Auditing Profession Act, 2005 (Act No. 26 of 2005)Board NoticesIndependent Regulatory Board for AuditorsNew Rules Regarding Improper Conduct and Code of Professional Conduct for Registered AuditorsEffective Date |
This Code is effective on 1 January 2011; early adoption is permitted. The Code is subject to the following transitional provisions:
Transitional provisions
Public Interest Entities
| 1. | Section 290 of the Code contains additional independence provisions when the audit or review client is a public interest entity. The additional provisions that are applicable because of the new definition of a public interest entity in paragraph 290.25 or the guidance in paragraph 290.26 are effective on 1 January 2012. For partner rotation requirements, the transitional provisions contained in paragraphs 2 and 3 below apply. |
Partner Rotation
| 2. | For a partner who is subject to the rotation provisions in paragraph 290.151 because the partner meets the definition of the new term “key audit partner,” and the partner is neither the engagement partner nor the individual responsible for the engagement quality control review, the rotation provisions are effective for the audits or reviews of financial statements for years beginning on or after 15 December 2011. For example, in the case of an audit client with a calendar year-end, a key audit partner, who is neither the engagement partner nor the individual responsible for the engagement quality control review, who had served as a key audit partner for seven or more years (that is, the audits of 2003-2010), would be required to rotate after serving for one more year as a key audit partner (that is, after completing the 2011 audit). |
| 3. | For an engagement partner or an individual responsible for the engagement quality control review who immediately prior to assuming either of these roles served in another key audit partner role for the client, and who, at the beginning of the first fiscal year beginning on or after 15 December 2010, had served as the engagement partner or individual responsible for the engagement quality control review for six or fewer years, the rotation provisions are effective for the audits or reviews of financial statements for years beginning on or after 15 December 2011. For example, in the case of an audit client with a calendar year-end, a partner who had served the client in another key audit partner role for four years (that is, the audits of 2002-2005) and subsequently as the engagement partner for five years (that is, the audits of 2006-2010) would be required to rotate after serving for one more year as the engagement partner (that is, after completing the 2011 audit). |
Non-assurance Services
| 4. | Paragraphs 290.156-290.219 address the provision of non-assurance services to an audit or review client. If, at the effective date of the Code, services are being provided to an audit or review client and the services were permissible under the IFAC Code of Ethics June 2005 Code (revised July 2006) but are either prohibited or subject to restrictions under the revised Code, the firm may continue providing such services only if they were contracted for and commenced prior to 1 January 2011, and are completed before 1 July 2011. |
Fees - Relative Size
| 5. | Paragraph 290.222 provides that, in respect of an audit or review client that is a public interest entity, when the total fees from that client and its related entities (subject to the considerations in paragraph 290.27) for two consecutive years represent more than 15% of the total fees of the firm expressing the opinion on the financial statements, a pre- or post-issuance review (as described in paragraph 290.222) of the second year's audit shall be performed. This requirement is effective for audits or reviews of financial statements covering years that begin on or after 15 December 2010. For example, in the case of an audit client with a calendar year end, if the total fees from the client exceeded the 15% threshold for 2011 and 2012, the pre or post-issuance review would be applied with respect to the audit of the 2012 financial statements. |
Compensation and Evaluation Policies
| 6. | Paragraph 290.229 provides that a key audit partner shall not be evaluated or compensated based on that partner's success in selling non-assurance services to the partner's audit client. This requirement is effective on 1 January 2012. A key audit partner may, however, receive compensation after 1 January 2012 based on an evaluation made prior to 1 January 2012 of that partner's success in selling non-assurance services to the audit client. |