Independent Reviews Explained: What ISRE 2400 Means for South African Practices
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Independent Reviews have become one of the most important assurance services in South Africa, particularly for small and medium companies that do not need a full audit but still require a credible, independent check on their financial statements. For Chartered Business Accountants in Practice, this is an area where technical skills and strong client relationships come together.
The question is, what exactly does ISRE 2400 say, when does the Companies Act require an Independent Review, and how does it differ from other engagements? Let us look at each of these.
What is ISRE 2400 and Why Does It Matter?
ISRE 2400 (Revised) is the international standard that sets the rules for performing an Independent Review of historical financial statements. It is issued by the International Auditing and Assurance Standards Board and adopted in South Africa.
The standard tells practitioners how to accept and plan an Independent Review engagement, what procedures to perform, how to form and express a conclusion, and how to document the work to show that it was done properly.
In simple terms, ISRE 2400 is your instruction manual for providing limited assurance on financial statements. It is not as in-depth as an audit, but it still requires a structured process, sound professional judgement, and independence.
The Purpose of an Independent Review
The main goal of an Independent Review is to give limited assurance that the financial statements are free from material misstatement, whether caused by error or fraud.
This means you are not providing absolute certainty, as you would in an audit, but you are going beyond simply compiling the statements. You use enquiry and analytical procedures to reach a conclusion on whether anything has come to your attention that makes the statements look unreliable.
For clients, this provides more credibility for stakeholders such as banks, investors, and SARS. It is also a lower-cost alternative to an audit and offers the comfort of knowing that an independent professional has reviewed their numbers.
Scope of an Independent Review
In an Independent Review, you obtain an understanding of the entity and its environment, make enquiries of management and others in the business, perform analytical procedures to identify unusual trends or relationships, and follow up on anything that looks inconsistent or concerning. You then conclude whether there is anything that causes you to believe the statements are not fairly presented.
You do not test every transaction. You do not inspect large volumes of original source documents unless something looks suspicious. You also do not provide absolute assurance.
Independent Review Compared to Audit and Compilation
The simplest way to compare these services is to consider the level of assurance, the procedures performed, and the outcome.
An Independent Review fits in the middle. It gives more assurance than a compilation, but it is less extensive and less costly than an audit.
When is an Independent Review Required in South Africa?
The Companies Act, 2008, states that a Private Company or Personal Liability Company that is not required to be audited may need an Independent Review if it is not owner-managed, has a Public Interest Score of 100 to 349, and its financial statements are internally compiled.
Owner-managed companies, where every shareholder is also a director, can often opt out unless the Memorandum of Incorporation or another law requires otherwise. Companies with a Public Interest Score of 350 or more, and certain categories such as public companies, still require an audit.
Why This Matters for Your Practice
Independent Reviews are an opportunity for growth. They give you a recurring annual engagement with clients. They allow you to apply your professional judgement and analytical skills. They position you as a trusted advisor rather than just a compliance provider.
By following ISRE 2400 properly, you protect yourself from risk, give your client confidence, and meet your legal and professional obligations.
Final Word
ISRE 2400 is not simply a lighter version of an audit. It is a clearly defined standard with its own requirements, procedures, and documentation expectations. Done correctly, an Independent Review builds trust and strengthens client relationships. Done poorly, it can expose you to reputational and legal risk.
As Chartered Business Accountants in Practice, this is an opportunity to blend technical expertise with a practical, client-focused approach that delivers real value.
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