The role of internal audit functions at State Owned Enterprises in South Africa

Abstract

This paper was undertaken to assess the role of internal audit functions in South African State owned enterprises. The state owned enterprises (SOEs) in South Africa have been on the spot light for quite long, with these enterprises failing among other things to obtain positive audit outcomes, self-sustainability and corruption allegations. All these proved to be unfolding despite the internal audit functions (IAFs) being in place. Although IAFs are instruments with the expertise to assess efficient utilisation of financial resources within the SOEs and could help them to improve oversight and financial performance, research has paid little attention to the role of IAFs in the financial management process. As a result, the SOEs in South Africa have been obtaining negative audit outcomes from the Auditor General South Africa (AGSA) over the years. This paper relied on AGSA reports in establishing what role the internal audit functions play in the SOEs in South Africa and whether they have any role to play in assisting them to obtain the desired audit outcomes. Therefore, the data was collected from the AGSA audit reports for the period of five years, being the period from 2014/2015 to 2017/2019 financial years. The results of the paper suggest that IAFs appear to be playing an important role in SOEs in South Africa, however, they have no power to enforce their report findings as the oversight structures appear to be ineffective. Therefore, this paper further suggests that the oversight structures such as audit committees need to be strengthened for the IAFs to be effective and value adding.