INVESTIGATING INTERNAL AUDIT AS A TOOL FOR ACHIEVING ORGANIZATIONAL OBJECTIVES

CHAPTER ONE

INTRODUCTION

Background of the Study

It is no doubt that  internal auditors of organisations are responsible for conducting independent exams and providing assurance on various initiatives aimed at enhancing organisational performance on a regular basis. This enables an organisation to achieve its operational goals by implementing thoughtful and dedicated approaches to assess and improve risk management, establish effective controls, and increase governance. Nevertheless, the comprehensive scope of internal audit positions it as a crucial element of public expenditure management, encompassing management controls and information communication processes (Li, et al., 2018). Internal evaluators primarily advise individuals in the general division due to the rule operator relationship that exists between the official and the general population (Cai & Jun, 2018). Internal audits play a crucial role in safeguarding an organization's assets. They provide a consistent record of how these assets are utilised and enable ongoing evaluation of whether the outcomes align with public goals and expectations. Additionally, internal audits help mitigate the risks associated with the principal-agent relationship (Testa, et al., 2018). 

Literarily, as the importance of internal evaluation has increased in the broader context of management and control, concerns about its effectiveness in fulfilling this role have been more prominent than ever before (Sunyoto, et al., 2018). Although there have been notable instances, such as WorldCom, where internal audit has been seen as only partially successful, the current global financial crisis has raised concerns about the effectiveness of internal audit. This includes its traditional role of ensuring compliance with internal control and financial accuracy, as well as its more recent role as an integral part of risk management within large financial institutions, whether in the private or public sector.  Internal auditing is an essential component of effective management in all financial units. It is crucial to comply with auditing regulations and address the extensive requirements of accountability in resource utilisation, particularly public funds. Therefore, it is not justifiable to neglect internal auditing, even in small institutions. Internal auditing is a necessary requirement for the efficient functioning of monetary organisations. Many executives rely on the performance of internal auditors to improve their own performance and achieve organisational goals (D'Onza & Sarens, 2018). The internal open audit has a distinct role in ensuring the effectiveness of the administrative accountability system.

In contrast to the extensive focus on external audit, there have been relatively few studies examining the effectiveness of internal audit (Chen, et al., 2019). Therefore, it is crucial to have internal controls in place to detect, correct, assess, and manage the processes that ensure compliance with both legal requirements and the proper functioning of financial units. An internal control structure must be established to effectively monitor and regulate compliance with legal requirements. Internal evaluation is an assessment conducted by the management of a monetary unit to analyse the effectiveness of its internal control system. It evaluates the adequacy of the system in terms of appropriateness, efficiency, effectiveness, and resource utilisation through tests, evaluations, and other methods. Ensuring that the utilisation of public resources has been allocated appropriately and cost-effective, efficient, and in the best interest of society, plays a crucial role. 

In the context of legislation, the primary objective of internal open audit is to enhance the quality of public entities' management by conducting an impartial assessment of control processes, risk management, and governance. The internal audit should encompass all activities within a public entity and it is necessary to evaluate more than ten activities, areas, or systems, such as those with financial implications, payments, asset management, accounting systems, management systems, and information systems, at least once every six months, but not limited to that (Lenz, et al., 2019). Therefore, this study aims to investigate internal audit as a tool for achieving organizational objectives.

Statement of the Problem

Over the years, organization has come to terms that viability of any business depends on the implementation of efficient internal audits, which are necessary to deter unethical behavior, such as intentionally withholding crucial information to facilitate fraudulent activities especially in insurance industry.  The purpose of internal auditing is to improve organisational productivity and efficiency by providing relevant feedback (Wu, et al., 2019). Mihret & Grant (2019) assert that the perception that internal auditing solely assesses accounting functions is outdated and counterproductive, as it fails to recognise the proactive nature of internal auditing and its significant impact on organisational performance. 

Owing to incessant corporate scandals and failures brought about by unethical conduct over time have exposed weaknesses in control systems and a lack of accountability in some organisations the role of Internal Audit (IA) has grown to include all aspects of organisational operations, rather than its previous primary focus of fraud detection and compliance (Grima, 2022). Assuring internal controls, risk management, and compliance, it is essential to the "governance framework" (Soh & Martinov-Bennie, 2021). Conflicts arise, nevertheless, because of personal interests or managerial ethical demands (Siegel et al., 2019). Internal auditors frequently deal with a variety of moral conundrums and challenges while attempting to uphold their professional integrity because of their close relationship with management. 

Shamki & Alhajri (2019) in their study argued that the role of internal audit is crucial in the organisational process. It is not only responsible for conducting routine verification activities, but also serves as a strategic partner to the company, enhancing its operations by improving organisational processes and ensuring their efficiency and effectiveness. According to Desmedt, (2019) organisations that possess a strong and skilled internal audit function are more equipped to detect deception compared to those that lack such capabilities within their organisations, therefore an effective internal audit capacity can serve as a valuable asset in improving public confidence in financial reporting and business governance helping firm to achieve its objectives. Hence. it is in the light of these, the study seeks toinvestigate internal audit as a tool for achieving organizational objectives.

1.3 Objectives of the Study

The main purpose of this study is toinvestigate internal audit as a tool for achieving organizational objectives. Specifically, the study will;

Find out whether internal audit standards have an effect on the performance of insurance companies inCameroon.

Assess the impact of internal audit function on the financial performance of insurance companies in Cameroon.

Assess the relationship between internal audit practices and the productivity levels of insurance companies in Cameroon.

Propose best practices for enhancing the effectiveness of internal audits in promoting productivity in insurance companies.

1.4 Research Questions

The following questions have been prepared for the study:

Do internal audit standards have an effect on the performance of insurance companies in Cameroon?

What is the impact of the internal audit function on the financial performance of insurance companies in Cameroon?

What is the relationship between internal audit practices and the productivity levels of insurance companies in Cameroon?

1.5Research Hypotheses

H0:Internal audit does not have a significant impact on the productivity of insurance companies in Cameroon.

Ha: Internal audit have a significant impact on the productivity of insurance companies in Cameroon.

1.6 Significance of the Study

Insurance companies' internal auditors and audit committees will benefit from the study, as it will provide them with better knowledge of how their job affects the productivity of the company. Internal auditors will make sure that their audits are in line with the business's strategic goals and operational priorities by using the findings to improve their target areas and methodology. With the knowledge gained from this study, audit committees will be better equipped to assist the internal audit function, foster an environment of responsibility, and make sure that the audit recommendations are carried out in a way that maximizes performance gains.Moreover,subsequent researchers will use it as a literature review. This means that other students who may decide to conduct studies in this area will have the opportunity to use this study as available literature that can be subjected to critical review. Invariably, the result of the study contributes immensely to the body of academic knowledge with regard to internal audit as a tool for achieving organizational objectives.

1.7 Scope of the study

The scope of this study is boarded on the internal audit as a tool for achieving organizational objectives. Empirically, the study will find out whether internal audit standards have an effect on the performance of insurance companies, assess the impact of internal audit function on the financial performance of insurance companies, assess the relationship between internal audit practices and the productivity levels of insurance companies and propose best practices for enhancing the effectiveness of internal audits in promoting productivity in insurance companies.

Geographically, the study will be delimited to insurance companies in Cameroon.

1.8 Limitation of the study

In the course of carrying out this study, the researcher experienced some constraints, which included time constraints, financial constraints, language barriers, and the attitude of the respondents. In addition, there was the element of researcher bias. Here, the researcher possessed some biases that may have been reflected in the way the data was collected, the type of people interviewed or sampled, and how the data gathered was interpreted thereafter. The potential for all this to influence the findings and conclusions could not be downplayed. More so, the findings of this study are limited to the sample population in the study area, hence they may not be suitable for use in comparison to other schools, local governments, states, and other countries in the world.

1.9 Definition of Terms

Auditing:The systematic examination and evaluation of financial records and transactions of an organization to ensure accuracy, reliability, and compliance with established accounting standards and regulations.

Internal Audit: refers to an independent, objective assurance and consulting activity designed to add value and improve an organization's operations.

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