The Independent Regulatory Board for Auditors recently announced that it plans to impose regular forced rotation of auditors on businesses. This is apparently aimed at enhancing independence and transformation.
Currently only public companies and companies that voluntarily choose to adopt the so-called ‘enhanced accountability and transparency’ provisions of the Companies Act are required to rotate their auditors. While the legislation seems to envisage a rotation of the actual auditing firm, large firms have apparently to date interpreted this loosely and simply changed the audit partner that signs off on the audit every few years, with the firm still remaining the client’s auditor. IRBA’s proposal will change this and will force companies to actually go out and find new auditors on a regular basis – or rather, one suspects, it will force auditors to change clients every number of years, as it is not clear that IRBA has the legal authority to overrule the provisions of the Companies Act without actually amending the Act, which would require parliamentary approval. At best they can change the rules that apply to their own profession.
This move is no doubt a step towards ensuring independent and objective auditing, but one has to wonder about the administrative burden that it places on businesses. It may have been more appropriate to revisit ethical strictures for auditors and impose stricter oversight rather than shifting the burden of safeguarding against improper conduct onto clients.