Enhancing the effectiveness of the audit committee at South African state-owned entities : a strategy to improve audit outcomes
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Authors
Pududu, Mangakane Lehlogonolo
Issue Date
2025-02-15
Type
Thesis
Language
en
Keywords
Audit committee effectiveness , Audit outcomes , Content analysis , Decoupling , Discriminant analysis , Interactive qualitative analysis (IQA) , Neo-institutional theory , Pareto principle , Political interference , Power , State-owned entities (SOEs)
Alternative Title
Abstract
This study examined the monitoring and oversight role of the audit committee in improving audit outcomes at South African state-owned entities (SOEs). The thesis addressed three objectives: determining the factors that drive the effectiveness of the audit committee (RO1); determining the factors that drive modified audit outcomes (RO2); and developing a strategy for the audit committee to improve audit outcomes (RO3). Positioned from an agency theory perspective, the study also draws on neo-institutional theory to consider the impact of institutional effects on audit committee effectiveness.
RO1 employed a qualitative method (minor quantitative method embedded within). Two focus groups in 2018, comprising audit committee members and stakeholders were conducted and analysed using the Interactive Qualitative Analysis (IQA) method, applying the Pareto Principle to guide data interpretation. Political interference was identified as a primary driver of audit committee effectiveness, with themes of power, independence and competence emerging. RO2 utilised quantitative content analysis of 1 145 audit reports of SOEs listed in Schedules 2 and 3 of the Public Finance Management Act No 1 of 1999 from 2017 to 2021. The analysis revealed non-compliance with legislation as a primary driver of modified audit outcomes, particularly in financial statement preparation and procurement. The study remains pertinent, as audit outcomes of South African SOEs have continued to exhibit problematic trends post-2021, with only modest improvements recorded in 2023 and 2024.
The findings from RO1 and RO2 were triangulated to develop a strategy for the audit committee to improve audit outcomes at South African SOEs, addressing RO3. The findings indicate that political interference undermines the audit committee's effectiveness, reducing the committee to a ceremonial function and exacerbating financial reporting issues. To improve audit outcomes, the audit committee’s legitimate power needs to be strengthened through a streamlined regulatory environment. This study contributes empirical evidence linking decoupling pressures on audit committees with modified audit outcomes and provides a practical strategy for improving audit outcomes.