TPCSA • Audit and assurance
NPO Audit vs Independent Review in South Africa
Choose the right engagement by checking your legal form, governing documents and funding conditions.
An NPO audit vs independent review decision starts with what your organisation is required to obtain. These engagements provide different levels of assurance. A review cannot replace an audit simply because it costs less, and an organisation’s NPO registration alone does not settle every reporting requirement.
For a South African NGO, charity, non-profit company or trust, the starting point is to identify the entity, the rules applying to it and the people who will rely on the report. The practical steps below help a board or finance manager prepare that discussion with an assurance practitioner.
What is the difference between an audit and an independent review?
| Point to compare | Audit | Independent review |
|---|---|---|
| Assurance | Reasonable assurance; not an absolute guarantee. | Limited assurance. |
| Approach | Risk-based work to obtain evidence supporting the audit opinion. | Primarily enquiries and analytical procedures, with further procedures where needed. |
| Result | An auditor’s opinion on the financial statements. | A review conclusion rather than an audit opinion. |
| Suitability | Required where the applicable rules or agreements call for an audit. | Appropriate only where the applicable requirements permit a review. |
The IAASB’s explanation of review engagements sets out the limited-assurance distinction. Neither engagement transfers responsibility for the accounts or the organisation’s controls away from management and the board.
How do you establish which engagement your NPO needs?
- Confirm the legal form. Is the organisation a non-profit company, a trust or a voluntary association? Keep incorporation or founding documents available.
- Read the governing document. Identify any requirement for an audit, appointment of a practitioner or reporting to members.
- Identify applicable legislation. For an NPC, assess the Companies Act and regulations, including the relevant audit criteria and public interest score where applicable. Do not apply a private-company summary automatically to an NPC.
- Read every funding agreement. A donor may require an audit or separate project report even where another reporting route would otherwise be available.
- Document the conclusion. Record the requirement, reporting period, intended recipient, deadline and the basis for the engagement selected.
The Companies Regulations, particularly regulations 28 and 29, are a starting reference for company audit and review requirements. Separately, DSD’s registered NPO obligations address registered NPO reporting. Check both where both apply; meeting one responsibility does not automatically complete the other.
Example: a donor asks for an audit
A small community organisation may assume a review is sufficient because its transactions are straightforward. Its grant agreement, however, asks for an audited project statement. The finance team should clarify that project’s required scope and report with the donor and practitioner before commissioning work. A general review report may not answer the donor’s request.
What should you prepare before requesting a quote?
- Founding documents, registrations and the previous year’s signed financial statements.
- Funding agreements, amendments and the exact wording of reporting conditions.
- Trial balance, general ledger and key reconciliations for the proposed period.
- A list of projects, bank accounts, branches and significant changes during the year.
- The required completion date and the dates on which records and staff will be available.
Use the audit readiness checklist to identify missing records early. If you are still deciding on a practitioner, our guide to choosing an NPO auditor provides related questions to ask.
Questions NPO boards ask
Can we change to a review to reduce costs?
Only after confirming that legislation, your governing document and your agreements allow it. Discuss any proposed change before appointment and before a donor submission deadline.
Does an annual audit cover every donor report?
Do not assume it does. Compare the annual engagement letter with each donor’s required period, expenditure schedule and report format. A separate engagement may be needed.
Who should resolve uncertainty?
Ask a suitably qualified practitioner to assess the documents. If a donor’s wording is unclear, obtain written clarification from the donor before agreeing the engagement.