School of Accountancy
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Item Open Access Audit reports of the Free State provincial departments: an audit and corporate governance perspective(University of the Free State, 2012-07) Crous, Cornelie; Lubbe, D. S.English: This study has been undertaken against the background of public concern regarding the administration and financial management of public finances. Specific attention has been given to the 12 provincial departments in the Free State province. The purpose of this study was to determine whether or not there are trends in the aspects which have led to qualification, disclaimer and emphasis of matter paragraphs in the audit reports of these departments. This study aims to contribute towards the debate on the causes of the financial decline of government financial management and to offer some solutions to these problematic aspects. The literature review in this study focused mainly on the historic development of auditing. This historical overview covered areas in both the public and the private audit sectors and included the following aspects: 1) the development of auditing itself in England, the United States of America and South Africa; 2) the development of the audit report; 3) the development of the audit expectation gap; 4) the development of different forms of business as a key link in developments regarding the need for audits; 5) international harmonisation; and 6) the development of corporate governance as an integral part of auditing. The literature review was followed by a detailed analysis of the audit reports of the 12 provincial departments in the Free State. The aspects mentioned in each of the audit reports, from 2000/2001 to 2009/2010, were summarised and analysed to identify possible aspects that occurred, in each department separately, more than once over this 10-year period. A further comparison was made between the different departments to identify provincial trends. A basic scorecard system was also developed to rate and compare the various departments on their performance as far as audit reports are concerned. Based on the results of the comparison of audit aspects, a questionnaire was developed and distributed to the Members of the Executive Council (MECs), the Chief Financial Officers (CFOs), senior officials, the Auditor-General and private audit firms who also perform audits of public departments. The results of the empirical study, the questionnaire and the interviews indicated that the aspects identified in the document analysis of the audit reports correspond with the views of the interviewees. Aspects such as non-compliance to laws and regulations, insufficient supporting documentation, irregular, fruitless, wasteful and unauthorised expenditure and poor asset management were identified as the main causes of qualified and disclaimer audit reports. The same aspects have also proven to be challenges that the provincial departments need to address within the next three years. In addition to this conclusion, basic recommendations are made for improvement of these aspects in future. This study contributes towards the national debate on the causes for concern in public finance management and possible improvement to the public service in South Africa. This study further contributes towards possibly similar situations in the remaining eight provinces in South Africa in that the provinces may benefit from the aspects identified and the recommendations made to improve their own financial management.