The rational purpose requirement in non-financial assurance

Abstract

In his thesis, The Rational Purpose Requirement in Non-Financial Assurance, the promovendus investigated the potential emancipatory impact of the Rational Purpose Requirement (RPR) on assurance practices in South Africa. The main intention of the RPR is to preclude the acceptance of an assurance engagement where the information needs of the intended users will not be met. As part of this investigation, key actors in the South African sustainability assurance industry were given an opportunity to give meaning to the RPR in the process of determining how it would be operationalised in South Africa. This study used critical discourse analysis as its overarching methodology and was executed in four phases during which the perceptions of the various role players in the South African assurance industry were obtained. In phase 1, a Q methodology survey was administered with 57 respondents. The respondents fell into one of four relevant cohorts, namely report preparers, assurance providers, investors and social and environmental users. The purpose of the survey was to make explicit these groups’ understanding of the underlying subject matter, the purpose of reporting and the purpose of assurance. The results of the Q methodology survey were used to facilitate the first round of focus group conversations (phase 2). Phase 2 was followed by individual interviews (phase 3) of representatives of each of the four cohorts, to gain a better understanding of the way they intended to influence the RPR implementation. Phase 4 comprised the second round of focus group conversations specifically aimed at identifying the way that assurance providers viewed the operationalisation of the RPR. The overall conclusion of this study is that the potential of the RPR is completely undermined, principally by dominant corporate interests that will prevent the RPR from firstly driving higher accountability in reporting and assurance processes and, secondly, from exposing the conflicts and antagonisms inherent in corporate activity. This conclusion was reached by deploying discourse theory alongside critical discourse analysis. Apart from being the first to advance discourse theory into the assurance standard setting literature, this study also makes an important contribution to discourse theory itself. The study found that even though antagonistic groups put forward morally and intellectually superior arguments, their inability to manufacture popular support undermines their arguments, and ultimately their ability to advance the emancipatory potential of the RPR. This advances discourse theory because it shows that power, through the ability to generate consent, trumps the ability to show moral and intellectual leadership. This study also raises an important question around the role of the assurance standard setter and regulator because the evidence suggests that the RPR is doomed to fail in the voluntary environment and hence, by its own flawed design, is incapable of meeting the public interest. This finding contributes to earlier calls to advance audit and assurance scholarship in the international audit regulation arena.