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Cape Town - Mazars welcomes the announcement that the European Parliament has voted to adopt the amended directive and regulation regarding the statutory audit of public-interest entities and would welcome similar reform in South Africa.
“Since the reform was launched in Europe in 2010, Mazars has been an active contributor to the intense debate that has led to this positive vote," said Hilton Saven, chair of Mazars SA.
"The EU Parliament’s decision will allow for greater competition and introduce more choice for audit committees of listed companies."
This reform, if implemented properly, will encourage companies to improve the external control of their financial information, reinforce investors’ confidence by increasing quality in financial reporting and innovation, and provide greater market access to audit firms, according to Saven.
The regulation and the directive will introduce measures that will see reinforced governance by increasing the role of the audit committee and introduce a fair and transparent tendering process for the selection of auditors.
The compulsory rotation of audit firms, which recognises that joint audit is a healthy audit system, will be implemented and allow companies engaging two joint auditors to keep their auditors for 24 years without tendering versus 20 years for solo audit.
The reform also calls for a list of prohibited non-audit services and a threshold on permitted non-audit services provided by the audit firm.
Currently, the South African Companies Act 71 requires individual auditors to be rotated every five years, but does not prescribe a mandatory firm rotation.
Prohibited services
The Act does, however, also specify a list of prohibited non-audit services.
The measures specified in both the regulation and the directive will be applicable from mid-2016, excluding rotation of audit firms for current on-going audit engagements.
“South Africa needs similar reform to enable transparency, innovation and competition in the audit market," said Saven.
"The European reform will have a significant impact on the way we do business, particularly as the EU remains one of our largest trading partners, and investment from the EU countries into South Africa continues."
He said South Africa needs to keep up with international trends and standards and the reform accepted in the EU should be considered for SA's domestic market.
“Since the reform was launched in Europe in 2010, Mazars has been an active contributor to the intense debate that has led to this positive vote," said Hilton Saven, chair of Mazars SA.
"The EU Parliament’s decision will allow for greater competition and introduce more choice for audit committees of listed companies."
This reform, if implemented properly, will encourage companies to improve the external control of their financial information, reinforce investors’ confidence by increasing quality in financial reporting and innovation, and provide greater market access to audit firms, according to Saven.
The regulation and the directive will introduce measures that will see reinforced governance by increasing the role of the audit committee and introduce a fair and transparent tendering process for the selection of auditors.
The compulsory rotation of audit firms, which recognises that joint audit is a healthy audit system, will be implemented and allow companies engaging two joint auditors to keep their auditors for 24 years without tendering versus 20 years for solo audit.
The reform also calls for a list of prohibited non-audit services and a threshold on permitted non-audit services provided by the audit firm.
Currently, the South African Companies Act 71 requires individual auditors to be rotated every five years, but does not prescribe a mandatory firm rotation.
Prohibited services
The Act does, however, also specify a list of prohibited non-audit services.
The measures specified in both the regulation and the directive will be applicable from mid-2016, excluding rotation of audit firms for current on-going audit engagements.
“South Africa needs similar reform to enable transparency, innovation and competition in the audit market," said Saven.
"The European reform will have a significant impact on the way we do business, particularly as the EU remains one of our largest trading partners, and investment from the EU countries into South Africa continues."
He said South Africa needs to keep up with international trends and standards and the reform accepted in the EU should be considered for SA's domestic market.
