The impact of financial audits on the sustainable growth of SMME’s : a case study of the eThekwini Municipality

Abstract

Small, medium and micro enterprises (SMMEs) play a very important role in the economies of the world. However, the sustainable growth of these businesses in South Africa is one of worst recorded, as 90% of them fail within the initial stage of their existence. This study sought to investigate whether financial audits had an impact on the sustainable growth of SMMEs in South Africa. The New Companies Act 71 of 2008 of South Africa has brought about a lot of changes in the regulatory requirements of SMMEs to relieve them of administrative burdens and increase their sustainability. This, however, worked adversely against these businesses due to the barriers which inhibit their longevity. This can be attributed to the notion that managers/owners of the SMMEs have become oblivious to the risks inherently associated with businesses, and that this is enhanced by SMMEs not having to account to anyone (that is, there is no regulatory body or entity that controls these businesses). The commander and the agency theories, highlight the importance of separating ownership and control amongst SMMEs to align information symmetry between interested parties. A quantitative approach was followed in conducting the study and data was collected from SMMEs in Durban, under the eThekwini Municipality using a semi-structured questionnaire. A descriptive statistical analysis was performed to analyse the sample demographics, and then mean and standard deviations were computed for the variables.