The Supreme Court ruling on the Mandatory Rotation of Auditors needs to be a wake up call for government
2 June 2023
The Supreme Court of Appeal’s ruling repealing the Independent Regulatory Board of Auditors (IRBA)’s Mandatory Auditing Firm Rotation rule (MAFR) needs to be a wake-up call for government if South Africa is to win the fight against state capture and corruption. The Supreme Court found that IRBA does not have the legal authority to adopt and implement MAFR as its founding legislation, the Auditing Profession Act, does not provide it such powers.
IRBA adopted MAFR, requiring the rotation of auditing firms every 10 years, in an attempt to prevent unhealthy relationships developing between auditors and the companies and institutions over whom they are meant to provide an unbiased and professional audit. Auditing contracts are a lucrative business. The Zondo Commission exposed many auditors who turned a blind eye at best, and often were complicit and whitewashed corruption over the very institutions they were paid to audit, to ensure that these lucrative contracts were extended. This incestuous relationship has crippled many public and private institutions. IRBA has found instances of auditing companies auditing the same companies for over 80 years. Workers, society, the economy and the state have paid the price as these public and private institutions have collapsed under the corruption that these auditors covered up.
Whilst welcoming IRBA’s bold decision to institute such a progressive action in 2017, COSATU repeatedly raised the need to elevate this from an in-house rule that could easily be revoked, to a legislative requirement when Treasury drafted and Parliament deliberated upon the Financial Matters and the Auditing Profession Amendment Bills between 2018 and 2021. Whilst receiving positive support for this call from the NCOP, this common-sense proposal and the fears raised by COSATU were pooh poohed by Treasury and ignored by the National Assembly.
Tragically COSATU’s fears have materialised. MAFR has been struck down by the Supreme Court at the instance of disgruntled auditors! This is a massive blow in the fight against corruption and state capture. It occurs months after the international community grey listed South Africa precisely because they are not convinced our words are backed up by actions. It is yet another reminder that our cavalier approach to dealing with corruption does not hold water.
Whilst it is too late to amend the Auditing Profession Amendment Act with 6 months left in the Parliamentary calendar before the 2024 elections, Treasury needs to urgently draft and prepare an Auditing Profession Amendment Bill that will provide IRBA the legislative authority to reinstate MAFR. Treasury should not dilly dally. This Bill needs to be developed now so that it can be tabled as soon as the 7th Parliament has been sworn in. We cannot afford further delays and own goals.
Issued by Matthew Parks, Parliamentary Coordinator, COSATU, 2 June 2023
