National departments, provincial departments and public entities are subject to annual auditing by the Auditor-General of South Africa (AGSA). AGSA’s annual audits examine three areas: fair presentation and absence of significant misstatements in financial statements; reliable and credible performance information for predetermined objectives; and compliance with all laws and regulations governing financial matters. AGSA can express one of the following audit opinions:

• Clean audit outcome: the financial statements are free from material misstatements and there are no material findings on reporting on performance objectives or non-compliance with legislation.
• Unqualified audit with findings: the financial statements contain no material misstatements but findings have been raised on either reporting on predetermined objectives or non-compliance with legislation, or both these aspects.
• Qualified audit opinion: the financial statements contain material misstatements in specific amounts, or there is insufficient evidence for AGSA to conclude that specific amounts included in the financial statements are not materially misstated.
• Adverse audit opinion: the financial statements contain material misstatements that are not confined to specific amounts, or the misstatements represent a substantial portion of the financial statements.
• Disclaimer of audit opinion: the department provided insufficient evidence in the form of documentation on which to base an audit opinion. The lack of sufficient evidence is not confined to specific amounts, or represents a substantial portion of the information contained in the financial statements.

In 2018/19, AGSA conducted 11% more audits than in 2015/16. AGSA has continually expressed concern that audit outcomes for departments, public entities and municipalities have been regressing over the years. Financial and going concern matters remain a challenge at most of the auditees and specifically, for a number of strategic state-owned enterprises. 

Some highlights of this year’s national departmental audit outcomes are as follows:

• No national department received an adverse or disclaimer audit opinion for the second year running.
• The Departments of Mineral Resources, Public Service and Administration, improved their audit outcomes from unqualified with findings to clean audits.
• Eight departments maintained clean audits.
• The Departments of Agriculture, Forestry & Fisheries, Public Works, Social Development and Tourism all regressed from unqualified to qualified audit opinions this financial year.

AGSA communicates key messages to Parliament about the root causes for audit failures or stagnation i.e. not improving and achieving a clean audit. These root causes are:

• Slow response from senior management to implement action plans to remedy audit findings,
• Lack of consequences for poor performance and transgressions,
• Instability caused by vacancies in key positions.

*At the time of this publication audits for the Departments of Cooperative Governance, Traditional Affairs and Water & Sanitation were still outstanding.

See infographic below on the 2018/19 National Departmental audit outcomes: