The usefulness of the annual reports for accountability and decision-making purposes by the KwaZulu-Natal municipalities.
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Date
2021
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Abstract
According to the IPSAS and ASB’s Conceptual Frameworks for Financial Reporting, annual
reports prepared using these frameworks present information that users can use for
accountability and decision-making purposes. Such conceptual frameworks state that the annual
reports’ information must exhibit important and enhance qualitative characteristics to be helpful
to the users. The study’s purpose was to determine whether the annual reports prepared by the
KwaZulu-Natal municipalities presented information that is useful for accountability and
decision-making. The setting for this study is all the municipalities in KwaZulu-Natal.
However, only 43 annual reports were included in the results of this study. The study
analyses annual report contents using a content analysis methodology based on a 21-index
research instrument developed by Beest, Braam, and Boelens (2009). The research instrument
operationalises the qualitative characteristics of useful information into 21 measurable
disclosure indicators. An exploratory factor analysis was used to ascertain the relationships
between variables. The study results revealed that the quality of annual reports prepared by
municipalities was satisfactory, notwithstanding that there is still room for improvement in the
overall usefulness of the annual reports. Most annual reports omitted forward-looking
statements and included technical jargon that was not clarified. The majority of municipalities
used historical cost accounting for assets rather than fair value cost accounting in their annual
reports. Municipalities need to limit technical jargon in the annual reports, and all technical
terms should be explained in a glossary. Municipalities should also present forward-looking
information that will enable users to make future expectations. The results of this study
contradict previous research conducted in Europe and Asia that concluded that annual reports
were inadequate for accountability and decision-making. However, the study lacks the
interpretive analysis component necessary to provide an accurate qualitative view of annual
report by users. Notwithstanding this limitation, the results of this study lay the groundwork for
future research on this topic.
Description
Master’s Degree. University of KwaZulu-Natal, Durban.