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Home Ethics News 05 December 2011

05 December 2011

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Key Audit Partners and Transitional Provisions



Johannesburg / 05 December 2011


Key audit partners


The IRBA Code of Professional Conduct for Registered Auditors (the Code) introduces the concept of a "key audit partner" that is defined as: "the engagement partner, the individual responsible for the engagement quality control review, and other audit partners, if any, on the engagement team who make key decisions or judgments on significant matters with respect to the audit of the financial statements on which the firm will express an opinion." Paragraphs 290.151 – 290.155 of the Code recognise the significance of the threats that might arise and require the rotation, after seven years, of both the engagement partner, and key audit partners for audit clients that are public interest entities. Firms are advised to identify those other partners who are key audit partners to such clients, to whom the Code's requirements will apply from the effective date below.


Transitional provisions in the Code


Certain provisions of the Code have an effective date later than that of 1 January 2011, namely:

  1. The definition of public interest entity in paragraph 290.25 is effective from 1 January 2012;
  2. Rotation of key audit partners referred to in section 290.151 is effective for audits or reviews of financial statements of public interest entities for years beginning on or after 15 December 2011;
  3. Fees relative size: paragraph 290.222 requires a pre or post-issuance review where the total fees from an audit or review client that is a public interest entity represent more than15% of the total fees of the firm for more than two consecutive years commencing on or after 15 December 2010, i.e. applies to the audit or review 2012 engagement; and
  4. Compensation and evaluation polices: a key audit partner may not be evaluated or compensated on selling non-assurance services to an audit or review client in terms of paragraph 290.229 with effect from 1 January 2012.

Engagement partner rotation in terms of the Companies Act, 2008


In addition to the auditor rotation requirements of the Code, Section 92 of the Companies Act, 2008 provides for a shorter rotation period of five years for the individual auditor (i.e. the engagement partner). There is no additional Companies Act requirement for other key audit partners. The requirements are as follows:

  1. The same individual may not serve as the auditor or designated auditor of a company for more than five consecutive financial years.
  2. If an individual has served as the auditor or designated auditor of a company for two or more consecutive financial years and then ceases to be the auditor or designated auditor, the individual may not be appointed again as the auditor or designated auditor of that company until after the expiry of at least two further financial years.
  3. If a company has appointed two or more persons as joint auditors, the company must manage the rotation required by this section in such a manner that all of the joint auditors do not relinquish office in the same year.

CIPC has advised that the determination of the five years, for purposes of this section commences from 1 May 2011, i.e. the date on which the Companies Act, 2008 became effective.


If you have any further questions please contact the Director: Standards at 087 940 8871 or send an email to This e-mail address is being protected from spambots. You need JavaScript enabled to view it


Sandy van Esch
Director: Standards

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