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The Rational Purpose Requirement: Impact on South Africa

Last Updated Oct 2020

Johannesburg, 5 October 2020 – The release of the International Standard of Assurance Engagements 3000 (Revised) in December 2015 introduced the Rational Purpose Requirement, which required that an assurance practitioner cannot accept an assurance engagement when the information needs of the intended users will not be met. This impacts both the assurance practitioner and the report preparer, as an incomplete reporting scope will always result in an incomplete assurance scope. In other words, rationale purpose requires an informed view of the information needs of the users.

As the South African audit and assurance standard setter, the Independent Regulatory Board of Auditors (IRBA) concluded that assurance practitioners required additional guidance to support the implementation of the rational purpose requirement in addition to other sustainability assurance concepts. To this effect it developed the South African Assurance Engagement Practice Statement 1 (SAAEPS 1) that was published in August 2018, which will become effective on 15 December 2020. SAAEPS 1 provides guidance on the rational purpose requirement, the suitability of criteria and the appropriateness of underlying subject matter. To assist assurance practitioners, prepare for the impact of SAAEPS 1, the IRBA requested that the South African Institute of Chartered Accountants (SAICA) develop a number of interventions to action this request. 

Under the auspices of SAICA, Pieter Conradie from the University of Pretoria (and his team), presented four separate interventions between June and October 2019, which aimed to achieve: assisting assurance practitioners and other stakeholders with making sense of the rational purpose requirement; and soliciting input from all relevant stakeholders on the way the rational purpose requirement would impact assurance (and reporting) practices in South Africa. These interventions were also part of a research project and were recorded and analysed, including the release of the research report on which this summary is extracted from.

The research process revealed challenges and opportunities on three levels: the systemic level, the ideological level and the technical / practical level. The major issue at the systemic level is that the assurance practitioner is limited in implementing the rational purpose requirement without regulatory support, as would be the case with the audit of financial information, as sustainability reporting and assurance practices are voluntary practices.

At the technical / practical level, one concern is that considerable work effort may be required in the pre-engagement phase of an engagement in order to meet the requirement, which has cost implications for the assurance practitioner and whether these costs could be recovered from their clients This entails that an investment into the project may need to be made by the assurance provider. Another concern relates to the professional judgment that is required from an assurance practitioner to decide whether an engagement exhibits a rational purpose.

However, the most important concern is that it appears there is very little consensus as to what the underlying subject matter of a sustainability report is. This concern is intimately linked to the fact that there is no consensus regarding the reporting framework for a sustainability report, and it is also linked to the complex multi-stakeholder nature of the sustainability report environment. The research here suggests that report preparers cannot make meaningful progress towards satisfying the rational purpose requirement if they do not succeed in conveying a meaningful, detailed understanding of the underlying subject matter that forms the basis of their report. 

As SAICA, we have undertaken work to expand the awareness and understanding of specific underlying subject matter such as user requirements on tax transparency, and employee health & wellbeing.  For more information please visit: SAICA Sustainability

The full report can be accessed here: The Rational Purpose Requirement: Impact on South Africa


The South African Institute of Chartered Accountants (SAICA), South Africa’s pre-eminent accountancy body, is widely recognised as one of the world’s leading accounting institutes. The Institute provides a wide range of support services to more than 50 000 members and associates who are chartered accountants [CAs(SA)], as well as associate general accountants [AGAs(SA)] and accounting technicians [ATs(SA)], who hold positions as CEOs, MDs, board directors, business owners, chief financial officers, auditors and leaders in every sphere of commerce and industry, and who play a significant role in the nation’s highly dynamic business sector and economic development.

Chartered Accountants are highly valued for their versatile skill set and creative lateral thinking, that's why all of the top 100 Global Brands employ Chartered Accountants.

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