Impact of Section 90(2) of the Companies Act, 2008 on Audit

An audit on a set of annual financial statements can be either voluntary or statutory. A voluntary audit is where a South African company is not required to be audited by the law or regulation. Rather, the audit decision is made by the directors, stakeholders, or members. On the other hand, a statutory audit requires the company to be audited by the law, its Memorandum of Incorporation (MOI), or an Association Agreement (for a close corporation).


Section 90 of the Companies Act only applies to statutory audits. It prohibits an auditor from providing certain services to the company or close corporation for which a statutory audit is performed. Let’s delve deeper to understand the impact of Section 90(2) of the Companies Act on audit-related services.


Application of Section 90 Companies Act:

Section 90 does not apply to independent audits. The only requirement for independent audits, as per the Companies Regulations, 2011, states that the audit of the company’s annual financial statements must not be performed by the independent accounting professional who was involved in preparing its financial statements.

Section 90(2)(b) provides the conditions for a person or firm to be appointed as an auditor for statutory audits of a company:-

A person or firm must not be:-

(i) a prescribed officer or director of the company;

(ii) a consultant or employee of the company engaged for over one year in the maintenance of the financial records or preparation of the company’s financial statements;

(iii) a director, officer, or employee appointed as company secretary;

(iv) a person or firm that regularly or habitually performs the duties of bookkeeper or accountant for the company or performs related secretarial work


Examples of activities classified as maintenance of financial records

  • Maintaining fixed asset registers
  • Compiling purchase orders
  • Compiling customer orders
  • Assisting clients with outsourced payroll systems
  • Preparing time records for payroll


Examples of activities classified as preparation of financial statements

  • Preparing the income statement, balance sheet, and cash flow statement
  • Preparing notes to the financial statements
  • Converting financial information from a trial balance to financial statements
  • Using automated software to produce financial statements
  • Posting journal entries to comply with IFRS


Examples of activities classified as related secretarial work

  • Being appointed as the company secretary
  • Providing constant advice on compliance with legislation


To Sum Up!


The major effect of Section 90(2) of the Companies Act is that an auditor cannot provide iXBRL services to a South African company if they provide audit services to that company. Solution? If you got an auditor to audit your company’s financial statements, you could outsource your iXBRL preparation to DataTracks! With an experience of over 17 years, 220,000 reports, and 21,500 clients, the professionals at the company can help you prepare error-free reports in compliance with CIPC regulations. Contact an expert @ +27-10-446-9061 or send an email to TODAY!



Schedule A Demo

Schedule A Demo