South Africa’s Independent Regulatory Board for Auditors (IRBA) issued the latest statistics on mandatory audit firm rotations (MAFR), following through with its rule that audit firm tenure may not exceed 10 years after 1 April 2023, the effective date that was approved in June 2017.

The use of this 5-year lead time into the effective date of the rule has facilitated early adopters to complete their audit firm rotations ahead of time. At this point, only 74 listed public interest entities (PIEs) across 5 South African stock exchanges are still to rotate audit firms to comply with the April 2023 deadline.

IRBA CEO, Ime Nagy, said: “This represents less than one-third of listed PIEs on the five exchanges in South Africa at 27.51% and of this, 68 entities on the largest stock exchange, the Johannesburg Stock Exchange (JSE), must still rotate audit firms.”

Additionally, the IRBA has completed a study of PIEs which are also subject to provisions of MAFR. These included licensed insurers, pension funds, and medical schemes that meet the definition of a PIE as outlined by the IRBA Code of Professional Conduct. This study concluded that of the 404 entities identified as PIEs to which MAFR applies, a total of 170 are due for audit firm rotation, while 52% are already in compliance with tenure below the 10-year limitation.

Nagy further added: “We have engaged with the audit firms and have had assurances that they are aware of the effective date and on track to rotate off audits for which they will no longer be eligible, come 1 April 2023. 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 the rule’s effective date.”

South Africa now joins several jurisdictions with audit firm tenure limitations, which require either rotation or mandatory audit tendering, with the maximum tenure allowed ranging from anywhere between 5 to 20 years.