Impacts of combined assurance on integrated, sustainability and financial reporting qualities: Evidence from listed companies in South Africa

Background: South Africa issued regulations implementing country-by-country (CbC) reporting standards for multinational enterprises (MNEs) on 23 December 2016. Country-by-country reporting will be applicable to all MNEs with a group revenue in excess of R10 billion. Aim: The aim of the study was twofold: to identify ambiguities that might influence the filing obligation and subsequent scope of CbC reporting in South Africa and to quantitatively measure the potential impact of any identified ambiguities. Setting: This study used data from Johannesburg Stock Exchange-listed companies. Methods: The study commences with a review of the relevant regulations and other applicable literature and continues with a quantitative analysis exploring alternative interpretations deduced from this review. Results: The review identified conflicting interpretations of how companies can be categorised as an MNE Group or not, as well as in measuring the revenue threshold. An analysis of the group structures and annual reports of a selected sample of 78 companies showed that the scope of CbC reporting will depend on the definitions applied to an MNE Group and revenue. Conclusion: Further guidance is needed to determine whether non-controlling entities must be considered as Constituent Entities, as well as how to measure revenue (i.e. whether only the International Financial Reporting Standards [IFRS] 15 revenue line item should be used or whether other income should also be included).

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Share repurchases: Which number of shares should be used by JSE-listed companies when publishing market capitalisation in annual reports?

South African Journal of Business Management ◽

10.4102/sajbm.v39i4.571 ◽

2008 ◽

Vol 39 (4) ◽

pp. 51-61 ◽

Cited By ~ 1

Author(s):

P. G. Bester ◽

W. D. Hamman ◽

L. M. Brummer ◽

N. Wesson ◽

B. W. Steyn-Bruwer

Keyword(s):

South Africa ◽

Financial Reporting ◽

Accounting Standards ◽

Listed Companies ◽

Annual Reports ◽

Share Repurchases ◽

Earnings Per Share ◽

Weighted Number ◽

Top 40 ◽

Market Capitalisation

The legalisation of share repurchases in South Africa since July 1999 introduced additional complexity to financial reporting. The repurchasing of shares by subsidiaries or share trusts has led to a new concept: the number of company shares differs from the number of group shares. Ratios like earnings per share and headline earnings per share are governed by accounting standards and circulars, and prescribe the use of the (weighted) number of group shares. No guidance exists on the calculation of market capitalisation.This article aims to determine the methods used by companies listed on the JSE Securities Exchange South Africa (JSE) to calculate their number of shares when publishing market capitalisation. It was found that only about 25% of companies participating in share repurchases and publishing market capitalisation in their annual reports calculated market capitalisation based on the number of group shares. About 75% of the companies did not calculate their market capitalisation based on the number of group shares (i.e. they omitted to deduct subsidiary repurchases and/or trust consolidations in their calculation of the number of shares). It was also found that the JSE, when compiling the Top 40 index, calculates market capitalisation based on the number of company shares (i.e. ignoring subsidiary repurchases and trust consolidations). Accounting guidance is needed on the reporting of market capitalisation to ensure that this aspect is not overstated by the reporting entities.

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An analysis of audit committee effectiveness at the largest listed companies in South Africa from a CFO and audit committee perspective

Acta Commercii ◽

10.4102/ac.v9i1.90 ◽

2009 ◽

Vol 9 (1) ◽

Author(s):

Ben Marx

Keyword(s):

South Africa ◽

Financial Reporting ◽

Internal Control ◽

Financial Literacy ◽

Audit Committee ◽

Listed Companies ◽

Audit Committees ◽

Chief Financial Officers ◽

Subject Field ◽

Effective Functioning

Purpose: The purpose of the study is to investigate and analyse the effective functioning of audit committees at the largest listed companies in South Africa.Problem investigated: The modern audit committee is often seen as the panacea of the corporate world and as such is looked upon to cure all the financial reporting and control-related problems of entities. Audit committees are, however, not always as effective as they are held to be, as is evidenced by the many well-known corporate scandals and business failures that occurred where audit committees existed and fraudulent financial reporting, audit failures, internal control breakdowns and other irregularities prevailed. The modern audit committee will be of value only if it is properly constituted, is functioning effectively and if its role is clearly understood by all the parties concerned. The research problem investigated stems precisely from this issue, and the paper therefore aims to analyse the effective functioning of the audit committees at the largest listed companies in South Africa. Methodology: The study empirically tested the audit committee practices at the largest listed companies in South Africa. This was done through questionnaires addressed to the CFOs and audit committee chairs. Findings: The study found that audit committees at the largest listed companies in South Africa are well established, properly constituted, have the authority and resources to effectively discharge their responsibilities and consist of members who act independently and who have the right mix of appropriate experience, financial literacy and financial expertise amongst their members. The audit committee's role was found to be generally well understood and supported by the board and the Chief Financial Officers. It was further found that the audit committees are effective in discharging their oversight responsibilities on the board's behalf, with the only real exception being their effectiveness regarding IT-related aspects. Value of research: The study provides valuable information on audit committee practices and the effectiveness of audit committees at the largest listed companies in South Africa. These findings can therefore serve as guidelines for best practice standards for audit committees at other companies and institutions. Conclusion: Audit committees at the largest listed companies in South Africa were found to be well established and according to the views of the CFOs and audit committee chairs to be functioning effectively. Further research regarding the subject field of audit committees should focus on the status and effective functioning thereof at smaller companies, unlisted entities, higher education institutions and public sector entities.

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Emerging trends in reporting: An analysis of integrated reporting practices by South African top 40 listed companies

Journal of Economic and Financial Sciences ◽

10.4102/jef.v7i1.138 ◽

2014 ◽

Vol 7 (1) ◽

pp. 231-250 ◽

Cited By ~ 21

Author(s):

Ben Marx ◽

Ahmed Mohammadali-Haji

Keyword(s):

South Africa ◽

South African ◽

Financial Reporting ◽

Mineral Resources ◽

Listed Companies ◽

Integrated Reporting ◽

Reporting Practices ◽

Emerging Trends ◽

Annual Reporting ◽

Top 40

Companies should behave as responsible corporate citizens and conduct their business in a manner that meets existing needs without compromising the ability of future generations to meet their needs. Thus they should protect, enhance and invest in the wellbeing of the economy, society and the natural environment in which they do business. Annual reporting format of financial reporting does not take cognisance of stakeholders’ needs in this regard, and there is a need for reporting that brings together financial, sustainability, management commentary and governance aspects in a coherent, simplified and concise manner.The objective of this paper is twofold: it aims, firstly, to provide a brief overview of the development of integrated reporting, and, secondly, to provide evidence regarding the integrated reporting practices at the largest listed companies in South Africa. This is done through a literature review of current corporate governance and sustainability developments, supported by empirical evidence obtained from assessing, through content analysis, the integrated reporting practices of the top 40 companies on the Johannesburg Securities Exchange, South Africa. The study found that although integrated reporting is evolving, inconsistencies still exist regarding the process to follow, format, content, and value thereof. The study is of specific relevance for Africa with its rich mineral resources, as it is of vital importance that companies that do business on the continent behave as responsible corporate citizens, respect the environment and society, and provide accurate, reliable and credible reporting on their financial and sustainability performance to all of their stakeholders in a simplified and integrated manner.

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The Severity of Internal Controls over Financial Reporting Deficiencies: Differences among Types and Industries

FINANCIAL REPORTING ◽

10.3280/fr2014-001003 ◽

2014 ◽

pp. 55-77

Author(s):

Tatiana Mazza ◽

Stefano Azzali

Keyword(s):

Information Technology ◽

Financial Reporting ◽

Internal Control ◽

Service Industry ◽

Listed Companies ◽

Internal Controls ◽

Service Companies ◽

Finance Industry ◽

Material Weaknesses ◽

Fixed Assets

This study analyzes the severity of Internal Control over Financial Reporting deficiencies (Deficiencies, Significant Deficiencies and Material Weaknesses) in a sample of Italian listed companies, in the period 2007- 2012. Using proprietary data the severity of the deficiencies is tested for account-specific, entity level and information technology controls and for industries (manufacturing and services vs finance industries). The results on ICD severity is compared with one of the most frequent ICD (Acc_Period End/Accounting Policies): for account-specific, ICD in revenues, purchase, fixed assets and intangible, loans and insurance are more severe while ICD in Inventory are less severe. Differences in ICD severity have been found in the characteristic account: ICD in loan and insurance for finance industry and ICD in revenue, purchase for manufacturing and service industry are more severe. Finally, we found that ICD in entity level and information technology controls are less severe than account specific ICD in all industries. However, the results on entity level and information technology deficiencies could also mean that the importance of these types of control are under-evaluated by the manufacturing and service companies.

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