The report shows that audit deficiencies continue to cluster around complex financial reporting areas, including revenue recognition, accounting estimates, going concern assessments, journal entries, and financial statement disclosures.
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The Independent Regulatory Board for Auditors (IRBA) has raised renewed concerns about audit quality in South Africa, warning that weaknesses remain concentrated in high-risk and judgement-intensive areas despite signs of improvement across parts of the profession.
Releasing its 2025 Public Inspections Report on Monday, the regulator said its findings provide a “risk-focused diagnostic” of audit quality, highlighting pressure points in the system and identifying areas requiring sustained attention to protect the public interest.
The report is based on inspections conducted during the 2024/25 cycle and focuses deliberately on complex, high-risk audits, including public interest entities and engagements where significant judgement is required.
IRBA stressed that the results are not representative of the entire audit profession but rather target areas where the risk of failure is greatest.
IRBA CEO Imre Nagy said the findings reinforce the importance of maintaining high standards in an increasingly uncertain economic environment.
“High-quality audits are fundamental to trust in financial reporting, particularly during times of economic pressure and uncertainty,” Nagy said. “This report reinforces the need for continuous improvement and strong leadership commitment to audit quality across the profession.”
He added that the risk-based methodology used in inspections is key to interpreting the results. By design, the inspections highlight areas where governance, judgement and oversight are under the most strain, rather than depicting an “average” audit outcome.
The report shows that audit deficiencies continue to cluster around complex financial reporting areas, including revenue recognition, accounting estimates, going concern assessments, journal entries, and financial statement disclosures.
In many cases, inspectors found shortcomings in the quality of audit evidence, insufficient challenge of management assumptions, and weak documentation supporting key audit judgements.
IRBA director for inspections, Ntlambi Gulwa, noted that these issues often stem from how professional judgement and scepticism are applied in practice.
“What we consistently observe in high-risk audits is that challenges arise where professional judgement and scepticism are most heavily relied upon,” Gulwa said.
“In many cases, judgements may have been made, but the audit documentation does not clearly demonstrate how alternatives were considered, how contradictory evidence was evaluated, or how conclusions were reached.”
She added that professional scepticism remains a recurring concern, particularly in complex audits where it must be clearly evidenced through procedures performed and conclusions reached.
“Professional scepticism is not a statement of intent. It must be demonstrated through the audit approach, the nature and extent of procedures performed, and the documentation that supports the auditor’s conclusions. In high-risk audits, this is fundamental to support the audit opinion,” she said.
The report also points to the growing use of advanced technologies such as data analytics and artificial intelligence in audit processes. While these tools offer the potential to enhance efficiency and audit quality, IRBA cautioned that they also introduce new risks if not supported by appropriate governance, skills and oversight.
Inspection findings in this area highlighted gaps in auditors’ understanding of IT environments, weaknesses in testing system-generated information, and challenges in integrating technology considerations into audit planning and execution.
At a firm-wide level, the regulator noted progress in the implementation of systems of quality management under international standards ISQM 1 and ISQM 2. Many firms have strengthened leadership accountability, increased training efforts, and improved monitoring and remediation processes.
However, the report also identified ongoing deficiencies in some firms’ quality management systems, particularly in risk assessment processes and the design and implementation of responses to quality risks. In certain instances, IRBA said firms had not implemented effective systems of quality management at all, raising concerns about the potential impact on audit outcomes.
Recurring engagement-level deficiencies were also flagged in key audit areas, with some issues pointing to broader systemic weaknesses. These findings were escalated to firm level, underscoring the link between firm-wide controls and the quality of individual audits.
Nagy emphasised that improving audit quality is a shared responsibility, with audit committees playing a crucial oversight role.
“Audit quality is a shared responsibility. Audit committees play a critical role in setting expectations, interrogating significant judgements and holding firms accountable, particularly in high-risk engagements,” Nagy said.
“Both the public inspections report and the report on Audit Quality Indicators are intended to encourage positive engagement between audit committees and the auditors, as well as with other stakeholders.”
The report encourages stronger engagement between auditors, audit committees and stakeholders, particularly around how firms manage independence risks, apply professional scepticism, and govern the use of technology.
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