South Africa’s appeals court has ruled that auditor rotation is no longer mandatory, overturning a previous ruling by the country’s regulator, the Independent Regulatory Board for Auditors (IRBA).
- The ruling means that companies are no longer required to rotate their auditors every 10 years, as was previously mandated by the IRBA.
- The court’s decision was based on an appeal by the South African subsidiary of global auditing firm Deloitte, which argued that the mandatory rotation rule was unconstitutional and could be detrimental to audit quality.
- The court found that the IRBA had failed to provide sufficient evidence to support the need for mandatory rotation and that the rule could potentially harm audit quality by disrupting long-term relationships between auditors and their clients.
- The ruling has been welcomed by the auditing profession in South Africa, which has argued that mandatory rotation could lead to a loss of expertise and institutional knowledge.
- However, some experts have raised concerns that the ruling could undermine efforts to improve audit quality and restore public trust in the profession, which has been hit by a series of high-profile corporate scandals in recent years.
- The ruling also comes amid ongoing efforts by South African regulators to strengthen the country’s corporate governance and financial reporting standards, following a series of corporate scandals involving firms such as Steinhoff and Tongaat Hulett.