Exemption from Financial Statement Audits for Legal Practices

There’s been an interesting development regarding the auditing requirements for legal practices in South Africa.

The requirement for legal practices to have their business’ annual financial statements audited if they hold assets in a fiduciary capacity exceeding R5 million, as per Regulation 28(2)(a) of the Companies Regulation, 2011, has indeed sparked debate within the legal community. Some practitioners argue that this mandatory audit duplicates the existing requirement for auditing attorney’s trust accounts.

The draft order from the High Court provides clarity on the exemption from annual financial statement audits for legal practices established as commercial juristic entities under specific legislation.

The matter between the Law Society of South Africa and the Companies and Intellectual Property Commission was brought before the High Court of South Africa on 8 March 2024.

A draft order was issued confirming that Legal practices established as commercial juristic entities under section 34(2) of the Legal Practice Act, No. 28 of 2014 (referred to as ‘the LPA’) and incorporated as personal liability companies under section 8(2)(c) of the Companies Act, No. 71 of 2008 (as amended), are exempt from having their annual financial statements audited or independently reviewed. This exemption is based on section 30(2A) of the Companies Act, read in conjunction with Regulation 28(1) of the Companies Regulation, 2011.

Exceed (Cape Town) Inc. is ready to offer accounting and audit assistance or consultation for legal practices navigating these regulations. It would be beneficial for legal practitioners to consider reaching out for further guidance on how it impacts their specific situation.