MAFR: Covid not impacting rotations
Zoya Malik, 13 October 2021
ith 48% of Johannesburg Stock Exchange (JSE)-listed entities having rotated audit firms since June 2017, driven by early adoption of compliance to Mandatory Audit Firm Rotation (MAFR), the evidence suggests that Covid-19 has had little impact on the rate of rotation says South Africa’s Independent Regulatory Board for Auditors (IRBA).
Of all rotations, 46% cited MAFR compliance as the main reason for rotating auditors. This remains the leading reason for changing external audit firms, with the next most cited reason being a tender process at 12%. Termination either by mutual agreement or instigated by the entity came in at 11%, while resignation of auditors’ accounted for 10%. Audit firm mergers amongst mid-tier firms accounted for 11%.
The uncertainty caused by Covid-19 and its effect on the market during 2020 could have impacted some entities’ decisions regarding rotation of auditors, the IRBA said, but it appears as this has had little impact, as January to June 2020 is comparable to the preceding six months at 16 rotations for each half year, and the number of rotations beween July and December 2020, during the extended lockdown, doubled to 31. This trend has continued with 26 rotations occurring in the six months to June 2021.
IRBA acting CEO Imre Nagy said the IRBA expects the pace of rotations to continue to pick up significantly in 2022 in order to meet the 1 April 2023 deadline.