An Analysis of Internal Audit Effectiveness in State-Owned Enterprises in Ghana

Abstract

This study analyses IA effectiveness in State-Owned Enterprises in Ghana using the institutional and resource-based theories. The role of internal auditors has extended to ensuring value creation for their respective organisations. This has attracted the attention of both academicians and practitioners to assess the effectiveness of internal audit functions (IAFs) in achieving their objectives. However, there is no harmony among researchers about the antecedents of IA effectiveness. It is also argued that there is no one theory that can best be relied upon in developing a universal theoretical framework for analysing IA effectiveness. This is partly due to the fact that IA effectiveness is contextually dependent. Thus, extant literature highlights the need for further studies in different contexts using suggested theoretical propositions. The study explores the internal and external factors that influence IA effectiveness. To achieve this, the study adopted the qualitative multiple case study approach. This approach was chosen because the contextual views of the respondents are critical in realising the objective of the study. The key source of data was an interview with the chief internal auditors and audit managers of the respective cases. The analysis of data involved the development of themes with reference to the theoretical framework adapted. The findings of the study revealed that, from the external environment, IA effectiveness is influenced by government laws and regulatory institutions through coercive isomorphism. Similarly, the expert power of professional bodies and consultants also influence IA effectiveness through normative isomorphism whiles mimetic isomorphism influence IA effectiveness when the IAFs of the SOEs in these cases copy the structure, processes and resource requirements of perceived best organisations in order to be seen as doing well. Moreover, the study found that organisational characteristics, departmental characteristics, employee characteristics and managerial practices are internal factors that influence IA effectiveness. Within these internal factors are issues like inadequate IAF staff size and resources availability, poor auditee relationships, poor top management supports and high political circumvention of internal controls especially during an election, which impedes IA effectiveness in these SOEs. Besides, there is a link between the internal and external factors in that the external factors also influence the internal factors. It is recommended that top managements of these SOEs must exert more attention to the resource needs of the IAFs so that they can render their required services to their respective organisations. It is also recommended that the Internal Audit Agency should step up its attentions to the IAFs of the various SOEs.