scholarly journals An Analysis of Mandatory Auditor Rotation Requirements in South Africa in light of International Legislative Trends

Obiter ◽  
2019 ◽  
Vol 40 (2) ◽  
Author(s):  
Vela Madlela
Keyword(s):  
South Africa ◽  
Financial Markets ◽  
Audit Quality ◽  
The United States ◽  
Auditor Independence ◽  
Company Law ◽  
The European Union ◽  
External Audit ◽  
Auditor Rotation ◽  
Mandatory Rotation

An independent and objective external audit of companies is an integral element of sound corporate governance and of functional financial markets. The issues relating to auditor independence and objectivity have attracted considerable regulatory and public scrutiny in many leading jurisdictions. This is partly due to a general decrease in audit quality over the years as evidenced by high-profile accounting scandals and audit failures, both locally and internationally, as well as the vital role that an external audit is expected to play in ensuring transparency, accuracy and efficiency in the financial markets. In an attempt to restore confidence in the audit profession and to strengthen the independence of the external audit function for companies, legislatures in some leading jurisdictions have introduced a variety of regulatory strategies, including mandatory rotation of auditors in the form of mandatory audit partner rotation (MAPR) and/or mandatory audit firm rotation (MAFR). In this article, the author examines the adequacy of the current provisions of section 92 of the Companies Act 71 of 2008 regarding MAPR and the recently promulgated rule of the Independent Regulatory Board for Auditors (IRBA) on MAFR (the MAFR rule) in addressing the issue of mandatory auditor rotation in South Africa. The author considers whether the provisions of the Companies Act 71 of 2008 regarding MAPR and the MAFR rule are adequate to promote an independent and objective external audit function for companies, as well as transparency, efficiency and accountability, while providing certainty for companies and auditors. The author first examines some of the key principles and policy considerations relating to the external audit of companies – namely, the significance of audits and auditors in the financial markets as well as the value of auditor independence and objectivity. This is followed by an examination of the provisions of section 92 of the Companies Act 71 of 2008 regarding MAPR and the recently promulgated MAFR rule in light of legislative developments in the United States, Canada, the European Union, Australia and India regarding mandatory rotation of auditors and audit partners. Based on the lessons to be drawn from the experiences of the above jurisdictions, the author then makes recommendations for appropriate reforms for South Africa in this important area of company law. This is followed by some concluding remarks.

Are There Adverse Consequences of Mandatory Auditor Rotation? Evidence from the Italian Experience

2013 ◽  
Vol 34 (1) ◽  
pp. 1-24 ◽  
Author(s):  
Mara Cameran ◽  
Jere R. Francis ◽  
Antonio Marra ◽  
Angela Pettinicchio
Keyword(s):  
Audit Quality ◽  
Earnings Quality ◽  
The United States ◽  
First Year ◽  
The European Union ◽  
Auditor Rotation ◽  
Italian Experience ◽  
Auditor Tenure ◽  
Mandatory Rotation

SUMMARY Mandatory auditor rotation was recently proposed for the European Union and is also under consideration in the United States. There has been little research into either the benefits or costs of rotation in a true mandatory setting that could inform intelligent policy making. Our paper helps fill this gap by examining Italy, where mandatory rotation of auditors has been required since 1975. We find that outgoing auditors do not shirk on effort (or quality), but final-year fees are 7 percent higher than normal, which may indicate opportunistic pricing. The fees of incoming auditors are discounted by 16 percent even though they have abnormally higher engagement hours in the first year (17 percent), which is suggestive of lowballing. However, subsequent fees are abnormally higher and exceed the initial fee discount. Thus, the costs of mandatory rotation are nontrivial. Higher costs could be acceptable if rotation improves audit quality, but we find evidence of the opposite. Namely, the quality of audited earnings is lower in the first three years following rotation, relative to later years of auditor tenure. Since rotation is costly and earnings quality improves with longer auditor tenure, the evidence from Italy does not support the case for mandatory rotation.

scholarly journals Effects Of Rotation On Auditor Independence And Quality Of Audit Service In Malaysian Banking Industry

2012 ◽  
Vol 6 (2) ◽  
pp. 249 ◽  
Author(s):  
Kabiru Isa Dandago ◽  
Nur Diyana Binti Zamro
Keyword(s):  
Audit Quality ◽  
Banking Industry ◽  
Auditor Independence ◽  
Primary Data ◽  
Auditor Rotation ◽  
Mandatory Requirement ◽  
Banking Institutions ◽  
Mandatory Rotation ◽  
The Impact

This study highlights the nature of auditor rotation in the Malaysian banking industry and its effects on auditor independence and quality of audit service in the industry. To generate primary data for analysis, interviews were conducted on officials of two banking institutions and one accounting/audit firm. The study finds that there have not been significant changes in the annual appointment of auditors in the Malaysian banking institutions over the last ten years, suggesting that there is a good working relationship between the auditors (especially the Big4) and the banks. This allows room for continuous debate on the need for mandatory rotation as a<br />means for ensuring auditor independence and high audit quality in the Malaysian banking industry. In the absence of statutory/mandatory requirement for auditor rotation, it is recommended that the Malaysian banking institutions should be carefully evaluating the impact auditor rotation would have on the quality of audit work on their current and future financial statements, as they decide whether to rotate their auditors or not.

scholarly journals Impact of auditor and audit firm rotation on accounting and audit quality: A critical analysis of the EC regulation draft

2012 ◽  
Vol 1 (3) ◽  
pp. 7-13 ◽  
Author(s):  
Patrick Velte ◽  
Markus Stiglbauer
Keyword(s):  
Audit Quality ◽  
Rotation Period ◽  
Auditor Independence ◽  
Financial Accounting ◽  
Audit Firm ◽  
Positive Effects ◽  
Auditor Rotation ◽  
Mandatory Rotation ◽  
Mandatory Audit Firm Rotation ◽  
A Current

In a current regulation draft of 2011, the European Commission (EC) plans the mandatory audit firm rotation principally after six years and with regard to a cooling off period of four years to increase auditor independence. This could complement the internal mandatory rotation (auditor rotation) by the 8th EC directive. The present paper gives a state of the art analysis of the empirical research results with regard to auditor and audit firm rotation. In contrast to the perception of the EC, the majority of the empirical results doesn’t find evidence for increased financial accounting and audit quality by audit firm rotation. Furthermore, the positive effects of the internal rotation period of seven years and the cooling off period of two years by the 8th EC directive are not empirically proved yet.

scholarly journals Disciplining Role of Auditor Tenure and Mandatory Auditor Rotation

2021 ◽  
Author(s):  
Aysa Dordzhieva
Keyword(s):  
The United States ◽  
Auditor Independence ◽  
The European Union ◽  
International Debate ◽  
Auditor Tenure ◽  
Audit Firms ◽  
Client Relationship ◽  
Popular View ◽  
Mandatory Rotation

This study addresses the international debate over whether the rotation of audit firms should be mandatory. Mandatory rotation rules have been adopted by the European Union, but these rules have not been established in the United States. Proponents of the policy believe that a long-tenure auditor-client relationship leads to the auditor building an excessive economic bond with the client which may then erode auditor independence. Motivated by this claim, I build a theoretical model that compares auditor incentives to issue independent reports under regimes with and without mandatory rotation. The model demonstrates conditions under which mandatory rotation could actually impair auditor independence, contrary to the popular view.

Ocena antykryzysowej polityki gospodarczej Stanów Zjednoczonych i wybranych państw członkowskich Unii Europejskiej w latach 2005–2014

2016 ◽  
pp. 26-46
Author(s):  
Marcin Jan Flotyński
Keyword(s):  
United States ◽  
European Union ◽  
Financial Markets ◽  
Global Economy ◽  
Global Financial Crisis ◽  
The United States ◽  
The European Union ◽  
High Volatility ◽  
The Global Financial Crisis ◽  
Domestic Products

The global financial crisis in 2007–2009 began a period of high volatility on the financial markets. Specifically, it caused an increased amplitude of fluctuations of the level of gross domestic products, the level of investment and consumption and exchange rates in particular countries. To address the adverse market circumstances, governments and central banks took actions in order to bolster the weakening global economy. The aim of this article is to present the anti-crisis actions in the United States and selected member states of the European Union, including Poland, and an assessment of their efficiency. The analysis conducted indicates that generally the actions taken in the United States in response to the crisis were faster and more adequate to the existing circumstances than in the European Union.

International Report: Sludge management and related legislation

2002 ◽  
Vol 46 (4-5) ◽  
pp. 367-371 ◽  
Author(s):  
R. Leschber
Keyword(s):  
South Africa ◽  
European Union ◽  
United States Of America ◽  
Management Practices ◽  
The United States ◽  
Future Trends ◽  
The European Union ◽  
Sludge Management ◽  
International Report ◽  
America South

This report comprises the present sludge management practices with special view to agricultural utilization in the European Union and some accessing countries in eastern Europe in comparison with countries from Asia, the United States of America, South Africa and Australia. Information is given on the respective legislation and on future trends.

scholarly journals Balanced Investment Treaties and the BRICS

AJIL Unbound ◽  
2018 ◽  
Vol 112 ◽  
pp. 217-222 ◽  
Author(s):  
Congyan Cai
Keyword(s):  
South Africa ◽  
The United States ◽  
The European Union ◽  
Brics Countries ◽  
Investment Treaty ◽  
Wide Range ◽  
Cast Doubt ◽  
Investment Treaties ◽  
Emerging Powers ◽  
Bretton Woods Institutions

Brazil, Russia, India, China, and South Africa (the BRICS) have emerged as a new hub of power in international relations. They have begun to speak out jointly on a wide range of issues and to explore cooperating collectively. For instance, they strongly urge the Bretton Woods institutions to address their legitimacy deficits by transferring substantial voting power to emerging powers, and suggest that failure to do so will “run the risk of seeing [those institutions] fade into obsolescence.” The investment treaty regime may be another field in which they can exert influence, but the investment treaty policies of BRICS countries are diverging now more than ever. In particular, India and South Africa have taken significant measures, such as terminating investment treaties, that cast doubt on whether the BRICS can play a collective role in reforming such treaties. In this essay, I make two arguments. First, the recent investment treaty policies of some BRICS (India, South Africa, and to some extent Brazil) have shifted from one imbalanced approach that is too protective of foreign investors to another that is too protective of host states and is likely to be rejected by major powers such as the European Union, the United States, and China. Second, the BRICS together have the ability to craft approaches to investment treaties that encourage greater balance in the regime overall, including by remedying some of the defects inherent in the traditional investment treaties.

scholarly journals A Survey of the Regulatory Requirements for the Acceptance of Foreign Comparator Products by Participating Regulators and Organizations of the International Generic Drug Regulators Programme

2019 ◽  
Vol 22 ◽  
pp. 28-36 ◽  
Author(s):  
Alfredo Garcia Arieta ◽  
Craig Simon ◽  
Gustavo Mendes Lima Santos ◽  
Iván Omar Calderón Lojero ◽  
Zulema Rodríguez Martínez ◽  
...  
Keyword(s):  
South Africa ◽  
New Zealand ◽  
Immediate Release ◽  
The United States ◽  
Essential Medicines ◽  
Oral Dosage ◽  
Quantitative Composition ◽  
Limiting Factor ◽  
The European Union ◽  
Regulatory Requirements

The acceptance of foreign comparator products is the most limiting factor for the development and regulatory assessment of generic medicines marketed globally. Bioequivalence studies have to be repeated with the local comparator products of each jurisdiction because it is unknown if the comparators of the different countries are the same product, with the consequent duplication of efforts by regulators and industry alike. The regulatory requirements on the acceptability of foreign comparator products of oral dosage forms differ between countries participating in the Bioequivalence Working Group for Generics of the International Pharmaceutical Regulators Programme. Brazil, Colombia, the European Union member States, Japan, Mexico, South Korea and the United States only accept bioequivalence studies with their local comparator. In contrast, Australia, Canada, New Zealand, Singapore, South Africa, Switzerland and Taiwan accept studies with foreign comparators under certain conditions. Canada limits its use to highly soluble drugs with a wide therapeutic range in immediate release products. Australia requires a comparison of the quantitative composition. In contrast, there are fewer restrictions on the acceptance of foreign comparators in New Zealand, Singapore, South Africa, Switzerland and Taiwan. For the WHO Prequalification of Medicines and for developing generics of the essential medicines the WHO lists comparators from different countries. In conclusion, there is currently no consensus amongst regulators on the acceptability of foreign comparator products.

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