The functioning of internal audit in category 'A' municipalities in South Africa

Abstract: Internal audit functions around the world are faced with the challenge of assisting key stakeholders such as audit committees and senior management in discharging their responsibilities. Organisations face many risk, governance, control and compliance challenges and having proper functions in place to assist in managing these challenges is integral to the success of organisations. Internal audit functions are a critical component of the combined assurance model providing stakeholders with independent and objective assurance and consulting services on internal control, risk management and governance processes. It is therefore crucial that internal audit functions operate properly. The research problem was defined as follows: if internal audit functions are providing inadequate services to audit committees in the areas of internal control, risk management and governance, the ability of audit committees to perform their responsibilities effectively could be hampered. The research problem thus called for a study into the functioning of internal audit functions within the current framework of the International Standards for the Professional Practice of Internal Auditing and other related best practices. The research problem was explored through qualitative content analysis of annual reports and through questionnaires sent to audit committee members and chief audit executives of the eight metropolitan municipalities in South Africa. The three data sets were presented separately and triangulated. The study found that internal audit functions are crucial informants to audit committees in the areas of internal control, risk management, governance and compliance issues. In this regard, internal audit provides a broad scope of work which audit committees use to assist them in discharging their responsibilities. This is underpinned by the fact that internal audit is regarded as ethical, competent in its core technical areas and able to provide internal audit reports which are informative, persuasive and calling for action. However, overall competency is regarded as problematic by audit committee members. The study also found that internal audit’s true functioning is not reflected in annual reports and the opportunity thus exists to implement internal audit disclosure policies as this would contribute to transparency and accountability which, in turn,...D.Phil. (Auditing