The Independent Regulatory Board for Auditors (IRBA) has on Monday said it would begin a process to implement mandatory audit firm rotation, which would promote transformation in the profession, as well as strengthening auditors’ independence.
The decision from the statutory body that protects the financial interests of the public follows an extensive, year-long international research and industry consultation on enhancing audit firm independence.
The IRBA said in a statement that mandatory rotation would enhance audit quality, thereby improving public and investor protection, as well increasing access to the audit market and promoting transformation in the profession.
Bernard Agulhas, IRBA chief executive, said independence was one of the top five issues in audit inspections in South Africa, which was consistent with global results.
“In a South African context, the IRBA board has also recognised the challenges with lack of economic transformation, and domination by certain firms within the profession,” he said.
He said only nine of the 353 audit partners who signed off on financial statements of JSE-listed companies were black African, and more than 90% were audited by a few firms.
“We will only see true empowerment when opportunities are provided equally amongst everyone,” he said.
The IRBA, which plays a key role in building the reputation of South Africa as an investment market for both local and global investors, has been recognised by the World Economic Forum (WEF) as the top independent audit regulator worldwide for six consecutive years for the strength of its audit controls and standards.
The statement added that governments and regulators around the world were taking steps to focus on the independence of auditors, specifically through mandatory rotation.
Agulhas concluded: “Investor protection is facilitated when financial statements are reliable, credible and trustworthy. A crucial component of creating the necessary confidence in financial statements, and consequently the financial markets, is the knowledge that the auditors are independent when they report to the shareholders.”
– African News Agency (ANA)