ISA 701 links to corporate governance practices of South African state-owned enterprises

Purpose: This study aimed to explore how auditors' applications of the International Standard on Auditing (ISA) 701 (communicating key audit matters) in independent auditor's report-principles link with corporate governance practices in state-owned enterprises, in South Africa. This was expected to provide insights regarding public sector auditors' views regarding ISA 701-links to the influencing of governance practices in state-owned enterprises. Methodology: The study followed a qualitative approach, relying on interviews with senior external auditors and senior technical managers, who have a working knowledge of auditing state-owned enterprises in South Africa. Findings: The study found that public sector auditors communicate certain matters to encourage effective oversight by those charged with promoting good governance. These matters include communication and emphasising matters that significantly impact financing decisions, as well as significant weaknesses in key financial controls. Implications: The benefits of drawing management's attention to issues that could improve corporate governance, are significant. Regulatory authorities might consider extending the reporting of key audit matters to all state-owned enterprises, not just those that are publicly listed. Additionally, the insights provided by auditors can be leveraged by regulatory authorities to strengthen corporate governance within state-owned enterprises. Originality/Value: The study contributes to understanding the value of adopting international auditing standards to the broader corporate governance ecosystem, using evidence from the public sector within an emerging economy.