Financial reporting by Scottish local authorities
This research examines financial reporting by Scottish local authorities. Two particular aspects have been examined, namely audit lags and audit incidents. 65 local authorities were examined for the period 1989/90 until 1995/96. This period is classified as the pre-reorganisation period. Then the research continued by analysing audit lags and audit incidents for the 32 new postreorganisation local authorities for 1996/97 and 1997/98. The researcher used Luder's (1992) contingency model of public sector accounting innovations as a framework to analyse the stimuli for financial reporting changes in the Scottish local authorities. The effect of audit qualifications appears not to be a strong stimulus for the local authorities to improve financial reporting. The discussion on audit lags was divided into pre-reorganisation and postreorganisation periods. In addition, the ten local authorities in the Grampian and Tayside regional areas were studied for an additional 14 years. The results indicated that there was a persistent pattern among the local authorities in Scotland. The good performers were always good and the poor performers were always poor. Authorities like Angus DC managed to get an audit lag of around 4 months, while some local authorities took more than two years. Thus it is not impossible to get the accounts certified within four months. Audit incidents were classified into two categories, that is Audit Qualifications (AQ) and Comments Short of Audit Qualification (CSAQ). The performance among authorities varies tremendously. While some regional councils obtained very few audit incidents, some have many. Likewise some district councils have many and some have none. Islands appear to have more audit incidents. As proven by some authorities, getting a clean report is not impossible. Therefore it is important for local authorities to emphasise improving the audit lags and improving the quality of the accounts to obtain a clean report every year. Lengthy audit lag reflects inefficiency in management. This not only suggests weak internal control but also indicates that financial reporting is considered as a low priority task. Numerous audit incidents seem to signal that local authorities have not complied with all the rules and regulations. Repeated audit incidents imply that they were not serious in rectifying the situation. Reorganisation appears to disturb the ranking of the councils resulting in much longer audit lags in the last year of the abolished councils and the first two years after reorganisation. Thus, reorganisation contributes to longer audit lags and leads to numerous audit incidents, especially for 'limitation in audit scope'. Undoubtedly, Scottish local authorities should improve their financial reporting and their accountability to the public.