Fighting Corruption by Means of Effective Internal Audit Function: Evidence from the Ghanaian Public Sector

Abstract

Using structural equation modelling (SEM) we analysed the link between corruption and effective internal audit function (EIAF) in Ghana through a survey of directors and managers of selected public sector organizations. A decade after the promulgation of the Internal Audit Agency Act (IAAA), 2003 (Act 658) as an instrument to fight administrative corruption in Ghana, there is little empirical evidence to show its impact on corruption, though anecdotal evidence suggests it has played a critical role in maintaining financial discipline and public sector accountability and transparency. We established that full implementation of Act 658, size of the internal audit department and independence of the audit department significantly affect the effectiveness of the internal audit function which negatively impact on corruption. We conclude that strict adherence to and the implementation of regulations and laws as well as independence of the internal audit function will help fight administrative corruption in Ghana.

Breaking the silence: An empirical analysis of the drivers of internal auditors' moral courage

“…Indeed, auditing literature suggests that an ethical and objective IAF can improve corporate governance by deterring employee theft and reporting financial irregularities as well as enhancing firm performance (Gramling, Maletta, Schneider, & Church, ). Asiedu and Deffor () go further to say that an effective IAF helps reduce administrative corruption.…”

The Value of Public Sector Risk Management: An Empirical Assessment of Ghana

“…As the discussion involves the public sector, the principal stakeholders who are the taxpayers will stand to benefit if the public entities exercise sound internal control and risk management practices that will secure trust and confidence in public intuitions (Themsen and Skaerbaek 2018). The study reassures stakeholders in the public sector that the existence of internal control elements such as the segregation of duties, review, commitment to ethics, control environment and communications and information are clear examples of good corporate governance indicators needed to be considered to minimize the impact of risk and enhance performance and effectiveness (Asiedu and Deffor 2017). Looking forward, the study also suggests that the poor performance of public organizations, particularly in Ghana, should not always be measured based on macroeconomic indicators, according to some arguments by Domingues et al (2017), and sustainability could also be based on certain internal factors such as control, good governance and risk management practices.…”

“…Control environment explained 28.54% out of the total variance, and it is significant that control environment forms the foundation of internal control and the atmosphere on which other elements of control are built. However, a 28.54% variance by control environment is a remarkable indication that the absence of risk management could render the organization vulnerable to risk (Asiedu and Deffor 2017). The result emphasize that setting the right tone for the organization such as influencing risk appetite or management attitude towards risks and ethical values should be the priority (Arena et al 2017;Asiedu and Deffor 2017).…”

“…The risk response that is chosen must be realistic and take into account the cost of responding as well as the impact on risks and the resources capability of the entity. A study by Asiedu and Deffor (2017) stated that it is important to avoid handling risks in isolation, but rather to consider the entity as a whole. Consequently, risk response will contribute to an effective internal control which could be applied in the form of detective, preventive or automatic controls (Lim et al 2017).…”

“…However, a 28.54% variance by control environment is a remarkable indication that the absence of risk management could render the organization vulnerable to risk (Asiedu and Deffor 2017). The result emphasize that setting the right tone for the organization such as influencing risk appetite or management attitude towards risks and ethical values should be the priority (Arena et al 2017;Asiedu and Deffor 2017). Based on the predictive power of the PCA, management can develop risk management polices around these three principal components to ensure that the public sector is fully conscious and embedded with the fundamental guidelines proposed by the COSO integrated framework, though not mandatory, is very influential.…”