On 22 July 2024 the Supreme Court of Appeal ordered the Independent Regulatory Board for Auditors (IRBA) to reconsider certain fees it had charged to auditors in 2019 and 2020. In doing so, the court reaffirmed that administrative action must be exercised in a lawful, rational and procedurally fair manner.

A voluntary association of registered auditors brought review proceedings in terms of the Promotion of Administrative Justice Act, 2000 (PAJA) to challenge the IRBA’s decisions to:

• prescribe percentage-based fees for Category C assurance work (which is low-risk assurance work such as voluntary audits and independent reviews in terms of the Companies Act, 2008);
• impose tax practitioner fees;
• levy above-inflation increases in annual registration and reinstatement fees; and
• withdraw the 50% discount on annual fees granted to registered auditors over the age of 65.

The court was therefore required to decide:

• whether the impugned decisions constituted administrative action; and
• if so, whether the impugned decisions met the standards for just administrative action in terms of PAJA.

The court highlighted three factors that indicate that the IRBA’s decisions constituted administrative action:

• the source of the IRBA’s functions and powers is found in the Auditing Profession Act, 2005, as opposed to the Constitution;
• that Act strictly circumscribes the IRBA’s functions and powers; and
• the decisions were not limited to matters of high policy and therefore it was appropriate to subject them to the scrutiny of PAJA.

On that basis, the court applied PAJA’s standards and made the following findings:

• the decision to prescribe percentage-based fees for Category C assurance work was beyond the IRBA’s statutory powers and irrational, because the Act only permits the IRBA to recover the costs of inspections conducted by it, and there was no link between the fees prescribed and such costs;
• the decision to impose tax practitioner fees, although authorised by the Act, was procedurally unfair because the IRBA did not give affected parties a reasonable opportunity to make representations before it imposed the fees; and
• the decisions to increase annual registration and reinstatement fees and to withdraw the fee discount were procedurally unfair because although the IRBA did not have a duty to consult with affected parties, it was required to follow a notice and comment procedure in terms of PAJA.

The court ordered the IRBA to repay or pass credits to the voluntary association’s members in respect of the fees for the Category C assurance work that it was not authorised to prescribe.

The court remitted the balance of the impugned decisions to the IRBA because the court was not in as good a position to take those decisions as the IRBA will be after complying with its procedural fairness obligations. In this regard, the court stressed the IRBA’s superior expertise, experience and access to the relevant information. Accordingly, the IRBA was ordered to take fresh decisions by 31 March 2025.

The case is Independent Regulatory Board for Auditors and Others v East Rand Member District of Chartered Accountants and Others (945/2022; 40/2023) [2024] ZASCA 114 (22 July 2024).