THE ROLE OF INTERNAL AUDITING ON THE FINANCIAL PERFORMANCE OF PUBLIC ESTABLISHMENT

CHAPTER ONE

INTRODUCTION

• Introduction

This chapter presents the research findings on the role of internal audit in improving local government authority. Though there are several aspects of management control systems in organizations, the researcher focused only on the financial aspect. This study therefore explored the status of council’s internal audit roles in achieving and improvement in the financial performance.

The study is conducted in the Buea Municipal council in the period of January 2020 to May 2020. The chapter also seeks to deal with giving the background of the local government council, background of the problem, statement of the problem, objectives of the study, research questions, significance of the study, scope, limitation of the study and delimitation which in tend will help in investigating this topic of the study coming to the good conclusion and recommendations. From the above listed, a number of areas will be covered in details which will include the theory behind audits and other control bodies which promotes public sector accountability through good corporate governance, effective risks management and transparency in government operations as fulfilling the pre-set objectives.

 1.1.2 Background to Local Government Authority (Buea Council)

1.2.1 Local Government system in Cameroon

The Republic of Cameroon is made up of ten regions, with eight French speaking regions and two English speaking regions that unified in the year 11^th February 1961 in the days of Ahmadou Ahidjo as president, while the Southern Cameroon had British as colonial masters who introduced Indirect Rule that has actually contributed greatly to the performance of the council. While the French had the French men who introduced Assimilation; but the coming together of the two Mandated Territories has brought about Evolution in the two various systems that has actually made it what it is today. The Buea Municipality is bounded to the north by the tropical forest on the slope of Mount Cameroon (4100m) above the sea level. The mountain range extends to the beautiful sandy beaches of Atlantic Ocean. The town shares boundaries with other towns such as the city of Limbe, Muyuka, Tiko and Idenau district with an equatorial climate, temperatures are moderate with a slight seasonal variation. Also, Buea is characterized with a moderate economy with agricultural administrative, business, tourism and financial sector taking the central stage of the town.

• The Research Problem

In the local government establishments, management system refers to organizational policies and procedures used to ensure that programme achieve their intended goals, resources are used consistently with agency mission; laws and regulations are followed consistently, reliable and timely as information is obtained, maintained and reported for decision making purposes. The council is regulated by the act which applies in respect of all local government authorities. An act gives authority to make provisions for sources of revenue and the management of funds and resources for councils and for matters connected or incidental to securing the proper collection and management of finances in the council system. In the local governance, the finances are controlled by FIECOM.  The finance office of the council is responsible of monitoring the planned budget and financial management.

Internal audit as an independent appraisal activity established within a ministry, department, agency or any other reporting units which operates as a service to the head of the unit involved, of which it controls activity functions by examining and evaluating the accuracy of effectiveness of internal controls in the unit reviewed and conducting values for money audits throughout the unit in order to ensure that proper systems of internal controls and accounting systems exists throughout the unit. It is the responsibility of the internal auditor review appraises and report to the board members of the council. By so doing, assets and interests are accounted for and safe guarded from loses of all kinds arising there from (fraud and other offenses, waste, extravagance, inefficient administration, poor value for money or other causes). Failure of all that brings about an expectation gap between auditors and the public at large.

The aim of this study is to evaluate the role of internal audits in improving the financial performance of the local government establishment by eliminating the mismanagement of financial resources entrusted and eliminate expectation gap.

• Research Questions

Having it in mind that the financial rules of the finance office is to lead the local council to perform financial operations.

1.3.1 Main Research Question

 The general question was why gross financial mismanagement is still being reported in council.

1.3.2 Specific Research Questions

1. i) What is the role of internal audit in Buea council?
2. ii) Is the internal audit in Buea council performing its duties as the rules and guidelines demands?

iii) What are the factors limiting the role of the internal auditors in Buea council?

1. iv) What should be done in order to enhance the performance of the internal audit unit?
2. v) What are the effects of internal control components on output performance in Buea council?

• Research Objectives

1.4.1Main Objectives

The main objective of the research aims to assess the role of internal audit in improving financial management systems in the council and suggest some possible ways to improve financial management in as much as measures to be adopted in rectifying the shortfalls and solutions to the problem.

1.4.2 Specific Objectives

1. i) Identify whether there is a sound internal control system in the Buea municipal council
2. ii) Determine if expenditures in the council is done as per the rules and guidelines in the Buea council.

iii) Determine if the internal audit is independent and functions properly as expected.

1. iv) To recommend measures that need to be done in order to enhance the performance of the internal audit unit in the Buea municipal council.
2. v) To examine the effect of internal control components on output performance in Buea council.

1.5 Research Hypothesis

HO: Auditing has no significant role in the financial performance of councils.

HA: Auditing has a significant role in the financial performance of councils.