Plan to enforce auditor rotation in SA puts big business in flat spin
South Africa's Independent Regulatory Board for Auditors may be sent back to the drawing board over its plans to force audit-firm rotation in the country this year.
The proposal has met overwhelming opposition from local and international players in the financial services industry.
Deloitte Africa CEO Lwazi Bam, in an interview with Business Times, said there had been no credible evidence put forward that there was an issue with audit quality in South Africa or that rotation "will enhance audit independence and quality".
The process followed did not show that alternatives had been considered, he said - and accused the regulator of not being transparent.
Media conglomerate Naspers - the owner of Media 24 and DStv holding company MultiChoice - issued a statement on Friday saying the framework had been a flop elsewhere and could cost the South African economy dearly.
"South Africa's auditing standards are consistently rated as the best in the world, which makes us - and many others - question why [the board] is looking to introduce this failed concept here," Basil Sgourdos, Naspers Group chief financial officer said.
The board proposed that auditors could remain with their clients for an extended period provided that they enter into joint audits with smaller, black-owned companies. It said this was to ensure audit independence and address transformation.
Black-owned firm Sizwe Ntsaluba Gobodo on Friday declined to comment outside official channels, saying that "due to the sensitive nature of the topic, we do not wish for our comments to be put on public record".
Bernard Agulhas, CEO of the regulatory board, said more than 65 submissions had been received by Friday evening.
Due to the level of interest, Agulhas said, the standing committee on finance had decided to host public hearings.
CFO Forum, a body representing chief financial officers of large JSE-listed companies and state-owned firms, reconfirmed its rejection of the proposal. It said the proposed framework would cost "billions of rands to introduce" and called for a proper investigation into the current state of audit independence.
Forum chairwoman Christine Ramon said the issue was "too significant to leave to the board".
"It cuts across numerous pieces of legislation, and undermines the rights of corporates, investors and shareholders. It has far-reaching consequences, and the process requires responsible management."