Accounting Review Engagement Letter Template for South Africa

An Accounting Review Engagement Letter is a formal agreement that establishes the terms when you engage an accounting firm to review your company's financial statements. Under South African law, this document is mandatory for all review engagements and must comply with specific professional standards including ISRE 2400, IRBA rules, and SAICA's Code of Professional Conduct.

When do you need this document?

You need an Accounting Review Engagement Letter when your company requires an independent review of financial statements but doesn't need a full audit. This typically occurs when you're a private company not subject to audit requirements under the Companies Act 71 of 2008, when lenders or investors request reviewed financial statements, or when you want professional assurance about your financial reporting without the cost of a full audit. The letter is also essential when changing from audit to review services, or when establishing a new relationship with an accounting firm for review services.

Key legal considerations

The engagement letter must clearly define the scope and limitations of the review engagement, distinguishing it from an audit. Under ISRE 2400, the accounting firm provides limited assurance rather than reasonable assurance, meaning they perform inquiry and analytical procedures but not substantive testing. You must understand that a review doesn't detect all material misstatements or fraud. The letter should specify management's responsibilities for preparing financial statements, maintaining internal controls, and providing complete information. It must also address confidentiality requirements under POPIA, fee arrangements, and reporting timelines. Professional indemnity insurance coverage and limitation of liability clauses should be clearly stated to protect both parties.

Legal requirements in South Africa

Under South African law, the engagement letter must comply with IRBA's mandatory requirements for registered auditors performing review engagements. The document must reference ISRE 2400 (Revised) as the governing standard and include specific disclosures about the nature of review procedures. Companies Act 71 of 2008 requirements for financial reporting must be acknowledged, particularly regarding the preparation of annual financial statements. The letter must ensure compliance with SAICA's Code of Professional Conduct regarding independence, objectivity, and professional competence. POPIA compliance is mandatory when processing personal information during the engagement. The engagement partner must be clearly identified, and the letter should specify that the review will be conducted by appropriately qualified professionals registered with SAICA and subject to IRBA oversight.