THE SOUTHERN AFRICAN JOURNAL OF ACCOUNTABILITY AND AUDITING RESEARCH VOLUME 16: 2014 CONTENTS Assessment of the corporate governance compliance in the annual reports of companies listed on the Alternative Exchange (AltX) A critical review of South African Audit Practice Statement 3 Reasons why JSE accredited auditors avoid statistical sampling and resources available to auditors wanting to use statistical sampling – an empirical study The expectation gap perceptions of internal audit managers by type of university attended in the Republic of South Africa Focus of IA departments on strategic risks of listed companies Critical and interpretive accounting, auditing and governance research in South Africa Social media policy in South Africa [ BACK TO THE TOP ] ABSTRACTS Assessment of the corporate governance compliance in the annual reports of companies listed on the Alternative Exchange (AltX) (HE Scholtz ) This research study provides a brief overview of the corporate governance practices in South Africa and discusses the corporate governance indicators which were used to compile a checklist against which companies were evaluated. This study assessed the corporate governance compliance of a sample of companies listed on the AltX in South Africa, based on disclosures in their annual reports. The corporate governance indicators tested include inter alia the boards of directors, audit committee, the governance of risk and information technology and the internal audit division. The results demonstrate substantial variation in rates of adoption of individual recommendations. Two areas namely IT governance and internal auditing had low adoption rates. [ BACK TO THE TOP ] A critical review of South African Audit Practice Statement 3 (W Maroun & HE Wainer ) The illustrative audit reports issued by the Independent Regulatory Board for Auditors during June 2012 imply that the nature of the directors’ report, coupled with the absence of suitable criteria against which the report may be evaluated, has the effect of excluding the directors’ report from the scope of the auditor’s opinion on the full set of related financial statements. Based on an interpretive analysis of company law, International Standards on Auditing, and codes of corporate governance, we argue that this approach is conceptually flawed. Rather than add to the complexity of the audit report by introducing what amounts to a dual reporting system, the Independent Regulatory Board for Auditors should focus on providing conceptual guidelines for the form and content of directors’ reports on which, in terms of Company Law, auditors are required to express an opinion. [ BACK TO THE TOP ] Reasons why JSE accredited auditors avoid statistical sampling and resources available to auditors wanting to use statistical sampling – an empirical study (SPJ von Wielligh & E Swanepoel) The objective of the study was to investigate the reasons why South African Registered Auditors accredited by the Johannesburg Stock Exchange choose not to use statistical sampling as an audit tool, as well as the types of assistance and resources available to audit teams that do consider using statistical sampling as an audit tool. Data was collected by means of a research questionnaire. The findings from the study indicate that auditors avoid the use of statistical sampling due to (1) its perceived inefficiency and costliness and (2) their lack of confidence in using it. They also indicate that various types of resources, including computer software, are available to auditors considering the use of statistical sampling. A lack of resources and assistance available to auditors wanting to apply statistical sampling on audits therefore does not explain why many auditors avoid using it. [ BACK TO THE TOP ] The expectation gap perceptions of internal audit managers by type of university attended in the Republic of South Africa (H Fourie & H de Jager) The development and rapid growth of the internal audit profession internationally, as well as the promulgation of new legislation in the RSA, combined with the assimilation of the King reports on governance into daily business life, has resulted in an increasing desire for internal auditors to possess a more diverse and sophisticated skills set. Users of internal audit educational services in turn have increasingly shown that they desire universities in the RSA to provide them with entering trainee internal auditors who are in possession of sufficient and appropriate skills that identifies them as work-ready. The South African educational system has undergone a fundamental restructuring since 1994 that has resulted in the creation of three different university types, each with its own distinctive focus. All three types are permitted to offer internal auditing educational programmes. The empirical research underlying this article obtained perceptions in respect of expectation gaps pertaining to the work-readiness of entering trainee internal auditors held by participants who had obtained their highest academic qualifications from one of the three types of South African universities. Hypotheses were formulated based on the research problem and objective of the article. The study concludes that an internal audit expectation gap does exist, and based on the results of the research it is further concluded that relationships do exist between internal audit educational expectation gaps regarding technical skills capabilities and the types of universities attended by the internal audit manager respondents; and that relationships do not exist between internal audit educational expectation gaps regarding behavioural skills capabilities and types of universities attended by the internal audit manager respondents. [ BACK TO THE TOP ] Focus of IA departments on strategic risks of listed companies (L Foxcroft & H de Jager) Since 2000 various companies including Enron and Tyco, have ended up throwing in the proverbial towel as major accounting fraud has led to their downfall. A diversity of other companies has followed suit due to the global financial crisis since 2008, and the escalating U.S. federal debt and deficit.  This has merely intensified global pressure for the adoption of a risk focussed approach to internal audit (IA), especially when reviewing strategic risks. Strategic decision making and the implementation of those decisions during the still stuttering economic recovery is vital and will determine any firm’s success or failure for many years to come. The global pressure for a risk focussed approach to IA has highlighted the fact that some of the most important risks that a company faces are strategic risks. In this paper, the involvement of IA functions in the context of strategic risk management is explored. The alignment of the IA function’s strategy with the business’s strategy is investigated, including the extent of IA’s participation in strategic risk identification and management. The results of the research reported in this paper suggest that IA departments of Johannesburg Stock Exchange Limited (JSE) listed entities, whose chief audit executives (CAE) are members of the Institute of Internal Auditors, exclude strategic risk from their audit scope. [ BACK TO THE TOP ] Critical and interpretive accounting, auditing and governance research in South Africa (W Maroun & C Jonker) The role of non-positivist research styles has been well documented by a number of leading accounting and auditing academics such as Humphrey (2008), Power (2003), and Fogarty et al (2006). In Europe in particular, high quality journals are dedicated to interpretive and critical research in the interest of promoting social change. In contrast, a simple archival analysis of the research published in South Africa’s main accounting journals suggests that this country remains steadfast in its use of primarily quantitative methods for studying accounting, auditing, and other governance systems. Whether because of the time required to carry out qualitative studies, the inherent limitations of interpretive research, or an assumption that sophisticated statistical analysis is synonymous with high quality research, the end result is that there is very little critical and interpretive research in South Africa. To address this shortcoming, more needs to be done to highlight the invaluable contribution of ‘alternate research’ styles. In particular, local journals need to acknowledge the need for methodological and theoretical eclecticism in South African accounting, auditing and accountability research. [ BACK TO THE TOP ] Social media policy in South Africa (G Mushwana & H Bezuidenhout) Social media use is a growing trend worldwide. It is viewed as a revolution in electronic communications and an effective business marketing tool. Despite the business benefits, social media is viewed as a risk within organisations. This study examines the perceptions of CAEs (Chief Audit Executives) on the state of development and implementation of social media policies in companies in South Africa. The study reveals that even though social media is perceived to be a risk, most of the organisations surveyed have not implemented a social media policy. This might be because social media policies are not perceived to be effective, or because social media is classified as a lower priority risk within the organisations. The study reveals that social media is not part of the internal audit universe in most organisations, supporting two perceptions: that it might be viewed as a lesser risk; and that the organisations and internal audit functions have not yet fully understood the nature and potential negative impact social media usage can have on business. [ BACK TO THE TOP ]
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