THE EFFECTIVENESS OF INTERNAL AUDIT IN THE KETA MUNICIPAL EDUCATION OFFICE

ABSTRACT

This study examines the effectiveness of internal audit in the Keta Municipal Education office. The objectives of the study were to examine the effectiveness of internal auditors in identifying non-compliance activities in the Keta Municipal Education office, determine the extent of management support for internal auditors in the Keta Municipal Education office, examine the independence of internal auditors in the Keta Municipal Education office, to determine whether the Keta Municipal Education office have adequate and competent internal audit staff and finally to determine how operational level of internal audit and internal control measures in the Keta Municipal Education Office. The study used purposive sampling method to sample sixty (60) respondents including 8 management members, 8 internal auditors and 44 heads of departments. However, only 56 questionnaires were retrieved and analyzed using the SPSS software and results displayed in tables, pie chart and bar graph. Two questionnaires were adapted and used to collect data. The finding of this research proved that the management support, the existence of adequate and competent Internal Audit staff, and approved Internal Audit standards and legislations were statistically significant and positively related with the Internal Audit Effectiveness in the public education offices. Thus, the education office should give more support for the internal audit functions by facilitating the Internal Audit work and give sufficient in-service training and resources for the existing Internal Audit staff.

CHAPTER ONE

INTRODUCTION

Background to the Study

Internal Auditing is a profession and activity involved in advising organisations regarding how to better achieve their objectives through managing risk and improving internal control. Internal Auditing involves the utilization of a systematic methodology for analyzing business processes or organisational problems and recommending solutions (Asare, 2008).

The International Standard of Supreme Audit Institutions (ISSAIs) (2007) also asserted that, internal auditing has become a factor of the new accountability and control era. The manner in which public sector entities maintain internal control and how they are held accountable has evolved to require more transparency and more accountability from these organisations that spend investor or tax payer funds. This trend has significantly impacted how management implement, monitors, and report on internal control. When the Turnbull report came in 1999 in the United Kingdom (UK), emphasizing on risk handling within the whole organisation, and when companies like Enron and WorldCom shocked the world, internal auditing expanded in a big way.

The Internal Audit Agency (IAA) was also established by the Internal Audit Agency Act, 2003 (Act 658) with the mandate to coordinate, facilitate and provide assurance for internal Audit Units in Ministries, Departments and Agencies (MDAs) and Metropolitan, Municipal and District Assemblies (MMDAs) such as the education offices. The ultimate goal of the Agency is to ensure accountability and performance in the public sector of Ghana (Nomo, 2009).

The creation of the Internal Audit Agency (IAA) was predicated on the need for the Government to put in place a structure that could support the eventual transfer of budgetary authority and expenditure control to the municipal and district education offices. These initiatives are part of the government’s effort under the Public Financial Management Reform Programme (PUFMARP). The Act received presidential assent on 31 December 2003, Administrative transition was allowed up to 31 August 2004 and effective implementation started in 2005 (Abbey, 2010). As part of the reforms under the Public Financial Management Reform Programme, a scoping study for the establishment of internal control audit functions in Municipal and District Education Offices was carried out.

Municipal and district education offices are decentralized departments of the Ghana Education Service (GES) headed by the Director General. The decentralisation policy to embark on by the government in the public sector means delegation of authority and decision making to MMDAs. For decentralisation to be felt and seen, budgetary allocation and funding to decentralized departments had been increased. A lot of resources both human and financial are allocated to this department. There is the need to safeguard these resources by enactment of laws, rules and regulations. The policing of these rules and regulations are done through internal audit department by internal auditors, therefore there is the need to strengthen these departments.

With the increased emphasis on accountability, transparency and improvement in municipal and district education office performance especially in the developing countries where the various stakeholders including civil society and the media are becoming more interested in how funds are allocated and expended, it is imperative that governments are seen to have a sense of responsibility coupled with an efficient and effective financial control mechanism. Public sector auditing particularly internal auditing is useful in managing public expenditure, ensuring financial accountability, and strengthening governance systems of public institutions (Asare, 2008).

Professional practice of internal auditing in the municipal and district education offices is a new phenomenon. The management of internal audit function in any organisation will largely impact on its effectiveness. The profile of internal auditors has changed significantly in recent years and there has been increased emphasis on accountability and improvement in public sector performance (Asare, 2008).

Statement of the Problem

Under the then Financial Administration Decree, 1979, SMCD 221, the Auditor-General had the legal mandate to carry out internal audit activity in the MMDAs. These staff mainly concentrated on pre-auditing of payment vouchers due to lack of formal training in internal auditing. No improvements were recorded in the internal control system as weaknesses were being repeated on an annual basis. According to Ghartey (2003), there was also the risk of conflict of interest with officers having to perform possibly the roles of both accounting as well as an internal audit in the same or related department. The threat to effectiveness and integrity became apparent in a series of scandals in the mid-1980s involving officers of the Audit Service, acting as both internal and external auditors at the Ghana Education Service that caused a huge financial loss to the state.

A review of this function revealed limitations on the scope of the audit function and unsatisfactory reporting relationship. This resulted in the establishment of a central Internal Audit Agency to enhance efficiency, accountability and transparency in the management of resources in the public sector (Internal Audit Agency Act 2003 (Act 658) as cited in Nomo, 2009). Previous studies by Mihret and Yismaw (2007), Bota-Avram and Palfi (2009), Marika Arena and Giovani Azzone (2009), Cohen and Sayag (2010) and Karagiorgos, Drogalas and Giovanis (2011) have been on the effectiveness of internal audit and found some determinants of internal audit effectiveness.

There have been many incidents of fraud and embezzlement in recent times in some cases as a result of ineffective internal control systems being put in place. For example, the Daily Graphic (2016, p. 33, March 10) reported the embezzlement of GH 549,245.59 of some 8 assemblies in 2014 as a result of cash flows and insertions on cheques after endorsement. This was reported according to the Auditor General’s Report for 2014.

From this background, this study intends to access the effectiveness of internal audit in the Keta Municipal Education office in the Volta region. This is because so far no research has been focused on the internal audit effectiveness under the Internal Audit Agency Act that came into being to curb the inefficiencies existing prior to the establishment of the Act in the municipal and district education offices.

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Item Type: Ghanaian Topic  |  Size: 63 pages  |  Chapters: 1-5

Format: MS Word  |  Delivery: Within 30Mins.

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