Journal of Economics and Business

ISSN 2615-3726 (Online)

ISSN 2621-5667 (Print)

Published: 17 October 2018

An Evaluation of Mandatory Audit Firm Rotation in South Africa

Arnold Rademeyer, Danie Schutte

North-West University, South Africa

Download Full-Text Pdf



Following on recent corporate failures, various initiatives are introduced to restore confidence in the audit function. In this regard, the Independent Regulatory Board for Auditors of South Africa announced its plans to pursue mandatory audit firm rotation for the audits of public interest entities. The motivation for this decision was firstly due to concerns raised about independence issues as well as a lack of transformation and competition in the South African environment. This article examines the legal and practical implications of the announcement to enforce companies to appoint auditors for a limited period of time. The article contributes to the scarce literature on the audit profession and in particular issues pertaining to the independence of auditors. Against the background of the global business world and the existence of multinational companies, the results are also relevant in an international context.


  1. American Institute of Certified Public Accountants (AICPA). (1992). Statement of position regarding mandatory rotation of audit firms of publicly held companies. New York: Author.

  2. Chandler, A.D. 1992. Organizational Capabilities and the Economic History of the Industrial Enterprise. The Journal of Economic Perspectives, 6(3): 79-100.

  3. Choudhury, F. 2016. IFAC CEO Fayez Choudhury criticises mandatory audit firm rotation. Date of access: 20 March 2018.

  4. Cohen, J.R., Pant, L.W. & Sharp, D.J. 1993. Culture-based ethical conflicts confronting multinational accounting firms. Accounting Horizons, 7(3): 1-13.

  5. Financial Reporting Council. (FRC). 2016. Developments in Audit – 2015/16 An Overview. Date of access: 22 July 2017.

  6. Harber, M. 2016. Mandatory rotation: what is the price for audit firms. Date of access: 8 October 2018.

  7. Harris, S.B. 2015. Audit Quality, Firm Independence, and the Firm Business Model. Date of access: 13 April 2017.

  8. International Federation of Accountants (IFAC). 2017. Independent Regulatory Board of Auditors Consultation Paper: Mandatory Audit Firm Rotation. Date of Access 26 September 2017.

  9. Jerzemowska. M. 2006. The Main Agency Problems and Their Consequences. Acta Oeconomica 14(3): 9-17.

  10. Kathan, M. 2017. There is no benefit in MAFR. Date of access: 20 March 2018.

  11. Kim, K.A. & Nofsinger, J.R. 2004. Corporate  Governance, Upper  Saddle River, NJ: Pearson/Prentice Hall.

  12. Livne, G. 2013. Threats to Auditor Independence and Possible Remedies. Date of access: 30 May 2017.

  13. Melancon, B. 2017. SA should reject MAFR says the AICPA. Date of access: 14 July 2018.

  14. O'Keefe, T.B., Simunic, D.A. & Stein, M.T. 1994. The Production of Audit Services: Evidence from a Major Public Accounting Firm. Journal of Accounting Research, 32(2): 241-261.

  15. Peng, M.W. 2004. Outside directors and firm performance during institutional transitions Strategic. Management Journal, 25(5): 453-471.

  16. Porter, B., Simon, J. & Hatherly, D. 2005. Principles of external auditing. John Wiley & Sons, Ltd.

  17. Ruiz‐Barbadillo, E., Go´mez‐Aguilar, N. & Carrera, N. 2009. Does Mandatory Audit Firm Rotation Enhance Auditor Independence? Evidence from Spain. AUDITING: A Journal of Practice & Theory, 28(1): 113-135.

  18. Terry, G. (2002, September 23). Examining the efficacy of auditor rotation. Business Day (Johannesburg).

  19. The Institute of Chartered Accountants in England and Wales. (ICAEW). 2005. Agency theory and the role of audit. Date of access: 22 July 2017.

  20. The Institute of Chartered Accountants in England and Wales. (ICAEW). 2009. Changes in Financial Reporting and Audit Practice. Date of access: 25 July 2017.

  21. Young Joni J. 2006. Examining Audit Relations: A Reconsideration of Auditor Independence, in Cheryl R. Lehman (ed.) Independent Accounts (Advances in Public Interest Accounting, Volume 12) Emerald Group Publishing Limited.

About Us

The Asian Institute of Research is an online and open-access platform to publish recent research and articles of scholars worldwide. Founded in 2018 and based in Indonesia, the Institute serves as a platform for academics, educators, scholars, and students from Asia and around the world, to connect with one another. The Institute disseminates research that is proven or predicted to be of significant influence for the general public.

Stay Connected

  • Instagram - Black Circle
  • Facebook - Black Circle
  • LinkedIn - Black Circle

Contact Us

Please send all inquiries to the email:

Business Address:

5th Floor, Kavling 507, Fajar Graha Pena Tower, Jl. Urip Sumohardjo No.20, Makassar, Indonesia 90234

Copyright © 2018 The Asian Institute of Research. All rights reserved