Assessing The Implementation Of The King III Internal Auditing Reporting Guidelines At Universities Of Technology In South Africa

Abstract

Sound corporate governance is indispensable for any organisation, mitigating the risk of financial scandals and maintaining the good reputation of organisations. Internal auditing has been found to be one of the fundamental pillars of sound corporate governance because of the key role it plays in improving organisational efficiency and effectiveness through the assessment of internal controls and risks and making of recommendations to enhance governance processes. Higher education institutions in the South African context are facing numerous challenges, such as poor incorporation of the King III Report and not being financially sustainable. This is especially applicable to Universities of Technology (UoTs) as ‘newly born’ type of university that emerged from the former technikons. Challenges such as those mentioned above emphasise a need for UoTs to adhere to sound governance, and the King III internal auditing guidelines can offer valuable insights in this regard. The main objective of the study was, thus, to assess the extent to which UoTs in the South African context implement the King III internal audit guidelines. The study followed a qualitative research approach, using content analysis design to evaluate the annual reports of the six UoTs in South Africa, namely the Central University of Technology (CUT), Cape Peninsula University of Technology (CPUT), Durban University of Technology (DUT), Mangosuthu University of Technology (MUT), Tshwane University of Technology (TUT) and Vaal University of Technology (VUT). For each university annual reports were examined for years ending 2014, 2015 and 2016. A two-rater scale indicating if information was disclosed or not disclosed was used for section A of the empirical study, while a three-rater scale for section B of the impirical study, indicating that information was fully disclosed, partially disclosed or not disclosed. This, was applied to measure the extent to which the UoTs implemented the King III internal audit principles. A checklist was developed to ensure a uniform analysis of the documents. Findings indicate that the UoTs did not implement most of the King III internal audit guidelines for the years 2014, 2015 and 2016. The majority of UoTs did not report on the following: whether internal audits adhered to the Institute of Internal Auditors (IIA) Standards and Code of Ethics; whether the chief audit executive (CAE) reported functionally to the audit committee chairperson; whether the audit committee was responsible for the appointment, performance assessment and dismissal of the CAE whether internal audits provided a written assessment of internal financial controls to the audit committee. Most UoTs also failed to disclose whether the internal audit charter was defined and approved by the council. However, in reporting information which indicates that internal audit formed an integral part of the combined assurance model the UoTs fared somewhat better. Although information was disclosed pertaining to internal audit’s responsibility in respect of corporate governance, there is still room for improvement. The positive findings indicate that most UoTs disclosed that internal audit is responsible for reporting on internal control and risk management.