Pretoria - The Independent Regulatory Board for Auditors (IRBA) is set to begin a process to implement the Mandatory Audit Firm Rotation (MAFR) for audit firms to strengthen their independence from their clients.
In a statement, the board said the decision to pursue MAFR is also aligned to its objective to enhance audit quality, which ultimately contributes to public and investor protection.
While the primary objective of MAFR is to strengthen auditor independence, it will increase access to the audit market as well as promote transformation in the profession.
The decision comes as a result of a year long process of extensive research as well as industry consultation locally and abroad on how best to enhance audit firm independence.
The decision does not exclude the possible inclusion of additional measures such as mandatory audit tendering or joint audits, as a combination with firm rotation, in certain circumstances.
The IRBA -- which is a public protection statutory body established to protect the financial interests of the public by ensuring registered auditors and their firms deliver services a high quality -- intends to further consult on implementation of the new requirements, as the board plans to engage with business around the associated steps and milestones to be accomplished.
Both companies and their audit firms will also need to make plans to adopt the change into their procurement and operational planning.
Chief Executive Officer of the IRBA, Bernard Agulhas, said findings are that the issue of independence are prominent.
“Our latest inspections findings includes independence issues as one of the top five findings amongst the audits of financial statements. This is consistent with global inspections 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.
“Out of the 353 audit partners who sign off on the financial statements of all Johannesburg Stock Exchange (JSE) listed companies, only nine are Black African and over 90% are audited by a few firms. We will only see true empowerment when opportunities are provided equally amongst everyone.”
Worldwide, notably in the UK and EU, as well as in some of the BRICS countries, governments and regulators are taking steps to focus on the independence of auditors, specifically through MAFR, as critical to the credibility and transparency of audited accounts.
“We accept that any change to the status quo will be met with some resistance. However, the ultimate mandate of the IRBA is to enhance and ensure investor protection. Investor protection is facilitated when financial statements are reliable, credible and trustworthy - a crucial component of creating the necessary confidence in financial statements,” Agulhas said. – SAnews.gov.za
