the South African public holds in
a company and in turn determines whether the company should be audited
or not. A company scores one point for every employee, one point for every
R1 million in turnover, one point for every R1 million in third-party debt and one
point for every shareholder it has.

The lower level of the threshold provides for those companies that do their
accounting internally and specifically employ their own accountant for this
purpose instead of outsourcing it to an independent firm of accountants. Such
companies must have their books audited if they score at least 100 public

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