Role-Players Affecting Audit Firm Rotation in KwaZulu-Natal
Keywords:
Keywords: Audit; Audit rotation; MAFR; Role-playersAbstract
Abstract: Objectives: This study aimed to provide insight into the key role-players in the rotation process from the perspective of accounting and auditing professionals. The study ultimately will provide guidance for auditors as they attempt to navigate the new mandatory audit firm rotation (MAFR) rule which is applicable to all Johannesburg Stock Exchange-listed companies from April 2023. Prior Work: The study builds on the knowledge of the interaction of auditors and firm managers. Approach: The study utilized a qualitative exploratory methodology in the form of in-depth interviews with selected industry players. Results: The findings of the study reveal practices recommended by audit practitioners in order to deal with MAFR, such as improved training and more time being allowed to onboard clients. The participants further point out actions that can be performed by specific role-players. This study is unique in KwaZulu-Natal as it surveyed auditors and audit clients. Implications: The finding will change the way auditing professionals create their strategies to deal with MAFR. It also provides basis for understanding the dynamics of interpersonal relationships in an audit. Value: The study contributes to the existing literature in that it focuses on the actual roles of the key groups and key factors in the audit firm rotation process. In addition, it has revealed the perceptions of audit clients
References
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Lennox, C.S., Wu, X. & Zhang, T. 2014. Does mandatory rotation of audit partners improve audit quality? The Accounting Review, 89(5):1775-1803.
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Plant, K., Coetzee, G.P., Fourie, H. and Steyn, B. 2013. Internal audit competencies: Skills requirements for internal audit staff in South Africa. Southern African Journal of Accountability and Auditing Research, 15(1):65-74.
PWC. 2017. PWC comments to the IRBA’s MAFR Consultation Paper (20 January 2017). [Online] https://www.saica.co.za/portals/0/technical/assurance/PwC%20Firm%20Response%20to%20IRBA.pdf (Accessed: 24 September 2019)
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SAICA. 2017b. SAICA comments to the IRBA’s MAFR Consultation Paper issued on 25 October 2016. [Online] https://www.saica.co.za/portals/0/documents/SAICAsCommentReport.pdf (Accessed: 24 September 2019)
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Ahmed, M. 2015. The impact of ex-auditors’ employment with audit clients on perceptions of auditor independence. Procedia - Social and Behavioral Sciences, 172(1):479 – 486.
AngloGold Ashanti Limited. 2017. AngloGold Ashanti Limited comments to the IRBA’s MAFR Consultation Paper (18 January 2017). [Online] https://www.saica.co.za/portals/0/technical/assurance/AGA%20Sumission%20to%20IRBA%2018%20January%202016.pdf (Accessed: 24 September 2019)
Arrunada, B. & Paz-Arez, C. 1997. Mandatory rotation of company auditor: A critical examination. International Review of Law and Economics,17(1):31-61.
Auditing Professions Act, No 26 of 2005. Auditing Profession Act. [Online]. https://www.irba.co.za/upload/AuditingProfessionAct.pdf (Accessed: 24 September 2019).
Ball, F., Tyler, J. & Wells, P., 2015. Is audit quality impacted by auditor relationships? Journal of Contemporary Accounting & Economics, 11(2):166-181.
Cameran, M., Francis, J. R., Marra, A., & Pettinicchio, A. 2015. Are there adverse consequences of mandatory auditor rotation? Evidence from the Italian experience. Auditing: A Journal of Practice & Theory, 34(1), 1–24. https://doi.org/10.2308/ajpt-50663
Cameran, M., Prencipe, A. & Trombetta, M. 2016. Mandatory Audit Firm Rotation and Audit Quality, European Accounting Review, 25(1):35-58.
Corbellaa, S., Florioa, C., Gotti, G. & Mastrolia, S. A. 2015. Audit firm rotation, audit fees and audit quality: The experience of Italian public companies. Journal of International Accounting, Auditing and Taxation, 25(1):6-66.
Daugherty, B.E., Dickins, D., Hatfield, R.C. & Higgs, J.L, 2013. Mandatory Audit Partner Rotation: Perceptions of Audit Quality Consequences. Current Issues in Auditing, 7(1):30-35.
DeFond, M. L., Wong, T. J. & Li, S. 1999. The impact of improved auditor independence on audit market concentration in China. Journal of Accounting and Economics, 28(3):269-305.
Deloitte. 2017. Deloitte comments to the IRBA’s MAFR Consultation Paper (20 January 2017). [Online] https://www.saica.co.za/portals/0/technical/assurance/Deloitte%20response%20to%20the%20IRBA%20Consultation%20Paper%2020%20January%202017.pdf (Accessed: 24 September 2019)
European Commission, 2010. Green Paper, Audit Policy: Lessons from the Crisis. [Online] http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52010DC0561&from=EN (Accessed: 24 September 2019).
Ewelt-Knauer, C., Gold, A. & Pott, C. 2013. Mandatory audit firm rotation: A review of stakeholder perspectives and prior research. Accounting in Europe, vol. 10(1):27-41.
EY. 2017. EY comments to the IRBA’s MAFR Consultation Paper (20 January 2017). [Online] https://www.saica.co.za/portals/0/technical/assurance/IRBA_CONSULTATION_PAPER_COMMENT_LETTER.PDF (Accessed: 24 September 2019)
Firth, M., Rui, O. M. & Wu, X., 2012. How Do Various Forms of Auditor Rotation Affect Audit Quality? Evidence from China. The International Journal of Accounting, 47(1):109-138.
Harber, M. & Willows, G. 2016. An exploration of audit practitioner opinions on mandatory audit firm rotation in South Africa: a specific focus on market concentration and transformation issues. In 2016 Southern African Accounting Association National Teaching and Learning and Regional Conference Proceedings. (pp. 25-43).
Harber, M., 2018. Exploring the nature and consequences of a possible decline in the appeal of the South African audit profession. Southern African Journal of Accountability and Auditing Research, 20(1):13-28.
Harber, M, Marx, B, De Jager, P, 2020 The perceived financial effects of mandatory audit firm rotation. Journal of International Financial Management Accounting. 2020; 00: 1– 20 https://doi.org/10.1111/jifm.12115
Harber, M., & Marx, B. (2020). Audit quality and independence concerns in the South African audit industry: Contrasting views. South African Journal of Accounting Research, 34(1), 1–23. https://doi.org/10.1080/10291954.2019.1667646
Institute of Directors in Southern Africa. 2016. The King IV Report [Online] https://cdn.ymaws.com/www.iodsa.co.za/resource/collection/684B68A7-B768-465C-8214-E3A007F15A5A/IoDSA_King_IV_Report_-_WebVersion.pdf (Accessed: 24 September 2019)
IRBA. 2016a. The IRBA announces timeline for public participation process around MAFR. [Online]. https://www.irba.co.za/news-headlines/press-releases/the-irba-announces-timeline-for-public-participation-process-around-mandatory-audit-firm-rotation (Accessed: 24 September 2019).
KPMG. 2017. KPMG comments to the IRBA’s MAFR Consultation Paper (20 January 2017). [Online] https://www.saica.co.za/portals/0/technical/assurance/KPMG%20response%20to%20IRBA%20Consultation%20Paper.pdf (Accessed: 24 September 2019)
Kwon, S. Y., Lim, Y. & Simnett, R. 2014. The Effect of Mandatory Audit Firm Rotation on Audit Quality and Audit Fees: Empirical Evidence from the Korean Audit Market. Auditing: A Journal of Practice & Theory, 33(4):167-195.
Lennox, C.S. & Park, C.W. 2007. Audit Firm Appointments, Audit Firm Alumni, and Audit Committee Independence. Contemporary Accounting Research, 24(1):235–258.
Lennox, C.S., Wu, X. & Zhang, T. 2014. Does mandatory rotation of audit partners improve audit quality? The Accounting Review, 89(5):1775-1803.
Mason, M., 2010. Sample Size and Saturation in PhD Studies Using Qualitative Interviews. Forum for qualitative social research, 11(3):1-19.
Naresh Chandra Committee. 2003. Report to the Ministry of Finance and Company Affairs, India: Committee on Corporate Audit Governance. [Online] http://reports.mca.gov.in/Reports/3-Naresh%20Chandra%20committee%20report%20on%20regulation%20of%20private%20companies%20and%20partnerships,%202003.pdf (Accessed: 24 September 2019)
Omnia Holdings Limited. 2017. Omnia Holdings Limited comments to the IRBA’s MAFR Consultation Paper (20 January 2017). [Online] https://www.saica.co.za/portals/0/technical/assurance/Omnia%20Holdings%20Limited.pdf (Accessed: 24 September 2019)
Plant, K., Coetzee, G.P., Fourie, H. and Steyn, B. 2013. Internal audit competencies: Skills requirements for internal audit staff in South Africa. Southern African Journal of Accountability and Auditing Research, 15(1):65-74.
PWC. 2017. PWC comments to the IRBA’s MAFR Consultation Paper (20 January 2017). [Online] https://www.saica.co.za/portals/0/technical/assurance/PwC%20Firm%20Response%20to%20IRBA.pdf (Accessed: 24 September 2019)
SAICA. 2017a. Submission to Parliament’s Standing Committee on Finance (SCoF). [Online] https://www.saica.co.za/Portals/0/documents/SAICA_Communication_Submission_to_SCoF_FINAL.pdf (Accessed: 24 September 2019)
SAICA. 2017b. SAICA comments to the IRBA’s MAFR Consultation Paper issued on 25 October 2016. [Online] https://www.saica.co.za/portals/0/documents/SAICAsCommentReport.pdf (Accessed: 24 September 2019)
SAICA. 2016a. Full results of the report of the SAICA MAFR survey. [Online] https://www.saica.co.za/portals/0/technical/assurance/AttachB_SAICA_MAFR_Full_Report.pdf (Accessed: 24 September 2019)
Shah, L. 2018, Institutional Ownership in Relation to the Mandatory Audit Firm Rotation Rule and its Effect on Audit Quality. [Online] https://scholarship.claremont.edu/cmc_theses/1878/ (Accessed: 24 September 2019).
Published
2020-11-02
How to Cite
Chetty, Y., & Deodutt, L. J. (2020). Role-Players Affecting Audit Firm Rotation in KwaZulu-Natal: Array. The Journal of Accounting and Management, 11(1). Retrieved from https://dj.univ-danubius.ro/index.php/JAM/article/view/426
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