Audit Partner Rotation ensures auditor independence
The objective of audit partner rotation is to enhance the integrity of the audit process and financial reporting. Credible financial statements can only be achieved if auditors are independent and unbiased in business relationships. Audit partner rotation strengthens the independence of the auditors in relation to the company that they audit, ensuring impartial financial audits.
Section 92 of the Companies Act 71 of 2008, stipulates that audit partner rotation is mandatory and further details strict audit partner rotation requirements. Section 92 of the Act allows for an Audit Partner Rotation every 5 years.
Apart from the mandatory audit partner rotation, Section 94 of the Companies Act requires that state owned companies, public, or other companies that are required by their Memorandum of Incorporation to have an audit committee and appoint the members thereof at each AGM.
Why is auditor independence crucial?
Preserving auditor independence is a fundamental requirement as this avoids negative consequences concerning relevant stakeholders in the auditing field. Auditor independence solidifies the public’s trust within a company’s financial system as well as interested shareholders and investors.
Controversies, irregularities or misrepresentation within the auditing industry can similarly affect a country’s financial reputation, especially when well known auditing firms are involved. Not only do such circumstances affect a country’s reputation but it also undermines the public’s trust within the sector which in turn, leads to lower market participation which then affects the investment community negatively. Partner rotation aims to minimise or quash such irregularities.
What is the difference between Audit Partner Rotation and Mandatory Audit Firm Rotation (MAFR)?
The difference between MAFR and partner rotation is the partner rotation refers to the rotation after a specified period of key audit partners. In simpler terms, the audit firm keeps the client but the key audit partners within the firm rotate. With MAFR, a different audit firm is appointed after a prescribed rotation period and the new firm designates the new key audit partners. Mandatory audit firm rotation (MAFR) will be in effect from 1 April 2023, as prescribed by the Independent Regulatory Board for Auditors (IRBA).
Why choose us?
The audit partner rotation rules set out by the Act are specific to ensure auditor independence and thereby increase the quality of financial audits. We pride ourselves on remaining professional and impartial when auditing a company’s financials. As an auditing firm, commercial interests within a company’s audit cannot be ignored, therefore we strive to provide appropriately balanced, accurate and fair auditing practices. Our audit quality is of the highest standard and we adhere to all the industry’s ethics and code of conducts in order to audit companies successfully and in an unbiased and independent manner.
Please contact us to learn more about our audit services.