The CFO Forum‚ representing the chief financial officers of the top 100 JSE listed companies‚ said it “deeply concerned” by the decision to introduce mandatory audit firm rotation for South African business.
“The decision – announced on Friday by Finance Minister Malusi Gigaba – flies in the face of ongoing discussions with the parliamentary standing committee on finance and its commitment to” explore audit independence problems and solutions before a decision is taken‚ the forum said in a statement on Friday.
The forum wants an urgent meeting with Gigaba. “This [decision] does not bode well for the relationship between government and business‚ and we urge the minister to reconsider his decision and instruct IRBA to undertake broader‚ proper consultation before making any final decisions.”
It said the standing committee had received strong objections to mandatory audit firm rotation from five financial governance structures: the CFO Forum; the Association for Savings and Investment South Africa‚ the Institute of Directors‚ the King Committee and the Audit Committee Forum.
The ongoing process should be respected and the Independent Regulatory Board for Auditors (IRBA) should not rush into a decision without understanding the consequences‚ the forum said.
* Mandatory audit firm rotation will cost South Africa about R10-billion over 10 years;
* Examples from other parts of the world resulted in increased market concentration;
* There is no evidence to support IRBA’s argument that it will speed up transformation in the audit profession; and
* More research is needed to understand any possible problems caused by the current audit framework‚ so that informed solutions can be taken. This includes “a full understanding of what role‚ if any‚ audit independence has played in any of the financial failures referred to by IRBA”.
The forum said it should be acknowledged that South Africa’s auditing standards are among the highest in the world‚ and play a crucial role in attracting and maintaining foreign investment and in ensuring good governance in the corporate community.