The South African regulator, Independent Regulatory Board for Auditors (IRBA), has launched a public consultation on the introduction of mandatory firm rotation in South Africa.
The 2013 World Bank Report on the Observance of Standards and Codes – Accounting and auditing (ROSC) for South Africa, which recommended strengthening accounting and auditing practices in South Africa towards enhanced competitiveness, governance and accountability in the private and public sector.
Following up on this recommendation and as part of its mandate to strenghten the independence of auditors, IRBA initiated a research project in July 2015 looking at mandatory audit firm rotation, mandatory audit tendering and joint audits and the implementation of these measures worldwide.
Following this research phase, IRBA has resolved that the appropriate measure to be introduced in South Africa would be mandatory audit firm rotation, with the possibility in certain circumstances to implement it in conjunction with joint audits.
As such IRBA has introduced the following requirements:
- An audit firm shall not serve as the registered auditor of a listed company for more than 10 consecutive financial years.
- The audit firm will only be eligible for reappointment as registered auditor after a five financial years cool off period.
These requirements will be effective for financial years commencing on or after 1 April 2023. IRBA’s requirements also introduces transitional period in the case of joint audits of up to two years.
Comments for the public consultation are requested by 20 January 2017. The consultation paper is accessible here