Practical implications of the new IRBA Code

Practical implication of the new IRBA code

The new IRBA Code of Professional Conduct for Registered Auditors (Revised November 2018) (IRBA Code) came into effect recently, but not all registered auditors understand the practical implications thereof. This article sets out important practical areas to consider to ensure ethical compliance.

When does what apply?

The effective dates relevant to the new IRBA Code are as follows:
Parts 1 & 3: 15 June 2019
Part 4A & 4B: Periods beginning on or after 15 June 2019
Section 321 amendments: Engagements commencing on or after 15 January 2020
Just because some parts of the new IRBA Code will only become effective next year doesn’t mean that it can be left for then. Firms should already start with preparations now to be able to fully comply at that time.

Changes to the conceptual framework

The new IRBA Code clarifies the definition of a reasonably informed third party (RITP) and requires that the RITP test should be applied to all three stages of applying the conceptual framework. Professional judgement should also be exercised throughout the entire process. The registered auditor should remain alert for new information and changes in facts and circumstances, since this may influence conclusions drawn.

The new IRBA Code further brought in a stand back requirement to consider the overall conclusion made and whether actions taken are appropriate to resolve the issue. Safeguards are no longer the only means to address threats and it should be thoroughly considered whether safeguards are actually effective or whether further steps need to be taken.

All of these changes should be considered and documentation of ethical considerations should clearly reflect how these new requirements were brought in. This therefore requires an update to ethical considerations working papers and registers of the firm.

conceptual framework image


Some of the changes to the independence provisions of the new IRBA Code requires firms to change policies, update forms and registers and create awareness among staff to ensure that these are correctly applied and complied with. The following are areas requiring action by firms ahead of the effective date to ensure that everyone is ready for implementation:

• Inducements: The previous definition of gifts and hospitality has been expanded significantly, a new intent test was introduced and inducements relating to immediate or close family members should be considered. Firms should therefore update gifts registers, related forms and working papers to cater for this.

• Recruitment: Reference checks for senior positions at audit clients are no longer allowed, and searching for candidates are also prohibited. This means that firms should review services provided to clients and inform clients accordingly.

• Long association: The extension of the cooling off period for audit engagement partners of public interest entities was already brought in during 2018 with transitional provisions, but not all firms have started planning for this yet. The firm’s rotation plan and strategy for continuity must be revised in line with the new requirements.

• Networks: Many requirements previously only referred to firms and the vast majority of requirements now refer to both firms and network firms. Policies and procedures of network firms may require updating in this regard to ensure full compliance.


Non-compliance with laws and regulations (NOCLAR) provisions were already effective from 2017 as a separate pronouncement from the extant IRBA Code. When these requirements were brought into the new IRBA Code, a few modifications were made in terms of the NOCLAR response framework but the overarching principles remained the same.

The biggest practical challenge to date, however, is that not all firms have documented their consideration of the NOCLAR response framework, since many believed that it was addressed through considering reportable irregularities. Firms should consider implementing separate NOCLAR considerations working papers and registers, or combine this with their existing forms and processes to ensure that it also caters for NOCLAR requirements.

Audit report

The IRBA issued a communication in March 2019 about the impact of the effective dates of the new IRBA Code on audit reports. The illustration below sets this out clearly. Auditors should be mindful of this when issuing audit reports during this transitional period. South African Auditing Practice Statement 3 (SAAPS 3) was revised and the updated version was issued by the IRBA in May 2019, therefore it should be easy enough to check against this whether audit reports are worded correctly.


The new changes coming into effect require revision of existing practices, forward planning and communication to staff and other affected parties. Don’t be left behind or caught off guard – take action now to ensure that your firm is compliant. If you have any questions or need a helping hand, you are welcome to contact LEAF for expert technical advice and practical guidance.


1. IRBA Code of Professional Conduct for Registered Auditors (Revised November 2018), November 2018
2. IRBA: Final amendments to the IRBA Code of Professional Conduct for Registered Auditors (Revised November 2018) in respect of Section 321 Second Opinions, June 2019
3. IRBA: Alert: Implications of the effective dates of the IRBA Code of Professional Conduct for Registered Auditors (Revised November 2018) on the Auditor’s and Assurance Provider’s Reports, March 2019
4. IRBA: South African Auditing Practice Statement 3 – Illustrative Reports, May 2019

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