Ethics wane as audit executives feel loss of independence – report


Johannesburg – More than 50% of surveyed audit executives say their work in government and state-owned companies is hampered due to undue influence and interference, affecting good corporate governance.

This is one of the findings of the fifth annual 2017 corporate governance index by the Institute of Internal Auditors of South Africa (IIA SA) released on Wednesday. The survey reflects the views of 281 chief audit executives on the state of corporate governance in South Africa.

Only 53% of chief audit executives in both public and private sectors said that ethics forms an “integral part” of their organisational culture.

Particularly, only 44% of those working in national government believe their internal audit work was done independently, compared to 75% last year. In state-owned companies, only 46% of respondents said they can do their work independently.

Similar trends are seen at local municipalities, with 46% of audit executives agreeing they have no interference with their work, compared to 82% reported in the previous year. At provincial government level this is down from 80% to 56%, in district municipalities this is down from 80% to 57% and for metros it is down from 83% to 60%.

“The results plummeted in comparison to last year. This perhaps reveals why governance at all spheres of government are weakened and ties in with the Auditor General’s analysis of the state of paralysis and wasteful expenditure that currently persists,” said Dr Claudelle von Eck, CEO of IIA SA.

Von Eck suggested that the numbers could actually be worse, given the lack of ethics in organisations.

“A concern is that South Africans often only associate ethics with fraud and corruption and do not always include issues such as inequality in remuneration policies, anti-competitive behaviour, exploitation of staff, sexual harassment, discrimination based on issues such as gender or race and harming the environment or communities when they rate organisations on ethics,” she explained.

Von Eck called for good governance principles to be prioritised given the political uncertainty, adverse economic climate and credit ratings downgrades, among other things. This requires the building of an ethical culture.

“This means that internal auditors should be more vigilant and ensure that their audit plans are crafted to put the spotlight on the issues that will ultimately lead to well governed organisations,” she said. 

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