Effects of an Audit Opinion on the Operations of a Municipality in a Developing Economy
Effects of an Audit Opinion on the Operations of a Municipality in a Developing Economy

Summary/Abstract: This study investigates how audit opinions affect the operations of municipalities in South Africa. The study is premised on the principal-agent theory, where the municipal council and management act as agents and the stakeholders as principals. Municipalities 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 data. The study found that the municipal employees are aware of audit findings and indicate that qualified audit findings have an adverse impact on the operations of the municipality. The study offers insight into the services provided by external auditors that add value to municipality operations and ensure sound governance, efficient financial recordkeeping, 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 policy formulation and implementation.

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