Neutralizing Deviance at State-owned Enterprises: The Case of South African Airways

State-owned enterprises (SOEs) constitute approximately one-fifth of the world's largest enterprises. If they fail, the ramifications are substantial (OECD, 2018; Ackers and Adebayo, 2022) because SOEs play a key role in implementing public policy and addressing economic problems arising from natural monopolies (Baum et al., 2019). Therefore, SOEs must serve the public interest with governance and accountability mechanisms which ensure responsible use of taxpayers’ funds. These mechanisms include effective systems of internal control complemented by robust internal and external audits (Hassan et al., 2023). There are, however, only a handful of studies that investigate how accountability mechanisms function at SOEs and the problems that are encountered by these organizations (Baum et al., 2019; Dzomira, 2020). In particular, researchers have called for case studies to provide in-depth insights into the operation and interaction between multiple governance mechanisms, especially when governance failures have occurred (Grossi et al., 2015; Daiser et al., 2017).

In this paper, we undertake a case study approach to analyze the near-collapse of South African Airways (SAA) and how individuals key to upholding the airline's accountability mechanisms justified their actions during the crisis period. Specifically, we consider how SAA's board and its auditors rationalized or justified behaviour which, under normal circumstances, would be regarded as contravening codified governance principles1 and related legalization. This departs from the traditional approach of examining how governance mechanisms (like monitoring by board members and external audits) enable improved organizational performance and accountability (Grossi et al., 2015). As its basis, our research uses the conclusions of recent independent judicial inquiries held in South Africa into SAA's breakdown. The paper makes four key contributions.

Firstly, research on SOEs has increased recently but most SOE studies apply a predominantly quantitative approach (Daiser et al., 2017). While these studies have generated valuable insights into the determinants underlying SOEs’ governance performance (such as the impact of audit committees on financial or social performances) they overlook the possibility of governance mechanisms being ‘captured’ and how the involved individuals rationalize or justify the misapplication of or departure from generally accepted governance standards.

Secondly, most SOE studies investigate China, India, the US, and European countries but few focus on African countries (exceptions include Abuazza et al., 2015; Bananuka et al., 2018). Our study investigates South Africa, which is one of the key economies in Africa, adding to the body of work on under-researched jurisdictions.

Thirdly, this is one the first governance-related studies of South African ‘state capture’, which is the common term used to describe the process by which private individuals and companies commandeered South African organs of state, including prominent SOEs, to redirect public resources into their own hands (Gevisser, 2019). We draw on recently concluded investigations of the Zondo Commission which investigated state capture across the South African public sector, including SOEs. The Commission's extensive investigations offer a unique insight into governance and audit crises at a SOE as witnesses testified under oath. Many documents that are not usually available to researchers were made public by the Zondo Commission, thereby offering a rich set of data for examining how the Board and external auditors of an important SOE rationalized accusations of malpractice and non-compliance with existing governance norms and regulations. Although data are drawn from a single case, the explication of how key individuals in SAA's governance mechanisms attempt to defend their conduct provides insights that are relevant for examining other governance-related failures at SOEs in South Africa and internationally.

Finally, our analysis of SAA's crisis is informed by the neutralization techniques framework (Sykes and Matza, 1957; Harris, 2022), which has been used in different domains (e.g., Hinduja, 2007; Fooks et al., 2013). The framework has, however, seen limited application in accounting scholarship. Our study reveals the framework's relevance for understanding the role of individuals when governance—including audit—mechanisms fail.

NEUTRALIZATION TECHNIQUES

Company failures have made international headlines in recent years. From Enron's collapse in the US in 2001 to Wirecard in Germany in 2020, most company failures have exposed serious crises in companies’ governance and audit arrangements. Extensive literature has emerged linking weak corporate governance to deviant and non-compliant behaviour by individuals within and outside the organization (Felo, 2011).

Although they are often used interchangeably the meanings of the terms ‘deviance’ and ‘non-compliance’ do differ slightly. ‘Deviance’ refers to any behaviour that violates social norms and expectations notwithstanding that these are often not legislated or formally codified. ‘Non-compliance’ refers to failure to obey formal rules and regulations (Mitra et al., 2021). Owing to its nature as a social norm, what is perceived as deviant behaviour is primarily the result of an individual's learning process which occurs through their association with those who approve of deviant behaviour and those who do not. These associations, which will influence an individual's actions, are not limited to an individual's immediate social setting but will be vulnerable to influences from larger institutional and cultural arrangements (Vaughan, 2002). Individuals generally have multiple differential associations (e.g., family and peers) but the associational importance of an individual's workplace is significant given the amount of time individuals spend in the workplace and the (financially) important role this occupies in their lives (Piquero et al., 2005). Examples of audit-related norms include how auditors are trained within their firms to apply auditing standards and guidelines. Although audit standards such as those issued by the International Auditing and Assurance Standards Board (IAASB) provide a framework for how audits are to be conducted, within this framework, auditors have substantial discretion as judgement is inherent in many auditing tasks such as assessing materiality and risks or concluding on the sufficiency and appropriateness of evidence obtained during audit engagements. The same is true in the context of boards of directors. Codes of best practice have emerged but these typically provide broad principles according to which directors are expected to operate. Detailed prescriptions catering for how every issue encountered when overseeing an organization's strategy, risk management, and core operations are seldom available. This is the case even when governance codes are complemented by legislation. Similar to the situation encountered with auditors (and other professionals), directors are trained to apply guidelines but also to rely on rules of thumb, subjective sense-making, and ‘gut feel’ (Pentland and Rueter, 1994).

To explain the development of the specific drivers and motives associated with misbehaviour (understood here as encompassing both deviant and non-compliant behaviours), Sykes and Matza (1957) proposed a theory of delinquency which emphasizes that individuals become delinquent by learning techniques that allow them to justify their behaviour rather than learning criminal behaviour (Piquero et al., 2005). These learned techniques allow individuals to justify or neutralize their behaviour, enabling them to alternate between deviant and functional behaviours without feeling deeply guilty (Harris, 2022; Piquero et al., 2005). In their original framework, Sykes and Matza (1957) outline five neutralization techniques: (1) ‘denial of responsibility’, where individuals claim they did not mean to deviate; (2) ‘denial of injury’, involving denial of harm; (3) ‘denial of victims’, centring on abjuration of casualties; (4) ‘condemning the condemners’, involving attacking critics; and finally (5) ‘appeals to higher loyalties’, which focuses on elevating other norms.

Sykes and Matza (1957, p. 666) claim that neutralizations ‘precede deviant behaviour and make deviant behaviour possible’. While some studies support this view (e.g., Pogrebin et al., 1992), researchers have found evidence that neutralization practices can occur both before and after episodes of deviance because justifications employed as neutralizations in one case may be used as rationalizations by the same offender in a later incident (Harris, 2022; Vitell and Groves, 1987). Hence, we follow Kaptein and Van Helvoort (2019, p. 1261) who argue against distinguishing between neutralization and rationalizations, as such terms ‘are increasingly used interchangeably in the literature covering both ex-ante and ex post arguments’.

One criticism of neutralization theory is its limited development over time with most studies following Sykes and Matza's original framework (Maruna and Copes, 2005). Some seek to address this under-theorization, including risks of arbitrariness and inconsistency associated with the way neutralization techniques have been named and selected by Sykes and Matza (1957). Kaptein and Van Helvoort (2019), for example, provide a comprehensive literature review and develop a model of neutralization techniques that deductively devises a basic structure that helps to connect categories of neutralization techniques. They distinguish between two main techniques—denial of deviance and denial of responsibility—arguing that these are logical and exhaustive given that they capture the essence of neutralization. Denial of deviance can be perceived as the higher-order variant because individuals employing these strategies accept their actions but claim they did not result in deviance from explicit or implicit contextual norms (‘It is not deviant’). In the case of the lower-order variant, denial of responsibility, techniques are used that imply a cognitive acceptance of misbehaviour, with the subsequent justification of behaviour provided on the ground of diminished responsibility (‘I am not responsible for it’) (Kaptein and Van Helvoort, 2019).

The literature subdivides denial of deviance and denial of responsibility into four categories with ‘facts distortion’ and ‘norm negation’ as second-order dimensions of ‘denial of deviance’, and ‘circumstance blaming’ and ‘self-hiding’ as second-order dimensions of ‘denial of responsibility’. Kaptein and Van Helvoort (2019) further subdivide these four categories into 12 broad techniques. We draw on these techniques, and Harris's (2022) recent adaptation, to investigate how individuals inside and outside SAA mobilize neutralization techniques to justify behaviour which contributed to the airline's collapse. Our adapted model, depicted in Figure 1 and including a brief explanation of each strategy, uses a decision tree to highlight how the selection of initial neutralization techniques influence defence strategies available to individuals in consecutive stages.

We draw on neutralization theory to understand how individuals involved with SAA's governance and audit crisis mobilize neutralization techniques to justify their role. Whilst our focus is on SAA Board members and SAA's private sector auditors, we also investigate the role of the Auditor General of South Africa (AGSA, hereafter AG) and the Department of Public Enterprises (the South African government department responsible for overseeing SOEs, including SAA) insofar as their actions are interconnected with the activities of the Board and external auditors.

Depending on the setting in which individuals operate, different incentives and options exist for rationalizing norm infringement. We hypothesize that individuals will rely on denial of deviance strategies when facts associated with the norm violation might be disputed, or perpetrators question the accuser's interpretation of the norm. The latter is more likely if governance or audit standards are ambiguously defined, leaving scope for individuals to justify behaviour which, even if not in direct violation of those standards, could be construed as inappropriate (Harber et al., 2023).

As discussed below, the formal framework of governance and audit in relation to the public sector in South Africa is generally acknowledged to be of high quality (Maroun et al., 2014). We expect this to render denial of deviance strategies less attractive for rule infringers, especially if evidence is undisputed. In these circumstances, denial of responsibility constitutes a more feasible approach if individuals believe their norm infringement will be excused because of the unique circumstances in which they found themselves or the knowledge and capability deficiencies they claim to have faced. Owing to SAA's position as a SOE, and the unique political-economy dynamics such as government officials being subordinate to hierarchically superior government politicians, we expect denial of responsibility to have been a frequently applied neutralization strategy by individuals involved in SAA's audit and governance crises. Further, the mobilization of denial or responsibility strategies is likely to have been enhanced because of the volume of evidence collected by the Zondo Commission, which would have reduced the probability, as assessed by norm infringers, to employ successful denial of deviance strategies.

GOVERNANCE AND AUDIT OF STATE-OWNED ENTERPRISES IN SOUTH AFRICA

Individual governments, the World Bank (2014), and the OECD (2018) have developed SOE-specific governance best practice guidelines. Ackers and Adebayo (2022) find that South Africa demonstrates a high level of conformity between their corporate governance codes and those international guidelines. The South African Public Finance Management Act (PFMA), introduced in 1999, King IV (IoD, 2016), and the Protocol on Corporate Governance in the Public Sector are considered world class in terms of the regulatory and governance structures laid out for SOEs (Ackers and Adebayo, 2022).

The PFMA focuses specifically on the functions of SOEs and the related duties of board members and accounting officers. The focus of the PFMA and related guidelines is on ensuring ‘good’ governance and eliminating agency problems. SOEs are at particular risk of being affected by principal–agent problems as citizens effectively ‘appoint’ the state as principal to oversee SOEs but state owners can be tempted to pursue their political or other objectives (Allini et al., 2016). These risks are exacerbated by the nature of the relationship between the state and the economy often being blurred in SOEs (Roper and Schoenberger-Orgad, 2011).

Similarly, research has found that SOEs tend to be more prone to corruption than privately owned companies due to potential interference by public sector officials involved in the state ownership governance structure, especially in emerging markets (Apriliyanti and Kristiansen, 2019). For example, inferential work suggests that for SOEs where there is significant state control, audit fees tend to be higher (Andrews and Ferry, 2021), implying that the SOE structure can influence audit characteristics in a potentially negative manner.

Fiduciary duties applying to directors of South African SOEs are entrenched in the PFMA and overlap, in many ways, with those applying to directors of private sector companies in terms of the South African Companies Act (see Section 76). For example, directors of both private companies and SOEs must act in good faith, with reasonable care and skill and in the best interest of their organizations. However, the PFMA (Section 50) also lists SOE-specific duties including the requirement for Boards of SOEs to: (i) act with fidelity, honesty, and integrity; (ii) disclose to the Minister of Finance all material facts which in any way may influence the decisions or actions of the Minister; and (iii) prevent any prejudice to the financial interests of the state. The PFMA places stringent financial reporting duties on Boards of SOEs, such as information requirements towards Parliament and the government department charged with oversight.

South African SOEs are either audited by the AG or another auditor acting on the AG's behalf. Several requirements apply to auditors of SOEs, some of which are relevant to the audit profession generally while others specifically apply to auditors of SOEs. Firstly, auditors must comply with all relevant ethical requirements, including those contained in codes of best practice and enshrined in the relevant laws (IAASB,2 2009b). Secondly, the auditor needs to exercise professional judgement and scepticism.3 Thirdly, audits must be conducted with the express purpose of collecting sufficient audit evidence on which to base the opinion on the client's financial statements (IAASB, 2009a, 2009b). The PFMA and Public Audit Act (PAA) create additional requirements for auditors of SOEs, in particular the need to consider the compliance of the auditee with legislation, evaluating the operating effectiveness of SOEs’ internal processes, and the obligation to report non-compliance to the appropriate authorities. Audits of SOEs, however, are not performed with the express purpose of detecting fraud, and inherent limitations of an audit mean that some fraud may never be uncovered (IAASB, 2009c).

Even though South Africa boasts impressive regulations for SOEs and associated governance requirements, deficiencies in management and oversight continue to undermine SOEs’ ability to fulfil state-provided mandates. Examples include weaknesses in the design and implementation of controls over core processes (Myeza et al., 2021), ineffective audit committees (Dzomira, 2020), and inadequate involvement by the respective government departments in their role as shareholders (Thomas, 2012). A root cause analysis of these problems is beyond the scope of this paper. Relevant to this research is that breaches of statutory and fiduciary duties are alleged at South African SOEs, including SAA. These problems are widely publicized by the financial press and were investigated by the Zondo Commission. How the individuals implicated in breaches of statutory and fiduciary duties attempt to neutralize allegations of impropriety put to them by courts of law or commissions of enquiry is the focal point for the remainder of this paper. Indeed, we address a need for research in this area, given that the ‘… importance of SOEs, the problems of mismanagement, lack of transparency in effective control and corruption, and public pressure are increasingly queried by the public …’ (Phuong et al., 2020, p. 668) and require urgent attention from the academic community.

RESEARCH ISSUE AND METHODOLOGY

We employ a qualitative research method applying content analysis of available documentary evidence to study a specific SOE case. As Grossi et al. (2015, p. 282) argue, ‘… qualitative studies are required to further our knowledge of the subtleties of these adaptive and enduring organizations and for substance and insights to prevail over superficialities’.

Our selected case, SAA, experienced financial and governance crises for many years. In November 2019, SAA aircraft were grounded due to an eight-day strike and in December 2019 SAA was placed under Business Rescue. In January 2020, the SAA Business Rescue Practitioners secured funding from the Development Bank of Southern Africa to formulate a business rescue plan. SAA took urgent action to conserve cash in February 2020, including targeted changes to the route network, deployment of more fuel-efficient aircraft, and renegotiation of key contracts with suppliers. In March 2020, SAA's Business Rescue Practitioners requested an extension from creditors to extend the publication of the Business Rescue Plan. The timing of SAA's financial and governance failures coincided with the onset of the COVID-19 pandemic and, on 24 March 2020, SAA suspended all domestic flights.

SAA's long overdue 2017/18 financial report, presented in September 2022, showed that in 2017/18, the airline had debts of SAR8.4 billion (US$0.5 billion), and total liabilities of SAR26.7 billion (US$1.5 billion), exceeding total assets of SAR13.4 billion (US$0.8 billion). The South African Government had injected SAR10 billion (US$0.6 billion) during the financial year but the airline made a total operating loss of SAR5.4 billion (US$0.3 billion) (SAA, 2022).

In June 2021, the Government announced it would sell its majority stake in SAA to a private consortium in order to provide SAA with a much-needed capital boost. However, after nearly three years of negotiations, the deal fell through in March 2024, leaving SAA without the expected financial injection (ch-aviation, 2024).

CORPORATE GOVERNANCE AND AUDIT PERFORMANCE: NEUTRALIZATION OF BEHAVIOURS

SAA experienced financial, business, and governance crises for several years with many problems already having started around 2010; however, it took many years for SAA's problems to be revealed. To understand this delay, we need to consider the simultaneous occurrence of a crisis in SAA's audit and governance arrangements. The following sections analyze to what extent key individuals draw on neutralization techniques when reflecting on their role during SAA's crisis period, beginning with a discussion of SAA's audit failure, and then moving to failures in SAA's corporate governance mechanisms.

DISCUSSION AND CONCLUSION

Much has been written on corporate governance in the context of developed economies and the causes or consequences of governance failures by large private sector firms. Comparatively little is known about how the public sector deals with governance issues, including the methods employed by implicated parties to neutralize accusations of maladministration. Where current research dealing with governance in SOEs is dominated by quantitative studies of developed economies (Daiser et al., 2017), our study provides a qualitative, case-based analysis of governance and accountability failure in a SOE in an under-researched economy and continent. Data were collected from witness transcripts and other evidence published by the Zondo Commission, SAA's integrated reports, and select media articles. We analyzed these sources to understand how allegations put to auditors and members of SAA's Board of Directors during the Zondo Commission were rationalized.

Testimony that the newly appointed AG required restatements of prior period financial statements, audited by PwC/Nkonki, is not only embarrassing for the professional accountants involved but also calls into question the level of care and skill with which the audit engagements were executed. The Zondo Commission casts doubt on whether the SAA audit was conducted per the applicable standards and relevant regulations. Although auditors cannot detect every error, fraud, or misconduct during an engagement because of inherent limitations, this does not lessen the duty to ensure that testing methodologies were appropriate to conclude on material balances and transactions and that adequate quality control systems were put in place to ensure that SAA's audit was performed to the highest standards.

PwC/Nkonki partly accepted that errors had been made during their audits of SAA, and they offered multiple justifications. Most notable is the actual or perceived willingness by the AG to go beyond what could reasonably be expected as part of an audit engagement of a SOE and the fact that the AG has extensive experience in public sector audits. PwC/Nkonki relied on the complexity of the circumstances and the fact they had imperfect knowledge of SAA to detect material fraud or error. The explanations are a clear example of neutralization techniques mobilized by the auditors to avoid or lessen blame, but they also expose the auditors to further scrutiny. For example, if neither PwC nor Nkonki had the prerequisite experience in public sector audits, why did they accept the SAA engagement in contravention of codes of ethics and the IAS? Further, why did PwC/Nknonki's auditors not qualify their audit reports sooner or request additional resources from their network firms or reach out to the AG for assistance on the SAA audit? PwC/Nkonki led the Zondo Commission to believe their engagements were conducted according to ‘normal’ standards of care while the AG worked to a higher threshold. As the definition of what ‘normal’ standards of care encompasses is partly a result of informal norms and expectations dominant within private audit firms, it proved difficult for the Zondo Commission to validate the extent to which PwC/Nkonki's auditors had deviated from these non-formalized industry norms and practices. However, even if PwC/Nkonki's auditors had not deviated from these norms and expectations, one of the world's largest audit firms with access to significant financial, intellectual, and human resources has conceded publicly that it has been outperformed by a public sector auditor which is a fraction of its size and has a considerably smaller budget than PwC (the world's second-largest accounting firm).

It is tempting to lay the blame for corporate failures on the external auditors but other key parts of the governance system, including government oversight and SAA's internal audit, also failed. Weaknesses in the internal audit function should have heightened PwC/Nkonki's concerns about the overall level of risk of material misstatement at SAA with implications for how the external audits were conducted. At the same time, King IV (Principles 13 and 15) and the PFMA (section 50) require the Board of Directors to take proactive steps to address a significant breakdown in the internal control systems which curtail risk. The Zondo Commission does not conclude on the extent to which SAA's demise is a result of internal or external audit failures but with shortcomings in both formal assurance functions, the probability of material fraud and error going undetected increases significantly.

The Zondo Commission heard testimony on how the Board itself disregarded its fiduciary duties (section 50 of the PFMA and section 76 of the Companies Act). Evidence pointing to mismanagement, negligence, and corruption stands in stark contrast with the position presented in annual reports. The conclusion of the Zondo Commission points to flagrant impression management in corporate reports which relied on information asymmetry to decouple weaknesses in governance mechanisms from the view of the control environment the Board wanted to present to its stakeholders.

To neutralize accusations put to Board members, denial of responsibility, fact distortion, and norm negation are well used. Most notable is the ‘lesser of two evils’ maxim. The Board would have the Zondo Commission believe that departures from codes of best practice and the PFMA were necessary to avoid a calamity. Paradoxically, the Board may never have been in a predicament if the necessary care and skill had been applied to ensure the sound operation of internal control systems and the swift implementation of remedial action when those systems revealed weaknesses or failed.

At the empirical level, this study is among the first to deal concurrently with how an organization and its auditors rationalize non-conformances. Prior studies tend to deal either with management or the auditor (Allini et al., 2016; Ruan and Zhang, 2021) but seldom reflect on how both individuals may be engaged in efforts to circumvent accountability. An added contribution is the source of data. Existing studies on how auditors legitimize themselves in the aftermath of a corporate failure often rely on detailed interviews where respondents cannot be compelled to answer questions (Alleyne and Howard, 2005; Hassan et al., 2023). In contrast, the data for the current study come from evidence led by a commission of enquiry with powers of subpoena and authority to hold witnesses accountable for perjury. As a result, the paper's findings are based on high-quality data which provide better insights than would result from academics engaging with respondents long after studied events and circumstances have transpired.

Further, our article provides one of the first illustrations of neutralization techniques, adapted from deviance theory, and applied in the context of a significant corporate governance failure. Most of the prior literature drawing on deviance theory is found in criminology. There are few examples of how neutralization techniques are mobilized in a commercial context. To the authors’ knowledge, this is the first study to deal concurrently with how neutralization techniques are mobilized in the context of boards of directors justifying weaknesses in internal governance mechanisms and external auditors addressing accusations that their engagements were not performed to the highest standards.

Our analysis of witness testimonials makes a further contribution by demonstrating how individuals’ operationalization of neutralization strategies develops as additional evidence and accusations are put to them. For the auditors, the order in which testimony is given significantly impacts the number of neutralization strategies available. Following evidence of technical and procedural flaws presented by the AG, denying responsibility is no longer a feasible defence strategy for PwC and Nkonki. Both firms changed strategy by acknowledging obvious errors and implementing measures aimed at remedying those shortcomings to garner sympathy. The individuals representing the two audit firms must also take their own and their firm's professional reputation into consideration. This is especially the case for PwC which, unlike Nkonki, is an international firm. Accepting some responsibility for what transpired at SAA may be better than inviting further scrutiny with ramifications for how other audits in South Africa and abroad are being conducted. In contrast, the Board of Directors is less flexible, reflected in the consistent use of denial of responsibility strategies, even as evidence tabled at the Zondo Commission continues to mount. Unlike the auditors, the individual Directors are serving on the SAA Board and run the risk of being declared unfit to serve in that role. Faced with an ‘all or nothing’ situation, the respective Directors hold fast by refusing to accept responsibility irrespective of the evidence presented to them. The two approaches followed by the auditors and Directors, respectively, highlight the importance of incorporating the sequence in which accusations are put to individuals and the context in which those individuals are operating when evaluating how they choose to use neutralization techniques (see Kaptein and Van Helvoort, 2019).

Owing to the many economic and political interests involved, the case of SAA is complex, similar to governance crises at flag carriers and SOEs in other countries (Beria et al., 2011). The complexity, including from a moral angle, was reflected in the decision-making of some individuals we analyzed, including the National Treasury when it sought to balance between its preference to enhance SAA's governance performance versus concerns it had about any increases in South African SOE borrowing costs for taxpayers. This illuminates that in some cases individuals provide genuine justifications for their norm deviation, thereby reflecting a decision-making complexity incorporating unavoidable ethical trade-offs. This decision-making complexity may be genuinely reflected in the retrospective defence lines individuals mobilize. However, with individuals generally portrayed as merely selecting strategies that offer the highest likelihood of avoiding blame, the neutralization framework is at risk of simplifying and emulating an overly cynical approach to human behaviour. This highlights the need to advance the neutralization techniques framework in future studies.

A decision-making complexity is also visible concerning the audit standards where, ignoring cases of obvious norm violation identified by the Zondo Commission, PwC appears to have a different view of what constitutes a ‘good’ audit when compared to the AG. In line with our expectation, leeway in the interpretation of the requirements set by the audit standards increased scope for SAA's auditors to justify behaviour which, even if not in direct violation of those standards, could be construed as inappropriate (Harber et al., 2023). Given their profit orientation, private sector auditors may unavoidably interpret norms differently compared to (not-for-profit) public sector auditors. Sufficiently precise audit standards for auditing public sector organizations with which all auditors need to comply might address this, even though this might cause risks for the commercial attractiveness of public sector audits, which is an issue in several countries (De Widt et al., 2022).

This paper is not without limitations. The demise of SAA is complex and the findings deal with only the use of neutralization techniques deployed by directors, internal auditors, and external auditors called to account by the Zondo Commission. A more refined analysis of exactly how the assurance functions were overcome is required. Future researchers should examine the extent to which internal and external audits were deficient, the professional standards that were not adequately applied, and the facts and circumstances that contributed to any misconduct by professional accountants.

Our identification of multiple neutralization techniques raises several questions about the role of private vs public sector auditors when auditing SOEs, and the role of the Board in ensuring governance standards are maintained. Related areas meriting further investigation include: (1) whether, in the interest of audit quality, audits of SOEs should better be conducted by public sector specialized auditors instead of private sector auditors; (2) the depth and scope of audits required for SOE audits; (3) the suitability of methods available for internal auditors to report findings and escalate concerns; and (4) considerations auditors make when deciding on elevating findings to the audit report.

In addition to focusing on formal assurance functions, it would be useful to understand how SAA's systems of internal controls were designed and exactly how individuals were able to bypass the processes that were designed to safeguard the airline's operations. Few scholars consider micro-level activities involved in coordinating complex activities and ensuring that individuals discharge their duties. A step-by-step analysis of control failures at SAA from its procurement processes to the monitoring that ought to have been carried out by its Audit Committee and Board of Directors will provide invaluable lessons for ‘immunizing’ corporates from ‘deviants’ or individuals who do not feel compelled to operate according to the tenets of good governance.