Enhancing audit committee effectiveness in South African municipalities

The continuous failure of South African municipal administration, governance and oversight, renders the effectiveness of the municipal audit committee, questionable. The purpose of this study is to propose a framework for improving audit committee effectiveness in South African municipalities. The purpose was achieved by obtaining an understanding of the factors influencing the effectiveness of the municipal audit committees from municipal stakeholders and audit committee members; further exploring the factors identified from the stakeholders and audit committee members through a literature study and review of best practices; and acquiring input from stakeholders regarding the relevance and completeness of the framework developed, leading to refining of the framework. A constructivist ontology and interpretivist epistemologies were employed to achieve the research objective and a qualitative research methodology was embraced, comprising of focus groups, a literature study and an interview survey. The agency theory was adopted as the grand theory for this study and the resource-based view of the firm theory was applied to the literature, to extend and complement the existing literature on the effectiveness of audit committees. During the first phase of the study, the Interactive Qualitative Analysis method was harnessed for conducting the focus groups and analyses of the data. Purposive sampling was applied to select 15 participants who were stakeholders and audit committee chairpersons of municipalities, to conduct two focus groups. Twenty-five affinities (factors) and 139 sub-affinities (sub-factors) that influence the effectiveness of audit committees were identified, consolidated into five themes. The second phase was to explore the factors identified by the focus groups through a literature study. The findings of the literature study and focus groups were employed to develop the draft framework consisting of a Framework for audit committees and a Framework for municipalities. The development of these two guides led to a third guide for National Treasury, provincial treasuries and SALGA. In the third phase, purposive and snowball sampling methods were used to select participants to semi-structured interviews, followed by the refinement of the framework. Based on the findings, a framework is proposed, comprising factors that can improve the effectiveness of audit committees in South African municipalities. Furthermore, activities that can be centralised to enhance the effectiveness of municipal audit committees are identified, and an improved framework for agency theory is introduced.College of Accounting SciencesD. Phil. (Accounting Sciences