Best practices to consider when changing your Audit Firm in South Africa

Changing your audit firm is not just a procedural shift; it’s a strategic move that can reshape the way your organisation manages risk, ensures compliance, and builds stakeholder confidence. Whether driven by regulatory changes, a need for fresh perspectives, or concerns about audit quality, the decision to switch auditors demands careful planning and thoughtful execution. 

In South Africa, where regulatory frameworks like the Companies Act and IRBA standards set a high bar for auditor independence and transparency, the stakes are even higher. Beyond compliance, companies must consider whether the new audit firm’s culture aligns with their own, whether the timing allows for a seamless transition, and whether the new team can hit the ground running, especially when it comes to critical tasks like stock counts(inventory counts) and year-end reporting.

This article explores the key best practices to follow when navigating this important change.

• ENSURE CULTURAL COMPATIBILITY AND BUILD AUDITOR RELATIONSHIPS

Choosing an audit firm whose culture aligns with your company’s values is essential for a productive and high-quality engagement. A strong cultural fit promotes open communication, trust, and professional scepticism—key ingredients for effective auditing.

1. Audit firms often emphasise collaboration and control, but inconsistencies in cultural understanding across offices can lead to reduced psychological safety and poor person-organisation fit.
2. A “culture of challenge” is essential—auditors must feel empowered to question assumptions and validate management’s judgments without fear.
3. In-person interactions and site visits enable auditors to understand your operations, and facilitate knowledge transfer, especially during the transition phase.

Tip: During the selection process, prioritise in-person meetings with the audit team to assess their working style and values, and schedule regular check-ins to foster a collaborative relationship.

• CLEARLY DEFINE THE REASON FOR CHANGE

Whether driven by regulatory requirements, dissatisfaction with service quality, or a desire for fresh insights, the reason for changing audit firms should be clearly documented and communicated.

1. In South Africa, many companies voluntarily rotated auditors even before the now-overturned mandatory audit firm rotation rule.
2. Common reasons include independence concerns, audit quality issues, or changes in company leadership.
3. Tip: Use the reason for change to guide your selection criteria and expectations for the new firm. 
   Note: Documenting the rationale for changing audit firms is important for governance and board reporting purposes.

• ENSURE COMPLIANCE WITH SOUTH AFRICAN LAWS AND STANDARDS

1. Compliance with the Companies Act and IRBA regulations is non-negotiable.
2. Section 90(2)(b) of the Companies Act restricts auditors from providing services such as bookkeeping, internal audit, and financial information system design to the same client, ensuring independence.
3. Both the audit firm and the designated auditor must comply with these restrictions.
4. Auditor independence declarations should be obtained and reviewed to ensure compliance with ethical standards.

Tip: Review the IRBA Code of Professional Conduct and consult legal advisors to ensure full compliance during the transition.

• PLAN THE TRANSITION TIMELINE CAREFULLY

Timing is critical to avoid disruptions in financial reporting and stock count procedures.

1. A well-structured transition plan should include onboarding, access to prior audit documentation, and risk assessments.
2. The new firm must have sufficient time to understand your business, attend stock counts, and meet reporting deadlines.
3. Ensure timely access to prior audit documentation and internal policies to facilitate a smooth transition.

Tip: Avoid switching auditors close to year-end or during peak reporting periods. Ideally, initiate the change early in the financial year.

• DEVELOP A ROBUST REQUEST FOR PROPOSAL (RFP)

An effective RFP helps identify the right audit firm by focusing on:

1. Industry expertise
2. Audit methodology
3. Technology capabilities
4. Transition processes and timelines
5. Expected fees or fee structures
6. Specify the expected audit team composition, including relevant experience and qualifications
7. Evaluate the firm’s approach to ESG or sustainability reporting if relevant to your company.

Tip: Include questions about how the firm handles onboarding, communication, and client satisfaction to gauge their readiness and fit.

• CONCLUSION

Changing your audit firm is more than a compliance exercise. It presents an opportunity to enhance audit quality, gain fresh insights, and strengthen governance frameworks. By considering cultural fit, legal compliance, timing, and strategic planning, your organization can navigate the transition smoothly and effectively.

Telisha Naidoo CA(SA)

 Audit: Manager

References:
1. Audit Firm Culture: Recent Developments and Trends in the Literature – Foundation for Auditing Research. https://foundationforauditingresearch.org/publications/audit-firm-culture-recent-developmentsand-trends-in-the-literature/
2. The Future of the South African Audit Landscape – Accountancy SA. https://www.accountancysa.org.za/the-future-of-the-south-african-audit-landscape-part-1/
3. Rule on Mandatory Audit Firm Rotation – IRBA. https://www.irba.co.za/upload/Government%20Gazette%20with%20Final%20Rule%20-%201%20June%202017.pdf