The Municipal Audit Committee Self-review Threat: The South African Dilemma

Context: Corporate governance in South African municipalities is severely lacking and retrograding. The audit committee should essentially be an oversight committee that acts on behalf of the municipal council to ensure that key controls are operating, ethical practices are reinforced, key accounting estimates and judgements are properly made, and that internal and external audits are effective. However, the Municipal Finance Management Act requires that the audit committee acts in an advisory capacity to among others, the municipal management. This statutory requirement is in contrast to international governance code best practice for audit committees. Purpose: The aim of this study was to establish how municipal audit committee members perceive their role and whether they realise the self-review threat brought about by the role conflict between legislation and internationally accepted best practice. Design: A web-based survey questionnaire was used to collect primary data from municipal audit committee members. Findings: The study found that municipal audit committee members seem to be unaware of the self-review threat their perspectives on their role hold. Practical implications: Results of the study may assist policy makers and other stakeholders in drafting regulations and legislation governing the functioning and establishment of independent municipal audit committees in South Africa. Originality: Although the conflicting roles of assurance (oversight) and consulting (advisory) have received attention in the disciplines of external auditing and internal auditing, similar attention is needed in the case of South African municipal audit committees.