NEW! Proposed IRBA Rules

30 June 2022
Auditing and Assurance
South African Accounting Academy

The proposed IRBA Rules will promote and enhance audit quality, thereby, strengthening the reputation of the auditing profession, and assist in restoring confidence.

The 5 Proposed Rules are published alongside an Explanatory Memorandum, and arise from the IAASB's Quality Management standards. The proposed IRBA Rules are briefly highlighted below:

Proposed Rule 1: Firm Chief Executive Officer (CEO)

A firm's CEO should be a registered auditor (RA), subject to firms being allowed to appoint CEOs for their assurance divisions (the CEO must be an RA), if a different non-RA CEO is to be appointed for the non-assurance division (the CEO can be an RA or any other suitable individual).

Proposed Rule 2: Transparency Reports

The mandatory annual preparation of transparency reports for firms, as defined in the Auditing Profession Act, as amended, that audit financial statements of listed entities.

Proposed Rule 3: Engagement Quality Reviews

An engagement quality review should be performed for all audits of financial statements of public interest entities, as defined in the IRBA Code, in addition to those engagements scoped in by International Standard on Quality Management (ISQM) 1.

Proposed Rule 4: Engagement Quality Reviewer (EQR) and an Assistant to an EQR

The engagement quality reviewer must be registered with the IRBA as a registered auditor. Further, an assistant to an engagement quality reviewer must have, as a minimum, three years of relevant expertise.

Proposed Rule 5: Assembly and Retention of Audit Documentation

The assembly of the final engagement file shall not exceed 60 days;
The retention period for the engagement documentation should be a minimum of five years, or such longer period as determined by other laws and regulations or firm policies/procedures; and
The retention of documentation for the system of quality management should be a minimum period of five years, or such longer period as determined by other laws and regulations or firm policies/procedures..

Depending on the comments received, the proposed Effective Dates for the 5 Proposed IRBA Rules are recommended as:

Proposed IRBA Rules 1-4 be effective 24 months (two years) after the IRBA Board's prescription and/or publication of the Rules.
Proposed IRBA Rule 5 (Assembly and Retention of Audit Documentation) be effective 12 months (one year) after the IRBA Board's prescription and/or publication of the Rule.

The Exposure Draft is available in a PDF format.

The IRBA welcomes comments from auditors and other interested parties on all matters addressed in the proposed IRBA Rules. It also seeks responses to the 6 questions that are set out in the Explanatory Memorandum section.

Comments are due by 19 August 2022

Click here to download the Exposure Draft:

https://www.irba.co.za/upload/Final%20ED_Proposed%20IRBA%20Rules%20arising%20from%20the%20International%20Standards%20on%20QM.pdf

Relevance to Auditors, Independent Reviewers & Accountants:

These Rules should be considered in line with the APA, IRBA Code and the QM Standards
The proposed amendments place additional responsibility on audit firms (at firm level) as follows:

They will be required to consider the appointment of RAs as CEOs of their firms;
Mandatory preparation of transparency reports in instances where the firms audit financial statements of listed entities;
Specific entities and/or engagements when an engagement quality review should be performed, in addition to those engagements scoped in by ISQM 1; and
Consideration of the assembly and retention of audit documentation.

The impact of the Proposed IRBA Rules at an engagement level is:

Minimum requirements to be eligible as an EQR and an assistant to an EQR, in addition to the requirements in ISQM 2; and
Consideration of the assembly and retention of audit documentation.

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