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EVALUATING THE CHALLENGES OF INTERNAL AUDIT FUNCTION IN THE CAMEROON PUBLIC SECTOR
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Delivery: Within 24 hoursEVALUATING THE CHALLENGES OF INTERNAL AUDIT FUNCTION IN THE CAMEROON PUBLIC SECTOR
CHAPTER ONE
INTRODUCTION
1.1 Background of the study
In the current era of globalised business, technological progress, dynamic business environment, intricate business operations, emerging risks, notable risk management failures, escalating market volatility, and more frequent economic crises than in the past, all these critical factors can result in reputational damage to businesses, regulatory consequences, and substantial financial repercussions (Jesse, 2019). The viability and success of any organisation rely on its ability to adapt to the swiftly evolving business environment, mitigate organisational risk, and maintain the efficient functioning of business processes and systems to effectively accomplish its goals (Alan, 2018). Therefore, the requirement for proficient and productive management and responsibility in organisations has emerged as a significant factor for the total achievement of the organisation, in addition to the proficient and productive contribution of the internal auditing activities in an organisation. Internal auditing encompasses both the assurance and consulting functions, providing valuable insights into emerging risks and employing effective strategic plans, tactics, and analytics to address them (Shoye et al., 2020).
Auditing, as described by Champ (2022), is the process conducted by an auditor to verify accounting data, assess the correctness and reliability of accounting statements, and provide a report on the truth and fairness of the financial statement. Opinion is the articulation of the auditor's expert perspective on the financial statement, formed via the application of judgement and analysis of the audit material collected. Financial statements encompass a range of essential records, including sources documents, books of prime entry, ledgers, income statement, balance sheet, cash flow statement, directors and management report, and minutes of directors and shareholders (Cenker, 2017).
According to Nagy et al. (2018), the Institute of Internal Auditors (IIA) defines internal auditing as a separate and unbiased activity that provides assurance and advisory services to enhance an organization's operations and add value. By implementing a systematic and disciplined approach, it aids an organisation in achieving its objectives by evaluating and enhancing the efficacy of risk management, control, and governance systems. This definition aims to illustrate the whole scope of the internal audit function within an organisation, in contrast to its previous focus solely on analysing payment transactions over time. Contemporary internal audit encompasses, or should encompass, all the activities carried out by the organisation. Hence, the internal audit's scope has expanded beyond the confines of the accounting and finance function, encompassing a broader range of procedures and systems.
Hung et al. (2018) examined the determinants of the efficacy of internal auditing for publicly traded companies in Taiwan. The results indicated that professionalism is beneficial in improving the perceived performance of department heads who are subject to auditing. Additionally, regular performance evaluations of internal auditors, a positive attitude of the controller towards internal auditing, and well-designed education and training programs for internal auditors are effective in enhancing management's perception of performance. The results also indicated a substantial impact on the performance of the internal auditing department by several factors, both internal and external to the department. Coram, Ferguson, and Moroney (2018) evaluated whether organisations that have an internal auditing function are more prone to detecting fraud compared to those that do not have an internal auditing function. Research revealed that organisations equipped with an internal auditing function had a higher probability of detecting fraudulent activities within their own operations compared to organisations lacking such a function. In addition, organisations that exclusively depend on outsourcing for their internal auditing function are less inclined to identify fraud compared to those that partially handle their internal auditing job internally. The findings indicated that internal audit enhances the management and monitoring framework within organisations to identify instances of fraud (Han et al., 2018). These findings also indicate that retaining the internal auditing function within the organisation is more efficient than fully outsourcing it.
Aside from the functions and benefits of internal auditing, there are problems that internal auditors face, including meeting the expectations of different stakeholders. Management views internal auditing as a means to not only provide guarantees, but also to go beyond this primary assurance role in order to get a higher return on the organization's investment in internal auditing. This includes efforts to create, sustain, and enhance shareholder value in a difficult business climate (Han et al., 2018). IA is also subject to regulatory standards. Furthermore, in order to prevent any vulnerability to cyberattacks, the internal auditing department must remain watchful of security risks when using new technologies in business processes. Failure to safeguard company data can have significant consequences, including financial losses, the potential loss of data files or network functionality, and damage to system software. Additionally, it can lead to the loss of business clients and have a negative impact on the reputation and quality of service of the brand. One challenge that companies may face is a lack of qualified and experienced employees for their internal auditing department. They may have difficulty finding and keeping individuals with the necessary audit skills and data analytics experience to effectively identify and respond to risks using a data-driven approach (Igho et al., 2022).
The internal audit role has increasingly been a crucial element in improving accountability, transparency, and governance in the public sector in recent years. The role of internal auditors in assuring the appropriate management of public resources and the proper operation of systems has become increasingly important as public institutions globally face growing demands for efficiency and effectiveness (Han et al., 2018). The development of internal auditing in Cameroon mirrors wider patterns in public sector governance and restructuring. Traditionally, the public sector placed less importance on the internal audit role, instead prioritising external audits and financial supervision. Over time, the expanding function of internal auditors has been driven by the increasing need for tighter internal controls and greater responsibility. The change has been facilitated by a range of reforms and initiatives designed to enhance governance and enhance the performance of the public sector (Genesis, 2022). Cameroon, a nation characterised by a multifaceted socio-economic and political environment, relies heavily on the public sector to drive its overall progress. Nevertheless, this industry is frequently plagued by obstacles such as inefficiency, corruption, and misallocation of resources. Within this context, internal audit operations are anticipated to offer assurance regarding the trustworthiness of financial reporting, adherence to rules and regulations, and the efficiency of internal controls (Asena et al., 2023). Internal audit functions in the public sector of Cameroon encounter various problems that hinder their effectiveness and efficiency, notwithstanding their significance. This study aims to conduct a thorough assessment of these difficulties and propose effective solutions to address them.
1.2 Statement of the problem
The internal audit function is essential for promoting openness, accountability, and efficient management in the public sector. However, in Cameroon, this function has various problems that impede its capacity to fulfil its intended role efficiently. Although internal auditing is increasingly acknowledged as a fundamental aspect of effective governance, internal audit units in the public sector of Cameroon face numerous substantial challenges.
According to David (2023), numerous internal audit units in the public sector of Cameroon encounter substantial limitations in resources. This encompasses insufficient amounts of staff, inadequate training, and restricted availability of essential equipment and technologies. These constraints impede the capacity of internal auditors to conduct thorough and efficient audits. Fils et al., (2023) states that corruption continues to be a widespread problem in the public sector of Cameroon, impacting every level of government. Internal auditors frequently confront opposition and confront ethical quandaries when their discoveries contradict deeply rooted interests or uncover anomalies (Bana, 2023). The presence of this environment can erode the efficiency of audit procedures and diminish the influence of audit suggestions. According to Jubril (2023), the autonomy of internal audit units can be undermined by variables such as political intervention, hierarchical influences, and conflicts of interest. The efficacy of internal audits is intricately tied to the autonomy and objectivity of the audit function. Difficulties in upholding this independence might impede the internal auditors' capacity to efficiently fulfil their responsibilities.
Furthermore, the proficiency in auditing is contingent upon one's expertise, abilities, and practical familiarity with the profession (Raphael, 2021). Enhancing capacity can be achieved by the inclusion of supplementary proficiencies such as certification, training, and mentoring programs. Regrettably, Cameroon does not provide any courses or programs to bolster the competence of the internal audit profession (Mahmour et al., 2022). Furthermore, the future advancement in the auditing profession depends on the level of demand from client agencies for internal audit services. Similarly, the effectiveness of internal auditors in the public sector is determined by their abilities to supply services that meet the specific requirements of client agencies. If regular courses or programs were available for the internal audit profession, similar to those offered for accounts, procurement, IT, etc., the problem of competency and career development would not exist, and performance would improve significantly (Raphael, 2021).
Moreover, the lack of professional competence among newly recruited individuals in the internal audit service has posed significant issues for both client agencies and current internal auditors in Cameroon (Adebayo, 2020). Currently, newly enlisted individuals are solely provided with orientation trainings conducted by their more experienced colleagues. In the absence of a senior internal auditor, both the internal auditor's ability to fulfil their job responsibilities and the client agency's utilisation of the service are compromised. The majority of internal auditors who had knowledge and expertise have departed from their positions, either under the pretence of pursuing further education or in search of transfers to other locations (Joffrey et al., 2020). A lack of motivation, a hostile work environment, and a restricted number of recruitment opportunities are contributing factors to the failure to fulfil the permitted manpower capacity in the internal audit service (Adebayo, 2020). The high attrition rate in the internal audit service can be attributed to the aforementioned concerns and obstacles. Therefore, the necessity for this investigation arises.
Objectives of the study
The primary objective of this study is to critically evaluate the challenges of internal audit function in the Cameroon public sector. Specific objectives of this study are to:
To determine the main challenges faced by internal auditors in the Cameroon public sector
To assess the Impact of Resource Constraints on Audit Effectiveness in the Cameroon public sector
To evaluate the effect of Training and Professional Development on internal auditor’s function
To suggest strategies for improving resource allocation, training, and institutional support for internal audit functions
1.4 Research Questions
The following research questions which are in line with the objectives of this study will be answered in this study:
What are the challenges faced by internal auditors in the Cameroon public sector?
What is the Impact of Resource Constraints on Audit Effectiveness in the Cameroon public sector?
What is the effect of Training and Professional Development on internal auditor’s function?
What are the strategies for improving resource allocation, training, and institutional support for internal audit functions?
1.5 Research Hypotheses
To determine the effectiveness of this study, the following research null hypotheses will be formulated to guide the study and it will be tested at 0.05% levels of significance.:
Ho: Internal auditors face no challenge in Cameroon public sector.
Ha: Internal auditors face challenge in Cameroon public sector.
1.6 Significance of the study
The study is important because it has the potential to bring about significant improvements in the internal audit function, which in turn can lead to better governance, accountability, and performance in the public sector of Cameroon. The study will establish a fundamental reference point for the management of the public sector, policymakers, researchers, and scholars.
The study aims to enhance openness and accountability in public sector operations by identifying and addressing the issues faced by internal audit functions. This, in turn, would assist build public trust in government institutions. Gaining a comprehensive understanding of these difficulties can result in the implementation of robust internal controls and enhanced monitoring, hence minimising the potential for corruption and mismanagement.
Moreover, the investigation might uncover deficiencies and inefficiencies in existing procedures, resulting in the implementation of superior methods and more rigorous auditing criteria customised to the particular requirements of the public sector in Cameroon. The study aims to improve the efficiency of internal audits by identifying limitations in resources and capacity, therefore facilitating the optimal deployment of resources.
Moreover, the study might provide valuable insights for policy recommendations targeted at enhancing the internal audit function, guaranteeing that public institutions operate with enhanced integrity and comply with established criteria. The results can assist policymakers and managers in the public sector in making well-informed choices on the enhancement of governance structures, audit procedures, and institutional backing for internal audits.
Moreover, identifying specific areas in which internal auditors may have deficiencies in skills or knowledge can result in the implementation of focused training programs and possibilities for professional growth. The study can serve as a foundation for assessing the influence of internal audits on the performance of the public sector, aiding in the alignment of audit activities with wider organisational objectives.
In essence, this study enhances the existing academic understanding of internal auditing in developing nations, offering significant perspectives for researchers, professionals, and educators. The findings can serve as a valuable resource for internal auditors and audit professionals in Cameroon and comparable settings, providing guidance on how to overcome common difficulties and enhance their procedures.
1.7 Scope of the study
Broadly, this study focus is to critically evaluate the challenges of internal audit function in the Cameroon public sector. Specifically, this study seeks to determine the main challenges faced by internal auditors in the Cameroon public sector and assess the Impact of Resource Constraints on Audit Effectiveness in the Cameroon public sector.
Further, this study will focus on evaluating the effect of Training and Professional Development on internal auditor’s function and it also seeks to suggest strategies for improving resource allocation, training, and institutional support for internal audit functions.
The study is carried out in Cameroon.
1.8 Limitations of the study
As with any human endeavour, the researchers faced many minor constraints during the investigation. The main limitation was the lack of extensive literature on the subject, due to the limited availability of data regarding the assessment of issues faced by the internal audit function in the public sector of Cameroon. Hence, a significant allocation of time and exertion was necessary to ascertain the appropriate materials, books, or information and amass data.
Furthermore, this study is constrained by its small sample size and narrow geographic scope, focussing just on Cameroon. Therefore, the conclusions of this study cannot be extended to other situations, thus requiring further investigation.
Moreover, the researcher's restrictions were primarily due to financial constraints, as they are a student without any source of income to sustain themselves. The exorbitant transportation charges at the research location posed a challenge in covering the expenses for transportation fees.
Furthermore, the researcher faced a time constraint due to the need to conduct this study while still fulfilling the obligations of attending lectures and participating in other educational activities.
1.9 Definition of terms
Audit: Audit is the examination or inspection of various books of accounts by an auditor followed by physical checking of inventory to make sure that all departments are following documented system of recording transactions. It is done to ascertain the accuracy of financial statements provided by the organization.
Corporate governance: Corporate governance is the structure of rules, practices, and processes used to direct and manage a company. A company's board of directors is the primary force influencing corporate governance.
Accountability: Accountability is the practice of being held to a certain standard of excellence. It is the idea that an individual is responsible for their actions and, if that individual chooses unfavorable actions, they will face consequences.
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