Effect of Internal Auditing on Consequences Management in the KwaZulu-Natal Provincial Government

1. Introduction

Governance failures in South Africa’s provincial administrations continue to weaken accountability, disrupt service delivery, and erode public trust. Even with a fairly robust legal and institutional environment, including the Municipal Finance Management Act (MFMA) Public Finance Management Act (PFMA), Treasury Regulations and the professional standards promoted by the Institute of Internal Auditors (IIA), irregular, fruitless, and wasteful expenditure still appears repeatedly in audit reports. That pattern points to a deeper problem than technical non-compliance alone. It suggests that the real weakness lies in what happens after failures are identified, especially whether institutions are able and willing to act on audit findings through meaningful consequence management (Auditor-General, 2017; 2020).

This study is situated within that wider accountability problem. Internal auditing is generally understood as an independent and objective assurance and consulting function that improves operations by assessing risk management, controls, and governance processes (IIA, 2024). In the public sector, that role becomes even more important because internal audit is expected to assess compliance with financial management prescripts, strengthen internal control systems, and provide assurance to executive management and audit committees (Nyamita, Dorasamy & Garbharran, 2015; Lenz & Hahn, 2015). Within the three lines of combined assurance defence model, internal audit is often treated as the third line, meaning that it provides independent oversight and helps safeguard organizational value (COSO, 2013). Yet the existence of this assurance function does not automatically produce accountability. Internal audit may diagnose a problem accurately and still fail to trigger corrective action where management lacks commitment or where political and institutional pressures weaken enforcement. That gap between detection and action is central to the present study.

Consequence management refers to the prompt application of corrective, disciplinary, and remedial measures when misconduct or financial irregularities are identified (Lungisa, Nzewi & Sikhosana, 2023). It is related to internal auditing, but it is not the same thing. Internal audit can generate information, identify risks through risk assessments, and recommendations, but it does not itself impose sanctions. Its influence therefore depends on how management, audit committees, and other accountability structures respond to the evidence it produces (Mnguni & Subban, 2022; Mihret & Yismaw, 2007; Arena & Azzone, 2009). Where that response is weak, the internal audit function can become more symbolic than effective, reinforcing compliance on paper and not be seem to be adding value, while leaving the underlying culture of impunity largely unchanged.

The KZNPG provides a useful context for examining this issue because repeated audit findings suggest that internal auditing and consequence management may not be sufficiently connected in practice. The key question is not simply whether internal audit identifies governance failures, but whether it changes organisational behaviour in ways that improve accountability outcomes. Put differently, does internal auditing operate as a genuine catalyst for consequence management, or does it remain a diagnostic mechanism that exposes weaknesses without helping to correct them? The answer matters because public governance depends not only on the existence of rules, but on the capacity of institutions to enforce them consistently and fairly.

A broader management perspective helps sharpen this problem. Holistic management theory argues that organisations function best when all parts are integrated and aligned around a shared purpose. It emphasises transparency, clear goals, teamwork, information sharing, and individual empowerment. In this view, learning and change are not occasional events but continuous organisational practices. Ken Wilber’s integral theory and Chris Argyris’s work on organisational learning both support the idea that institutional performance depends on connectedness rather than isolated activity. Savory’s observation that nature is made up of integrated wholes, not separate parts, reinforces this logic (Gosnell, Grimm & Goldstein, 2020). Read in relation to governance, the implication is clear: internal audit cannot improve accountability on its own unless it is embedded within a wider system that learns, adapts, and responds.

Systems management theory develops that point further by treating the organisation as a set of interdependent subsystems rather than a collection of unrelated units. Employees, departments, municipalities, work groups, and business units all shape overall performance, and failure in one part can spread through the whole system. The theory has its roots in the work of Ludwig von Bertalanffy in the early 1950s and moved management thinking away from the classical image of organizations as machines toward a more relational understanding of how people, procedures, and activities interact. From this perspective, internal audit and consequence management should not be viewed as separate administrative tasks. They are part of the same governance system. If audit findings are not translated into action by management, committees, and oversight structures, then the weakness is systemic rather than isolated. This is why the study of internal audit in KZNPG has to move beyond a narrow compliance lens and examine how governance mechanisms interact, reinforce one another, or fail to do so.

Literature Review and Theoretical Framing

The literature on internal auditing shows a clear shift in how the function is understood. Early approaches focused mainly on asset protection, bookkeeping accuracy, and financial control (Mints, 1972). Over time, especially after major governance failures, internal audit was repositioned as a broader governance mechanism concerned with risk management, internal control, consulting function and oversight (Ridley & D’Silva, 2007; Hermanson & Rittenberg, 2003). The IIA’s expanded definition reinforced this wider role by locating internal audit within governance processes rather than treating it as a narrow checking function (Sarens & Abdolmohammadi, 2011). In the public sector, this expansion matters because internal audit is expected not only to verify compliance with legislation such as the PFMA, but also to support stewardship, accountability, and ethical use of public resources (Nyamita, Dorasamy & Garbharran, 2015).

At the same time, the literature is clear that the promise of internal audit is often constrained by organisational realities. Independence remains fragile where management interference is strong and professional distance is weak. Studies in provincial government settings show that internal audit may be compromised when it is too closely embedded in executive structures that are themselves implicated in governance failures (Everett & Tremblay, 2014; Geqeza & Dubihlela, 2024). This tension is important because it explains why strong audit findings do not always produce strong responses. Internal audit may generate credible information through audit reports, but credibility alone does not guarantee enforcement. The usefulness of the function depends on the surrounding leadership culture, institutional arrangements, and willingness to act.

Compliance auditing adds another layer to the discussion. Compliance audits assess whether organizations follow statutory requirements and financial management rules (Abbas, Kareem & Abd, 2020; House, 2022). In public administration, this matters because compliance is linked to budgeting discipline, fraud prevention, and public trust. Yet compliance is not the same as accountability. An institution may produce compliant reports and still fail to discipline misconduct or recover losses. Audit recommendations can also stall when consequence management structures are weak or when responsibility is diffused across multiple levels of authority (Hut-Mossel, Ahaus, Welker, Gans, 2021). This is why the presence of audit mechanisms should not be mistaken for the presence of accountability. The two are connected, but they are not identical.

The literature on audit committees and oversight bodies further shows that governance depends on the quality of interaction among institutions. In theory, the first line, usually departmental management and Heads of Departments, are responsible for day-to-day compliance. The second line, including Risk Management, Legal and Compliance, Information Security, Performance Monitoring and Evaluation, Quality Assurance, Organizational Health and Safety, etc provides management assurance. The third line include legislative committees like Standing Committee on Public Accounts (SCOPA), Municipal Public Accounts Committees (MPAC) Audit Committees, Risk Management Committees, Financial Disciplinary Boards, AGSA, etc offers external scrutiny and democratic accountability as well as independent oversight, respectively. In practice, however, these layers do not always work together as intended. Political alignment, limited enforcement authority, and institutional fragmentation can weaken SCOPA’s ability to act decisively (Maganoe, 2023). Likewise, audit committees may identify weaknesses but still lack the leverage to ensure implementation, especially where senior management is unwilling to cooperate (Krishnan & Subban, 2022). The result is a system in which findings circulate, but consequences remain uneven. Further, the impact of municipalities Financial Disciplinary Board depends on Council’ decision to implement recommendations to disciple or recover financial losses (Zungu, Chonco, & Madwe, 2024).

The principal-agent theory helps explain this pattern in a more structural way. Rooted in the work of Jensen & Meckling (1976) and earlier contributions from Alchian & Demsetz (1972), the theory focuses on the problems that arise when one party delegates authority to another. In the public sector, citizens and taxpayers are the principals, while public officials and departments act as agents entrusted with public resources. Because agents often possess more information than principals, and because their interests may not fully align, the risk of opportunism, shirking, and self-interest increases (Pepper & Gore, 2022). The theory is useful here because consequence management can be understood as a response to agency loss. It is one of the mechanisms through which principals, directly or indirectly, try to discipline agents and reduce the gap between delegated authority and responsible conduct.

At the same time, principal-agent theory has important limits. It tends to assume self-interested behaviour and often focuses on dyadic relationships, which can oversimplify the public sector where multiple principals and multiple accountability pressures exist Wiseman, Cuevas-Rodríguez & Gomez-Mejia, 2012; Olsen, 2022). It also underplays informal norms, trust, and shared values. Still, its strengths are significant. It clarifies why monitoring matters, why incentives shape behaviour, and why accountability cannot be left to moral expectation alone. In this study, the theory is particularly useful for understanding why internal audit may identify problems without producing consequences. The issue is not only information asymmetry, but also the absence of effective mechanisms that compel agents to act in the interests of the public.

Stakeholder theory broadens the analysis by moving beyond the principal-agent dyad. Freeman’s original formulation challenged the shareholder-centred view of organisations by arguing that institutions should consider the interests of all affected parties, not only those with formal ownership claims (Freeman, 1984; Freeman et al., 2020). Later scholarship extended this idea into business ethics, Corporate Social Responsibility (CSR), sustainability, and governance (Bridoux & Vishwanathan, 2020; Ferrell, Harrison, Ferrell & Hair, 2019; Tantalo & Priem, 2016). Its relevance to public administration is obvious. Government does not serve one stakeholder alone. It must respond to citizens, communities, employees, oversight bodies, and other affected groups. In that context, consequence management is not just a technical matter of punishment. It is part of a wider ethical obligation to protect the interests of those who rely on public institutions.

The theory’s main strength lies in its insistence that organizations should engage stakeholders, balance competing claims, and act with accountability. Its weakness is that it offers limited guidance on how to prioritize conflicting interests in practice (Crane & Ruebottom, 2011; Phillips, Freeman & Wicks, 2003; Tantalo & Priem, 2016). That limitation is especially relevant in government, where political considerations can distort whose interests are recognized and whose are ignored. Even so, stakeholder theory is valuable for this study because it highlights the democratic dimension of consequence management. When misconduct is ignored, the harm extends beyond internal procedures. It affects the public, which has a legitimate claim to transparent and responsive governance.

Institutional theory adds a different but equally important layer. Rather than focusing mainly on individual incentives or stakeholder claims, it explains how organizations are shaped by the rules, norms, and expectations of their environment (Scott, 2014; DiMaggio & Powell, 1983). In public administration, this matters because institutions often adopt governance structures to appear legitimate, even when those structures are only weakly implemented. The theory is especially helpful in understanding decoupling, where formal systems exist on paper but are not fully reflected in practice. This helps explain why internal audit units, audit committees, and compliance procedures may exist alongside persistent irregular expenditure and weak consequence management. The formal architecture of accountability may be present, yet the lived practice remains fragmented.

Institutional theory also shows how coercive, mimetic, and normative pressures encourage organizations to become similar over time, often by adopting best-practice language and compliance routines (Boon, Boxenbaum & Hartmann, 2019; Greenwood, Hinings & Amis, 2021). Its strength is that it captures the wider political and social context in which governance operates. Its limitation is that it can overstate external pressures and understate agency, especially the role of leadership choice and ethical commitment (Bromley & Meyer, 2015; Modell, 2021). Even so, for the KZNPG context, it offers a compelling explanation for why governance reforms may be formally adopted but unevenly enforced. Institutions may conform to expected norms to preserve legitimacy, while actual accountability remains weak.

Taken together, these theories suggest that internal auditing and consequence management should be understood as parts of a single governance ecosystem. Holistic management theory and systems theory stress integration and interdependence. Principal-agent theory explains the incentive and accountability problem. Stakeholder theory brings in the wider public interest. Institutional theory shows how formal rules, legitimacy pressures, and organizational culture shape the extent to which governance mechanisms actually work. The value of using them together is that they prevent the study from becoming one-dimensional. Internal audit is not treated merely as a technical function, and consequence management is not reduced to a disciplinary process. Instead, the study is positioned within a broader debate about how public institutions move from detection to response, from formal compliance to real accountability, and from fragmented oversight to integrated governance.

This combined framework also offers methodological clarity. It implies that the relationship between internal auditing and consequence management cannot be examined meaningfully without considering organizational context, leadership response, institutional pressures, and stakeholder expectations. That is important for transparency because it makes the analytical pathway visible rather than assuming that audit findings automatically produce action. The study therefore contributes not only to the literature on internal audit, but also to wider debates in management and public governance about why formal systems often fail to generate substantive consequences. In the KZNPG, that question goes to the heart of whether governance is being managed as an integrated system or left to operate as disconnected parts.

2. Methodology

This study was grounded in the interpretivist paradigm. The choice of paradigm was deliberate. Internal audit and consequence management are not merely technical compliance mechanisms; they operate within institutional environments shaped by leadership attitudes, administrative discretion and political realities. An interpretivist orientation recognizes that governance systems derive meaning through practice, interpretation and organizational culture. The study therefore approached internal audit findings, management responses and enforcement outcomes as socially constructed institutional processes rather than neutral administrative outputs. Adopting this paradigm allowed the research to move beyond a surface reading of audit reports. It enabled an examination of how audit findings are framed, how management responses are articulated and how patterns of recurring non-compliance signal deeper structural issues. The interpretivist lens guided the reading of documents in a way that paid attention to tone, repetition, emphasis and omission. Where repeat findings appeared across multiple reporting cycles, the analysis considered not only the technical issue identified but also what such recurrence implied about enforcement behaviour. In this way, the paradigm shaped both the analytical depth and the interpretive stance of the study.

The study employed a qualitative exploratory case study design using a desktop research approach. The case study focused specifically on the KZNPG as a bounded institutional system. The objective was not to generalize statistically to all provincial administrations but to develop an in-depth understanding of how internal audit processes interact with consequence management within a defined governance context. The exploratory character of the design was appropriate because the direct relationship between internal audit effectiveness and consequence management outcomes has not been extensively examined in provincial government settings. A desktop approach was selected because the phenomenon under investigation is extensively documented in official reports and governance frameworks. AGSA findings, Internal Audit and Audit Committee charters, Treasury Regulations and disciplinary frameworks provide traceable evidence of institutional practice. These documents form a structured record of compliance failures and corrective intentions.

The design unfolded in stages. The KNPG was first identified as the unit of analysis. A defined period of audit cycles was then established to ensure consistency of review. Official reports and governance documents were retrieved and examined systematically. Patterns of recurring audit findings were compared with documented responses relating to disciplinary action, recovery measures and implementation of recommendations. This comparative process allowed the study to interrogate the alignment between assurance mechanisms and enforcement outcomes within the provincial and local government administrations. The population for the study comprised governance-related documents relevant to internal audit and consequence management within the KZNPG. These included AGSA reports, internal audit policies and charters, audit committee reports, Provincial Treasury guidelines, PFMA and MFMA provisions and consequence management frameworks. Academic literature addressing internal audit effectiveness and public sector accountability was also included to contextualize institutional findings within broader theoretical debates.

Purposive sampling was employed to ensure that only information-rich and directly relevant documents were selected. The inclusion criteria required that documents explicitly address internal audit functions, governance compliance, irregular expenditure, repeat audit findings or disciplinary procedures. Documents lacking direct relevance to the research objective were excluded to maintain analytical focus. The sampling process involved screening retrieved documents against these criteria before inclusion in the analysis. The sampling units therefore consisted of official oversight reports, regulatory frameworks and scholarly analyses that provided substantive evidence on the audit–consequence management interface. This approach ensured that the database was both authoritative and aligned with the research objective.

Data was collected through systematic document analysis. The process began with the identification and retrieval of publicly available documents from official government and oversight platforms, as well as accredited academic databases. Each document was reviewed to determine its relevance to the research question. Once selected, documents were read repeatedly to achieve familiarity with their structure, content and emphasis. During the reading process, sections referring to audit findings, repeat findings, irregular and fruitless expenditure, management responses and disciplinary measures were identified and extracted. These extracts were recorded in a structured document analysis matrix, which captured the source, year, nature of the governance issue identified and the reported corrective action. This matrix facilitated comparison across departments and municipalities reporting cycles. The repeated reading of documents allowed emerging patterns to become visible. Recurring references to weak consequence management, delayed disciplinary action or persistent irregular expenditure were noted carefully. The aim was not merely to catalogue compliance failures but to examine whether documented enforcement actions corresponded meaningfully to audit recommendations.

The data analysis relied on thematic analysis to interpret documentary evidence. Immersion in the documents allowed for an overarching understanding of governance issues. Key excerpts were coded according to themes such as management responsiveness, enforcement gaps, and institutional constraints. These codes were then organized into broader categories, reflecting the core dimensions of the research problem. Themes like the role of internal audit as an assurance mechanism and the presence of enforcement gaps emerged from this analysis.

Trustworthiness was a priority throughout the study, employing triangulation to validate findings against various document types. An audit trail maintained through the document analysis matrix ensured that interpretations could be traced back to specific sources. Reflexivity was practiced, grounding interpretations in textual evidence rather than personal assumptions. Alternative explanations for recurring audit issues were also considered, promoting a balanced understanding of the complex realities of governance.

Ethical considerations were strictly followed, even without involving human participants. All data was sourced from publicly accessible materials, which avoided confidentiality issues typical of research involving individuals. Proper citation of sources maintained academic integrity, while the analysis focused on systems rather than individuals, minimizing reputational risks. The study avoided selective reporting or distortion of findings, remaining transparent about data limitations and ensuring a fair representation of the institutional landscape.

3. Findings on the Effect of Internal Auditing on Consequence Management in the KwaZulu-Natal Provincial Government

An assessment of the internal audit processes and external audit findings from the provincial and municipalities annual reports and Auditor-General South Africa (AGSA, 2024) unveil a complex accountability landscape within the KZNPG. Evidence of incremental improvements is juxtaposed against entrenched weaknesses in consequence management, particularly in high-expenditure departments such as Health and Transport. This aligns with findings by Manjate (2019), which highlighted the presence of highly qualified and skilled staff in the KZN provincial departments; however, their competency has not prevented persistent procurement irregularities and non-compliance audit findings. From a holistic management and systems management perspective, this disjuncture reflects a lack of integration between organizational capabilities and governance outcomes. The presence of skilled personnel represents one functional component of the system, yet the failure to translate competence into compliance suggests weak alignment between subsystems such as procurement, oversight, and enforcement. In line with systems theory, dysfunction in one component inevitably affects the performance of the entire governance system.

The scale of irregular expenditure emerges as a stark indicator of systemic failures in consequence management. As of the 2021–22 fiscal year, an alarming 93% of the cumulative irregular expenditure, amounting to R48.46 billion, remained unresolved (AGSA, 2024). Notably, 83% of this unresolved sum stemmed from the Departments of Health and Transport (AGSA, 2024). This lack of action indicates that internal and external audit findings have not effectively translated into meaningful disciplinary or corrective measures at the departmental level. The AGSA has persistently emphasized issues of non-compliance with the PFMA, yet investigations into financial misconduct often suffer from delays or lack conclusive findings, echoing the observations of Nzewi & Musokeru (2014). Interpreted through principal-agent theory, this reflects a classic accountability failure where agents, in this case public officials, do not act in alignment with the interests of principals, namely citizens and taxpayers. Information asymmetry may be reduced through auditing, but without credible sanctions, the incentive to comply remains weak. At the same time, institutional theory offers a complementary explanation. The persistence of unresolved irregular expenditure suggests a form of decoupling, where formal compliance structures exist but are not matched by substantive enforcement in practice.

The findings also resonate with the literature’s assertion that while internal audits aim to identify governance failures, they often fall short in ensuring corrective actions due to a lack of management commitment and accountability frameworks (Mihret & Yismaw, 2007; Arena & Azzone, 2009). Thus, repeated audit findings within the KZNPG raise essential questions about the relationship between internal auditing and consequence management. From a holistic management standpoint, this reflects a breakdown in organizational learning. Internal audit is intended to feed information back into the system throughout the financial years, to enable adaptation and improvement, and before the external auditors comes to conduct their statutory audit at the end of each financial year. When this feedback loop is ignored, the organization fails to function as a learning system, weakening its ability to correct itself over time.

Compared to the KZNPG local government sphere, the picture looked promising. While municipalities managed to reduce unresolved irregular expenditures from R14.39 billion in 2020–21 to R8.27 billion in 2023–24, this improvement must be approached cautiously (AGSA, 2024). Many councils failed to conduct thorough investigations before writing off irregular expenditures or imposing sanctions. Therefore, a mere reduction in reported irregularities does not automatically imply strengthened accountability. This observation is consistently supported by Zungu, Chonco, & Madwe (2024), who note that without robust disciplinary measures, audit findings may lack a corrective impact. This aligns with institutional theory, where organizations may adopt practices that signal improvement to maintain legitimacy, even when underlying behaviours remain unchanged. The apparent improvement may therefore reflect compliance symbolism rather than substantive governance reform. In addition, from a principal-agent perspective, the absence of credible sanctions reduces deterrence, allowing opportunistic behaviour to persist.

Additionally, the increase in municipal unauthorized expenditure from R3.09 billion to R3.79 billion in 2023–24 further illustrates ongoing weaknesses in budget oversight and financial discipline (AGSA, 2024). Despite the presence of internal audit units and audit committees, these entities seem to exert limited influence on executive decision-making. When audit recommendations are perceived merely as compliance checks rather than genuine governance instruments, consequence management becomes procedural instead of substantive. This finding mirrors the arguments of Hut-Mossel et al. (2021), who argue that audits are less effective in driving accountability when there are no tangible repercussions. From a systems management perspective, this highlights weak coordination between subsystems responsible for oversight and those responsible for execution. The system produces information, but the absence of integration means that this information does not translate into action.

Regarding internal control deficiencies, external audit outcomes did show slight improvement between 2020–21 and 2023–24, where 28% of municipalities enhanced their audit results (AGSA, 2024). However, internal audit reports still reveal significant shortcomings in key controls across various departments. In 2023–24, 51% of municipalities received unqualified opinions only after substantial audit adjustments (AGSA, 2024). This suggests that internal controls remain reactive, positioned to address issues primarily during the audit period. Thus, while audits may improve reporting accuracy, sustainable internal control environments are not consistently realized, contradicting the assertions of Ngoepe & Ngulube (2016), who advocate for proactive internal controls to bolster accountability. This pattern reflects a misalignment within the organizational system, where control mechanisms function episodically rather than continuously, undermining the principles of both systems theory and holistic management, which emphasize ongoing integration and proactive adaptation.

On supply chain management (SCM), audit reports frequently highlight non-compliance with SCM legislation as a key driver of irregular expenditure and fraud risk by municipalities and provincial departments (AGSA, 2024). The persistent reliance on consultants complicates accountability. While consultant costs have declined, critical skills gaps continue to persist. Provincial departments and municipalities with modified audit opinions still depend heavily on external consultants, with instances revealing an inadequate transfer of skills back to local staff. Findings from the Amajuba District Municipality exemplify this issue, where revenue qualification is linked to inadequate consequence management of IT consultants. Internal auditing demonstrates diagnostic strength but lacks the coercive authority necessary for effective enforcement. This reflects both principal-agent problems, where consultants and officials may not be fully aligned with public interests, and institutional weaknesses, where governance systems fail to enforce accountability across contractual relationships.

Infrastructure management also reveals significant risks to service delivery. Audit site visits uncovered deficiencies in infrastructure management across various stages of project execution. Poor maintenance led to provincial water losses reaching R3.47 billion, with eThekwini Metro accounting for R1.99 billion (AGSA, 2021). Such discrepancies underline that while a clean or unqualified audit opinion issued by the AGSA to any government institution may reflect compliance, it does not guarantee effective infrastructure management. Where consequence management fails to encompass contractor accountability and maintenance oversight, service delivery failures continue independently of audit outcomes. This reinforces a systems perspective, where financial compliance and service delivery are interconnected subsystems. Weakness in one inevitably undermines the other, illustrating the limitations of evaluating governance through audit outcomes alone.

Financial health paints another critical area of concern. By 2023, five municipalities (9%) expressed uncertainty regarding their status as going concerns, while 69% of municipal debt was deemed irrecoverable (AGSA, 2024). Continuous warnings from both internal and external audits about these financial risks have not been translated into meaningful reforms. Zungu & colleagues (2024) articulate that while audits effectively identify issues, they often lack the transformative influence necessary to inspire genuine change. This again reflects institutional inertia, where organizations fail to respond adequately to external and internal pressures, and principal-agent misalignment, where decision-makers do not internalize the long-term consequences of financial mismanagement.

Contrastingly, occasional instances of turnaround, such as the KZN Department of Public Works and Infrastructure achieving a 100% audit score in 2026 (AGSA, 2024), illustrate that under the right conditions, specifically strong leadership commitment and adherence to internal controls, auditing can serve as a powerful corrective tool (AGSA, 2024). This case highlights the importance of leadership as a coordinating mechanism within systems theory and reinforces holistic management principles, where alignment, accountability, and shared purpose enable organizational improvement. It also suggests that principal-agent problems can be mitigated where incentives, monitoring, and commitment are effectively aligned.

Cumulative evidence presents a complex picture of auditing’s role in consequence management. While there are demonstrable improvements in audit outcomes and a reduction in unresolved irregular expenditures, glaring systemic weaknesses persist. The finding that 93% of R48.46 billion in cumulative irregular expenditure remains unresolved, combined with rising unauthorized municipal expenditure and delayed investigations, signals a predominant failure in consequence management (AGSA, 2024). This finding resonates with Hut-Mossel et al. (2021), who emphasized that without tangible consequences for non-compliance, officials may disregard audit recommendations altogether.

Overall, while KZN provincial departments and municipalities face significant challenges, the literature underscores that internal auditing is not merely a detection mechanism; it fundamentally revolves around the transformative capacity of enforcing recommendations. Zungu (2024) asserts that while internal auditing enhances transparency and uncovers governance weaknesses, its efficacy in consequence management relies heavily on political will and the integrity of oversight institutions. In theoretical terms, this reinforces the need to view governance through an integrated lens. Holistic management and systems theory highlight the importance of alignment and interdependence. Principal-agent theory explains the persistence of opportunistic behaviour in the absence of enforcement, and institutional theory reveals how formal compliance can coexist with weak practical implementation.

In summary, the findings underscore that internal auditing reflects governance failures with precision; however, the effectiveness of this “mirror” is contingent upon institutional support and the willingness of management to act on the insights provided. Without robust enforcement and adequate expertise, audit recommendations risk becoming routine formalities rather than instruments of substantive accountability. This reinforces the need for stronger, integrated governance mechanisms capable of bridging the gap between audit findings and effective consequence management in the KZNPG.

4. Conclusion

The findings on the effect of internal auditing on consequence management within the KZNPG reveal a complex interplay between audit processes and accountability outcomes. Despite the presence of skilled personnel and some incremental improvements in audit outcomes, systemic weaknesses persist, particularly in high-expenditure departments like Health and Transport and municipalities such as Amajuba District and eThekwini Municipality. A staggering percentage of irregular expenditure remains unresolved, indicating that audit findings have not effectively translated into disciplinary actions. This inefficacy is largely attributed to the lack of political will, inadequate enforcement mechanisms, and the symbolic nature of internal auditing, which often fails to prompt meaningful changes in governance.

5. Research Implications

5.1. Contributions to the Literature

This research contributes to the existing body of literature by illuminating the intricate relationship between internal auditing and consequence management in a South African context. It underscores the limitations of internal auditing as a mere diagnostic tool without the necessary political support and enforcement mechanisms to drive accountability. Moreover, it highlights gaps in empirical evidence regarding the causal impact of internal audits on governance outcomes, paving the way for future investigations.

5.2. Contributions to Practice

Practically, the findings suggest the need for stronger frameworks that link audit processes to actionable consequences. The research emphasizes the importance of fostering a culture of accountability and reinforcing the independent value adding internal audit functions. For practitioners, these insights advocate for enhanced training, clearer accountability structures, and greater political commitment to ensure that audit findings lead to meaningful corrective actions.

6. Future Scope

Future research should focus on exploring the dynamics of political will and its impact on the effectiveness of internal audits in consequence management, including the role played by independent oversight functions. Additionally, comparative studies across other provinces or countries could provide valuable insights into best practices and challenges in public sector auditing. Further investigation into the role of audit committees and their effectiveness in enforcing accountability measures could also enhance understanding of the interplay between auditing and governance. By addressing these areas, future studies can contribute to the development of more effective auditing frameworks that genuinely influence consequence management in the public sector.