Review engagement – no limit to liability of reviewers

It is important that the letter provides for indemnity as the Companies Act 2008 and Regulations does not limit the liability of independent reviewers.

Section 46 of the Auditing Professions Act 2005 limits the liability of auditors. The auditor incur liability only if it is proved that the audit opinion was issued maliciously fraudulent or pursuant to negligent performance of auditors duties.

The reviewers engagement letter should therefore include provisions related to:

• Use and distribution of report
• Reproduction of review report
• Preparation of schedules
• Working papers
• File inspection
• Governing legislation
• Dispute resolution
• Indemnity

I have drafted an example engagement letter which can be used as a guide. This is your responsibility so get an attorney to review this sample.

It is available here:  Case study – 983 Engagement letter-Review-New client – Updated 2020315

The potential unlimited liability is another reason that reviewers should seriously consider obtaining legal cover. For more on this read the article “accountants liability” and visit this website: www.iaplegal.co.za.