Whistle-blowing by external auditors in South Africa

2014 ◽  
Vol 27 (5) ◽  
pp. 834-862 ◽  
Author(s):  
Warren Maroun ◽  
Jill Atkins
Keyword(s):  
South Africa ◽  
Corporate Governance ◽  
Audit Quality ◽  
Mandatory Reporting ◽  
Content Type ◽  
Whistle Blowing ◽  
External Auditors ◽  
Power And Control ◽  
And Control ◽  
African Setting

Purpose – The purpose of this paper is to explore how notions of disciplinary power manifest themselves in audit regulatory developments. When it comes to research on the relationship between audit quality and regulation, much of the prior scholarly work has kept to the positivist tradition of quantitative analysis under the guise of “economic rationality”. In contrast, this research takes an interpretive approach to provide an alternate and unique perspective, using motifs of Foucauldian power and control to illuminate the operation of external regulation in a South African setting. The paper examines what may be loosely described as a mandatory whistle-blowing duty imposed on external auditors. Design/methodology/approach – Detailed interviews with some of South Africa's leading corporate governance experts are used to highlight the disciplinary effect of an auditor's duty to bring reportable irregularities to the attention of an independent regulator. Findings – Blowing the whistle on irregularities contributes, not only to increasing the information made available to stakeholders, but to creating a valid expectation of auditors serving the public interest by enhancing a sense of transparency and accountability. Elements of resistance to panoptic-like control are, however, also present suggesting that, in part, the regulation may simply be creating the illusion of active reporting. Research limitations/implications – The research relies on a relatively small sample of subject experts and does not provide a complete account of regulatory developments taking place in South Africa and abroad. Additional research on the role of whistle-blowing in an external audit setting is needed focusing particularly on similarities and variations in interpretations of reporting by auditors from the perspective of more diverse stakeholder groups. Practical/implications – Mandatory reporting of irregularities by auditors can provided additional useful information for stakeholders and may contribute to demands for more effective reporting by auditors. Social implications – Arms-length regulation of the audit profession should not be seen only as a means of improving audit quality and the utility of audit reports. Powerful social forces are also. This research demonstrates how laws and regulations have a potential disciplinary effect on the audit profession that contributes to a restoration of confidence in the audit process after it is best by scandals, even if motifs of power and control are somewhat illusionary. Originality/value – This research addresses the need for more detailed analysis of precisely how mechanisms of accountability and transparency operate in the broader corporate governance arena. The paper also contributes to the calls for more detailed, context-specific studies of audit. Finally, this paper is one of the first to employ a critical theoretical perspective on audit in an African setting, responding to the need for contextual, methodological and theoretical eclecticism in the area of corporate governance research.

The scantness of the effect of corporate governance mechanisms on executive directors’ remuneration in small listed companies: evidence from Malaysia

2018 ◽  
Vol 14 (4) ◽  
pp. 934-949
Author(s):  
Husna Siraji Nyambia ◽  
Hamdino Hamdan
Keyword(s):  
Corporate Governance ◽  
Small Firms ◽  
Independent Directors ◽  
Executive Directors ◽  
Content Type ◽  
Power And Control ◽  
Executive Remuneration ◽  
The Family ◽  
One Year ◽  
And Control

Purpose This study extensively aims to investigate the effects of different aspects of corporate governance (CG) mechanism, including board size, executive directors’ shareholdings, Chief Executive Officer (CEO) duality, a family member as the CEO and/or chairperson of the board, independent directors in remuneration committee and number of board meeting, on executive directors’ remuneration in small firms listed on Bursa Malaysia (BM). Design/methodology/approach The sample of this study consists of 173 bottom-listed companies from Bursa Malaysia in Year 2010. The Year 2010 was chosen because the disclosure of remuneration committee activities and directors’ pay structure is required under the revised Malaysia Code of Corporate Governance, 2007. Furthermore, the period selected is after the global economic crisis (2008), which may have an effect on the remuneration structure in small firms. The ordinary least squares regression was used to estimate the relationship between remuneration as dependent variable and other independent variables. Findings A finding from this study reveals that there is a significant positive relationship between executive ownership and executive remuneration, and between board size and executive remuneration. The results provide evidence that the family members manipulate power and control remuneration in small firms. This indicates that the independent directors are not truly independent to monitor and control the firm activities, including minimizing the excessive remuneration. Research limitations/implications This study examines how the corporate governance (CG) affects remuneration among 173 small firms in Malaysia based on market capitalization, for one year, 2010. Hence, the results may not be generalizable to other periods or types of the companies. This shows the possibility of the absence of some additional variables in the research model and hence a limitation to the findings of the study. Although the study is being parsimonious in the choice of relevant variables, prior literature serves the guide in the selection of the used variables. This therefore gives room for future research using the potential omitted variables. Furthermore, the study focuses on total remuneration, such as fees, salaries, bonuses and benefits in kind, which makes aggregate directors’ remuneration. However, this study did not consider the remuneration related to stock options. Finally, this study only uses secondary data; hence, it could be interesting to use other instruments to collect data like a questionnaire to add more weight to the research. This study only uses one-year data; therefore, impact of changes between years cannot be analysed. Originality/value Results of the study provide evidence that the family members manipulate power and control remuneration in small firms. They reduce the effectiveness of non-executive directors because most of them are appointed by a family member and not socially responsible to their stakeholders.

Perceptions of justice as a catalyst for whistle-blowing by trainee auditors in South Africa

2015 ◽  
Vol 23 (1) ◽  
pp. 118-140 ◽  
Author(s):  
Faeeza Soni ◽  
Warren Maroun ◽  
Nirupa Padia
Keyword(s):  
South Africa ◽  
Quality Control ◽  
Audit Quality ◽  
Specific Reference ◽  
Justice Theory ◽  
Professional Literature ◽  
Content Type ◽  
Whistle Blowing ◽  
Junior Staff ◽  
Organisational Justice

Purpose – This study aims to use organisational justice theory to examine variations in the propensity of trainee auditors in South Africa to blow the whistle internally on misconduct by an engagement leader. Design/methodology/approach – Three vignettes describing high and low states of distributive, procedural and interactive justice are presented to a sample of trainee auditors. A questionnaire is used to gauge the likelihood of trainees blowing the whistle after taking into account a number of control variables. Preliminary results are analysed using parametric t-tests and one-way ANOVA’s. Findings – The study finds that the likelihood of trainee auditors reporting an engagement leader for misconduct increases when there is a high level of distributive, interactional and procedural justice. Gender, age, seniority, the importance of religion and performance ratings does not appear to have an effect on the propensity to whistle-blowing. Research limitations/implications – The growing importance of an effective mechanism for reporting malfeasance is reflected in both the academic and professional literature. Prior research has found that ensuring high levels of organisational justice is one means of promoting whistle-blowing in a professional setting. This paper argues that the same applies to trainee auditors. In turn, this suggests that audit firms wanting to implement sound audit quality control practices should be mindful of how their whistle-blowing policies are implemented and perceived by their junior staff. Originality/value – This paper is the first to apply organisational justice theory in a South African setting with specific reference to trainee auditors. As such, it makes an important contribution to the literature on whistle-blowing. The findings should also be of interest to the audit profession when seeking to implement effective quality control and monitoring systems, as required by the relevant professional standards.

Oversight of audit quality in the UK: insights into audit committee conduct

2017 ◽  
Vol 25 (3) ◽  
pp. 351-367 ◽  
Author(s):  
Noor Adwa Sulaiman
Keyword(s):  
Corporate Governance ◽  
Audit Committee ◽  
Audit Quality ◽  
Audit Process ◽  
Content Type ◽  
External Auditors ◽  
Code Of Corporate Governance ◽  
The Uk

Purpose The purpose of this paper is to examine the conduct of the audit committee (AC) in terms of its oversight role of audit quality in the UK. Design/methodology/approach This study uses semi-structured interviews with 11 AC members and 11 audit partners. Findings The findings show that the conduct of the AC in relation to audit quality involves the assessment of the contents of the reports prepared by the external auditors for the AC. Furthermore, the oversight of audit quality by the AC involves a thorough assessment of the presentation of the external auditors during the interaction and communication between the two parties. This illustrates the AC’s role as an effective monitoring mechanism when overseeing the audit quality. However, the conduct of the AC in overseeing four major areas (independence, appointment, remuneration and effectiveness of audit process) related to audit quality, as recommended by the UK Code of Corporate Governance, provides mixed results. The findings highlight the ceremonial role of the AC in those areas, which demonstrates the limited supporting role of the AC in enhancing audit quality. Furthermore, it is suggested that the effectiveness of the oversight role is influenced by the quality of the chairman of the AC and the quality of the relationship between the AC and the external auditors. Originality/value This study contributes to the existing literature by providing additional insights into the conduct of the AC in overseeing audit quality as well as additional evidence concerning the role and effect of the AC in relation to audit quality as prescribed by the UK Code of Corporate Governance.

The impact of audit reforms on objectivity during the performance of non-audit services

2014 ◽  
Vol 29 (3) ◽  
pp. 222-236 ◽  
Author(s):  
Richard G. Brody ◽  
Christine M. Haynes ◽  
Craig G. White
Keyword(s):  
Audit Quality ◽  
Content Type ◽  
Auditor Liability ◽  
Internal Auditors ◽  
External Auditors ◽  
Regulatory Perspective ◽  
External Auditor ◽  
The Impact ◽  
Practical Implications ◽  
Non Audit Services

Purpose – This research aims to explore whether recent audit reforms have improved auditor objectivity when performing non-audit services. Design/methodology/approach – In two separate experiments, the authors tested whether external and internal auditors' inventory obsolescence judgments are influenced by their client's (or company's) role as the buyer or seller in an acquisition setting. Findings – External auditors assessed the likelihood of inventory obsolescence objectively, regardless of their consulting role in the acquisition setting. Internal auditors assessed the likelihood of inventory obsolescence as higher when consulting for the buyer than when consulting for the seller, consistent with the supposition that the buyer would prefer to write-down inventory and negotiate a lower purchase price, whereas the seller would prefer the inventory not be written down. Practical implications – From a regulatory perspective, external auditors may be relying too much on the work of internal auditors if internal auditors' lack of objectivity as consultants extends to their assurance role. Originality/value – This paper extends prior research in the area of internal and external auditor objectivity and is the first paper to include both subject groups in the same experiment. It also addresses the current policy issues that may have a significant effect on audit quality and auditor liability.

scholarly journals To report or not to report

2013 ◽  
Vol 16 (1) ◽  
pp. 13-25 ◽  
Author(s):  
Warren Maroun ◽  
Harvey Wainer
Keyword(s):  
South Africa ◽  
Corporate Governance ◽  
South African ◽  
Regulatory Reform ◽  
External Audit ◽  
Whistle Blowing ◽  
Definition Of ◽  
Governance Processes

Whistle-blowing can play an important role in enhancing the effectiveness of corporate governance processes. In particular, legislation mandating that auditors blow the whistle on their clients’ transgressions can assist in overcoming agency-related costs and improve confidence in external audit. This is, however, only the case if regulatory reform enjoys cohesion. The Companies Act No. 71 of 2008, by introducing a definition of ‘reportable irregularities’ different from that in the Auditing Profession Act No. 26 of 2005 (APA); excluding ‘independent reviews’ from the scope of APA; and effectively exempting the majority of South African companies from the requirement either to be audited or reviewed, may materially undermine whistle-blowing by auditors in South Africa. In turn, this begs the question: for how long will South Africa rank first globally for the quality of its auditing practices? 

Determinants of voluntary formation of risk management committees

2014 ◽  
Vol 29 (7) ◽  
pp. 649-671 ◽  
Author(s):  
Nkoko Blessy Sekome ◽  
Tesfaye Taddesse Lemma
Keyword(s):  
South Africa ◽  
Risk Management ◽  
Corporate Governance ◽  
Management Practices ◽  
Emerging Economy ◽  
Board Structure ◽  
Content Type ◽  
Listed Firms ◽  
Practical Implications

Purpose – The aim of this paper is to examine the nexus between firm-specific attributes and a company’s decision to setup a separate risk management committee (RMC) as a sub-committee of the board within the context of an emerging economy, South Africa. Design/methodology/approach – The authors analyse data extracted from audited annual financial reports of 181 non-financial firms listed on the Johannesburg Securities Exchange (JSE) by using logistic regression technique. Findings – The results show a strong positive relationship between the existence of a separate RMC and board independence, board size, firm size and industry type. However, the authors fail to find support for the hypotheses that independent board chairman, auditor reputation, reporting risk and financial leverage have an influence on a firm’s decision to establish RMC as a separately standing committee in the board structure. The findings signify the role of costs associated with information asymmetry, agency, upkeep of a standalone RMC, damage to the reputation of directors and industry-specific idiosyncrasies on a firm’s decision to form a separate RMC. Research limitations/implications – As in most empirical studies, this study focuses on listed firms. Nonetheless, future studies that focus on non-listed firms could add additional insights to the literature. Investigating the role of firm-specific governance attributes other than those considered in the present study (e.g. gender of directors, ownership structure, etc.) could further enhance the understanding of antecedents of risk-management practices. Practical implications – The findings have practical implications for the investment community in assessing the quality of risk management practices of companies listed on the JSE. Furthermore, the results provide insights that are potentially useful to the King Committee and other corporate governance regulators in South Africa in their effort to improve corporate governance practices. Originality/value – The present study focuses on firms drawn from an emerging economy which has profound economic, institutional, political and cultural differences compared to advanced economies, which have received a disproportionately higher share of attention in prior studies. Thus, the study contributes additional insights to the literature on corporate risk management from the perspective of an emerging economy.

Corporate governance failure at Ricoh India: rebuilding lost trust

2018 ◽  
Vol 8 (4) ◽  
pp. 1-20
Author(s):  
Sonu Goyal ◽  
Sanjay Dhamija
Keyword(s):  
Corporate Governance ◽  
Board Of Directors ◽  
Multinational Corporations ◽  
Audit Committee ◽  
Governance Structure ◽  
Special Focus ◽  
Corporate Governance Structure ◽  
Content Type ◽  
External Auditors ◽  
The Board Of Directors

Subject area The case “Corporate Governance Failure at Ricoh India: Rebuilding Lost Trust” discusses the series of events post disclosure of falsification of the accounts and violation of accounting principles, leading to a loss of INR 11.23bn for the company, eroding over 75 per cent of its market cap (Financial Express, 2016). The case provides an opportunity for students to understand the key components of corporate governance structure and consequences of poor corporate governance. The case highlights the responsibility of the board of directors, audit committee and external auditors and discusses the changes required in the corporate governance structure necessary to ensure that such incidents do not take place. The case also delves into the classic dilemma of degree of control that needs to be exercised by the parent over its subsidiaries and freedom of independence given to the subsidiary board, which is a constant challenge all multinationals face. Such a dilemma often leads to the challenge of creating appropriate corporate governance structures for numerous subsidiaries. Study level/applicability The case is intended for MBA courses on corporate governance, business ethics and also for the strategic management courses in the context of multinational corporations. The case can be used to develop an understanding of the essential of corporate governance with special focus on the role of the board of directors, audit committee and external auditors. The case highlights the consequences and cost of poor corporate governance. The case can also be used for highlighting governance challenges in the parent subsidiary relationship for multinational corporations. The case can be used for executive training purposes on corporate governance and leadership with special focus on business ethics. Case overview This case presents the challenges faced by the newly appointed Chairman Noboru Akahane of Ricoh India. In July 2016, Ricoh India, the Indian arm of Japanese firm Ricoh, admitted that the company’s accounts had been falsified and accounting principles violated, leading to a loss of INR 11.23 bn for the financial year 2016. The minority shareholders were agitating against the board of directors of Ricoh India and were also holding the parent company responsible for not safeguarding their interest. Over a period of 18 months, Ricoh India had been in the eye of a storm that involved delayed reporting of financials, auditor red flags regarding accounting irregularities, a forensic audit, suspension of top officials and a police complaint lodged by Ricoh India against its own officials. Akahane needed to ensure continuity of Ricoh India’s business and also act quickly and decisively to manage the crisis and ensure that these incidents did not recur in the future. Expected learning outcomes The case provides an opportunity for students to understand the key components of corporate governance structure and consequences of poor corporate governance. More specifically, the case addresses the following objectives: provide an overview of corporate governance structure; highlight the role of board of directors, audit committee and external auditors; appreciate the rationale behind mandatory auditor rotation; appreciate the consequences of poor corporate structure; explore the interrelationship between sustainability reporting and transparency in financial disclosures of a corporation; understand management and governance of subsidiaries by multinational companies; and understand the response to a crisis situation. Supplementary materials Teaching notes are available for educators only. Please contact your library to gain login details or email [email protected] to request teaching notes. Subject code CSS 11: Strategy.

scholarly journals SECRECY, PUBLICITY AND POWER: STRATEGIES OF OCCULT PRACTITIONERS AND UNIVERSITY MANAGERS

2016 ◽  
Vol 25 (3) ◽  
Author(s):  
F Wood
Keyword(s):  
South Africa ◽  
Significant Role ◽  
Control Mechanisms ◽  
Eastern Cape ◽  
Beliefs And Practices ◽  
Power And Control ◽  
Power Strategies ◽  
Market Driven ◽  
And Control ◽  
Magical Beliefs

Various mystical, magical beliefs and practices, including some of those in the Transkei region of the Eastern Cape, are bound up with secrecy and mystery, exerting part of their influence by this means. This has certain metaphorical parallels with the way in which various managerial systems in market-driven, corporatised universities in South Africa and elsewhere tend to employ obscurity and mystification as a form of power and control. However, there are possible ways of transcending confinement within the verbal-ideological control mechanisms of corporate managerialism, with their shadowy, opaque qualities that sow confusion and bring about disempowerment, and the study of folklore can play a significant role in this regard. 

scholarly journals Effectiveness of Corporate Governance and Audit Quality: The Role of Ownership Concentration as Moderation

ETIKONOMI ◽  
2020 ◽  
Vol 19 (1) ◽  
pp. 131-140
Author(s):  
Natasya Adela Widani ◽  
Yustrida Bernawati
Keyword(s):  
Corporate Governance ◽  
Management Practices ◽  
Audit Quality ◽  
Stock Exchange ◽  
Ownership Concentration ◽  
Manufacturing Companies ◽  
Purchasing Decisions ◽  
Financial Statement Fraud ◽  
Strategy Analysis ◽  
External Auditors

The case of corporate financial statement fraud committed by company management is a phenomenon that often occurs and occurs repeatedly. This condition is exacerbated by the involvement of external auditors to support the fraud. This study aims to determine the effect of corporate governance and audit quality and find out the ownership concentration moderating corporate governance and audit quality. This study uses moderated regression analysis and research samples on manufacturing companies listed on the Indonesia Stock Exchange in 2017-2018. The results of the study stated that corporate governance did not affect audit quality, and the presence of ownership concentration strengthened the effect of the effectiveness of corporate governance on audit quality. The implication of this research is to minimize earnings management practices. The effectiveness of corporate governance expects to run well and regulate the composition of ownership into something fundamental to implement.JEL Classification: G32, G34How to Cite:Widani, N. A., & Bernawati, Y. (2020). Competitive Strategy Analysis to Increase Consumer Purchasing Decisions on Minimarket Business. Etikonomi: Jurnal Ekonomi, 19(1), 131 – 140. https://doi.org/10.15408/etk.v19i1.14893.

The evolution of the stakeholder-inclusive approach in the King Reports

2020 ◽  
Vol 11 (2) ◽  
pp. 139-146
Author(s):  
Annamarie van der Merwe
Keyword(s):  
South Africa ◽  
Corporate Governance ◽  
Design Methodology ◽  
Human Intervention ◽  
Common Theme ◽  
Special Issue ◽  
Content Type ◽  
Corporate Governance Code ◽  
Inclusive Approach ◽  
High Level

Purpose The purpose of this paper is to provide the reader with a high-level overview of the key messages of each of the four King Reports on Corporate Governance for South Africa, published during the period from 1994 to 2017, with a particular focus on the stakeholder-inclusive approach. While confirming the constant themes and messages, it also highlights the unique features and attributes of each of these reports. Design/methodology/approach This paper is based on a review and comparison of the four King Reports of Corporate Governance for South Africa with a particular focus on the stakeholder-inclusive approach. Findings The key findings of this paper are: the concept of “stakeholder inclusivity” is a common theme across all four the King Reports forming part of the review while, at the same time, having a unique flavour in each of the reports and visibly developing over the years. The reliance on human intervention and ethical leaders to appropriately and effectively steer the stakeholder-inclusive approach is obvious. In the absence of this, no corporate governance code will provide adequate safeguards to stakeholders against corporate failures and disasters, whether in South Africa or anywhere else. Originality/value This paper is a part of a special issue which looks at the contribution of the King Reports to governance globally.

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