With all the talk in recent years about mandatory audit firm rotation (MAFR), I've wondered whether places that have adopted MAFR have deemed the measure to be working or not. A recent comment letter to a proposal released in October 2016 by the Independent Regulatory Board for Auditors (IRBA) in South Africa (SA) and an article by the CEO of the International Federation of Accountants (IFAC) provide some insight to my query.
American Institute of Certified Public Accountants (AICPA) CEO Barry Melancon recently penned a comment letter on behalf of the Association of International Certified Public Accountants (the new global organization comprised of the AICPA and Chartered Institute of Management Accountants (CIMA)) to the IRBA in response to its consultation paper proposing MAFR for listed companies in SA, in which he quotes IFAC CEO Fayez Choudhury:
... Chief Executive Officer Fayez Choudhury noted that the same week that the IRBA announced its timeline for new MAFR requirements, the Monetary Authority of Singapore (MAS) announced its intention to discontinue the very same policy. He further notes that multiple other countries are in “various phases of implementing or discontinuing mandatory audit firm rotation, with similarly diverse objectives. South Korea, Argentina, and Brazil have implemented and discontinued the policy for certain sectors; the EU is now implementing with numerous variations across Member States – some of which, such as Spain and Italy, had previously implemented and discontinued the policy.”
So, apparently (and admittedly, I do not have the details behind those cases), MAFR does not always deliver as promised. Time will tell and I plan to stay posted and blog as more details emerge about experiences with MAFR.
Side note: Melancon's letter voiced strong opposition to the proposal for the above and other reasons, i.e., that it's not in the public interest, risks harm to audit quality, would impose significant costs on businesses and shareholders without commensurate benefit, would be economically disruptive and create other negative consequences.