CEO Imre Nagy says the regulatory body is proactively engaging with stakeholders.
The latest statistics on mandatory audit firm rotations (MAFR) show that 74 listed public interest entities (PIEs) still need to rotate audit firms to comply with the upcoming deadline, which is just five months away.
This is according to the Independent Regulatory Board for Auditors (IRBA), which noted that the five-year lead time into the effective date of the rule has allowed early adopters to complete their audit firm rotations ahead of time.
“This represents less than one-third of listed PIEs on the five exchanges in South Africa at 27.51 percent and of this, 68 entities on the largest stock exchange, the Johannesburg Stock Exchange (JSE), must still rotate audit firms,” Imre Nagy, CEO of the IRBA, said.
Under the rule passed by public protection statutory body IRBA on 5 June 2017, audit firm tenure may not exceed 10 years after 1 April 2023.
Aspen group CFO Sean Capazorio also noted that the company strategically embraced MAFR two years ahead of the implementation.
“We took the view not to leave audit rotation to the last minute, but to go two years early to enable a comprehensive and detailed tender and auditor selection process. Going early increased our leverage position, enabled competitive bids and increased our ability to select a high-quality audit firm and lead partner from a larger pool, which would have diminished in size as more companies started to embark on audit rotation,” he told CFO South Africa.
Read more: Plan ahead for audit firm rotation, advises Aspen Pharmacare Group CFO · CFO South Africa
In an exclusive interview with CFO South Africa, Dion Shango, CEO of PwC Africa, noted that despite the cost and disruption involved, MAFR has had a beneficial effect on culture at the firm.
Read more: Audit must change alongside business, says CEO of PwC Africa · CFO South Africa.
“We have engaged with the audit firms and have had assurances that they are aware of the effective date and are on track to rotate off audits for which they will no longer be eligible, come 1 April 2023,” Imre said.
“We will continue to engage proactively with key stakeholders and do our part as the audit regulator to help ensure that the number of contraventions will be negligible come
1 April,” he added.
The IRBA has also completed a study of non-listed Public Interest Entities (PIEs) which are also subject to the provisions of MAFR, including licensed insurers, pension funds, and medical schemes that meet the definition of a PIE in terms of the IRBA Code of Professional Conduct.
Overall, of the 404 entities identified as PIEs to which MAFR applies, 170 are due for audit firm rotation, with 52 percent already in compliance with tenure below the 10-year limitation.
Rotation or mandatory audit tendering, with the maximum tenure allowed ranging between five and 20 years is practised in a number of jurisdictions across the world.
