Abstract
Audit activities form part of the key functions that enhance the reliability and validity of financial and non-financial information. One of the reporting processes investors and other stakeholders rely on when making decisions is the annual reports of enterprises which are a compilation of various reporting elements. Although internal auditors do not make direct disclosures in annual reports, many financial and non-financial disclosures are for audited items. Ultimately internally-audit activities and those of the external auditor are reflected in disclosures made by the internal audit function, the audit committee, and the external auditors themselves. The main objective of this study was to identify the levels of audit disclosure made in reference to the activities of IAFs, external auditor and the audit board committee, and to make comparisons therein between Botswana Stock Exchange (BSE) and the Johannesburg Stock Exchange (JSE) listed companies. To uncover the extent of these disclosures the current study derived seventeen (17) mandatory or voluntary audit disclosure areas that were used to conduct text analysis and to determine disclosures made for a cross-country study of three companies, each from the areas of retail, banking and insurance selected from the Botswana Stock Exchange (BSE) and the Johannesburg Stock Exchange (JSE). The study found that audit committees and internal audit functions dominated the disclosure of the audit-related variables, and that external auditors tend to confine their disclosure to areas concerned with presentation and qualification of financial statements. The study also found that companies listed in the JSE made more disclosures than their BSE counterparts, and that the retail sector made fewer disclosures as compared to the other two sectors. Furthermore, disclosures related to assessment and management risk as well as aspects of internal audit functions were the two most frequently disclosed variables in both geographic locations. The study goes on to recommend that future studies make more comparative studies by sector, geographic location, and to explore the use of a broader range of auditing variables.
Highlights
Audit activities of an organization are critical in shaping the assurance model of an entity
Annual reports of the six (6) selected enterprises listed in the Botswana Stock Exchange (BSE) and the Johannesburg Stock Exchange (JSE) for the years 2013 to 2015 provided the source of primary data analysed by this study
The audit-related disclosure counts for the selected BSE companies were categorized based on the source of the disclosure (IAFs, external auditor and audit committee)
Summary
Audit activities of an organization are critical in shaping the assurance model of an entity. Audit procedures are the independent examination of records and activities that ensure compliance with established organizational controls, policies and operational procedures (Basu, 2009). These financial compliance and probity functions were conventionally assumed by internal and external audit functions of organizations (Bosi & Joy, 2017). Whilst internal auditing evaluates an organization‟s operations by personnel within the same organization (Almström & Kinnander, 2011), external audit is the independent examination and expression of an opinion on the financial statements of an entity and risk therein by external professionals (Bediako-Ahoto, 2011). According to Soh and Martinov-Bennie (2011) the processes of external audit forms a smaller part of the audit process and investors and other stakeholders often depend on the work of other organizational constituents when making decision regarding a particular organization (Chatterjee, Tooley, Fatseas & Brown, 2011).
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