SAJAAR Vol. 21

SAJAAR Vol. 21

The Southern African Journal of Accountability and Auditing Research

Volume 21, Issue 1, November 2019

Featured Articles


  • Natasha Sexton (School of Accountancy, Stellenbosch University)
  • Riaan Rudman (School of Accountancy, Stellenbosch University)

Keyword(s): External audit; international standards; auditing; information technology; general and application controls; IT control risk

Abstract: Information Technology (IT) is rapidly changing business and how it is conducted. Modern technologies and innovative utilisation of technology such as mobile technologies, integrated online applications, machine learning technologies, bring your own device (BYOD), internet of things (IOT), etc. is utilised by enterprises of all sizes, including small and medium enterprises. Risk and governance frameworks utilised by enterprises have adapted to respond to these changes. External auditors are required to consider the impact of IT on the clients they audit and the related effect on the audit opinion. International Standard on Auditing (ISA) has not evolved to take modern technologies into account in the same manner, therefore, additional guidance is required. Not all audit firms may have specialised in-house developed approaches and methodologies which consider the impact of IT on their client’s internal controls comprehensively. The objective of this research is to develop a comprehensive approach that external auditing firms can utilise to evaluate and audit the IT control environment effectively when conducting an external audit in a modern IT intensive business environment. The approach can be used as a supplement to the generic procedures performed as contained in the International Audit Standards, and thereby address the shortcomings.


  • Anja van Niekerk (School of Accountancy, Stellenbosch University)
  • Riaan Rudman (School of Accountancy, Stellenbosch University)

Keyword(s): Internet of things; safeguards; controls; risks; corporate governance; IT governance

Abstract: Adopting Internet of Things (IoT) as part of a business’s operations could generate value for a business through data generation and integration, as well as enhanced information quality, by gathering information in real-time through sensor technologies embedded in uniquely identifiable physical or virtual objects. In order for a business to enhance its information capabilities, they may be quick to adopt IoT, without fully understanding its enabling technologies and associated risks. The objective of this paper is to identify the risks financial information faces when implementing IoT technologies in accounting and auditing environments in a business. It is imperative that financial information retain its characteristics of validity, accuracy, completeness and timeliness when IoT is deployed in a business. The study also recommends appropriate controls which can be implemented to mitigate the risks. A systematic literature review was conducted to define IoT and to acquire an understanding of the enabling technologies of IoT. In order to identify the risks underlying the technologies enabling IoT comprehensively, it was necessary to select a governance framework which could be utilised as a benchmark for a complete list of risks and controls. The understanding gained of IoT technologies was mapped against the COBIT 5 processes relating to accounting information risks to identify the relevant threats and to recommend possible controls. A risk-matrix was developed to identify key risks and mitigate controls. The identified risks for financial information centred on data integrity, confidentiality, authenticity, network availability and semantic technology vulnerabilities. A multi-layered approach of technical and non-technical internal controls, including a policy component, was formulated to mitigate the identified risks to an acceptable level.


  • Kagisho Moikwatlhai (School of Accountancy, University of the Witwatersrand)
  • Yaeesh Yasseen (School of Accountancy, University of the Witwatersrand)
  • Irfaan Omarjee (School of Accountancy, University of the Witwatersrand)

Keyword(s): ESG; institutional investor; investment decision; long-term investor; UN PRI

Abstract: The purpose of this research was to investigate the relationship between the integration of environmental, social and governance (ESG) factors in investor decision-making and to assess whether investments in Johannesburg Stock Exchange (JSE) listed companies are held in the long-term by institutional investors. This study also extended to assess whether this relationship varies between different sectors of the JSE. Prior research has focused primarily on aspects of responsible investment stemming from the agency problem, institutional investor fiduciary duties and financial performance. However, there is a lack of research into the application of Responsible Investment (RI) practices within an emerging market context such as South Africa, particularly as it relates to asset ownership. The study adopted a quantitative approach which was exploratory in nature and applied a positivist research philosophy paradigm. The results suggest that institutional investor’s commitment to the United Nations Principles for Responsible Investment (UN PRI) and the Code for Responsible Investing in South Africa (CRISA) has yet to translate into investments in JSE companies being held in the longterm. These findings motivate for policy setters to provide greater consideration for further industry guidance and monitoring techniques in order to ensure that the objectives as set out by the UN PRI and CRISA are achieved. The outcomes of this research contribute towards the debate on the extent to which the integration of ESG reporting influences investor decisions within emerging markets.


  • Mawonga C Deliwe (Department of Public Administration, University of Fort Hare)

Keyword(s): Accountability theory; concretization; consequence management; integrated literature review; public sector auditing; reportable irregularity

Abstract: The Auditor General South Africa (AGSA) is one of six Chapter 9 institutions which were established to strengthen South Africa’s constitutional democracy. The AGSA acting together with other relevant government role players, has not had what one could call, great success in bringing about significantly improved public financial management in South Africa. This conceptual article posits, on the basis of an integrated literature review undertaken: that even with the Public Audit Amendment Act 5 of 2018 (PAAA) in effect, only with the full support of the legislative and the executive arms of government, would the additionally empowered Auditor General South Africa (AGSA) have an impact on the improvement of public financial management – and that such support may probably, not be forthcoming for a while. Furthermore, it is also argued that the AGSA did not fully appreciate the implication for his powers, as contained in sections s5(1)(d), s(5)(2)(c), s5(3) and s20(3) of the Public Audit Act 25 of 2004 (PAA).


  • Mkhululi Ncube Financial and Fiscal Commission

Keyword(s): Vertical fiscal imbalances: accountability; efficiency; revenue-raising effort

Abstract: The decade-long trend of low growth that has characterised the South African economy has placed the country’s public finances under severe strain, and even constrained revenues available for sharing. Subnational government budgets (provinces and municipalities) have also been under severe pressure due to expenditure needs that have outstripped available revenue. In a fiscal constrained environment, such fiscal pressures have the potential to exert more pressure on the vertical fiscal imbalances of subnational governments. This article evaluated the magnitude of vertical fiscal imbalances, their determinants, and consequences on accountability, efficiency, and subnational governments revenue raising efforts. The paper is based on information sourced from the National Treasury and Global Insight data bases. After computing the vertical fiscal imbalances, coefficients, fixed and the random effects models were utilised to estimate the determinants of vertical fiscal imbalances. The Granger causality technique was then used to test causality between revenue decentralisation and spending decentralisation. The results confirm the hypothesis that existing vertical fiscal imbalances for subnational governments are large, and undermines spending efficiency, accountability, and revenue mobilisation efforts. The Granger results of causality tests for both municipalities and provincial governments perceive no evidence that revenue decentralisation follows expenditure decentralisation, at least in the shortterm. In a fiscally constrained environment, the perverse effects of large vertical fiscal imbalances suggest the need to rebalance the subnational governments fiscal framework.


  • Philna Coetzee (Department of Auditing, Tshwane University of Technology)
  • Houdini Fourie (School of Accounting, Nelson Mandela University)

Keyword(s): Appointing internal auditors; binary logistic regression analysis; core competencies theory; internal audit cosourcing;internal audit outsourcing; internalisation of internal audit activities; principal component analysis

Abstract: This study determines which competency-related factors could significantly influence the decision to outsource some or all internal audit services to third parties. Underpinned by the core competencies theory (CCT), the study utilised the Institute of Internal Auditors Research Foundation (IIARF) data to address the global Common Body of Knowledge (CBOK) 2015 research objective of the study. Three constructs were identified, namely: chief audit executive (CAE) knowledge; CAE experience; and internal audit staff complement. The 72 identified variables within the three constructs were reduced to 20 variables by means of principal component analysis (PCA) and weighting. Binary logistic regression analyses was utilised to determine which variables have a statistically significant relationship with the utilisation of third parties to conduct internal audit services. The analyses revealed 19 statistically significant predictors which are useful for management and the board, but also internal audit management, that may influence the decision to utilise third parties to enhance the internal audit function’s competence.


  • Jurika Groenewald (Department of Auditing, University of South Africa)
  • Elza Odendaal (Department of Auditing, University of South Africa)
  • Adele Bezuidenhout (Department of Human Resource Management, University of South Africa)

Keyword(s): Exploratory qualitative research; glass ceiling; interpretative phenomenological analysis; retention; turnover; underrepresentation of women; female audit managers; women in management positions

Abstract: Underrepresentation of women in audit firms at partner level is a global phenomenon. The purpose of this study is to explore the experiences of female audit managers to comprehend the reasons why they resigned from their respective firms. A qualitative research approach and an interpretative phenomenological analysis design were adopted in which semi-structured interviews were conducted with a selected group of former female audit managers. These women highlighted a lack of clear progression paths, audit firms are managed by the “old boys’ club”, a lack of female role models and no work-life balance were the primary reasons for their resignation. The findings of this study was utilised to propose a voluntary turnover model, specifically for female audit managers.


  • Faeeza Jaffer (Department of Financial Accounting, University of South Africa)
  • Elza Odendaal (Department of Auditing, University of South Africa)
  • Hans J Theron (Department of Auditing, University of South Africa)

Keyword(s): Ethical leadership; ethical culture; management integrity

Abstract: Auditors face criticism for not identifying management irregularities despite being required to consider management integrity prior to and during an audit. A qualitative research approach and a multiple case design was utilised to determine how auditors evaluate the ethical leadership of management. The participants revealed that they consider the elements of the control environment to evaluate management integrity. Although they do not specifically determine whether management displays ethical leadership characteristics, their audit procedures may provide information related to management’s ethical leadership characteristics. The study contributes by correlating the elements of the control environment and the characteristics of ethical leadership which may inform the framework utilised by auditors to evaluate management integrity, and ensure consistency among auditors.


  • Shelly Herbert (College of Accounting, University of Cape Town)
  • Mark Graham (Graduate School of Business, University of Cape Town)

Keyword(s): Sustainability; sustainability reporting; G4 sustainability reporting guidelines; GRI; integrated reporting

Abstract: This study is an examination of sustainability disclosures included in South African listed companies’ integrated reports. The purpose of this paper is to determine whether there was a change in the extent and nature of sustainability disclosures included in integrated reports of South African listed companies from when <IR> was first introduced in 2011, and following the release of the International <IR> Framework and the Global Reporting Initiative’s G4 guidelines in 2015, as well as determine if the industry classification had an influence on the sustainability disclosures observed. Interpretive content analysis was utilised, which involved creating a disclosure checklist based on the disclosure categories outlined in the G4 requirements. Statistical techniques were then used to determine if significant trends in disclosure were observable in the integrated reports from 2011 to 2015. The results reveal that the level of integration increased, although there was no statistically significant change in the number and type of sustainability disclosures. Furthermore, changes were observed for specific industries.