Out of the 353 audit partners which sign off on the financial statements of all JSE-listed companies, only nine are black African and over 90 percent are audited by a few firms. That is according to Bernard Agulhas, CEO of the Independent Regulatory Board for Auditors (IRBA), which intends to force companies to hire new audit firms on a regular basis to ensure independence and promote transformation.
Illustration by IRBA
In the coming weeks CFO.co.za will feature various interviews and guest articles about the proposed mandatory audit firm rotation. Next week: Nkonki managing partner Mitesh Patel and former global Heineken CFO René Hooft Graafland.
The recent announcement by IRBA has been met with mixed feelings, but Agulhas argues that mandatory audit firm rotation will strengthen audit firm independence and contribute to investor protection. "We will only see true empowerment when opportunities are provided equally amongst everyone."
IRBA's most recent statutory inspections had alerted it to possible independence issues. It found, for example, that among top 40 firms, individuals previously employed by a company's external audit firm chaired a quarter of audit committees. Furthermore, just five firms currently audit 90% of companies listed on the JSE. The European Union has previously made audit firm rotation mandatory and most European companies have gone through at least mandatory swap. IRBA hopes that it will open up the market and support transformation.
A final rule on the matter is expected in November.
