The purpose of this study is to examine the corporate governance practices disclosed by large- and medium-sized audit firms in South Africa, with a particular focus on transparency reports. Audit firms serve the public interest.
This study was motivated by recent corporate failures in South Africa, such KPMG, VBS Bank, and Steinhoff, to mention a few.
The research approach followed for this study consists of a mixed method approach. Qualitative secondary data were obtained from publicly accessible information published on the websites of the audit firms. The data, which consisted of the firms’ transparency reports, were analysed through content analysis. The results were then converted into quantitative data.
The main findings reveal that audit firms in South Africa do not disclose sufficient corporate governance information in their transparency reports. There are inconsistencies between audit firms.
In South Africa, audit firms do not have a corporate governance code for audit firms, and thus audit firms are not disclosing the relevant corporate governance information to their stakeholders.
This article contributes to the limited literature available on audit firm governance. Based on the findings, the study proposes best practice recommendations and regulatory and statutory recommendations regarding audit firm governance.
Fraudulent financial reporting and corporate collapses are often associated with audit failures. In these instances, it is believed that the auditors failed in their duty as ‘watchdog’ of the users of financial statements by letting fraud pass by undetected. Such failures have been ascribed to the poor governance practices and values within audit firms (Crotty
In 2010, the Financial Reporting Council (FRC) issued the United Kingdom (UK) Audit Firm Governance Code – the only such code in the world. The code was drafted to serve the interests of shareholders of listed companies to whom auditors address their reports. The objective of this code is to ensure that audit firms uphold best practice governance to enhance the transparency of audit firm’s reporting and to improve the way in which audit firms are managed. Ultimately, the code also aims to strengthen the regulatory regime by promoting effective governance without disproportionate regulation (FRC
To enhance transparency and support audit firm quality and governance, audit firms are expected to release any information that might affect market confidence. This information should be released in the form of a transparency report (TR) (or similar type of report) (Kumar & Zattoni
The International Auditing and Assurance Standards Board (IAASB) (
This study determines whether large- and medium-sized South African audit firms release transparency reports and identify which corporate governance information, as indicated in the UK Audit Firm Governance Code, is disclosed by these firms. This study is pertinent in the context of South Africa following the recent spate of high-profile corporate failures such as VBS Mutual Bank, Nkonki, KPMG and Steinhoff, to name a few (Bowker, Bonorchis & Wild
The structure of this article is as follows: firstly, a literature review is conducted, after which the empirical evidence is presented in tables. A content analysis is then performed to determine the corporate governance disclosures in the transparency reports of the top nine audit firms in South Africa. Thereafter, the findings will be discussed and recommendations will be provided in the conclusion.
A delimitation of the study is that it only focuses on the top nine South African audit firms. Consequently, future research could be extended to include smaller audit firms and firms in other countries. Moreover, the study only focuses on the disclosure principles contained in the UK Audit Firm Governance Code; therefore, not all the principles contained in the code are considered.
Corporate governance disclosures of listed companies have been researched and explored in several fields (Bauwhede & Willekens
It is important that audit firms understand their responsibility to implement corporate governance principles and establish independent governance structures within their firms. They also need to understand the value that this could add – not only to the firm, but to all stakeholders. Currently, in South Africa, there is no legislation or code that regulates the corporate governance of audit firms. Consequently, there is no law that requires audit firms to report on their corporate governance structure and its application. Although the IRBA (
As stated by the IRBA (
The audit profession takes on the responsibility of detecting and reporting fraud and verifying their clients’ ability to apply and disclose governance matters (Teck-Heang & Ali
To date, there is limited research on transparency reporting in audit firms. A study conducted by Fu, Carson and Simnett (
In its call on South African audit firms to voluntarily release transparency reports, the IRBA should collaborate with both the audit firms and TR users to decide on the minimum contractual criteria that should be reported on annually. These reports should allow consumers to understand a company’s commitment to audit quality, leadership, culture and ethics, risk management procedures, employee and service provider relationships and independence (IRBA
In South Africa, the fourth iteration of the King Report on Corporate Governance (King IV) is available to organisations to guide their corporate governance application and disclosure. Published in 2016, King IV is a framework that can be adopted across listed and unlisted companies, profit and non-profit organisations and public and private entities (Institute of Directors in Southern Africa [IoDSA]
Other legislation in South Africa that governs the audit profession is the
International legislation for the audit profession includes standards issued by the IAASB. In 2009, International Standard on Quality Control (ISQC) 1 was issued, entitled Q
British businessman, Sir Donald Hood Brydon, is the author of the Brydon Report, published by the UK government in 2019. The report discusses the quality and effectiveness of audit, stressing that there are certain principles that should guide the behaviour of auditors, beyond simply following standards and the law (Brydon
According to the South African Auditing Profession Trust Initiative (SAAPTI) (
From the literature reviewed, it is noticed that the United Kingdom is the only country in the world with a corporate governance code specifically designed for audit firms. Given that South Africa’s first King report, King I, was based on the UK’s Cadbury Report (Mangena & Chamisa
In this study, content analysis was used to analyse the qualitative data. This method examines written, verbal or visual communication messages (Cole
Informed by the UK Audit Firm Governance Code, a checklist (
The study used secondary data, namely the 2018 and 2019 transparency reports obtained from publicly accessible information published on the websites of the audit firms. Secondary data were also obtained by means of a literature review. Each of the transparency reports was analysed against the checklist. This list contained ‘yes’ or ‘no’ questions, asking whether the item stated in the checklist was present in the reports. This information was used to quantify how many firms disclosed the relevant information. The answers were then extracted from Excel and entered into the International Business Machines Corporation (IBM) Statistical Analysis Software Package (IBM SPSS) for analysis.
The study adopted a constructivist approach. This method seeks to clarify the world of human experience (Cohen & Manion
The study population consisted of the large- and medium-sized audit firms in South Africa, as determined by the IRBA (
The sample consisted of the top nine audit firms in South Africa, as determined by the IRBA (
PricewaterhouseCoopers.
Deloitte and Touche.
KPMG.
Ernst and Young.
Binder Dijker Otte (BDO) South Africa.
Mazars.
SizweNtsalubaGobodo Grant Thornton.
A2A Kopano.
SAB and T Chartered Accountants, trading as Nexia SAB & T.
As mentioned earlier, the data were sourced from the transparency reports of these audit firms. In cases where such a report was unavailable on the website of the audit firm, the researcher sent the firm an email asking for a report. The 2018–2019 reports were the most recent available given that some of the 2020 reports were only published after this study was completed. These transparency reports were read, analysed and compared with the checklist criteria. As there were only nine firms in the sample, the researchers were able to conduct the content analysis by reading each report in depth.
To ensure data quality and integrity, an auditing method was followed. This included maintaining comprehensive records for all phases of the study (Bryman & Bell
The section presents the qualitative findings obtained through the content analysis of the transparency reports of the top nine audit firms in South Africa. Only seven of the audit firms published transparency reports; thus, the sample used in the content analysis consisted of these seven firms.
According to the literature, the publication of transparency reports is not yet compulsory in South Africa, although it is recommended by the IRBA (
As can be seen in
Release of transparency or integrated reports.
Reports | Yes | % | No | % | Total | Total % |
---|---|---|---|---|---|---|
Transparency report | 7 | 77.80 | 2 | 22.2 | 9 | 100 |
Integrated report | 2 | 22.20 | 7 | 77.8 | 9 | 100 |
In the following sections, the findings of the content analysis are discussed according to the six principles of the UK Audit Firm Governance Code.
According to the FRC (
Findings on the leadership principles.
Leadership | Yes | % | No | % | Total | Total % |
---|---|---|---|---|---|---|
Available on the website | 4 | 57.14 | 3 | 42.86 | 7 | 100 |
EXCO information disclosed in transparency report | 7 | 100 | 0 | 0 | 7 | 100 |
Oversight board information disclosed in transparency report | 2 | 28.57 | 5 | 71.43 | 7 | 100 |
Duties | 2 | 28.57 | 5 | 71.43 | 7 | 100 |
Decisions made | 1 | 14.29 | 6 | 85.71 | 7 | 100 |
Job titles | 3 | 42.86 | 4 | 57.14 | 7 | 100 |
Election and appointment | 1 | 14.29 | 6 | 85.71 | 7 | 100 |
Terms | 1 | 14.29 | 6 | 85.71 | 7 | 100 |
Length of service | 2 | 28.57 | 5 | 71.43 | 7 | 100 |
Meeting attendance | 0 | 0 | 7 | 100 | 7 | 100 |
Biographical details | 0 | 0 | 7 | 100 | 7 | 100 |
Duties | 2 | 28.57 | 5 | 71.43 | 7 | 100 |
Decisions made | 2 | 28.57 | 5 | 71.43 | 7 | 100 |
Job titles | 3 | 42.86 | 4 | 57.14 | 7 | 100 |
Election and appointment | 1 | 14.29 | 6 | 85.71 | 7 | 100 |
Terms | 1 | 14.29 | 6 | 85.71 | 7 | 100 |
Length of service | 2 | 28.57 | 5 | 71.43 | 7 | 100 |
Meeting attendance | 1 | 14.29 | 6 | 85.71 | 7 | 100 |
Biographical details | 1 | 14.29 | 6 | 85.71 | 7 | 100 |
EXCO, Executive committee.
Lastly,
From the given discussion, it can be deduced that all audit firms appointed an EXCO and disclosed information about the EXCO in their transparency reports. The EXCO refers to the executive committee of the audit firm and the members are selected from the partners of the firm. According to the APA, a partner must be a qualified chartered accountant (CA [SA]) and registered with the South African Institute of Chartered Accountants (SAICA) and the IRBA (Deloitte
The given findings suggest that more guidance is necessary for audit firms on leadership disclosure in the transparency reports. The firms disclosed minimal information about their EXCO and oversight board and there were inconsistencies between firms in the information that was disclosed. This makes it difficult for the users of reports, as there is no standardisation of information that should be disclosed. Once again, it seems that audit firms are willing to disclose information about their EXCO and oversight boards, but the lack of structure creates uncertainty as to exactly what should be included in the transparency reports.
The objective of the value principle, according to the FRC (
Findings on the values principle.
Values | Yes | % | No | % | Total | Total % |
---|---|---|---|---|---|---|
Code of conduct on website | 5 | 71.43 | 2 | 28.57 | 7 | 100 |
Discloses to whom the code of conduct is applicable | 5 | 71.43 | 2 | 28.57 | 7 | 100 |
The findings illustrate that audit firms do disclose information about their codes of conduct and the values that govern them. However, the concerns stem from the application of these values. As a result of the lack of a formal corporate governance code for audit firms, these values differ from one firm to another, thereby creating inconsistencies. Once again, it is submitted that the values that govern the audit firms should be formalised through specific guidelines or a corporate governance code for audit firms.
According to the FRC (
Findings on the independent non-executive director principle.
Variable | Yes | % | No | % | Total | Total % |
---|---|---|---|---|---|---|
Consists of a majority of INEDs | 0 | 0 | 7 | 100 | 7 | 100 |
Has at least three INEDs | 2 | 28.57 | 5 | 71.43 | 7 | 100 |
Discloses reasons for not having at least three INEDs | 0 | 0 | 7 | 100 | 7 | 100 |
Has a majority of INEDs who are members of other relevant governance structures in the firm | 2 | 28.57 | 5 | 71.43 | 7 | 100 |
Appointment, retirement and resignation of INEDs | 1 | 14.29 | 6 | 85.7 | 7 | 100 |
Remuneration of INEDs | 1 | 14.29 | 6 | 85.71 | 7 | 100 |
Duties of INEDs | 1 | 14.29 | 6 | 85.71 | 7 | 100 |
INEDs’ discharge of duties | 1 | 14.29 | 6 | 85.71 | 7 | 100 |
Firm support for INEDs | 1 | 14.29 | 6 | 85.7 | 7 | 100 |
How the firm positions INEDs | 3 | 42.86 | 4 | 57.14 | 7 | 100 |
Has INEDs who have skills and experience in audit | 2 | 28.57 | 5 | 71.43 | 7 | 100 |
Has INEDs who are competent in auditing/accounting | 2 | 28.57 | 5 | 71.43 | 7 | 100 |
How INEDs influence independence | 1 | 14.29 | 6 | 85.7 | 7 | 100 |
Discloses the procedures for dealing with any fundamental disagreements | 0 | 0 | 7 | 100 | 7 | 100 |
INEDs, Independent non-executive directors.
As can be seen in
Furthermore,
According to SAAPTI (
The findings presented in
According to the FRC (
Findings on the operations principle.
Operations | Yes | % | No | % | Total | Total (%) |
---|---|---|---|---|---|---|
Policies and procedures to manage conflicts of interest | 4 | 57.14 | 3 | 42.86 | 7 | 100 |
Effectiveness of the internal control system | 2 | 28.57 | 5 | 71.43 | 7 | 100 |
Process followed in reviews | 2 | 28.57 | 5 | 71.43 | 7 | 100 |
Weaknesses in internal control system | 2 | 28.57 | 5 | 71.43 | 7 | 100 |
Actions to address weaknesses | 2 | 28.57 | 5 | 71.43 | 7 | 100 |
How the firm supports its commitment to professionalism, openness and risk management | 1 | 14.29 | 6 | 85.71 | 7 | 100 |
Whistle-blowing policies and procedures | 6 | 85.71 | 1 | 14.29 | 7 | 100 |
The findings reveal that most of the operations principles were not disclosed by the majority of the audit firms. This is concerning given that audit firms should disclose to the public and all stakeholders how their risks are managed and whether their internal controls are effective. As audit firms largely serve the public interest, it is important that they maintain transparency in their disclosure about risks and internal controls.
It should be noticed that one audit firm did disclose all the operations principles in its integrated report (IR) but not in its transparency report. This was, therefore, included in the findings as a ‘Yes’.
The objective of the reporting principle in the UK Audit Firm Governance Code, according to the FRC (
Findings on the reporting principle.
Reporting | Yes | % | No | % | Total | Total (%) |
---|---|---|---|---|---|---|
Includes a commentary on the firm’s performance, position and prospects | 3 | 42.86 | 4 | 57.14 | 7 | 100 |
Includes fair and balanced information | 4 | 57.14 | 3 | 42.86 | 7 | 100 |
Explains everything in an understandable manner | 6 | 85.71 | 1 | 14.29 | 7 | 100 |
Has an audit committee | 3 | 42.86 | 4 | 57.14 | 7 | 100 |
Has a risk committee | 5 | 71.43 | 2 | 28.57 | 7 | 100 |
Has a nomination committee | 2 | 28.57 | 5 | 71.43 | 7 | 100 |
Has a remuneration committee | 3 | 42.86 | 4 | 57.14 | 7 | 100 |
Has an ethics committee | 2 | 28.57 | 5 | 71.43 | 7 | 100 |
Audit committee constituted according to King IV | 1 | 14.29 | 6 | 85.71 | 7 | 100 |
Publishes audited financial statements | 0 | 0 | 7 | 100 | 7 | 100 |
Publishes audited financial statements prepared with the financial reporting framework | 0 | 0 | 7 | 100 | 7 | 100 |
Publishes audited financial statements that are clear and concise | 0 | 0 | 7 | 100 | 7 | 100 |
Explains who is responsible for preparing the financial statements | 0 | 0 | 7 | 100 | 7 | 100 |
Only three of the audit firms included commentary on the firm’s performance, position and prospects. Four firms included information that was fair and balanced. Six of the firms conveyed information in an understandable manner.
With reference to committees, three of the audit firms disclosed information about having an audit committee, five disclosed information about having a risk committee and two disclosed information about a nomination committee. Three of the firms disclosed information about a remuneration committee and two firms had ethics committees. Only one firm indicated that its audit committee was constituted according to the principles of King IV.
Evidence was neither found of published audited financial statements nor was there any information regarding the reporting framework or who was responsible for preparing the financial statements. None of the firms disclosed that their financial statements were clear and concise. A further search was performed to determine whether the audited financial statements were possibly published on other platforms; however, no such evidence was found.
As stated by the IoDSA (
The findings reveal that only two of the provisions were implemented by the majority of the audit firms. In this study, the conclusions on the understandability of the information in the reports could be subjective. The assessment was based merely on the opinion of the researcher and each user of the transparency reports of the audit firms may have a different opinion. Once again, this could stem from the lack of specific guidelines for audit firms, explaining what information should be included in transparency reports and which committees should be established.
The fact that none of the audit firms published audited financial statements is also a concern. The public, whose interests these firms serve, has no insight into the financial information of these firms. This too, is something that could be addressed through formal guidelines for audit firms.
The UK Audit Firm Governance Code’s dialogue principle, according to the FRC (
Findings on the dialogue principle.
Dialogue | Yes | % | No | % | Total | Total (%) |
---|---|---|---|---|---|---|
Discloses policies and procedures for dialogue with listed company shareholders and listed companies | 3 | 42.86 | 4 | 57.14 | 7 | 100 |
Discloses the nature and extent of the involvement of INEDs in the dialogue | 1 | 14.29 | 6 | 85.71 | 7 | 100 |
It is evident that most audit firms failed to disclose appropriate information on the dialogue principle. The literature states that governance includes communication and involvement with shareholders and stakeholders. It is thus important that audit firms have regular dialogue with these parties and disclose the relevant information in their transparency reports.
Summary of findings.
Principle as per the UK audit firm governance code | Disclosure % |
---|---|
Leadership | < 50 |
Values | > 50 |
INEDs | < 50 |
Operations | < 50 |
Reporting | < 50 |
Dialogue | < 50 |
INED, Independent non-executive directors; UK, United Kingdom.
The study determined which of the disclosure principles and provisions contained in the UK Audit Firm Governance Code were disclosed by South African audit firms in their transparency reports.
According to the literature, audit firms are expected to reveal any information that would promote market trust and increase transparency (Kumar & Zattoni
The call for greater transparency and disclosure by audit firms is validated by the recent high-profile audit firm failures and the lack of confidence in the financial market in the post-global financial crisis era (Huddart
The findings of this study revealed that the disclosure of corporate governance information in the transparency reports did not always contain sufficient details. This lack of disclosure reduces the reliance of stakeholders on the corporate governance of the audit firms, thereby undermining public trust in the profession. The minimal disclosure by audit firms suggests that the firms may be unaware of the information that should be disclosed in their transparency reports. Consequently, there is a strong need for guidelines on the disclosure that is expected of audit firms. Formal guidelines or a code would ensure that audit firms disclose necessary and consistent information to the public.
A shortcoming of the South Africa’s corporate governance code, King IV, is that it does not contain any sector supplements for audit firms. Thus, the application of King IV as it currently stands is challenging for audit firms. It would be difficult for firms to apply all the principles in King IV, especially those relating to the appointment of INEDs. This is because the APA also makes it impossible for audit firms to appoint INEDs to their EXCO; therefore, reform of this act would be necessary.
Six recommendations are proposed based on the findings of this study:
The IoDSA should consider the inclusion of a sector supplement for audit firms in future King Code iterations.
The IRBA should consider using the findings of this study and the UK Audit Firm Governance Code to draft guidelines for audit firms on corporate governance.
An amendment of the APA should be considered to facilitate the appointment of INEDs for audit firms.
Professional bodies and institutions such as the IoDSA and SAAPTI should consider providing best practice standards on corporate governance at audit firms.
The IoDSA (or the IRBA, as the regulator) should consider providing a statement for audit firms, giving them guidance on corporate governance practices (such as the UK Audit Firm Governance Code provided by the FRC).
All audit firms should give greater consideration to the practice of good corporate governance to enjoy the benefits that it offers. As the principles embodied in King IV are similar to those contained in the UK Audit Firm Governance Code, the audit firms could start by implementing the relevant principles of King IV until more specific developments emerge in future.
Based on the study’s findings, it can be concluded that that the application of corporate governance in large- and medium-sized audit firms is inadequate. This was evident from the empirical results and the content analysis. The key reason for the low levels of corporate governance in South African audit firms is attributed to the lack of a South African corporate governance code specifically designed for audit firms.
The following step-by-step approach could be used by the IRBA and professional bodies to improve corporate governance implementation and disclosure at audit firms.
The authors declare that they have no financial or personal relationships that may have inappropriately influenced them in writing this article.
R.J.S. performed the literature review and content analysis. Prof. B.M. supervised the study.
This article followed all ethical standards for research without direct contact with human or animal subjects.
This research received no specific grant from any funding agency in the public, commercial or not-for-profit sectors.
Data sharing is not applicable to this article as no new data were created or analysed in this study.
The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of any affiliated agency of the author.
Checklist used for the empirical study.
Control sheet for the analysis of the transparency reports | |||||
[Yes = Y; No = N] | |||||
1 | Does the auditing firm issue a transparency report? | ||||
Comments: | |||||
2 | If ‘YES’ to question number ‘1’, where is the transparency report published? | ||||
2.1 | Company website? | ||||
2.2 | Emailed the company and requested it? | ||||
Comments: | |||||
3 | Does the auditing firm issue an integrated report? | ||||
Comments: | |||||
4 | If ‘YES’ to question number ‘3’, where is the integrated report published? | ||||
4.1 | On the company website? | ||||
4.2 | Had to email the company and request it? | ||||
Comments: | |||||
‘This question requires a response with regards to both, the transparency report (TR) and the integrated report (IR)’. | |||||
5. | Does the audit firm disclose information about the Board of Directors? | ||||
Comments: | |||||
‘This question requires a response with regards to both, the transparency report (TR) and the integrated report (IR)’. | |||||
6 | Does the audit firm disclose information about the oversight board? | ||||
Comments: | |||||
‘This question requires a response with regards to both, the transparency report (TR) and the integrated report (IR)’. | |||||
7 | With regard to the composition of the Board of Directors, what information is disclosed on the composition of the Board of Directors? | ||||
7.1 | Number of members | ||||
7.2 | Number of executive directors | ||||
7.3 | Number of non-executive directors | ||||
7.4 | Number of INED directors | ||||
7.5 | Race (number of members) | ||||
a. Black | |||||
b. Mixed race | |||||
c. Indian | |||||
d. White | |||||
7.6 | Gender (number of members) | ||||
a. Male | |||||
b. Female | |||||
Comments: | |||||
‘This question requires a response with regard to both, the transparency report (TR) and the integrated report (IR)’. | |||||
8 | With regard to the composition of the Oversight Board, what information is disclosed on the composition of the Oversight Board? | ||||
8.1 | Number of members | ||||
8.2 | Number of executive directors | ||||
8.3 | Number of non-executive directors | ||||
8.4 | Number of INED directors | ||||
8.5 | Race (number of members) | ||||
a. Black | |||||
b. Mixed race | |||||
c. Indian | |||||
d. White | |||||
8.6 | Gender (number of members) | ||||
a. Male | |||||
b. Female | |||||
Comments: | |||||
‘This question requires a response with regards to both, the transparency report (TR) and the integrated report (IR)’. | |||||
9 | |||||
9.1 | A majority of INED directors? | ||||
9.2 | At least three INED directors? | ||||
9.3 | If your answer in 6.2 is ‘no’, do you disclose the reason for not having at least three INED directors on the Board of Directors? | ||||
9.4 | A majority of INED directors whom are members of other relevant governance structures in the firm? | ||||
9.5 | Independent, non-executive directors who have a balance of relevant skills and experience in audit? | ||||
9.6 | At least one INED director who has competence in accounting and/or auditing? | ||||
Comments: | |||||
‘This question requires a response with regard to both, the transparency report (TR) and the integrated report (IR) disclosure’. | |||||
10 | |||||
10.1 | A majority of INED directors? | ||||
10.2 | At least three INED directors? | ||||
10.3 | If your answer in 10.2 is ‘no’, do you disclose the reason for not having at least three INED directors on the Oversight Board? | ||||
10.4 | A majority of INED directors who are members of other relevant governance structures in the firm? | ||||
10.5 | Independent, non-executive directors who have a balance of relevant skills and experience in audit? | ||||
10.6 | At least one INED director who has competence in accounting and/or auditing? | ||||
Comments: | |||||
‘This question requires a response with regard to both, the transparency report (TR) and the integrated report (IR) disclosure’. | |||||
11 | With regard to the disclosure of information pertaining to the Board of Directors does the transparency report or the integrated report: | ||||
11.1 | State how the audit firm’s Board of Directors operate their duties? | ||||
11.2 | State what type of decisions are made by the Board of Directors? | ||||
11.3 | State the names and job titles of all members of the Board of Directors? | ||||
11.4 | State how the members of the Board of Directors were elected or appointed? | ||||
11.5 | State the terms of the members of the Board of Directors? | ||||
11.6 | State the length of service of the members of the Board of Directors? | ||||
11.7 | State the meeting attendance in the year of the members of the Board of Directors? | ||||
11.8 | State any biographical details of the members of the Board of Directors? | ||||
11.9 | Include information on the appointment, retirement and resignation of INED directors? | ||||
11.10 | Include information on the remuneration of the INED directors? | ||||
11.11 | Include information on the duties of the INED directors? | ||||
11.12 | Include arrangements by which the INED directors discharge their duties? | ||||
11.13 | Include how the supports the INED directors in discharging their duties? | ||||
11.14 | Explain how the audit firm has positioned its INED directors (on the Board of Directors or the Oversight Board)? | ||||
11.15 | State the criteria for assessing the impact of INED directors on the firm’s independence as auditors and their independence from the firm and its owners? | ||||
Comments: | |||||
‘This question requires a response with regard to both, the transparency report (TR) and the integrated report (IR)’. | |||||
12 | With regard to the disclosure of information pertaining to the Oversight Board does the transparency report or the integrated report: | ||||
12.1 | State how the audit firm’s Oversight Board operates its duties? | ||||
12.2 | State what types of decisions are made by the Oversight Board? | ||||
12.3 | State the names and job titles of all members of the Oversight Board? | ||||
12.4 | State how the members of the Oversight Board were elected or appointed? | ||||
12.5 | State the terms of the members of the Oversight Board? | ||||
12.6 | State the length of service of the members of the Oversight Board? | ||||
12.7 | State the meeting attendance in the year of the members of the Oversight Board? | ||||
12.8 | State any biographical details of the members of the Oversight Board? | ||||
12.9 | Include information on the appointment, retirement and resignation of INED directors? | ||||
12.10 | Include information on the remuneration of the INED directors? | ||||
12.11 | Include information on the duties of the INED directors? | ||||
12.12 | Include arrangements by which the INED directors discharge their duties? | ||||
12.13 | Include how the supports the INED directors in discharging their duties? | ||||
12.14 | Explain how the audit firm has positioned its INED directors (on the Board of Directors or the Oversight Board)? | ||||
12.15 | State the criteria for assessing the impact of INED directors on the firm’s independence as auditors and their independence from the firm and its owners? | ||||
Comments: | |||||
‘This question requires a response with regard to both, the transparency report (TR) and the integrated report (IR)’. | |||||
13 | With regard to the disclosure of information pertaining to risk management, does the transparency report or the integrated report: | ||||
13.1 | Disclose that a review was performed on the effectiveness of the system of internal control? | ||||
13.2 | Disclose which process was applied to perform a review on the effectiveness of the system of internal control? | ||||
13.3 | Disclose what weaknesses were identified in the review on the effectiveness of the system of internal control? | ||||
13.4 | Disclose what actions will be taken to deal with weaknesses identified in the review of the system of internal control? | ||||
13.5 | Disclose on the audit firm’s website how the firm will support its commitment to the professionalism, openness and risk management? | ||||
13.6 | Disclose on the auditing firms’ website the whistle-blowing policies and procedures? | ||||
Comments: | |||||
‘This question requires a response with regard to both, the transparency report (TR) and the integrated report (IR)’. | |||||
14 | With reference to disclosure in the transparency report and the integrated report, does your auditing firm: | ||||
14.1 | State how the firm applies policies and procedures for managing potential and actual conflicts of interest? | ||||
14.2 | Include a commentary on the firm’s performance, position and prospects? | ||||
14.3 | Include fair and balanced information? | ||||
14.4 | Explain everything in an understandable manner? | ||||
Comments: | |||||
15 | With regard to disclosure on the audit firm’s website, is the following information disclosed on the audit firm’s website? | ||||
15.1 | Policies and procedures for dialogue with listed company shareholders and listed companies. | ||||
15.2 | The nature and extent of the involvement of the INED director in the dialogues. | ||||
15.3 | Its code of conduct. | ||||
15.4 | To whom the code of conduct is applicable to? | ||||
15.5 | Procedures for dealing with any fundamental disagreement between the INEDs and members of the firm’s management team and/or governance structures. | ||||
Comments: | |||||
‘This question requires a response with regard to both, the transparency report (TR) and the integrated report (IR)’. | |||||
16 | Does the auditing firm disclose information on any of the following committees: | ||||
16.1 | Audit committee | ||||
16.2 | Risk committee | ||||
16.3 | Nomination committee | ||||
16.4 | Remuneration committee | ||||
16.5 | Ethics committee | ||||
Comments: | |||||
17 | If the auditing firm has an audit committee, is it constituted according to the principles in King IV? | ||||
Comments: | |||||
‘This question requires a response with regard to both, the transparency report (TR) and the integrated report (IR)’. | |||||
18 | With reference to audited financial statements, does the auditing firm: | ||||
18.1 | Publish audited financial statements? | ||||
18.2 | Publish audited financial statements that are prepared in accordance with the recognised financial reporting framework? | ||||
18.3 | Publish audited financial statements that are clear and concise? | ||||
18.4 | Explain who is responsible for preparing the financial statements. | ||||
Comments: |
INED, Independent non-executive directors.