STRENGTHENING AUDITOR INDEPENDENCE 1

The IRBA 4 Pillar Strategy 2

Background Audit failures and global financial crises drive focus on the independence of Auditors and the responsibility of Regulators Increased demands from investors Drive for High Audit Quality Governments and Regional Trade structures such as the EU are taking legislative steps and focusing on who is accountable for the public protection Stricter measures are the order of the day Aligning to international practice 3

Project Timeline and Key Milestones 4

What are our concerns in the SA context? Strengthening auditor independence to enhance audit quality (primary) Addressing audit market concentration (secondary); and Promoting transformation in the profession (secondary). 5

Scope of research The scope of the project considered the following three measures : –Mandatory Audit Firm Rotation (MAFR); –Mandatory Audit Tendering (MAT); and –Joint Audits (JA). Also allowed for exploration of other solutions or a combination of the above 6

INDEPENDENCE Research Findings 7

Threats to independence Familiarity threat between CFOs and the incumbent auditors Familiarity threat between audit committee chairs and incumbent auditors PIC concerns regarding the independence of auditors and company directors Myburgh Report on African Bank Inspection findings relating to ethical requirements Audit tenure of audit firm and rotation history of the Top 40 AG audits Discussions with Ratings Agencies 8

Audit tenure for Top 40 companies Top 40 companies. Audit tenure > 20 years Audit tenureAudit fees Anglo Gold Ashanti72 yearsR101 million Mondi Limited48 yearsR49 million MTN Limited22 yearsR107 million Nedbank Limited42 yearsR107 million NaspersMore than 90 yearsR117 million Standard Bank Group53 yearsR137 million 9

Impact of audit fees on previous audit firm rotations in South Africa 1.Vodacom Limited31 March March 2014 Audit feesR26 millionR22 million Audit firmPwCDeloitte 1.Sasol Limited30 June June 2014 Audit feesR87 millionR86 million Audit firmPwCKPMG 1.Bidvest Limited30 June June 2007 Audit feesR44 millionR39 million Audit firmDeloitteKPMG 1.Famous Brands Limited**28 February February 2015 Audit feesR4.6 millionR3.4 million Audit firmDeloitteRSM Betty 10

MARKET CONCENTRATION Research Findings 11

Audit market share for listed companies 12

Global presence of major audit firms in SA Name of Firm Deloitte 220,000 professionals in more than 150 countries and territories. EY 212,000 employees in over 700 offices in 150 countries. KPMG KPMG employs 174,000 in 152 countries and in over 700 cities worldwide. PwC PwC has offices in 157 countries and more than 208,000 people, BDO The firm have representation in 154 territories, with 64,300 people Grant Thornton 42,000 people in over 130 countries, RSM Betty It has firms in 120 countries and a combined staff of over 38,000 Howarth Leveton Boner Consists of more than 200 independent accounting firms in over 130 countries. SizweNtsalubaGobodo While rooted in Africa, its international links with leading global consulting and professional services firms enable it to meet the cross-border needs of its clients, Nkonki Nkonki Inc is a member firm of Kreston International Limited. Kreston covers over 100 countries and provides a resource of more than 20,000 professional and support staff. PKF Member firms operate under the PKF brand in 440 cities and operate in 150 countries across five continents. 13

TRANSFORMATION Research Findings 14

Racial demographics of audit partners signing off on listed companies - % 15

Further solutions suggested from consultation Strengthening of audit committees Public disclosure of firms’ inspections report Enhance audit committee report and auditor reporting Increase the IRBA penalties Provide audit quality indicators to relevant stakeholders Strengthen the audit regulator 16

Way forward The IRBA intends to further consult on implementation of the new requirements, as the Board plans to engage with business around the associated steps and milestones to be accomplished 17

THANK YOU 18