Acta Universitatis Danubius. Administratio, Vol 10, No 1 (2018)

Effects of an audit opinion on the operations of a municipality in a developing economy

Mabutho Sibanda, Hlengiwe Penelope Ndlela

Abstract


This study investigates how audit opinions affect the operations of municipalities in South Africa. The study is premised on teh principal-agent theory, where the municpal council and management act as agents and the stakeholders as principals.  Muncipalities are mandated to execute the national development plans of the government in power. Their main task is service delivery to the citizens residing within their area of jurisdiction. Thus, municipalities do not seek to make a profit. The municipal council forms part of the management of the municipality,  and governs it in line with the mandate prescribed by provincial and national government, as well as the country's constitution. A self-administered questionnaire was used to gather the data. The study found that the municipal employees are aware of the audit findings and indicate that qualified audit findings have an adverse effectt on the operations of the municipality. The study offers insight into the services provided by external auditors that add value to the municipal operations and ensure sound governance, efficient financial record-keeping, and also reporting thereon. The study concluded that an audit that is relevant to an entity's objectives rather than a standard, tick-box exercise, would enable municipalities to achieve their objectives and thus provide policy-makers with useful information to inform polciy formulation and implementation.


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