|Johannesburg, Tuesday, September 6, 2016 - In a positive development for audit firms and their global clients with shares issued on the Johannesburg Stock Exchange, the Independent Regulatory Board for Auditors (IRBA) has received confirmation that its application for recognition as an equivalent competent authority (ECA) under the European Union (EU) legislation - that came into effect on 17 June 2016 - has been approved.
This recognition of adequacy means that the IRBA meets the EU Commission’s standards for public oversight of statutory auditors and audit firms and that its quality assurance reviews and investigations are sufficiently comprehensive to meet the standards of the Commission when it comes to the exchange of information.
Importantly, this means that during a process of review and inspection, where portions of the audit were conducted in this country, firms would not be subject to additional inspections of their working papers by member state statutory oversight bodies, where the IRBA has successfully concluded a cooperative agreement with that oversight authority. By reaching a mutual reliance on each other’s oversight systems, the transfers of audit working papers or other documents held by statutory auditors of audit firms, and of inspection or investigation reports, would not be necessary and would become the exception rather than the rule.
The IRBA’s recognition is valid for three years and was issued in a EU Commission decision on 21 June 2016 and comes after a successful technical equivalence assessment for adequacy of the IRBA by the Commission.
Says Bernard Agulhas, CEO of the IRBA: “The limitation of three years pertains to the fact that under local South African law the sharing of documents obtained during inspections or contained in inspections reports may only be shared with the consent of the auditor or audit firm. This requirement could potentially present difficulties in implementing regulatory cooperation and create obstacles to information exchange and for that reason it required close monitoring.
“The adequacy assessment deals with matters such as cooperation in practice, obstacles to cooperation and exchange of information, which now also includes inspections findings where applicable.
The other regulatory bodies recognised in the decision include Brazil, Dubai, Guernsey, Indonesia, Isle of Man, Jersey, Malaysia, South Korea, Taiwan and Thailand.
The decision provides for member states and ECAs to conclude reciprocal working arrangements which provide for reciprocity.
The mission of the IRBA is to protect the financial interests of the South African public and international investors in South Africa through the effective and appropriate regulation of audits conducted by registered auditors, in accordance with internationally recognised standards. In line with its legislative mandate, its goal is to help create an ethical, value-driven financial sector that encourages investment and confidence and promotes sound practices by developing and maintaining auditing standards which are internationally comparable.
More about the IRBA:
The IRBA is a public protection statutory body established to protect the financial interests of the public by ensuring registered auditors and their firms deliver services of the highest quality. It upholds audit firm independence to ensure that audit quality is such that it enhances the accuracy and credibility of financial performance reporting. In this way, the IRBA has an important role to play in building the reputation of South Africa as an investment market for both local and global investors and driving economic growth for the country.
As an internationally recognised regulator of the auditing profession and other assurance services relevant to the South African environment, it has been recognised by the World Economic Forum as the top independent audit regulator worldwide for six consecutive years for the strength of its audit controls and standards. The IRBA also registers suitably qualified accountants as auditors, who must adhere to the highest ethics standards, and promotes the auditing profession through the effective regulation of assurance conducted in accordance with internationally recognised standards and processes.