The relationship between the executive secretary and the local government auditors in Maltese local councils

Abstract

Purpose: The relationship between the local government auditors (LGA) and the executive secretary (ES) of a local council (LC) can be compared to the auditor-management relationship in a private company. This study will analyse the different roles of ESs and LGAs, their competence, how ESs perceive audit, as well as identifying those factors that influence the ES-LGA relationship and the consequences on the financial statements and LC's performance. Design: A mix of qualitative and quantitative methods is used to achieve the objectives of this study. Thirteen ESs, two LGAs, and, a NAO representative collaborated through semi-structured interviews. Furthermore, the interviews were backed by a Likert Scale questionnaire to ESs and LGAs. Findings: The ES is responsible for the preparation and presentation of the LC's FS, while LGAs are responsible to issue an independent opinion on the truth and fairness of these statements. LCs have dual objectives as ESs' and Councillors' goals are different and this might lead to clashes. An ES has several roles and responsibilities to carry out, but the problem is that ESs are not prepared enough for such work. Such expertise is gained by experience and not by qualifications. The accountant might impair the ES-LGA relationship because if s/he is uncommitted to the job, there is a chain reaction onto LGAs' work. Audit is a good tool to ensure legal compliance, but since LCs' objective is not profit making, a VFM audit is more appropriate. Furthermore, the number of bids to work as LGAs decreased, and this might lead to several problems. Furthermore, the quantitative research identified a problem of expectations gap regarding the auditors' work. Conclusions: There are several factors that influence the ES-LGA relationship including the accountant and the parties' competence in LCs. These in turn affect audit quality and LC's performance. By applying the concept of Deis and Giroux (1992), audit quality improved as LGAs became more specialised and the identified weaknesses in the management letter increased. Value: This study may help all relevant parties to identify those factors that are impairing audit quality and LC's financial reporting.