In the world of business, where change is the only constant, "Helping you thrive in a changing world" is more than just a tagline at Moore South Africa; it's our mission. As part of our commitment to supporting your success, we believe it is time to address a critical issue affecting a significant portion of our clients: the need to reassess the Public Interest Score (PI) in South Africa.
The PI score, a crucial determinant for whether a company requires an audit, was introduced under the Companies Act 71 of 2008. It calculates based on several factors: a company's number of employees, turnover, debt, and shareholders. At present, an audit is mandated for companies with a PI score of 350 or more, while those with a score between 100 and 349 are subject to independent review. These thresholds have remained static for over a decade, and no longer reflect the realities of our modern business environment.
Increasing the PI score would significantly contribute to reducing over-regulation and trimming the administrative costs of doing business. This is not about eliminating audits, but ensuring they are performed where they can deliver the most value. Long live sensible regulations!
Let's look at how other countries approach this issue:
🇬🇧 United Kingdom: Companies are subject to an audit if they have an annual turnover exceeding £10.2 million, a balance sheet total over £5.1 million, or more than 50 employees.
🇦🇺 Australia: 'Large' companies, defined as meeting any two of the following criteria: revenue of AUD 25 million or more, assets worth AUD 12.5 million or more, or employing 50 or more people, are required to have an audit.
🇳🇿 New Zealand: Audits are mandated for companies with expenses or revenues over NZD 30 million or total assets exceeding NZD 60 million, as well as overseas companies meeting similar financial criteria.
Reflecting on these practices, we believe a re-evaluation of South Africa's PI score is essential to better support businesses. Here's why:
Promoting a Proportional Regulatory Framework: An increased PI score would create a more proportional regulatory framework. By targeting audits where they are most needed, we can enhance the effectiveness and efficiency of the audit process.
Supporting Small & Medium Enterprises (SMEs): A higher PI score would exempt more SMEs from mandatory audits. This enables them to focus on their core business operations, fostering innovation, growth, and job creation.
Reducing Compliance and Administrative Costs: Increasing the PI score would substantially reduce the compliance costs associated with mandatory audits. Companies could then redirect these saved resources towards strategic initiatives.
As part of our ongoing mission to help you thrive in a changing world, we at Moore South Africa advocate for sensible regulations. We think that the time has come for Government to revisit and increase the PI score. This change will contribute significantly to reducing over-regulation and administrative costs, thereby supporting the growth of our economy and ensuring that your businesses continue to flourish.
Through industry bodies within our profession, such as SAICA and CIBA, we are actively advocating for this change.
For more information, please get in touch with your local Moore Firm.