The significance and recent trends of management letters within the Maltese economy
PURPOSE: This study aims to obtain an understanding of the importance, usefulness and effectiveness attributed by both local businesses and local auditing firms, to the ML. Moreover, this study also seeks to explore any recent trends established when it comes to preparing and implementing the MLs. DESIGN: To achieve the study’s objectives, a qualitative research approach was adopted whereby fifteen semi-structured interviews were conducted with four private company managers, four public company managers, and seven EAs. FINDINGS: The findings indicate that overall, the letter is perceived as a beneficial tool by both parties, whereby EAs use the letter as an opportunity to include any areas of weakness, while company mangers use the ML as guidance in rectifying the matters listed. Moreover, the study also revealed that while the significance of the ML is ever-growing and has become more fundamental in recent years, its importance is highly dependent on the size and structure of the businesses. In fact, big and/or listed companies with effective CG tend to perceive the ML in a positive light and utilise it to their best potential, which is quite the opposite to small or family-run businesses. Furthermore, the study also indicated that the ML’s valuableness is heavily linked with the recommendations mentioned, but which regrettably are generally quite standardised, and not attuned or linked to the audit client and its resources. CONCLUSIONS: This study concludes that, while MLs are generally effective to both parties and are becoming increasingly more fundamental, such effectiveness mainly relies on the structure and size of the local business; the level of communication existent between the parties; and the recommendations listed in the MLs. Therefore, more emphasis should be placed on auditors’ approach towards the preparation and subsequent communication of the MLs. IMPLICATIONS: This study emphasises the perception and importance attributed to the ML by both the ones preparing the letter and the ones utilising the letter. It is hoped that this study and its recommendations encourage a stronger communication between the parties, as well as enable auditing firms to incorporate more relevant and feasible recommendations to the client, thus encouraging company management to derive more value from their MLs.
Auditing -- Malta, Business enterprises -- Malta, Communication in accounting -- Malta, Auditors -- Malta
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