ABSTRACT
The Auditor General of Ghana’s reports on the public accounts
of Ghana takes a direction of consistently reporting of malpractices. The role
of internal auditors in preventing these occurrences constantly comes into the
spotlight. Other researchers found that internal auditors devoted less time to
productive activities. The study therefore sought to evaluate the quality of
internal audit in the quasi-public sector institutions in preventing mass
financial malpractices. Specific attention was given to areas of audit coverage
obtained, independence and value adding benefits provided to the organisations
auditors work for and challenges faced by internal auditors in performing their
duties. Using a purposive sampling technique, seventy - (70) respondents from
ten (10) CHAG facilities in BA Region of Ghana were selected for data. The
respondents comprised of members of institutional management in the various
CHAG hospitals. Data were collected using close-ended questionnaires and in the
case of internal audit executives, follow-up interviews were conducted on specific
issues for better understanding of the issues involved. The findings of the
research showed that internal auditors in the health facilities obtained an
average of eighty percent (80%) coverage on issues of internal controls in the
health facilities. The setbacks of the function was that auditors reported to
and were appraised by the Administrators/CEOs of the health institutions due to
the absence of audit committees. This cast doubt on the independence of the
professionals in their duties. Their challenges were on non-availability of
training programs and logistics to work with. The research recommends that
audit committees be established to liaise with the internal audit in their
duties.
CHAPTER ONE
INTRODUCTION
In recent times, because of corporate governance problems,
the issue of internal auditing has become of great concern to all stakeholders
in both the private and public sector of every economy. These concerns are as a
result of the growing need and concerns for transparency in the management of
corporate bodies. In many instances however, the performance of internal
auditors has become a problem that stakeholders are eager to find out because
of continuous reported instances of wrong management practices in corporations,
resulting in malperformance of these institutions and in some cases, loss of
funds (Fung, 2014).
In the Auditor General’s report for 2014 Financial year,
among many issues reported included embezzlement of funds in excess of GH¢
549,245.59 by eight district assemblies. The report further stated that amounts
in excess of one million Ghana Cedis were not properly accounted for by 43
staff of some district assemblies because of lack of effective supervision, and
failure on the part of management to sanction the people involved (Auditor
General Report, 2014). In the Auditor General’s report for the 2016 fiscal
year, it was also reported that management and staff of various MMDAs continued
to violate various procedures and policy guidelines in place, which were to
ensure effective, economic and efficient management of resources allocated to
them. In the same report, financial irregularities in the public sector for the
fiscal year was about GH¢2,165,542,375.14, which was an increase in the
previous year’s irregularities (Auditor General Report, 2016). These and other
similar cases in the various public sector institutions calls for concerns to
be raised about how well internal controls have been designed, implemented and
monitored in the various government organisations.
Previous studies however, in an attempt to help address the
issue, have focused attention on assessing how internal auditors in public
sector institutions that have total government control, monitor
institutionalised internal controls and the audit coverage they obtained. It
was therefore worth knowing how the situation is in the institutions with
traits of both private and public ownership.
Background of the Study
Globally, the level of stakeholder expectations matching
skills and capabilities help internal auditors to enhance the value they
deliver to the organisation (PWC, 2014). Internal audit has become a growing
wing in the managerial setup of many businesses, both private and government
with many expectations in respect of performance, reportage and value adding.
Research suggests that many organisations around the world
recruit new graduates into this very important function and use it as a
training ground for future managerial positions. Thus, globally, the internal
audit function in many organisations has become the incubator hub where most
organisations equip new graduates with the skills to perform well as managers
in the institution in the future.
This is reported as being a policy that the internal audit
profession holds key (IIARF, 2014). This is because internal auditing cut
across all aspects of the organisation, ranging from finances to human
resources.
According to PWC (2014), the nature of African economies and
the diverse nature of industries on the continent, make it daunting doing
business and performing internal audit across the continent. These challenges
notwithstanding, the internal audit on the continent seem to be navigating its
way through in difficult business environments. The continuous changes in the
world and business environment requires that internal auditing also change.
Internal auditing in all aspects is no longer compliance driven, but risk based, and therefore must be seen
to be adding value to an organisation.
Studies conducted in some South African companies suggest
that, the reporting lines of internal auditors do not conform to best practices
so far as corporate governance is concerned. Significantly, in many
organisations, internal auditors and audit executives report to the Chief
Finance Officers (Erasmus and Coetzee, 2018). This practice will invariably
affect the independence of the audit executives, the quality of their work and
reporting system.
In Ghana, the Institute of Internal Auditors reports that,
the Internal Audit Agency Act 2003, Act 658, has established the Internal Audit
Agency, which is a statutory body to be part of the public governance
improvement programme, aimed at ensuring the active and mandatory development
and practise of internal audit as a key function in the Public Sector. The
Agency since its inauguration in 2005, has become part of the administrative
structures of many public institutions including the MMDAs in their operations.
Internal auditing in the public sector has therefore become a system of
reducing malpractices and fraudulent conducts among civil servants.
In the private sector however, internal auditing has been a
part of the corporate governance process for a long time. As part of best
practices and improving transparency in the organisational practices, corporate
governance practices have made prescription for the establishment of proper
internal controls and monitoring systems of which the internal auditors and
audit committees are part. This practice of corporate governance principles has
ensured proper management of private sector institutions ensuring that, the
agency relationship that exist between directors and shareholders are well
protected (Omolaye & Jacob, 2017).
In Ghana, even though internal audit departments have been
well established and are operational in the various government and
quasi-government institutions, the Auditor General continuously reports in his
annual report, instances of malpractices in government corporations and
departments. The Auditor General’s reports since the year 2011, continuously
reports of instances of poor cash management; resulting in poor revenue collected
on behalf of government to be paid into the consolidated fund, issues of tax
irregularities and un-authorised payments as well as non-availability of
adequate records on revenue collected. The Auditor General’s department
continuously reports on improper internal controls at the various MMDAs and
government enterprises. These errors are the very things the internal auditors
in the various departments are supposed to check and prevent (Auditor General’s
reports, 2011-2015).
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