THE SOUTHERN AFRICAN JOURNAL OF ACCOUNTABILITY AND AUDITING RESEARCH VOLUME 8: 2008   CONTENTS Regulation of the auditing profession in South Africa Towards the development of a framework for ethics audits: an internal auditing perspective A study of auditor’s responsibility for fraud detection in Malaysia Fraud examination: do auditors need the knowledge and skills? Integrating strategic planning and budgeting: a PFMA perspective Financial performance in terms of the PFMA – what does it mean? Do internal auditors possess adequate communication skills? A South African perspective ABSTRACTS Regulation of the auditing profession in South Africa (EM Odendaal & H de Jager) As a result of the worldwide spate of financial scandals, society has lost much of its confidence in the auditing profession because of a growing perception that the profession does not act in the public interest. Ineffective regulation is one of the key factors detracting from the value of the audit function, thereby undermining public confidence in the profession as a whole. The opportunity has been grasped in South Africa, as in some other countries, to make changes to the regulatory mechanisms of the auditing profession in an effort to restore trust in the profession. In this article the regulation of the auditing profession in South Africa, according to the Auditing Profession Act, 2005, (implemented in April 2006), is evaluated against the factors that are of importance to an effective and creditable regulatory system with reference to the regulation of the profession in some other English speaking countries with which the South African auditing profession has historical and professional ties. It appears that those factors that are important to a regulatory system are to a large degree addressed by the regulation of the auditing profession in South Africa. This should contribute to restore the trust in the auditing profession. [ BACK TO THE TOP ] Towards the development of a framework for ethics audits: an internal auditing perspective (K Plant) Ethics performance should efficiently and effectively be managed and assessed within an organisation to ensure continued stakeholder trust, and the attainment of a mutually sustainable advantage. According to the Professional Practice Framework (PPF) issued by the Institute of Internal Auditors, the internal audit function is a key role-player in assessing and making appropriate recommendations for improving the corporate governance processes within an organisation, which includes evaluating the effectiveness of the organisation’s ethics-related objectives, programmes and activities. The internal audit function should proactively assess ethics within an organisation, but no formal framework for conducting ethics audits is provided. The purpose of this article is to study ethics from an internal auditing perspective and to develop a framework which can be used by internal auditors to conduct ethics audits within an organisation and ultimately measure the ethics performance or ethical health of the organisation. A study of auditor’s responsibility for fraud detection in Malaysia (TH Lee, A Md Ali & JD Gloeck) The auditors' duties for the prevention, detection and reporting of fraud, other illegal acts and errors is one of the most controversial issues in auditing. This paper reports the findings of a survey that explores the financial report users’ perceptions on the extent of fraud in Malaysia and their perceptions of auditors’ responsibilities in detecting fraud and the related audit procedures. The study reveals fraud is a concern in Malaysia. This study also finds that there is a widely held misperception of the objective of an audit. This is because, among respondents, a much higher expectation has been placed on the auditors' duties in detecting and reporting fraud than statute or audit standards require. The results of the study show unquestionably the existence, with respect to detection of fraud, of a gap between the perception of the respondents and the present statutory requirements of auditors. [ BACK TO THE TOP ] Fraud examination: do auditors need the knowledge and skills? (M Marais & EM Odendaal) Recent fraud-related reports and surveys show that fraud is an unwelcome reality all over the world. In South Africa it is expected to increase in future, causing organisations to suffer material financial losses and reputational damage. The urgent need to combat fraud, public expectations regarding the auditors’ responsibilities with regard to fraud and newly introduced fraud-related regulations, standards and guidance, place greater responsibility on auditors to detect and investigate fraud. Most accounting graduates have received little formal education about fraud. Teaching auditing students the basic knowledge and skills of fraud examination should improve their effectiveness in this regard. Integrating strategic planning and budgeting: a PFMA perspective (T Ajam) This article explores the conceptual tensions and practical hurdles in integrating planning and budgeting in the public sector. It is imperative that budgets be affordable. If budgeting is subordinate to planning, there is a very real danger that budget constraints will be undermined. Allowing budgets to drive plans, however, sets up short-term inertia which favours status quo and impedes transformation. It is clear that in order to realise the benefits of both planning and budgeting, governments will have to maintain separate but aligned processes. This will require acknowledgement of the inherent, structural tensions which exist, and the active pursuit of a dynamic equilibrium where there are distinct but linked planning and budget processes. A number of operational factors impact on the degree to which plans are congruent with budgets in practice: departmental planning and budgeting systems, structures, processes, information flows, organisational culture and leaderships. The paper concludes by looking at empirical evidence from national and provincial departments, which indicates that while there has been significant progress, further work will have to be done to foster further integration between plans and budgets. [ BACK TO THE TOP ] Financial performance in terms of the PFMA – what does it mean? (LJ Erasmus) In recent years, terms such as economy, efficiency, effectiveness and performance have become commonplace when discussing public service finance. Yet, frequently, media reports focus public attention on arbitrary poor financial practices in the South African public service in an uncomprehending way, which inhibits effective service delivery. The aim of this paper is to establish whether a definition of financial performance in a public service department can be created. This definition will then form a basis from which financial performance in government may be assessed. The study consists of a literature review supplemented by the anonymous opinions of experts in the field. In the conclusion a definition is created and primary criteria are listed for financial performance assessment in a public service department. However, it must be emphasised that many non-financial variables also influence the outcome of financial performance. Do internal auditors possess adequate communication skills? A South African perspective (H Fourie) Senior management of organisations in South Africa relies on the internal audit activity (IAA) for guidance and assistance with regard to good corporate governance, risk management and effective internal control systems.  Internal auditors should be respected and regarded as a value-adding resource available to the management of the organisation to assist in achieving their operational objectives. Possession of adequate communication skills plays a vital role in assisting the internal auditors achieve their objectives. This study focuses on two research questions with regard to the communication abilities of internal auditors. The primary research question is whether internal auditors in South Africa possess adequate communication skills to effectively achieve their internal audit objectives, and the second question is whether tertiary institutions, in their curricula of formal educational programmes, teach adequate communication skills to prospective internal auditors. The study concludes that internal auditors in South Africa do not possess adequate communication skills to effectively achieve their objectives and that tertiary institutions do not teach adequate communication skills to prospective internal auditors. [ BACK TO THE TOP ]
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