IRBA Highlights Heightened Responsibilities and Risks in Auditing Listed Entities

03 Dec 2025
Johannesburg, Wednesday, 3 December, 2025 — The Independent Regulatory Board for Auditors (IRBA) has issued a strong reminder to audit firms of the significant responsibilities and risks associated with auditing listed entities, following recent inspections and regulatory changes in the audit landscape.

Says Ntlambi Gulwa, Director: Inspections at IRBA: “As auditors of listed entities, we play a crucial role in maintaining market confidence and protecting investors. Our inspections reveal that some firms may not fully appreciate the increased risks and challenges that come with these audits. It is imperative that audit firms rigorously apply the requirements of the International Standards on Quality Management (ISQMs), International Standards on Auditing (ISAs), the IRBA Code, and other regulatory requirements before accepting such clients.”

The IRBA, a founding member of the International Forum of Independent Audit Regulators (IFIAR), has adopted the IFIAR Core Principles, which require a risk-based inspections programme. Approximately 80 percent of IRBA’s inspection resources are dedicated to monitoring audit firms that accept public interest entities (PIEs) as assurance clients, which include listed entities. Listed entities, as defined by the IRBA Code, include any entity that issues financial instruments traded on a public market, and not only those with listed equity.

It is important to note that an entity that only lists instruments other than equity, such as debt, exchange-traded funds, redeemable preference shares, and interest rate instruments, meets the definition of a listed entity and is therefore automatically classified as a PIE. Consequently, auditors of listed entities are more likely to be selected for an inspection, regardless of the size of the audit practice.

Recent changes to the Johannesburg Stock Exchange (JSE) Listing Requirements concerning the auditor accreditation model have increased competition among audit firms. While there has been a growth in the number of audit firms being appointed across exchanges, Section 3.87 of the JSE Listings Requirements emphasises that any proposed auditor must be subject to a firm-wide independent quality management inspection performed by the IRBA in a current or previous inspections cycle. This has resulted in an increased number of firms being selected for firm-wide inspection.

Says Gulwa: “The removal of the JSE auditor accreditation model does not reduce the significant responsibility associated with auditing listed entities. Audit committees must consider the latest inspection results when appointing auditors, and firms must ensure they have the capacity, expertise, and independence required for these high-risk engagements.”

Key findings from IRBA inspections include:

• Inadequate client acceptance and continuance procedures, leading to engagements without full consideration of capacity, independence, and audit risks.
• Insufficient understanding of the listed environment and failure to identify clients as listed entities, especially those issuing non-equity instruments.
• Lack of expertise, resources, or infrastructure to perform audits to the required standard, including engagement quality reviews and specialist input.
• Independence threats due to fee dependency and the provision of prohibited non-assurance services.
• Over-reliance on financial statement preparers, resulting in undetected errors and inappropriate audit opinions.

Firms that are expanding into the listed space are encouraged to strengthen these areas of potential weakness in advance and ensure that audit teams fully understand the application of the applicable ISAs.

Concludes Gulwa: “Accepting an engagement without adequate capacity or safeguards not only risks audit failure but may also amount to negligence and breach the fundamental principles of our profession. Upholding quality and independence when auditing listed entities is not merely a regulatory requirement – it is a professional responsibility. By doing so, auditors protect the public interest and safeguard the trust that underpins our financial markets.”

Read the full findings here: IRBA News Issue 71

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About IRBA:

The Independent Regulatory Board for Auditors (IRBA) is the statutory body mandated to regulate the auditing profession in South Africa. Established by the Auditing Profession Act 26 of 2005, the IRBA’s mission is to protect the public interest by ensuring the highest standards of audit quality and ethical conduct among registered auditors.