A new rule has been put in place to monitor the length of relationships between auditors and their clients.
The rule is applicable to audit reports issued on the Annual Financial Statements of all public companies ‒ as defined in the Companies Act of 2008 ‒ that meet the definition of a public interest entity as per the IRBA Code of Professional Conduct for Registered Auditors.
As such, disclosing how long an auditor has been auditing a public company’s financial statements will no longer be optional. The IRBA will closely monitor compliance with the rule, which has now been gazetted.
“In the case of companies, as the appointment and continuation of auditors is the responsibility of the audit committee, members of the committee should take note of this rule and the need for auditors’ independence” says IRBA CEO Bernard Agulhas. “Independence is critical to the delivery of high quality audits, and any compromise to independence may cast doubt on the integrity of an audit report”.
The IRBA made the decision to require the mandatory disclosure of audit tenure in the context of strengthening auditor independence, which is consistent with measures implemented in other jurisdictions. “This disclosure of audit tenure will lead to transparency of association between audit firms and audit clients” says Agulhas.
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