An Investigation of the Impact of Material Misstatements on the Quality of Financial Reporting for a Public Sector

Abstract

Over the years, financial reports have been associated with material misstatements, which may result in wrong decision making, ineffective strategies or even financial loss for both internal and external users who rely on such financial statements. Government departments are also notorious for this phenomenon. This study aims to investigate the impact of material misstatements on the quality of financial reporting at the government department in Gauteng Province, South Africa. Fourteen participants, consisting of accountants, auditors, assistant directors and directors, were selected to participate in the interviews. Data were collected through semi-structured and open-ended interview questions. The qualitative research method was adopted for the study to gain an in-depth understanding of the research problem and answer the research questions. The findings of the study revealed that financial information such as a lack of timely and detailed reports; human intervention, where people tasked with the preparation of financial reports make mistakes or lack adequate and relevant information; reporting; and accounting as well as noncompliance with standards, are all possible sources that have led to misstatements within the organisation.