IRBA may take the Mandatory Audit Firm Rotation fight to Parliament

Imre Nagy, CEO of IRBA, confirmed that IRBA will approach parliament to amend legislation in order to revive mandatory audit firm rotation (MAFR). This follows a recent supreme court decision to strike down MAFR, which was issued as a rule by IRBA. 

MAFR was introduced as a rule and gazetted by IRBA in 2017. It came into effect in April 2023. However, less than two months later, the Supreme Court of Appeal found that IRBA acted ‘ultra vires’ or outside of its powers when issuing this rule. 

MAFR may be knocked out, but it’s not necessarily dead. 

In a press release, Nagy says, “We will therefore work urgently with parliament and stakeholders to address the technical issue raised in the judgment.” Nagy confirmed with Accounting Weekly that this means IRBA will approach parliament to pass or amend legislation that would require MAFR.   

Despite the court loss, IRBA has not wavered in its belief in the need for MAFR.

“Apart from the fact that the court found our powers ultra vires, which judgement we respect, our concern as a regulator remains, in that there are still public interest entities; auditors (firms) with tenures exceeding 10 years, with a few even exceeding 100 years.

“We therefore emphasise, now more than ever, the importance of independence considerations by auditors, audit committees and shareholders in terms of the IRBA Code of Conduct, to identify and address any related ethical threats.” 

Nagy also points out that as many as 91 percent of required firms changed audit firms in the lead-up to April 2023.