In today's competitive world, businesses need to think not only about profits but also about their impact on society. Public interest score is a critical measure that companies need to calculate as part of their annual reporting. The public interest score helps assess the level of risk a particular company poses to the general public's interest as defined by the South African Companies Act No. 71 of 2008.
What is Public Interest Score?
The Public Interest Score (PIS) is a measurement used to determine the level of public risk posed by a particular company. The score considers the company's turnover, number of employees, third-party liabilities, and level of public involvement from the company. The score helps the regulator and the public determine whether the company should undergo an independent audit or not.
Calculating Public Interest Score
Every registered company in South Africa with a profit-oriented purpose is required to calculate its score every fiscal year. The score is calculated using the following formula:
PIS = [A + B + C + D]
where:
- A represents the points the company earns based on its level of public interest. Companies score a maximum of 4 points based on their level of regulatory public interest. The higher your level of public interest, the more points earned.
- B represents the number of employees (including executive directors) at the end of the financial year. Each employee equals 1 point for every employee, up to a maximum of 4 points.
- C represents the total annual turnover of the company according to its financial statements. Every R1 million revenue earned equals 1 point, up to a maximum of 4 points.
- D represents the third-party liabilities of the company at the end of the financial year. Companies earn 1 point for every R1 million in third-party liabilities, up to a maximum of 4 points.
Once you have calculated your PIS score, you need to determine if an independent audit of your company's financial statements is required.
When is an Independent Audit Required?
If a company's PIS score is 350 or more, it is required to undergo an independent audit of its financial statements. The auditor must be a registered auditor and independent of the company being audited. Companies with PIS scores of less than 350 can choose to have an independent audit at their discretion.
Conclusion
Public Interest Score is essential to assess the level of risk a company poses to the general public's interest. Calculating this score is critical in ensuring that businesses act responsibly and transparently. It helps the public make informed decisions about the companies they support, buy products or use services from. Ensure to calculate your company's PIS score annually to comply with the South African Companies Act No. 71 of 2008.
