Faculty of Commerce, Law and Management (ETDs)

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    The role of Internal Audit Function (IAF) in integrated reporting in state owned entities and possible challenges to IAF's involvement, and potential future role of IAF in integrated reporting
    (2019) Makhathini, Hlengiwe Thandeka
    Orientation: Integrated Reporting (IR) is a developing reporting approach that assists companies to efficiently report in a concise manner. IR provides financial and non-financial information, and for the report to be credible to stakeholders, it requires assurance. Currently, there are no assurance frameworks for IR, and there are various types of assurance providers. Research Aim: The primary aim of the study is to understand the role that the Internal Audit Function (IAF) of State-Owned Entities (public entities) in South Africa plays in IR, to understand challenges associated with playing this role and to identify the future role of IAF in IR. Motivation for the study: In South Africa, the top 18 SOEs have an asset base of over R1.1 trillion and generate turnovers of over R395 billion which is testimony that they play a critical role in the economy. To improve communication of key objectives and how the mandate of the entity is being achieved, several public entities have voluntarily adopted IR. In the provision of information, there is always a risk of accuracy, validity and completeness and as a result King Code recommends that independent assurance be provided on IR. The assurance will increase the legitimacy of IR to the various stakeholders. There are several potential assurance providers for IR. IAF already plays an assurance role in terms of internal controls and the control environment of an entity, and therefore, has the potential to play a significant role in IR. The motivation for the study is therefore, to understand if the IAF of public entities has embraced this potential role; to understand challenges associated with playing this role and to identify what the potential future role might be. Research approach and method: A qualitative approach was followed, and data was collected through semi-structured interviews to explore the current environment and role played by the IAF. The data collection process involved interviewing Chief Audit Executives (CAEs) or Heads of Internal Audit of SOE’s, and thematic analysis was used to analyse the findings. Findings: The findings from this study are that corporate governance; the operating environment and the skills & capacity of the IAF are critical for the IAF to play a meaningful role in the IR process. Most CAEs highlighted the need for the IAF to be a proactive partner to the business in the IR process to add value and achieve a higher buy-in from stakeholders. Contributions: This study contributes the to the existing body of knowledge on IR in the public sector; specifically, in terms of highlighting the role and challenges of the IAF in the preparation of IR as well as identifying the potential future role of the IAF in IR
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    Barriers to the adoption of independent reviews by non-public interest entities in South Africa :the current perceptions of South African professional accountants
    (2019) Nyambuya, Kudzinetsa
    Orientation: The South African Companies Act no. 71 of 2008 introduced independent reviews as an additional form of providing assurance for the non-public interest entities (non-PIEs) with the aim of reducing the reporting burden. Despite the Companies Act becoming effective on 1 May 2011, some companies which qualify for independent reviews still opt to have their annual financial statements (AFS) audited. Research aim: The purpose of this study is to gain an understanding of the reasons that companies which qualify for independent reviews still select to have their AFS audited when there is a less burdensome option. The main research question is directed towards investigating why audits are still preferred to independent reviews and the barriers to the selection of independent reviews. Motivation of the study: Small and medium-sized enterprises (SMEs) play a crucial role in the South African economy so it is critical to ascertain whether the independent review option is meeting its goal of reducing the reporting burden. The feedback provided assists the government in developing and updating strategies meant to support SMEs. Research approach and method: The research follows a qualitative approach within an interpretive paradigm where the data were collected from a series of nineteen detailed semi-structured interviews with a sample of South African professional accountants with the relevant experience on the subject matter. Main findings: The main findings indicate that audits are retained due to the need of small companies to reduce agency costs and appease the demands of various stakeholders, specifically lenders, lack of knowledge and guidance from practitioners regarding independent reviews, independent reviews being compared to audits, misconceptions and the resistance to change. Contributions of the study: This study contributes to providing an understanding of the barriers to the successful adoption of independent reviews and also recommendations on how acceptance of independent reviews can be improved to meet the purpose of reducing reporting burden for non-PIEs in South Africa.