The South African Companies Act 71 of 2008, which came into effect on
1 May 2011, legislated that the financial statements of all public companies and
state-owned companies should be audited annually but stipulated that the
financial statements of private companies and personal liability companies are
only subject to audit if an audit is in the public interest. As a result, certain
companies are relieved from mandatory annual audits. This change in regulation
had a direct impact on the audit practice, in particular on small and medium-sized
audit practices since many of their clients no longer required an audit.
This study determined the impact of mandatory audit relief on small and mediumsized
audit practices in South Africa with reference to the need for an audit,
organisational arrangements, social factors, technology, physical settings,
organisational performance, and sustainability. A qualitative research approach
was used in this study with constructivism as a philosophical worldview. For the
purpose of this descriptive research a multiple-case study strategy was followed.
The findings of the study showed a need for the audit of financial statements
where an audit was in the public interest. Small and medium-sized audit practices
participating in this study changed their goals and strategies as a result of
mandatory audit relief with specific reference to a shift from audit services to
other service offerings. As a result of the change in service offerings, the small
audit practices and medium audit practices that participated in this study
experienced an increase in staff with a lower level of qualification than in the past.
Although several small and medium-sized audit practices experienced a
decrease in the income from audit engagements, there was an increase in
practice income from service offerings other than audits. It is clear that small and
medium-sized audit practices participating in this study were challenged in their
role as training offices for the South African Institute of Chartered Accountants
and/or the South African Institute of Professional Accountants. Sole practitioners
Dissertation (MCom)--University of Pretoria, 2015.