1. Mandatory Audit Requirements:
An NPC is obligated to have its annual financial statements audited if it meets any of the following criteria:
- Fiduciary Capacity: The NPC holds assets in a fiduciary capacity for individuals not related to the company, with the aggregate value of such assets exceeding R5 million at any time during the financial year.
- State Incorporation or Function: The NPC was incorporated directly or indirectly by the state, an organ of state, a state-owned company, an international entity, or a foreign state entity; or it was established primarily to perform a statutory or regulatory function in terms of legislation, or to carry out a public function at the initiation or direction of such entities.
2. Public Interest Score (PIS):
The PIS is a metric used to determine the level of public interest in a company, calculated based on factors such as turnover, number of employees, third-party liabilities, and the number of members. The audit requirements based on PIS are as follows:
- PIS of 350 or More: An audit is mandatory, regardless of whether the financial statements are internally or externally compiled.
- PIS Between 100 and 349:
- If the financial statements are internally compiled, an audit is required.
- If the financial statements are independently compiled, an independent review is sufficient.
3. Voluntary Audits:
Even if an NPC does not meet the mandatory audit thresholds, it may still opt for an audit under the following circumstances:
- Memorandum of Incorporation (MOI): The NPC’s MOI stipulates that an audit is required.
- Board or Member Resolution: The board of directors or members pass a resolution to conduct an audit.
In such cases, while not legally mandated, conducting an audit can enhance transparency and stakeholder confidence.
Conclusion:
Determining whether your NPC requires an audit involves assessing its fiduciary responsibilities, incorporation details, and Public Interest Score. If your organization does not fall under the mandatory audit categories, you may still choose to conduct an audit voluntarily to promote good governance.