SAJAAR Journal

Author(s):

• Natasha D 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 pervasive and changes business rapidly. External auditors must also evolve and address risks which arise from IT on audits. In small and medium sized audit firms, where in-house IT specialists may not have developed custom audit methodologies, guidance may be limited to the International Standards on Auditing (ISA) and other authoritative text. The problem arises if the auditor’s methodology may not have evolved sufficiently with IT. The objective of this study was to identify guidance available to the external auditor and investigate the appropriateness thereof to enable the identification of the control risk exposure in the IT controls relevant to the audit utilising a systematic approach. The research revealed that certain technology level control risks related to the hard and software components of the access path are not addressed, and additional guidance may be required.

Author(s):

• Ansoné Human (Centre for Business Mathematics and Informatics, North-West University)
• Nantes Kirsten (Consultant, Bell, Canada)
• Tanja Verster (Centre for Business Mathematics and Informatics, North-West University)
• Willem D Schutte (Centre for Business Mathematics and Informatics, North-West University)

Keyword(s): Telecommunications; regression; application fraud scorecard; predictive modelling

Abstract: Every year the telecommunications industry suffers huge losses due to fraud. Mobile fraud, or generally, telecommunications fraud is the utilisation of telecommunication products or services to acquire money illegally from or failing to pay a telecommunication company. A South African telecommunication operator developed two internal fraud scorecards to mitigate future risks of application fraud events. The scorecards aim to predict the likelihood of an application being fraudulent and surprise fraudsters before they surprise the telecommunication operator by identifying fraud at the time of application. The scorecards are utilised in the vetting process to evaluate the applicant in terms of the fraud risk the applicant would present to the telecommunication operator. Telecommunication providers can utilise these scorecards to profile customers, as well as isolate fraudulent and/or high-risk applicants. We provide the complete methodology utilised in the development of the scorecards. Furthermore, a novel Determination and Discrimination (DD) ratio is provided in the methodology to select the most influential variables from a group of related variables. Throughout the development of these scorecards, the following was revealed regarding fraudulent cases and fraudster behaviour within the telecommunications industry: Fraudsters typically target high-value handsets. Furthermore, debit order dates scheduled for the end of the month have the highest fraud probability. The fraudsters target specific stores. Applicants who acquire an expensive package and receive a medium income as well as applicants who obtain an expensive package and receive a high income have higher fraud percentages. If one month prior to application, the status of an account is already in arrears (two months or more), the applicant has a high probability of fraud. The applicants with the highest average spend on calls have a higher probability of fraud. If the amount collected changes from month to month, the likelihood of fraud is higher. Lastly, young, and middle-aged applicants have an increased probability of being targeted by fraudsters than other ages.

Author(s):

• Dale J McGregor (College of Accounting, University of Cape Town)
• Riley Carpenter (College of Accounting., University of Cape Town)

Keyword(s): Mandatory audit firm rotation; directors; audit committees; statutory duties; Companies Act; auditors; audit tenure; auditor independence; audit quality

Abstract:

The announcement by the Independent Regulatory Board for Auditors (IRBA) to implement mandatory audit firm rotation has raised concerns among various stakeholders regarding its impact on the ability of directors to discharge their statutory duties effectively as outlined in the Companies Act No. 71 of 2008. This conceptual paper analyses the impact of mandatory audit firm rotation on the ability of directors to discharge their statutory duties through a qualitative analysis of company law and common law, prior academic literature and statements from key stakeholders. The findings revealed that mandatory audit firm rotation may impede directors from discharging their statutory duties effectively. The value of the paper is a significant contribution for both the directors and the IRBA to consider the necessary steps to mitigate these negative consequences associated with the implementation of mandatory audit firm rotation.

Author(s):

• Mduduzi L Ngoma (Department of Accountancy, University of Johannesburg)
• Monique Keevy (Department of Accountancy, University of Johannesburg)
• Pranisha Rama (Department of Accountancy, University of Johannesburg)

Keyword(s): Cyber-security awareness; cyber-security threats; public sector organisations; phishing; malware; ransomware

Abstract:

With the rapid advances in information communication technologies (ICTs), cyberspace has provided organisations a platform to be more innovative in their operations. As a result hereof, individual users within the organisations have become even more connected to the internet, with a concomitant increase in cyberattacks. This is particularly prevalent within public sector organisations. It is thus critical that cyber-security awareness is at the forefront of all public sector organisation’s agendas.

The study evaluates South African state-mandated public sector organisations awareness of cyber-security. As part of their mandate, these organisations are expected to lead by example. A questionnaire with open- and closed-ended questions was administered to individuals tasked with cyber-security in the state-mandated public sector organisations. Overall, the results revealed that state-mandated public sector organisations are not at the forefront of cyber-security awareness. Gaps are evident in terms of cyber-security management, and training. Promising to note was the information technology (IT) experience and individuals expertise tasked to oversee cyber-security within these organisations. It is, however, recommended that IT departments manage cyber- security and not the Human Resources (HR) departments. The results are not generalisable beyond the scope of this study. Nonetheless, the findings provide various recommendations in terms of creating a culture of cyber- security awareness in state-mandated public sector organisations.

Author(s):

• Tonderai Kapesa (School of Accounting, Nelson Mandela University)
• Gift Mugano (Department of Economics, Nelson Mandela University)
• Houdini Fourie (School of Accounting, Nelson Mandela University)

Keyword(s): Zimbabwe; public infrastructure; framework; financing

Abstract:

The article develops and recommends a financing decisions framework for economic public infrastructure assets. The study was motivated by the lack of consistency among public entities in the financing decision- making process in Zimbabwe. The financing decision is of peripheral significance in the development of public infrastructure. Qualitative and quantitative methods are synchronously mixed guided the interpretivism philosophy. Primary data was collected through a survey questionnaire and secondary data acquired from the World bank’s development indicators website. The authors developed a seven-staged framework for public infrastructure financing based on gaps identified from the reviewed literature. The article, therefore, recommends application of the developed framework to enhance effective and efficient financing decisions for public infrastructure assets.

Author(s):

Phindiwe Kamolane (College of Accounting Sciences, University of South Africa)

Elza Odendaal (College of Accounting Sciences, University
of South Africa)

Keyword(s):

Audit market concentration; big 4 audit firms; concentration ratio; Herfindahl-Hirschman Index; JSE industries; listed companies; mandatory audit firm rotation; oligopoly

Abstract:

Concerns have been raised globally about the high levels of audit market concentration. The forthcoming implementation of mandatory audit firm rotation should be implemented with due consideration of the particularities of the country, in particular the audit market concentration per industry. This study utilised total assets and total revenue to determine the audit market concentration within South African industries. The Concentration Ratio and Herfindahl-Hirschman Index revealed the audit market in all industries to be concentrated and an oligopoly with the Big 4 audit firms specifically one firm dominating. The regulator should take cognisance of such dominance, specifically in highly specialised industries, and consider imposing transitional arrangements before the implementation of mandatory audit firm rotation.