What is auditing and why is there a need for it?

Nosipho Mba CA (SA)

What is auditing?

Auditing is the process of assessment and ascertaining of financial, operational, and strategic goals and processes in organizations to determine whether they are in compliance with the stated principles in addition to them being in conformity with organizational and more importantly, regulatory requirements.

Why is there is a need for audit?

  1. The unseen yet strong contract between the citizens of SA and the government.

When people vote for the party of their choice, they buy into their manifestos. This creates a need for the ruling party to put in place policies to ensure that they implement what they promised to the people.

  • The need to fulfil the promises made to the communities

The promises made to the communities are captured in an IDP, budgets  are  prepared to finance them and SDBIP is prepared for implementation.

  • The stewardship responsibility that comes with the need to account

In fulfilling the promises, taxes are collected from citizens and are re-distributed to various organs of the state to fulfil the promises.

As it stands, the money does not belong to the municipality but to the people, therefore, it must account for how it has used the money to fulfil the promises.

  • The obligation to uphold the constitution of the RSA which contains the Bill of Rights which applies to all law, and binds the legislature, the executive, the judiciary and all organs of the state.

All organs of the state including municipalities must comply with all relevant laws and regulations in fulfilling their mandate.

  • Moral degeneration

In older days, people’s words were their bond. What they said was true. However, due to moral degeneration, its no longer the case. Hence the need to verify management assertions on the Annual Financial Statements and Performance Reports.

What is the difference between clean audit and clean administration?

Clean Audit

  • Producing financial statements that are free from material misstatements
  • Ensuring that there are no material findings on the usefulness and reliability of the reported performance information for the selected objectives, and
  • No material non-compliance with legislation regarding financial matters, financial management and other related matters.

Clean Administration

  • Effective Leadership based on the Culture of honesty, ethical business practices, good governance, and oversight responsibility.
  • Financial and performance management with the focus on implementing controls over quality, reliable financial and management information, proper record keeping, compliance monitoring and formal controls over IT systems.
  • Strengthening Governance by implementing appropriate risk management activities, ensuring that there is an adequately resourced and functioning internal audit unit and ensuring that the Audit Committee promotes accountability and service delivery.
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