Every year, the IRBA issues its Public Inspections Report to provide the profession with critical insights into topical deficiencies, and trends identified during the inspection of audit firms and engagements. The 2025 report, which was issued in March 2026, serves as a vital tool for auditors to identify gaps within their own practices and implement the remedial measures necessary to address these gaps.

A risk-based inspection approach

The IRBA continues to employ a risk-based approach to its inspections. The past cycle addressed inspections through three primary avenues:

• Theme-based inspections
• Firm-wide inspections
• The monitoring of emerging risks

SMP segment

Notably, the IRBA observed a significant increase in small and medium-sized practices (SMPs) accepting audits for entities listed on South Africa’s four authorised stock exchanges. This shift has necessitated more frequent regulatory oversight within the SMP segment to ensure that the market remains protected, as these firms take on high-risk public interest engagements.

Trends in firm-level quality management

While most firms, particularly those auditing public interest entities (PIEs), have successfully implemented firm-quality management systems, the IRBA noted that quality system monitoring is not always performed as strictly as required. Common deficiencies include insufficient and inappropriate documentation of risk assessment processes and responses to quality risks. The compliance rate for satisfactory outcomes increased from 23% to 30%. However, there was a sharp increase in the number of firms referred for investigation, which jumped from 7% in 2024 to 25% in 2025. This suggests that, while many firms are improving, a segment of the profession still struggles with systemic quality issues that require formal intervention. Services similar to what LEAF provides are important for continuous improvement of quality systems, with compliance being part of normal audit business,

Engagement file outcomes and recurring deficiencies

At the engagement level, the IRBA inspected 72 files. Only 6% of the files required no further action, while 44% required significant improvement and 28% were referred for investigation. These referrals were primarily driven by pervasive poor audit quality, lack of sufficient evidence in non-PIE audits, and independence breaches in listed entities. This is indicative of poor training and lack of technical guidance.

Key areas of concern included:

• Revenue recognition: Specifically, issues regarding the completeness and occurrence of material revenue streams
• Accounting estimates: Insufficient evidence for assumptions used in asset impairment and a lack of documented retrospective reviews
• Information technology (IT): A significant number of findings involved inappropriate reliance on IT general controls and failing to test the reliability of system-generated information
• Professional scepticism: The IRBA frequently noted that auditors accepted management representations at face value without sufficient corroboration.

The remedial action process and new initiatives

The regulator has engaged firms in a proactive monitoring process, focusing on Root Cause Analysis (RCA) and Remedial Action Plans (RAPs). Effective remediation requires firms to look beyond surface-level issues to identify underlying causes such as time pressure, lack of technical knowledge or inadequate senior involvement. The IRBA has launched several new initiatives for the Ninth Inspections Cycle. These include: • National roadshows to create awareness of inspection results • The establishment of an Audit Quality Monitoring Forum for top firms • Audit Committee Round Tables to engage directly with committee chairpersons on the value of audit quality • Increased scrutiny of the auditor’s role in fraud detection following recent high-profile financial reporting failures.

Practical takeaways

Audit firms need to: • Analyse these common deficiencies and trends to identify areas for improvement • Perform a root cause analysis • Identify action plans • Implement the remedial measures required • Monitor complete and satisfactory implementation. The whole team should be involved in the brainstorming exercise performed as part of the root cause analysis. As part of the root cause analysis process, remember to ask why at least five times to identify the true root cause behind the deficiencies. Refer to Appendix B of the IRBA Public Inspections Report 2022 for an illustrative example of how to apply ‘The 5 WHYs Root Cause Analysis Tool’. Guidance by an expert in these situations is crucial.

Conclusion

The IRBA Public Inspections Report 2025 underscores the ongoing challenges and successes within the South African auditing profession. While there is evidence of progress in firm-level quality management, the high rate of engagement-level deficiencies indicates that much work remains to be done. By utilising these findings as a roadmap for remediation and embracing a culture of continuous improvement, auditors and audit committees, where applicable, can work together to safeguard the public interest and restore confidence in corporate reporting.

References

1. IRBA Public Inspections Report on Audit Quality 2025 2. IRBA Public Inspections Report on Audit Quality 2022 3. ISQM 1, Quality management for firms that perform audits or reviews of financial statements, or other assurance or related services engagements.

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