Original Research

Will mandatory audit firm rotation reduce audit market concentration in South Africa?

Nicolene Wesson
South African Journal of Business Management | Vol 52, No 1 | a2426 | DOI: https://doi.org/10.4102/sajbm.v52i1.2426 | © 2021 Nicolene Wesson | This work is licensed under CC Attribution 4.0
Submitted: 30 October 2020 | Published: 23 July 2021

About the author(s)

Nicolene Wesson, University of Stellenbosch Business School, Faculty of Economics and Management Sciences, Stellenbosch University, Cape Town, South Africa


Purpose: Deconcentrating the audit market was one of the stated objectives of the proposed mandatory audit firm rotation (MAFR) ruling in South Africa. With MAFR being a contentious topic, this study aimed to explore the possible effect of MAFR on audit market concentration in South Africa in anticipation of the implementation thereof in 2023.

Design/methodology/approach: A sample of 415 South African listed companies was studied for the period 2010–2018. Data were mainly captured from annual reports. Descriptive statistics and significance testing were performed on calculated concentration ratios and identified audit firm rotations.

Findings/results: South African audit market concentration mirrored empirical evidence from most developed countries – with Big 4 audit firms dominating the audit market, whilst a monopoly within the Big 4 audit firm grouping was also evident. Based on observed audit firm concentration and audit firm rotation behaviour, it was anticipated that MAFR might further increase audit market concentration. A concerning result was the sheer scale of audit firm rotations to be carried out in anticipation of MAFR in 2023.

Practical implications: This study identified the impairment of audit quality and increased costs as possible unintended consequences of MAFR in South Africa.

Originality/value: This study contributed to the limited body of knowledge on the possible effect of MAFR in South Africa. This study proposed alternatives to MAFR and recommended areas for future research to support evidence-based decisions on remedies to address audit quality and audit market concentration in South Africa.


audit market concentration; mandatory audit firm rotation; Big 4 audit firms; audit quality; audit firm tenure; emerging market; JSE.


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