What’s the difference for accounting practitioners?
The work effort in an independent review is limited to inquiry, analytical procedures and discussions related to the information that the client supplies. Consequently, an independent review does not require the gathering of supporting or independent evidence or an assessment of internal control as would be required in an audit.
Management's responses to inquiries are acceptable as long as they appear plausible in the circumstances. The word plausible is often defined in terms such as the information being credible, appearing worthy of belief, or seemingly or apparently valid, likely or acceptable.
The draft regulations to the Act make provision that allows the registered auditor in terms of the Auditing Professions Act and an accounting officer in terms of the Close Corporations Act to conduct the independent review.
Different skills
The independent review requires different skills from those possessed by auditors or accounting officers. When conducting an independent review, an essential ingredient is the ability to ask penetrating questions. On the other hand an auditor or accounting officer only needs to conduct various specialised procedures based on the objective of their engagement.
The independent reviewer not only has to ask the right questions and analyse the responses given but he has to spot implausibilities and have the strength to stand up to these and press for further explanation.
The role of the analytical review
In an independent review the analytical review is a primary source of evidence in assessing the plausibility of management’s representations.
In an audit, the analytical review of financial statements is not a primary source of audit evidence. Accounting officers are not obliged at all to conduct analytical reviews and an analytical review in an audit is only used as a planning tool and to corroborate any primary audit evidence obtained.
So if an accountant or auditor were required to conduct the independent review, they would have to learn how to use the analytical review as a primary tool rather than just a secondary one. This would entail additional training and practice to ensure this new skills set is obtained.
The accounting officer is at a disadvantage compared to the auditor when it comes to learning these skills. The accepted view is that the ability to perform an independent review is greatly facilitated by the fact that an auditor had previous audit experience with the clients. The accounting officer will need to obtain additional skill sets that an auditor already has.