UNIVERSITY OF GHANA
REFORMS AND PUBLIC SECTOR AUDITING IN GHANA
EMMANUEL TENAKWAH JUNIOR
10254992
THIS THESIS IS SUBMITTED TO THE UNIVERSITY OF GHANA – LEGON IN
PARTIAL FULFILMENT OF THE REQUIREMENT FOR THE AWARD OF
MASTER PHILOSOPHY DEGREE IN ACCOUNTING
JULY 2015
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DECLARATION
To the best of my knowledge and belief, this thesis has not been previously published by any
person except previously published materials that have been duly acknowledged. The thesis has
not been accepted for the award of any other degree in any university.
………………………………..
Emmanuel Tenakwah Junior
(10254992)
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CERTIFICATION
I hereby certify that this thesis was supervised in accordance with procedures laid down by the
university.
…………………………… ……………………...
Dr. Samuel Nana Yaw Simpson Date
(Supervisor)
……………………… ………………………
Dr. Cletus Agyenim-Boateng Date
(Co-Supervisor)
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DEDICATION
The ultimate dedication goes to the Almighty God for his guidance and abundant grace granted
on me. I also dedicate this work to my beloved parents, Mr. Peter Kwabena Tenakwah and Mrs.
Mercy Owusu-Ansah, who continue to inspire me in every endeavour. I further dedicate it to
my siblings Emmanuel, Agnes, Prince, Eugene and Joel who have always encouraged me to
attain higher heights in education.
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ACKNOWLEDGEMENTS
I am greatly indebted to my supervisors, Dr. Samuel Nana Yaw Simpson and Dr. Cletus
Agyenim-Boateng for being patient and kind in guiding and offering me constructive criticisms,
encouragement and useful suggestions. I must mention that I have learnt a lot from them. I am
equally thankful to all my lecturers for their contributions in making it possible for me to
successfully pursue this course.
Also, I am very much indebted to Dr. Francis Aboagye-Otchere for his continuous
encouragement, inspiration and support towards my education. Again I acknowledge Mrs.
Esther Asiedu and Mr. Benjamin Otchere-Ankrah for their immense inspiration and support
towards this journey.
I am grateful to the following persons for their help during my data gathering namely: Rev.
Gharney, Mr. Winful, Mr. Jerry Quao, Mr. Patrick Teye, Mr. Lawrence Ayabiga, Mr. Jacob
Essilfie, Mr. Zakaria, and Mr. Henry Kwadjo Missah. Finally, to all my seniors and colleagues in
the department of accounting for the support and immense contribution towards the completion
of this work. To all, I say God bless you.
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Table of Contents
DECLARATION ............................................................................................................................. i
CERTIFICATION .......................................................................................................................... ii
DEDICATION ............................................................................................................................... iii
ACKNOWLEDGEMENTS ........................................................................................................... iv
ABSTRACT ................................................................................................................................... ix
CHAPTER ONE ........................................................................................................................... 1
INTRODUCTION......................................................................................................................... 1
1.0 Background of the study ...................................................................................................... 1
1.1 Problem statement ................................................................................................................ 3
1.2 Research objectives .............................................................................................................. 6
1.3 Research questions ............................................................................................................... 6
1.4 Significance of the study ...................................................................................................... 7
1.5 Scope of the study ................................................................................................................ 8
1.6 Organization of the study ..................................................................................................... 8
CHAPTER TWO .......................................................................................................................... 9
LITERATURE REVIEW ON PUBLIC SECTOR AUDIT REFORMS ................................. 9
2.0 Introduction .......................................................................................................................... 9
2.1.1 Institutional Theories .................................................................................................. 10
2.1.2 Stakeholder Theories .................................................................................................. 14
2.2 The concept of reforms ...................................................................................................... 19
2.2.1 The evolution of public sector reforms ....................................................................... 22
2.2.2 Public sector reforms in Ghana .................................................................................. 24
2.2.3 Nature of public sector reforms .................................................................................. 25
2.2.3.1 Externally induced reforms .................................................................................... 25
2.2.3.1.1 Sponsored reforms.............................................................................................. 29
2.2.3.1.2 Unsponsored reforms .......................................................................................... 30
2.2.3.2 Internally induced reforms ...................................................................................... 37
2.2.4 Motivation behind the reforms ................................................................................... 38
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2.2.4.1 Market alignment .................................................................................................... 39
2.2.4.2 Productivity enhancement ....................................................................................... 39
2.2.4.3 Service orientation .................................................................................................. 40
2.2.4.4 Accountability ........................................................................................................ 40
2.3 Reforms and public sector auditing ................................................................................... 41
2.3.1 Concept of public sector auditing ............................................................................... 42
2.3.2 The role of audit in the public sector ...................................................................... 43
2.3.3 Key elements of an effective public sector audit function ...................................... 46
2.4 Types of audit reforms ....................................................................................................... 47
2.4.1 Regularity or compliance audit ................................................................................... 47
2.4.2 Risk-based audit ......................................................................................................... 48
2.4.3 Performance auditing .................................................................................................. 50
2.4.3.1 Objectives of public sector performance auditing ................................................. 51
2.5 Challenges in public sector auditing .................................................................................. 54
2.5.1 Lack of audit independence ........................................................................................ 54
2.5.2 Difficulty in evidence gathering ................................................................................. 55
2.6 Implementing public sector reforms .................................................................................. 56
2.6.1 Challenges of implementing public sector reforms .................................................... 57
2.7 Chapter summary ............................................................................................................... 59
CHAPTER THREE .................................................................................................................... 60
RESEARCH METHODOLOGY .............................................................................................. 60
3.0 Introduction ........................................................................................................................ 60
3.1 Research paradigm ............................................................................................................. 60
3.2 Research approach and design ........................................................................................... 61
3.2.1 Ghana audit service profile ......................................................................................... 65
3.3 Sources of data ................................................................................................................... 68
3.4 Data collection process ...................................................................................................... 69
3.5 Data management and Analysis ......................................................................................... 75
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CHAPTER FOUR ....................................................................................................................... 77
ANALYSIS AND DISCUSSION OF FINDINGS .................................................................... 77
4.1 Introduction ...................................................................................................................... 77
4.2 Background of respondents and audit service ................................................................ 77
4.2.1 The Audit Service during the colonial Era (1910-1957) ............................................ 80
4.2.2 The Audit Service after the colonial Era (1957 – Date) ............................................. 82
4.3 Types and nature of public sector audit reforms ................................................................ 84
4.3.1 Types of audit reforms ................................................................................................ 84
4.3.1.1 Systems audit ......................................................................................................... 85
4.3.1.2 Risk based audit ..................................................................................................... 86
4.3.1.3 IT audit ................................................................................................................... 87
4.3.1.4 Performance audit .................................................................................................. 87
4.3.1.5 Regularity audit ...................................................................................................... 89
4.3.2 Nature of public sector audit reforms ......................................................................... 92
4.3.2.2 Externally induced reforms .................................................................................... 95
4.4 Factors influencing the audit reforms ................................................................................ 95
4.4.1 Internationalisation ................................................................................................. 96
4.4.2 Governmental policy ............................................................................................... 96
4.4.3 Quest for good governance and accountability ....................................................... 98
4.5 Improvements in public sector auditing ............................................................................. 99
4.5.1 Meeting of statutory deadlines .............................................................................. 100
4.5.2 International acceptance of the audit reports ........................................................ 101
4.5.3 Enhanced accountability and institutional capacity .............................................. 101
4.5.4 Interactive approach to auditing ............................................................................ 102
4.5.5 Cost efficiency ...................................................................................................... 103
4.6 Challenges in the implementation of the reforms ............................................................ 104
4.6.1 Resistance of change ............................................................................................. 104
4.6.2 Financial constraints ............................................................................................. 106
4.6.3 Governmental support ........................................................................................... 106
4.7 Discussion of findings...................................................................................................... 107
4.7.1 Types of audit reforms .............................................................................................. 107
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4.7.2 Nature of audit reforms ............................................................................................. 109
4.7.3 Factors influencing the audit reforms ....................................................................... 109
4.7.4 Improvements in public sector auditing ................................................................... 111
4.7.5 Challenges in the implementation of the reforms ..................................................... 113
4.8 Reforms and theoretical explanations .............................................................................. 114
4.8.1 Institutional theory and audit reforms ...................................................................... 114
4.8.1.1 Mimetic isomorphism and audit reforms ............................................................. 115
4.8.1.2 Coercive isomorphism and audit reform ............................................................ 116
4.8.1.3 Normative isomorphism and audit reforms ............................................................. 117
4.9 Chapter summary ............................................................................................................. 118
CHAPTER FIVE ...................................................................................................................... 119
SUMMARY, CONCLUSION AND RECOMMENDATIONS ............................................ 119
5.0 Introduction ...................................................................................................................... 119
5.1 Summary of Key Findings ............................................................................................... 119
5.2 Conclusions ...................................................................................................................... 122
5.3 Contribution of the study ................................................................................................. 123
5.4 Recommendations ............................................................................................................ 125
5.5 Limitations of the study ................................................................................................... 129
5.5.1 Generalization ........................................................................................................... 129
5.5.2 Reliability ................................................................................................................. 130
5.5.3 Validity ..................................................................................................................... 130
5.6 Future research directions ................................................................................................ 131
Reference .................................................................................................................................... 132
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ABSTRACT
The study primarily investigated the reforms and public sector auditing in Ghana. Ghana has
been at the forefront of many of the World Bank reform programmes in the Sub-region.
Specifically the study investigated the nature and types of audit reforms as well as the factors and
challenges influencing public sector audit reforms. The study was undertaken from an
interpretivist perspective as this offered explanation to the reforms in Ghana‟s audit service from
the perspective of both the heads/supervisors and their subordinates. Eleven (11) employees were
selected and interviewed. The study relied on the experienced employees in top positions. The
data gathered from the interviews was analysed using the Miles and Huberman, (1994) approach
to qualitative data analysis. The study first revealed that the nature of the audit reforms were both
internally and externally induced. The nature of the reforms influenced the type of audit reform
to carry out. The reforms according to the study were not undertaken in vain but brought some
changes to the activities of the audit service of Ghana. The improvements include meeting of
statutory deadlines, international acceptance, enhanced accountability and others. The study also
revealed that the most significant challenges encountered in the implementation of the reforms
include financial challenges, acceptance of change by employees and political support. The study
concludes that notwithstanding the challenges in the implementation of the reforms, the reforms
achieved it intended objectives. The study contributed to the extant literature on reforms and
public sector auditing as this brought to bear the reforms and its effects on auditing. In terms of
policy, the study has indicated some issues that affect public sector reform implementation and
must be inculcated in other intended reforms to avoid delays and rejection by employees. Finally,
for reforms to achieve its intended objectives there should be a well-coordinated from its
planning stages to implementation.
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CHAPTER ONE
INTRODUCTION
1.0 Background of the study
The study examined reforms and public sector auditing in Ghana. Ghana has experienced several
reforms in almost all the sectors of the economy. This study therefore looked at the Ghana audit
service as the sole body mandated to carry out public sector external audit. The service started
experiencing reforms right from its inception to date. These reforms were embarked upon
because, an area of public sector practice that has attracted the public attention in recent times is
auditing (Pearson, 2014). Though auditing in both private and public sectors is important, it is
more important in the public sector considering the fact that more resources are at their disposal
and is meant to improve the entire nation. Since the 1980s, developed and developing countries
have been embarking on public sector reforms. The role and institutional character of the state
has been questioned, and the public sector has been under pressure to adopt private sector
orientations. The earlier reforms aimed at shaping a public administration that could lead
national development, and was based on the same institutional peculiarities inherited from the
colonial period (Economic Commission for Africa, 2003). This has led to changes in the
reporting pattern and practices which has brought about significant changes in the auditing
activity (Poullaos, 2004). These changes occurred both in the private and public sectors leading
to changes in the regulatory frameworks and other relevant laws.
Similarly, globalisation has brought significant reforms in public sector audit in the world
whether developed or developing economy (Arnold, 2005; Arnold & Sikkaf, 2001 & Barret et al,
2005). This has brought a shift of focus on public sector audit. The concept of value for money
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audits for central government has at various times offered the solution. According to Pallot
(2003), the changes in the role of the New Zealand audit office for example was as a result of the
new public management reforms in the later part of the twentieth century. The audit office
challenged aspects of new public management thinking by advocating “a wider accountability to
parliament and the public at large” (Pallot, 2003).
According to Othman, Nath, and Mahzan (2013), reforms of public sector auditing in Malaysia
are purely due to the social and political development factors. The traditional perceptions of the
audit function as being a corporate watchdog have changed dramatically over the years to be
perceived as a tool for monitoring compliance; to operate in a complex environment due to the
current practice of utilising information technology; and to perform an advisory function that
provides the citizenry with assurance that internal controls are adequate. Two types of audit exist
in the public sector: financial-related audits and performance related audits. Similar to the
reforms in auditing, regulation has gradually increased, and today there are many auditing rules.
While auditing and auditors often come under attack during financial crises (Chandler, 1997;
Heier, Dugan & Sayers, 2005), Power (1997), claims that such significant crises in the auditing
profession, which have increased regulation, have also been to the benefit of the profession (see
Barbadillo, Humphrey & Garcia-Benau, 2000). In the light of the above, this study threw more
light on the Ghanaian situation.
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1.1 Problem statement
The New Public Management accountability relies on standardised accountability measures to
satisfy the desires of particular stakeholders, often providers of capital or funds unlike the
traditional public administration which focused on the bureaucratic process of formal compliance
and control are largely results-oriented based on efficiency and effectiveness measures (Zapico-
Goni, 2007; Oakes & Young, 2008). The traditional approach assumes that governmental
activities are not profit-oriented and as such should not be given profit target. It assumes a stable
environment with conditions of certainty about expected results. Zapico-Goni (2007), however
states that, the realities of many public sector organisations today is characterised by uncertainty,
complexity, interdependence, diversity, and instability and under such conditions, new public
management accountability seems weak.
With regards to the New Public Management, public sector institutions are to adopt a private
orientation to be more efficient and effective in the delivery of goods and services. The public
sector is part of economic life, not in private ownership, that deals with the production, delivery,
and allocation of basic public goods and services at global, regional, national, or local levels
(Serrat, 2010). However, in most recent times, reforms under the influence of the New Public
Management (NPM) have been driven by a combination of economic, social, political and
technological factors, which have triggered the quest for efficiency and ways to cut the cost of
delivering public services (Economic Commission for Africa, 2003). Reforms may range from
introducing very micro-scale alterations, such as the introduction of new software in an office, to
large-scale organisational restructuring, including the creation of new organisations or divisions
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and the termination of existing ones. It is useful to note that reforms are a key to surviving and
growing in today‟s global economy.
Moreover, reforms with similar intent may achieve different objectives with respect to
geographical jurisdictions. For instance, Pollit (2011), states that Germans made their reforms in
the light of their circumstances and history. Some of these reforms were legal or constitutional in
nature. Therefore same reforms may be carried in different jurisdictions, yet the outcome may be
different. This is because of the circumstances surrounding them. Reforms were undertaken with
the aim of good governance, trust and transparency, accountability, efficiency, effectiveness and
others in governmental sectors (Pollit & Bouckaert, 2011).
Additionally, without reforms, organisations would run risk of becoming stale and unresponsive
to stakeholder demands. The challenge then is to learn to move through this valve of transition as
easily and creatively as possible to the organisational activities (Marković, 2007). These reforms
are classified in literature as the internally induced and externally induced reforms. These
reforms have generally resulted from increased awareness in the public domain, the greater
demand placed upon the reporting agencies by a multitude of stakeholder groups, and the
willingness on the part of such agencies to be “contemporary” and “objective” in their
performance. The failure of past reform efforts has led to a number of studies arguing that
engagement with public-sector reforms in isolation from the broader civil service culture would
have only limited effect. There is the need to understand the context of the reform as it affects
the enabling environment for capacity development (Owusu, 2006). The main reason behind
most reforms is to build both the personal and non-personal capacity of the public servant in
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order to be cost effective and efficient in their activities. As captured by Ayee (2007), the
motivations behind the various reforms were to correct the many debilitating features of the
public services. For example, the motive behind the reforms in the Australian public sector audit
was to remain relevant to the entire world as it keeps changing. The reforms also came as a result
of public expectations from government making the public sector activities more complex. The
nature of the reforms in Australian audit is regulatory and that government fulfilled its role by
having the right legislation and the right approach (Pearson, 2014). On the other hand the
Malaysia situation differs from that of Australia. The reforms were as a result of pressure from
the public and pressure from donor agencies (Othman et al., 2013).
There seem to be limited studies on reforms and public sector auditing especially in developing
countries. Exceptions are studies by Lalith, (2010) in Sri Lanka, Nath, (2011) in Fiji, Othman et
al. (2013) in Malaysia and Pearson, (2014) in Australia. The studies revealed that the reforms in
public sector audit resulted from the change in regulatory framework, that is to say that the laws
governing auditing has changed giving the Auditor General more power and independence to
operate. These reforms according to Lalith, (2010), Nath (2011), Othman et al. (2013) and
Pearson, (2014) were influenced by factors such as, foreign donor‟s support for institutional
development, lack of political support, bureaucratic influences, insufficient operational
independence, traditional organisational independence, state institutions and powerful actors
such as the Auditor General, Ministry of Finance, public service commission, public accounts
committee and international development partners. Therefore, there is the need for contemporary
research to focus more on developing countries where corruption and other malpractices are on
the rise.
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Again, studies reviewing the historical context of public sector auditing in British colonised
developing countries are under-researched (Othman et al., 2013). Unlike developed countries,
colonised developing countries experienced, practiced and enforced British law and accounting
practices into their own legislation and statutes even after their independence. This study
therefore assesses the reforms and public sector auditing from the perspective of developing
country.
1.2 Research objectives
1. To understand the nature of public sector audit reforms.
2. To examine the factors that drive audit reforms in Ghana.
3. To determine how the reforms affected public sector audit.
4. To identify the challenges faced in the implementation of public sector auditing reforms.
1.3 Research questions
1. What is the nature of public sector audit reforms?
2. What factors drive audit reforms in Ghana?
3. How has reforms affected public sector auditing?
4. What are the challenges associated with the implementation of public sector auditing
reforms?
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1.4 Significance of the study
Previous studies have been conducted with the focus to explain the historical, socio-economic
and political contexts within which auditing has been reformed and how individuals and
institutions have influenced the processes in both developed and developing countries (see
Hopwood 1982; Macrae & Vada 1997; Jacobs, 1998; Guthrie & Parker, 1999; Lalith, 2010;
Nath, 2011 and Othman et al., 2013; Pearson, 2014). In the developed economies, audits have
been widely accepted, albeit with different interpretations of how these were used as a tool by
parliament to hold the public sector managers and office holders to account for their stewardship
role (Jacobs, 1998). The study therefore made some contributions. First, the study investigated
the reforms in public sector auditing in Ghana. Hence, the researcher explaining the behavioral
contexts or with regards to reforms in the public sector audits relevant to their research.
Secondly, the study probably is one of the few studies to document the reforms in public sector
auditing in Ghana. The study made a significant contribution to the reforms in public sector
auditing in developing African country. This provided evidence on how these reforms affected
the public sector auditing and audit institutions with example from Ghana. The study contributed
to literature by using a qualitative approach to understand the reforms and public sector auditing.
The qualitative approach to research presents the view of the respondents by giving them
opportunity to describe the answers they seek to provide. Again, the study made use of the
institutional theory to explain why and how the reforms occurred. Finally, this paper provided a
comprehensive framework for understanding how public sector audit has developed overtime.
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1.5 Scope of the study
The empirical focus of this study is on the reforms in public sector auditing that have occurred
overtime in Ghana. Samples were drawn from the Ghana audit service. The study made use of
Ghana because, it is one of the countries in West Africa that have experienced several reforms in
its public sector under successive governments and (Owusu, 2006). It is also the first country in
sub-Saharan Africa to experience World Bank reform (Simpson, 2012). These reforms have had
diverse outcomes, therefore the need to study reforms and public sector auditing to ascertain
whether the reforms delivered the intended objectives.
.
1.6 Organization of the study
The study was organized into five chapters. Chapter one presented the introduction to the study,
problem statement, research objectives, research questions, significance and scope of the study.
Chapter two presented a review of literature on reforms and issues in the public sector. It looked
at the applicable theories and models based on which the data gathered was analysed. Chapter
three presented the various methods that used in the collection and analysis of data. It also
presented the justification for the choice of each tool as well as its limitations of the research
methods and tools employed. Chapter four presented the findings of the research and discussions
after the data gathering. Finally, chapter five concluded the study with summaries and
recommendations based on the findings.
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CHAPTER TWO
LITERATURE REVIEW ON PUBLIC SECTOR AUDIT REFORMS
2.0 Introduction
The previous chapter described the research problem, objectives and questions, among others.
This chapter focuses on the review of the literature that is relevant to the issues examined in this
study, that is, reforms and public sector auditing. Specifically, the chapter reviewed literature on
the concept of reform, evolution of reforms, nature of public sector reforms, motivations behind
reforms, types of audit reforms and public sector auditing in Ghana. The aim of the chapter
among other things is to provide a comprehensive insight into the theories and related empirical
studies on the reforms in public sector auditing.
2.1 Theoretical review
Theories are meant to explain a particular phenomenon. In order to explain the behavioural
issues in terms of reforms, the study reviewed two theories namely the stakeholder and
institutional theories. These theories looks at how individuals, group of people and institutions
can call for change in the activities of public sector institutions. The theories used are further
discussed in the following sections:
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2.1.1 Institutional theories
Institutions are commonly defined as „rules, norms, and beliefs that describe reality of the
organization, explaining what is and is not, what can be acted upon and what cannot‟ (Hoffman,
1999: 351). Institutions can be usefully viewed as performance scripts that provide „stable
designs for chronically repeated activity sequences,‟ deviations from which are counteracted by
sanctions or are costly in some manner (Jepperson, 1991: 145). Organizations exist in an
environment of institutions that exert some degree of pressure on them; institutional
environments are „characterized by the elaboration of rules and requirements to which individual
organizations must conform if they are to receive support and legitimacy‟ (Scott, 1995: 132).
Scott (1995), argues that institutions constrain behavior as a result of processes associated with
three institutional pillars: the regulative, which guides action through coercion and threat of
formal sanction; the normative, which guides action through norms of acceptability, morality and
ethics; and the cognitive, which guides action through the very categories and frames by which
actors know and interpret their world.
Institutional arrangements are fundamental to understanding organization because of the ways in
which they tend to be reproduced without much reflection in practice (Langer & Newman,
1979), taken for granted (Berger & Luckmann, 1967), and create path dependencies (David,
1985; Arthur, 1988). Organizational scholars have traditionally focused on the critical role that
institutions play in providing continuity and stability in organizational processes. Some
institutional scholars believe that the appearance and maintenance of institutional arrangements
are explained in terms of economizing on transaction costs (Coase, 1937; Williamson, 1985).
Institutional arrangements function to reduce uncertainty and to mitigate opportunistic behavior
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such that transaction costs associated with negotiating, monitoring and enforcing contracts
between boundedly rational actors are reduced. Institutional arrangements, in turn, tend to
reproduce rather than change existing social arrangements.
Institutional theory emphasize how institutional arrangements confer legitimacy, which is a
generalized perception or assumption that the actions of an entity are desirable, proper or
appropriate within some socially constructed system of norms, values, beliefs, and definitions
(Suchman, 1995: 574). Meyer and Rowan (1977), posits that some actions within a particular
institutional field come to be seen as legitimate and may even be prescribed, making it difficult
for actors to deviate from them.
Institutionalist thought has been criticized for its emphasis on continuity and conformity.
Because of its focus on the broader factors that induce organizations to become the same, it has,
according to some, neglected questions of agency, interest and change (DiMaggio, 1988).
According to DiMaggio (1988), one response to this criticism has been the elaboration of the
notion of the „institutional entrepreneur‟. This has been the new dimension of the institutional
theory apart from the coercive, mimetic and normative dimensions. Institutional entrepreneurs
are seen as those who deploy the resources at their disposal to create and empower the
institutions. Institutional entrepreneurs serve as agents of legitimacy supporting the creation of
institutions that they deem to be appropriate and aligned with their interests‟ (Dacin et al. 2002).
In the view of Fligstein (1997), institutional entrepreneurs are those who display an array of
„social skills‟. He suggests that „the idea that some social actors are better at producing desired
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social outcomes than others is the core notion that underlies the concept of institutional
entrepreneurs‟, which seems to ignore issues about why it is that some, rather than others, either
possess such skills or, more importantly, come to deploy them in the search for institutional
change (Fligstein, 1997). A further concern is to have a definition of what it is to be an
institutional entrepreneur. That is to take evidence of successful change of organizational
practice as indicating that it is the result of institutional entrepreneurship; institutional
entrepreneurs are then those who produce successful organizational change. Another important
aspect of the institutional theories is the isomorphic pressures. The literature identifies three
types of pressures through which isomorphic change processes work: coercive, mimetic and
normative (Ashworth, Boyne & Delbridge, 2007; DiMaggio & Powell, 1983). DiMaggio and
Powell (1983), suggest that the various actors operating in and around organisations can create
the institutional pressures that lead individual organisations to adopt specific structures and
procedures. For instance, the government and its agencies can be a source of coercive pressures,
professional bodies can contribute to the creation of normative pressures and consultants may
have an important role in the emergence of mimetic pressures. These explain how organisations
embark on change. These are explained below.
Coercive pressures involve one organization exerting power and influence over another to force
the adoption of preferred structures or institutions, often through political and legal means or by
controlling resource access or other means that seem to be appropriate. Highly dependent,
politically vulnerable organizations are particularly susceptible to such pressures (DiMaggio &
Powell, 1983). These pressures are often exerted because the beneficiary institutions do not have
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needed or required resources to undertake their activities. State institutions are highly affected by
these pressures from development partners.
Mimetic pressures center on the influence of „best‟ or „good‟ practice on the structural choices
that organizations make. This manifest in the tendency some organizations have to emulate or
copy what appear to be desirable or accepted practices in the sector or industry they find
themselves, even if these have not been proven effective. Organizations dealing with uncertainty
are particularly vulnerable, especially when uncertainty clouds the relationship between
organizational means and ends, complicating the choice of means (DiMaggio & Powell, 1983).
Normative pressures “describe the effect of professional standards and the influence of
professional communities on organizational characteristics” (Ashworth, et al 2007). They are
particularly strong where a professional grouping accredits certain practices, establishing them as
norms. Usually, regulatory institutions are at the forefront pushing institutions to adopt the
standards set by them (regulatory institutions) to ensure that there is some form coercion and
consistency in the activities of these institutions. Industry players hardly resist these pressures as
it seems to bring on board new ideas.
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Application of the theory
In applying the institutional theory to this study, the roles of other institutions may be deemed to
have some level of influence on the activities of the audit service. Some of these institutions may
be within the country or outside the country. In the case of coercive pressures, the institutions
may put pressures on some institutions to change their practices. These pressures may be in form
of monetary assistance or technical assistance in that area. On the issue of mimicry, the
institution may decide to mimic what other countries are doing which seem to be appropriate
within that context and may fully apply to the entity involved. The normative pressures come
when there is the need to follow some best practices locally or internationally to strengthen the
way the organisation operates. It could also be in a case of associations where members are
required to act in a way that may not contradict what others are doing.
2.1.2 Stakeholder theories
Stakeholders are group or individuals that have influences or are influenced by an organisation.
There are several definitions of stakeholders. Notable among them is the one by Freeman (1984),
which states that stakeholders as individuals or group of individuals that can directly or indirectly
affect, or be affected by a firm‟s activities. Stakeholders of organisations can be viewed from
two perspectives namely internal and external. Miller and Lewis (1991), argues that internal
stakeholders include functional departments, employees and interested internal parties whereas
external stakeholders include customers, competitors, advertising agencies and regulators.
Waddock et al. (2002), present another view of stakeholders and characterizes them as primary
or secondary. According to them, primary stakeholders are those whose continued participation
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is necessary for the survival of the organisation; they consist of employees, customers, investors,
suppliers and shareholders that provide the necessary infrastructure. Secondary stakeholders, on
the other hand, are not usually engaged in transaction with the focal organization and are not
essential for its survival; they consist of the media, trade associations, non-governmental
organizations, along with other interest groups or civil society organisations. The primary and
secondary stakeholders exert different pressures and priorities. For example, Hart and Sharma
(2004), posit that stakeholders at the fringe of operations can exert pressure calling into question
the firm‟s legitimacy and right to exist. According to Mitchell et al. (1997), the three critical
elements in assessing stakeholder influence are their power, legitimacy and urgency of issues.
Stakeholder theory can be put into three categories namely descriptive, instrumental and
normative stakeholder theories (Jones, 1994).
Descriptive stakeholder theory
Descriptive stakeholder theory describes the behaviours of the stakeholder behaviours.
According to Jones (1994), descriptive theory purports to describe actual behavior. Centering on
the belief that theory in the organizational sciences must include falsifiable claims (Bacharach,
1989; Whetten, 1989). Jones (1994), suggests that (at least) two stakeholder theory-based
propositions qualify as legitimate theoretical claims, and one of these appears to be unique to
stakeholder theory: organisational managers behave as if stakeholders important because of the
intrinsic justice of the stakeholders' claims on the firm. Evidence could be organized to show that
managers do not behave as if stakeholders had morally valid claims on the firm. Indeed, in
various studies researchers have investigated claims of this general type and found some support
for them (Clarkson, 1995). Although this proposition is theoretically interesting and empirically
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tractable, claims of this type do not fully exploit the possibilities for stakeholder-based
descriptive theory.
A descriptive stakeholder theory of the firm, for example, would create a wealth of research
possibilities and would probably catapult stakeholder theory into the ranks of major theories of
organization. The stakeholder theory of the firm posits that the nature of an organization's
stakeholders, their values, their relative influence on decisions and the nature of the situation are
all relevant information for predicting organizational behavior (Brenner & Cochran, 1991). The
work of Brenner and Cochran (1991), constitutes an early effort to provide a descriptive
stakeholder theory of the firm. Jones (1994), describes Brenner and Cochran's contribution as
"theoretically more aggressive" than the research proposition regarding managerial behavior
discussed above, because it suggests a relationship between various stakeholder traits and
situational characteristics and the decisions that firms actually make. It appears that Brenner and
Cochran's approach to a descriptive stakeholder theory of the firm needs to be more fully
developed before any testing can take place. Thus, although some possibilities exist for the
development of descriptive stakeholder theory, we leave them to other scholars. Instead, we
concentrate our attention on instrumental theory, which we feel holds greater promise.
Instrumental stakeholder theory
Stakeholder theorists with a social science orientation may also have an interest in instrumental
theory. This theory posits that certain outcomes will be obtained if certain behaviors are adopted.
Instrumental theory is contingent theory: the predicted outcomes are contingent on behavior of a
certain type. It does not require the theorist to make simplifying assumptions about the
fundamental nature of human behavior, such as the assumption of self-interest (or opportunism)
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made by economists. This virtue obviates the difficulties associated with oversimplifying human
behavior (resulting in models that predict poorly) or overcomplicating human behavior (resulting
in models that are hopelessly complex). One form of instrumental stakeholder theory has been
advanced by Jones (1995a), who makes a theoretical case for the general proposition that if firms
contract (through their managers) with their stakeholders on the basis of mutual trust and
cooperation, they will have a competitive advantage over firms that do not. No assumption is
made that managers will try to develop trusting and cooperative relationships with stakeholders,
but an argument is made that if they do, competitive advantage will result. He describes several
behaviors that reveal managerial opportunism and make it difficult for firms to develop mutually
trusting and cooperative relationships with their stakeholders. These empirical claims are
relatively straightforward and methodologically tractable, as long as one employs conventional
financial measures of corporate performance. However, one of the central (normative) tenets of
stakeholder theory is that firms should attend to the interests of all of their stakeholders not only
their stockholders. It follows that the performance of firms encompasses more than financial
performance alone.
Normative stakeholder theory
These stakeholder theorists take an approach that differs substantially from orthodox
(functionalist) social science. This mode of inquiry involves specifying what moral obligations
stakeholder theory places on managers, particularly the relative importance of obligations to
shareholders and those to other stakeholder groups (Boatright, 1994; Clarkson, 1995;
Goodpaster, 1991; Goodpaster & Holloran, 1994; Quinn & Jones, 1995). These scholars have a
common theme which suggests that firms ought to treat stakeholders as ends (Evan & Freeman,
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1983) or ought to view the interests of stakeholders as having intrinsic value. Supporters of this
stakeholder perspective develop alternative descriptions of business so that managers can interact
with stakeholders in a morally sound fashion. They focus on what the firm ought to do. Both in
terms of the ends it pursues and the means it utilizes, as well as why these oughts‟ are
appropriate (Evan & Freeman, 1983; Freeman, 1994; Freeman & Gilbert, 1988; Wicks, Gilbert
& Freeman, 1994). They seek not to shift the focus of firms away from marketplace success and
toward human decency but to come up with understanding of business in which these objectives
are linked and mutually reinforcing. These scholars seek alternative accounts that could guide
business activity in more constructive ways. They maintain that the language, conceptual
schemes, metaphors and images that individuals have of business activity make a difference in
how they think and act (Jones, 1988-89; Wicks et al., 1994). This view is consistent with
institutional theory in the organization sciences (DiMaggio & Powell, 1983, 1991; Meyer &
Rowan, 1977) and that these representations influence individual conceptions of what constitutes
"reasonable" strategic action. In Weick's (1979) language, these scholars seek means by which
people can "enact" different environments. Although advocates of this approach do not so state,
their work has significant empathies with "interpretivist" view (Berger & Luckman, 1966;
Morgan & Smircich, 1980). This assumes that "people socially and symbolically construct and
sustain their own organizational realities" (Gioia & Pitre 1990: 588) and some similarities to
"radical humanism." This shares this subjectivist view of organizational reality but takes a more
critical stance.
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Application of the theory
From the above discussions, it is vital for organizations to identify issues of concern to its major
stakeholders. A stakeholder issue is defined as the concerns that stakeholders embrace about
organizational activities and the residual impact (Maignan et al., 2005). Freeman, (1984) states
that, stakeholders provide resources that are more or less critical to the firm‟s long-term success.
Stakeholder resources may be both tangible and intangible. For example, stockholders can bring
in capital; suppliers can provide material resources or intangible knowledge; local communities
can offer infrastructure and a location; employees and managers can grant expertise, leadership,
and commitment; to help spread positive corporate images (Maignan & Ferrell, 2004). In
applying the theory to this study, it means that stakeholders of the Ghana audit service such as
citizens, development partners, other government institutions in order legitimise the activities of
the audit service may demand for change in their process and practices. These stakeholders
usually demand for change when other countries or similar institutions carry out their activities
in a way that seem to be relevant to the society at large. These institutions to be relevant may
carry out changes in process and practices in the organisation.
2.2 The concept of reforms
Public-sector entities could be described as agents and have been transformed into `more
complete' organizations by installing or reinforcing local identity, hierarchy and rationality. This
interpretation helps to explain important aspects of the reform process. Reform is a term used to
describe changes in policy, practice, or organization. Reform refers to intended or enacted
attempts to correct an identified problem. As an aspiration, its‟ goal is to realize deep, systemic,
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and sustained restructuring of organisations or institution (Flynn & Strehl, 1996). Throughout the
history, reform has been a means of conceiving and enacting visions for the collective good.
Reforms can be carried out in both private and public sectors of the economy. Reform is often
discussed as if it were a coherent entity. In reality, reform may be seen as an umbrella label for a
range of diverse actions, having in common only the intent to increase equity, quality, and/or
efficiency of service provision. Different kinds of reforms present different political challenges.
They arouse different interests and generate different alliances. They engage ideologies and
principles in varying degrees. In the recent generation, modern public sector reforms have been
a change in emphasis away from structural devolution, disaggregation, and single-purpose
organizations and toward a whole-of-government approach (Christensen & Lægreid, 2006;
OECD, 2005).
Public sector reform is about strengthening the way that the public sector is managed. The public
sector may be overextended and attempting to do too much with too few resources may lead to it
been poorly organized; its decision-making processes may be irrational; staff may be
mismanaged; accountability may be weak; public programs may be poorly designed and public
services poorly delivered. There have been several definitions of public sector reforms. Public
service reform is a planned intervention to raise the level of public service performance. Before
reforms are undertaken, it must have carefully defined goals and strategies to attain these goals
set for them. According to Schacter (2000), the public sector reform is defined as strengthening
the way that the public sector is managed. This basically means that the reforms may just be a
very small change or large change in the activities of public sector organisations. Some authors
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believe that it is just not a small change but rather a very big change in the government
machinery.
On the other hand, Omoyefa, (2008) believes that public sector reform is about the total
overhauling of the government administrative machinery with the aim of injecting real
effectiveness, efficiency, hard core competence, and financial prudence in the running of the
public sector. Public sector reform is usually a component of structural adjustment programmes
based on notions of economic liberalisation, free trade, competition and limited government
intervention (Uddin & Tsamenyi, 2005; Cook, 1986). The argument is public interest, via
customer satisfaction or better services to citizens, will be realised from institutional reforms
such as injections of private management styles into the state owned enterprises. These
management styles, whether they operate in the public or private sector, should produce more
efficient results serving all, including customers, employers, industry, and society (Toye, 2000).
This may not be the case as it may fail to provide efficient services (Uddin & Tsamenyi, 2005).
Proponents of reforms claim that it brings transparent accountability, enlightened and effective
management, and increased returns to the state. Some authors have disputed these claims citing
that these reasons may never be materialised (Uddin & Hopper, 2003; Uddin & Tsamenyi,
2005). These may be as result of problems inherent in the economy which is likely to hinder the
success of the reform. Since the 1980s, developed and developing countries have been
embarking on public sector reforms. The role and institutional character of the state has been
questioned, and the public sector has been under pressure to adopt private sector orientations.
The earlier reforms aimed at shaping a public sector and that could lead national development
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(Economic Commission for Africa, 2003). Countries all over the world have embarked upon
reforms to necessitate the needed changes so as to enhance efficiency and effectiveness. The
public sectors for the past decades, thus African countries including Ghana, have realized the
need to assess alternative means by which democracy in terms of participation, representation,
accountability and efficiency. The role of the public sector in the development of a country such
as Ghana cannot be overemphasized. It is therefore imperative to ensure that reforms are geared
at developmental goals and set targets due to the fact that, the public sector has been and
continue to be a tool used by governments in their quest to improve their countries.
2.2.1 The evolution of public sector reforms
The public sector is the entity that is entrusted with the delivery of goods and services by, and for
the government at the national, regional or local levels (Mansour, 2008). These resources are
large in nature as against the resources managed by the private sector in various jurisdictions.
This is likely to push citizens to demand for better services from the public sector. These
demands have brought about reforms in the public sector. The contribution of the traditional
public sector is largely questioned, suggesting the need for a major change or overhaul in the
sector. Public sector reform in both developed and developing countries have now become a
routine matter of public policy – reform is almost continuous if not always successful (Pal &
Ireland, 2009).
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Also, the debate on good governance and its requirements have provided an impetus for new
approaches to public sector management reforms. Some of the changes that have taken place
aimed at tackling some of the worst forms of services provided by public sector organisations.
The reforms were introduced as a result of the misuse of state resources and institutionalized
corruption; lack of accountability; bureaucratization in the public sector among others (Hyden,
2000, Bratton & van de Walle, 1992).
The aforementioned indicates that reforms in public sector help to ensure competency, efficiency
and effectiveness in relation to public services. Public sector management reforms in Africa face
a number of challenges that have limited the scope, speed and quality of services rendered. For
example, corruption constitutes by far one of the biggest challenges in the public sector. Other
challenges include multiple accountability, inadequate resource utilization and institutional
capacity. African governments, therefore, need to increase their efforts to address those
challenges through effective public sector reforms. The new public management approach may
be a panacea for the problems of the public sector in Africa, a careful and selective adaptation of
the elements to selected sectors may be beneficial.
Good public management, with emphasis on accountability and responsiveness to customer
needs, have been seen as an aspect of good governance by donor agencies supporting reforms in
developing countries. To the World Bank, good governance consists of a public service that is
efficient, a judicial system that is reliable, and an administration that is accountable to the public.
Ghana has seen various reforms before and even after independence era.
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Ghana‟s public administration had experienced three major reforms in the 1950‟s before the
PNDC civil service reforms in 1980. The Lidbury administration that was instituted in Ghana
was to support the pre-independence reforms.
2.2.2 Public sector reforms in Ghana
Similar to many African countries that experienced economic crisis in the 1970s and 1980s, the
public sector in Ghana was in complete disarray by the mid-1980s (Owusu, 2005). Thus between
these periods, most offices, especially those outside the capital city; Accra, were dilapidated and
lacked the basic necessities such as paper, pencils, telephones, light bulbs of a functioning office.
Employees therefore became demoralized; effectiveness and productivity concerns were
relegated to the background as work effort declined, absenteeism and moonlighting increased,
and corruption, political hiring, and rent-seeking became widespread (Owusu, 2005). These
conditions made it extremely difficult to recruit and retain technical and professional staff.
Gradually the bloated public sector became increasingly incapable of performing basic tasks, let
alone to facilitate national development efforts. The ineffectiveness of the public sector became a
serious hindrance when the government embarked one economic reform in 1983 (Ayee, 2001).
As a result; the government was compelled to initiate public sector reforms to support the
implementation of the economic policies.
A brief background of the World Bank‟s public sector reform policies recommended for African
countries is necessary for understanding the Ghana government policies because of the striking
similarity between them (Ayee, 2001). World Bank public sector reform policies can be
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classified into two: the “quantitative” first-generation, and the “qualitative” second-generation
reform programs. The first-generation reforms were implemented between the 1980s and early
1990s, and were part of the structural adjustment policies implemented by the Bank in several
African countries (Owusu, 2005). The aim of the first-generation reforms was to trim the size of
the government and the policies implemented included retrenchment, cost-recovery and
privatization (Lienert & Modi, 1997).
2.2.3 Nature of public sector reforms
Public sector reforms are meant to reduce the inefficiencies in the economy. The nature in which
the reforms take determines its objectives. There have been various names given to reforms in
different jurisdictions (Owusu, 2005). The headings may be broad or narrow to specific context.
These headings include the new public management (NPM) which basically suggests that public
sector institutions adopt private sector orientation to ensure efficiency and effectiveness. Others
include government business reinventing; Public sector reforms are mainly classified in two
forms namely; externally induced and internally induced reforms.
2.2.3.1 Externally induced reforms
These are the reforms that are usually championed by institutions outside the government. These
reforms are usually led by other institutions or development partners or donor agencies.
According to Owusu (2006), the search for reforms has been led by the World Bank and other
international development agencies. Indeed, many African countries, including Ghana, with the
support of donor agencies – especially the World Bank – have been experimenting with various
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reform strategies since the 1980s. The reforms may also be caused by other non-governmental
societies within the country. For instance, a study by Shahjahan and Amagoh (2011) revealed
that civil societies ensured that good governance prevail by making governments and the public
aware of salient issues, and working with governments to improve quality of governance. These
reform efforts have helped Kazakhstan facilitate its economic development and enhance the
possibility for it to attain its goal of being one of the competitive economies in the world. The
study recommended that reform efforts considered is a first step in helping the country towards
the part of being a competitive player on the global stage. It is suggested that more robust efforts
should be directed towards other public sector reform initiatives in order to make the country
well-grounded in good governance, and enhance its competitiveness in the global economy.
Although the reforms have been successful in some countries in reducing the size of the public
sector, in many cases this has left a demoralised and unmotivated personnel largely incapable of
performing basic functions (Mutahaba & Kiragu, 2002). Several reasons have been advanced for
the apparent failure of these reforms. More importantly, however, the mixed results of these
reforms have compelled African governments and the international community to re-evaluate the
policies (Mutahaba & Kiragu, 2002). The result has been a sober realisation that improving the
performance of public organisations is a difficult and multi-faceted task that must include
strategies to change the „rules of the game‟ fundamentally. It also requires long-term, high-level
commitment and extensive support by civil servants, national leaders and the international
community (Stevens & Teggemann, 2004). This has led to more reforms by governments in
Africa for the reason that citizens are demanding for accountability.
In 1987, the World Bank supported the Ghana Civil Service Reform Programme (CSRP) to
improve the efficiency and effectiveness of civil service. The CSRP sought to: strengthen the
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legislative framework and personnel management of the civil service, rationalizing and
improving salary and grading structures; rationalizing the size of the civil service and Ghana
education service and developing the capacity to government to apply management services
techniques (Owusu, 2005; Ayee, 2001). Indeed, many reforms have taken place including that of
the Sub-vented Agencies Reform Programme (SARA), the Decentralization Initiative (DI), the
Civil Service Performance Improvement Programme (CSPIP), the Public Sector Management
Reform Programme (PSMRP) and others. These are part of the broad new public management
which is discussed below.
New public management (NPM)
This segment presents issues about the new public management which seems to be new approach
public sector management. The new public management suggests public sector institutions
adopting private sector orientation. The NPM was aimed at bringing about efficiency and
improvement in public sector organizations (Hood, 1991; Pollitt, 1993). NPM has become
convenient shorthand for a set of broadly similar administrative doctrines which dominated the
public administration reform agenda of most OECD countries from the late 1970s (Hood, 1991;
Pollitt, 1993; Ridley, 1996). This reform paradigm is where ownership is retained by the public
sector but private sector principles and practices are used as described by Hood (1991) and
Pollitt (2003). It captures most of the structural, organizational and managerial changes taking
place in the public services of these countries. To quote Pollitt, “NPM has variously been defined
.as a vision, an ideology or (more prosaically) a bundle of particular management approaches and
techniques (many of them) borrowed from the private for-profit sector”. NPM is thus seen as a
body of managerial thought (Ferlie et al., 1996:9) or as an ideological thought system based on
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ideas generated in the private sector and imported into the public sector (Hood, 1991, 1995).
Unlike most government reforms, which either fall short of their presumed potential or just
plainly fail, (March & Olsen 1983; Cooper & Ogata 2005), one set of reforms that seems to have
gained traction in the 1990s and that has captured the attention of researchers is the NPM. While
its manifestations differ from country to country, a number of broad changes that fall under this
introduction appear to have taken hold in many OECD countries (Pollitt & Bouckaert 2000;
Hood 1991; Aucoin 1990, 1995).
Among the changes that have direct implications for public sector audit, NPM is said to have
produced an increasing reliance on private-sector accounting norms; fewer general procedural
constraints on the handling of contracts, cash and staff; a move away from detailed accounting;
and the erosion of self-management by professionals (Hood 1995, p. 96). Besides, the New
Public Management (NPM) relevance and information transparency are seen as crucial as well as
control. The citizen acquires a new role and become a fundamental element for public
management, since it is to the citizen that the information will go. At the same time, notions of
accountability, transparency and „value for money‟ have also become prominent within public
sector discourses (Free & Radcliffe 2008, p. 193). Such notions have wide appeal, and to
validate the formal systems that result from the operationalization or realization of these ideas
there have been attendant increase in and reliance on audit (Power 1999). That the rationalized
and conceptual elements of audit that is the audit mentality have become popular and widely
diffused because of the varying ways in which the concept is invoked and mobilized in the policy
field (Power, 2008a). Also of interest is the manner in which organizational actors „push back‟
against the incursion of formal controls and measurement models (Modell, 2004; Power, 2008b).
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For instance, in the public sector, both politicians and bureaucrats attempt to limit the scope and
bounds of auditing. Politicians do not want auditors to have „unbridled‟ inspection powers and
want to ensure that policy matters remain part of the political rather than the audit domain
(Radcliffe, 1998, p. 403). Likewise government bureaucrats worry that auditors will have the
power to audit „everything‟ with the consequence that deficiencies within government
departments are made visible (Gendron et al. 2007).
2.2.3.1.1 Sponsored reforms
Sponsored reforms are the reforms that are fully supported by donor agencies such as the World
Bank, European Union, International Monetary fund and others. The emergence of supranational
governance via regional (e.g. European Union) and global (e.g. United Nations, World Bank)
organizations that exercise economic and/or political power directly or indirectly influences
activities. They do this by prioritizing certain forms of development assistance and/or through
international agreements and conventions (e.g. Education for All and Millennium Development
Goal declarations, environmental treaties, human rights instruments, etc.). An array of financial
mechanisms (including the existence of global networks of companies) and interest groups
whose legitimacy may not be universally acknowledged, but whose existence invites collective
action or at least a framework for it, also exert influence beyond their geographical base. These
institutions make sure that the reforms are undertaken to suit what they expect. A major factor
contributing to the failure of most public sector reform efforts, according to World Bank (2000),
has been the “technocratic” approach taken by donors. For too long, donors treated the public
sector reform as an “engineering” problem- a phenomenon to be addressed through “blueprint”
or “textbook” solutions (Schacter, 2000). There was an assumption that the public sector reform
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problems and their solutions could be fully specified in advanced and that projects could be fully
defined at the outset and implemented on a predictable timetable, over a fixed period. This
accounts for the formulaic and mechanistic approach favored by donors, featuring quantitative
targets for payroll and workforce reductions, redrawing of organizational charts, recruiting of job
descriptions, training courses for public servants, installation of a new system for human
resources and public financial management, etc. (Schacter, 2000).
2.2.3.1.2 Unsponsored reforms
Unsponsored reforms are the reforms that were not catered for by the institutions that are
pushing for the change. One significant one is the concept of globalisation or
internationalisation. Many institutions by virtue of their associations are required to reform their
processes and practices at their own cost. Notable among them is the international organisation
of supreme audit institutions. There have been arguments that globalization is a unique
phenomenon that is occurring because of the congruence of key factors, specifically changes in
the global village that speed communications and make information and knowledge instantly and
democratically available to all via the integration of national economies into a tightly knit, global
web on a scale not seen before. These changes have led to changes in the political and cultural
spheres (Castells, 2000; Friedman, 2003). Held and McGrew, (2003) draw on the work of others
to point out how skeptics re-frame the concept of globalization: rather than globalization, the
skeptics conclude that a more valid conceptualization of current trends is captured by the terms
internationalization. The INTOSAI plays significant role in the activities of supreme audit
institutions world-wide. The activities of the INTOSAI are described below.
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The International Organisation of Supreme Audit Institutions (INTOSAI) operates as an
umbrella organisation for the external government audit community. For more than 50 years it
has provided an institutionalised framework for supreme audit institutions to promote
development and transfer of knowledge, improve government auditing worldwide and enhance
professional capacities, standing and influence of member Supreme Audit Institutions (SAIs) in
their respective countries. In keeping with INTOSAI's motto, 'Experientia mutua omnibus
prodest', the exchange of experience among INTOSAI members and the findings and insights
which result, are a guarantee that government auditing continuously progresses with new
developments. INTOSAI is an autonomous, independent and non-political organisation. It is a
non-governmental organisation with special consultative status with the Economic and Social
Council (ECOSOC) of the United Nations. INTOSAI was founded in 1953 at the initiative of
Emilio Fernandez Camus, then President of the SAI of Cuba. At that time, 34 SAIs met for the
1st INTOSAI Congress in Cuba. At present INTOSAI has 192 Full Members and 5 Associated
Members.
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Regional Working Groups promote INTOSAI's goals regionally, thus providing members with
opportunities of professional and technical cooperation on a regional basis.
The INTOSAI Governing Board has recognized the following seven Regional Working Groups:
OLACSAI Organization of Latin American and Caribbean
Supreme Audit Institutions
established in
1965
AFROSAI African Organization of Supreme Audit Institutions established in
1976
ARABOSAI Arab Organization of Supreme Audit Institutions established in
1976
ASOSAI Asian Organization of Supreme Audit Institutions established in
1978
PASAI Pacific Association of Supreme Audit Institutions established in
1987
CAROSAI Caribbean Organization of Supreme Audit
Institutions
established in
1988
EUROSAI European Organization of Supreme Audit
Institutions
established in
1990
AFROSAI
Ghana audit service is a member of AFROSAI. The AFROSAI is the working group of the
African sub region.
AFROSAI was created in November 1976. Chief objective of the African Organization of
Supreme Audit Institutions (AFROSAI) is to promote and develop the exchange of ideas and
experience among the SAIs of the African states in the field of the audit of public finances by
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Implementing systematic studies concerning the audit of public finances,
Organizing training courses for personnel charged with carrying out auditing tasks, and
Collaborating with INTOSAI, its regional working groups, and other organizations and
institutions specialized in the audit of public finances.
The AFROSAI is a combination of all English and French speaking African countries. The
languages involved made communication and coordination a bit difficult so members proposed
separation based on language lines.
In accordance with the purposes and principles of the United Nations, the heads of the Supreme
Audit Institutions (SAIs) in Africa that were members of the Assembly of English-speaking
African Supreme Audit Institutions and the Southern African Development Community
Organisation of Supreme Audit Institutions (SADCOSAI), convinced of the necessity of
effective public audit and with a view to:
improving relations among the member countries in the field of public audit, in spite of
differing political, economic and social systems;
meeting the need of the SAIs to work together, in view of the broad spectrum of
increasingly close cooperation among the member countries;
contributing to narrowing the gap among the differing systems, procedures and methods
of public audit by encouraging the exchange of experience within the institutions and
thereby bearing fruit for their own work;
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making a contribution to the objectives of the International Organisation of Supreme
Audit Institutions (INTOSAI) and the African Organisation of Supreme Audit Institutions
(AFROSAI) by drawing experience from the member countries;
promoting the ideals and objectives of the African Union;
For the purpose of separation, members met in Budapest, Hungary on 11 October 2004 where it
was resolved to regroup to form a new organisation with effect from 1 January 2005 called the
African Organisation of English-speaking Supreme Audit Institutions (AFROSAI-E), hereinafter
referred to as “the organisation”, for which a set of statutes was adopted. Members met again in
Mauritius on 10 May 2013 to accept the present text as the amended statutes of the organisation.
Objectives of AFROSAI-E:
Enhance audit performance of member SAIs
Develop and share resources on regional and local levels
Professional and technical development and co-operation
Sound relations with local and international institutions
Support regional institutions that promote good governance
Principles recognised by AFROSAI-E:
Equality of all SAIs that are members of AFROSAI-E.
Right to membership of any English or Portuguese- speaking country in Africa.
Laws by which each member SAI is governed.
Laws of the African Parliament.
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Responsibilities of Members:
Pay annual membership fees
Attend events and meetings as required
Actively participate in activities of AFROSAI-E
Provide Secretariat with information as required
Share professional and technical information
Use products developed by AFROSAI-E
Share and use regional subject matter experts
Apply quality assurance processes
Commit to high level of technical advancement
Commit to high level of management practices
Submit to reviews as required by Governing Board and donors
Powers and responsibilities of the Governing Board:
Take decisions, provide strategic direction, review progress, establish guidelines in order
to obtain objectives.
Approve the work plans and budgets of AFROSAI-E.
Consider/approve proposals by members.
Approve reports on the activities of AFROSAI-E.
Modify the Statutes of AFROSAI-E.
Draft rules and regulations for AFROSAI-E.
Appoint the external auditors of AFROSAI-E.
Approve terms of reference of committees.
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Approve recommendations of committees.
Approve donor support programmes.
Approve the appointment of institutional partners.
Do anything not specifically provided for in the Statutes.
Delegate powers i.e. the Statutes.
Powers and responsibilities of the Chief Executive Officer:
Implement decisions in accordance with direction provided by members and approved
work plans.
Submit work plans/budgets to Board for approval.
Notify members of membership fees and ensure collection.
Submit annual reports and audited financial statements to Board as required.
Represent Board in all matters pertaining to AFROSAI-E.
Compile submissions to Board if requested by members.
Compile policies and procedures as required.
Compile terms of reference of committees.
Assist committees with compilation of submissions.
Provide support/assistance to bodies of governing structure.
Secure donor support and compliance with donor agreements.
Facilitate support for bilateral agreements, parallel audits, etc.
Collaborate with institutional partners.
Monitor activities of AFROSAI-E and its member SAIs.
Appoint individuals or committees to support Secretariat.
Fulfil any other duties assigned by the Board
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2.2.3.2 Internally induced reforms
These are the reforms that are influenced by internal factors. These factors may be governmental
or individual institutions within the government machinery. These may be economic, legal and
social. Reforms are a means to recognize or rearrange administrative systems occasionally
especially when it is realized that there has been inefficiency or weakness in the public sector
(Omoyefa, 2008). The economic recovery programme (ERP) was launched in December 1981,
when it was evidently realized that the economy of Ghana was struggling to survive. The
Provisional National Defence Council (PNDC) government initiated this programme for varied
reasons including management incompetence, too many public employees, inadequate
motivation, rigid bureaucratic processes and corruption (Ayee, 2001). In a similar study in
Australia, Pearson (2014), revealed that the reforms to the public sector in the last few decades
and indicates that the audit practices have shifted in response to remain relevant as the world
around changes. This indicated that there has been some rising role of auditors and as such the
public expects more from their government and public sector activity becoming more complex.
Three current trends have been signalled and the challenges they bring for future audit practice
have been identified, emphasizing where Victorian legislation needs to change to allow audit to
keep pace with the changing world of modern government (Pearson, 2014). This means that the
audit legislation lags behind recent shifts in public sector approaches. Auditors are continuing to
explore new ways to give parliament, as well as the sector, advice that is relevant and valuable.
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2.2.4 Motivation behind the reforms
There is the need for every country to have a public sector that spearheads the activities of the
nation. The motivation behind the general public service reform is to provide the blueprint that
will enable the public sector to live up to the expectations for better service delivery and
improvement in productivity. The ultimate aim of the public service reform is to see remarkable
improvement in the public service outputs, such as more effectiveness and responsive service
deliveries. This is the driving force behind the public service reform (Adejuwon, 2012). Public
sector monopolies in developing countries are often associated with inefficiencies and inability
to meet rapidly growing demand. Studies estimate the annual losses from inefficiencies and
unsustainable pricing policies to be nearly equal to the annual investment in infrastructure (see
Caiden, 2007; World Bank, 1994; Araral, 2010). Public Sector reform initiatives aim to create
and maintain an effective governmental structure, and procedures to formulate and implement
development policies and programs for the benefit of the citizens (Liou, 2007). Every successful
institution, organization, company or nation depends on its caliber of qualified people working
with equipment and in a conducive environment. There are several reasons behind reforms in the
public sector. One of the main reasons behind the reform was to build both the personal and non-
personal capacity of the public servant in order to be cost effective and efficient in it activities.
Some authors have cited that the motives for reforms include the need for efficiency,
effectiveness, and economy and have centred on operational and financial management processes
of public sector entities (Broadbent & Guthrie, 1992; Pallot, 1992; Guthrie, 1993; Parker &
Guthrie, 1993; Guthrie & Humphrey, 1996). Also, the World Bank in 1997 revealed that behind
public sector reforms was a search for efficiency and effectiveness in the face of declining
resources of these countries. They were elaborated in most cases into a general campaign to
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reorganise and modernise the public sector, including the civil service (Caiden 1991; Peters
1992; Collins 2000). The following are the motivations behind the various reforms and they are
generally undertaken to correct the many weakening features of the public services (Ayee, 2001;
Owusu, 2006; Pollit & Bouckaert, 2011; Pearson, 2014). These features include: Market
Alignment, Productivity enhancement, service orientation, and accountability.
2.2.4.1 Market alignment
Market alignment as a key idea has been based on the notion that the public sector organisation
would be more efficient and effective if it were more like the private sector entity. The reforms
centered on trying to use private sector methods, and market-style strategies and incentives to
drive public policy, strategies and behaviour. This makes public sector entities to rely on private-
based techniques grow or improve on its programmes and activities to the benefit of the citizenry
(Ayee, 2001; Owusu, 2006).
2.2.4.2 Productivity enhancement
Again, one motive for reforms has to do with productivity enhancement. This is to ensure that
public sector institutions produce as expected from the public. The persistent search of greater
efficiency is often driven by public demand for more services to be provided without
commensurate increase in taxes. This leads public administrations or institutions to review their
key processes, eliminating or streamlining the activities of the where possible (Ayee, 2001;
Owusu, 2006).
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2.2.4.3 Service orientation
One of the influencing factors of reform is to make the government more customer-friendly and
service conscious. Thus, public sector institutions have tried to reinvent their service delivery
programmes. Instead of designing programmes from the perspective of the service providers
(especially government officials) and managing them through existing bureaucracies, reformers
have literally turned the system on its head and tried to put the service recipients (mainly citizens
and businesses) first (Ayee, 2001; Owusu, 2006).
2.2.4.4 Accountability
Finally, one important motive of reform is accountability. For government institutions to
improve their ability to deliver what they promise, governments try to get officials to focus on
outputs and outcomes, rather than processes and structures. A strong bond of accountability
between citizens and the public sector generates demand for public sector reforms. Public sector
performance is determined to an important extent by the interplay between the public sector and
the country‟s key institutions of accountability. In addition, the citizen-centric approach makes
them accountable for their performance not only up the chain of command, but also to their
customers. At the broadest level, these reforms seek to replace traditional rule based, authority-
driven processes with market-based, competition driven tactics. For instance, a study by Mulgan
(2008) examined public sector reforms in New Zealand and found that the reforms focused
mostly on public accountability through the specification of outputs, clarity of contractual
agreements, and division of government departments into smaller agencies. The study in its
conclusion stated that while one of the key objectives of the reforms was to improve public
service delivery, it failed to give the citizenry a greater right to complain about government
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services, and did not encourage managers to answer directly to the public. The managers did not
see the need to answer the calls of the citizenry.
2.3 Reforms and public sector auditing
Studies have shown diverse views or opinions on reforms. The public sector is undergoing
significant change. Reforms are intended to correct anomalies in the public sector organisations.
Reforms in public sector management over the past two decades have led to a re-examination of
public service delivery practices (Uddin & Hopper, 2003; Uddin & Tsamenyi, 2005).
Government-led managerial reforms have brought on a dramatic shift in the method of delivering
government services to the community, with an emphasis on a more efficient, effective and
accountable public services (Guthrie & Humphrey, 1996). The main aim of a reform is to see
significant improvement in the public service outputs, such as more effectiveness, efficiency and
responsive service deliveries. Because of these reforms, public sector audit has experienced a
face lift in its activities. It has been argued that auditing has contributed to promoting the
implementation of accountability and good governance in the public sector. These arguments
clearly state that auditing has made it possible to evaluate the use of public money in providing
the needed infrastructure in public sector. For instance, an argument according to Brooks and
Parisher (1995), claimed that public sector auditing is the key element in examining and
evaluating government accountability in using public money and providing services to the
public. Also in similar spirit, Predengast (2003) believed that the ability of bureaucracies to
allocate public goods leads to a high level of inefficiency in the public sector. Public sector
auditing can be an essential element in ensuring efficiency, effectiveness and accountability of
the government to the public (Barrett, 2000).
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2.3.1 Concept of public sector auditing
Public sector auditing is carried to ensure proper accountability in all public institutions. Public
sector audit is a vital component of the governance system devised to ensure executive
government accountability to parliament and the public. This is geared towards the citizenry
whose taxes are used to fund state activities. Public auditing that holds for a transparency,
accountability, efficiency, effectiveness, openness, preventing of corruption and excess
expenditure, can promise good governance (Shimomura, 2003). Lodhia and Burritt (2004)
believe that public sector accountability is a vital facet of governance, enabling ordinary citizens
in civil society to be kept aware of the performance of institutions controlled by government on
behalf of the people. Public sector auditing is therefore defined as the independent, objective
assessment of the fairness of management's representations on performance or the assessment of
management's systems and practices, against criteria, reported to a governing body or others with
similar responsibilities (Canadian Comprehensive Auditing Foundation, 1991; Andy, 2002;
Barrett, 2003; English, 2007). These institutions according to studies (Lodhia and Burrit, 2004;
Funnel, 2001; English and Guthrie, 1991; Barrett, 1999) need to be subjected to rigorous
scrutiny, requiring them to explain the causes and consequences of any difficulties or failures
experienced. There have been recent reforms in public sector auditing. Public sector auditing has
received increasing attention as part of the recently growing analysis and commentary on public
sector change (Christensen & Yoshimi, 2001). These reforms have been largely brought about by
increased awareness in the public domain, the greater demand placed upon the reporting agencies
by a multitude of stakeholder groups, and a willingness on the part of such agencies to be
“contemporary” and “objective” in their performance. Simply, this reform can be attributed to
the continued rise of a single phenomenon: “accountability”. Accountability is commonly
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referred to as a „process of being called to account to some authority for one‟s action‟ (Jones,
1992; Mulgan, 2000; Parker & Gould, 1999; Munro, 1996; Sinclair, 1995; Roberts & Scapens,
1985; Jensen & Meckling, 1976).
2.3.2 The role of audit in the public sector
A government's success is measured, to a large extent, by its delivery of programs and services
to its citizens, and by its ability to carry out its programs properly. Brooks and Parisher, (1995)
claimed that public sector auditing is the key element in examining and evaluating government
accountability in using public money and providing services to the public. Government auditors
therefore must have both the ability and authority to assess the integrity, effectiveness and
efficiency of that delivery as well as its management of citizens' financial resources. Public
sector audit according to Lapointe, (2008) serves three distinct roles in a public sector
organization namely:
Oversight
Insight
Foresight.
Oversight
Public sector undertakes the oversight role by assessing the activities of the governing bodies in
public sector organization. These include the appointed Board or a CEO, who are responsible for
providing oversight in any sound governance framework. Auditors assist them in that role and
are a key component of it. Auditors assist the oversight function by evaluating performance and
asking questions about government's, and management's, activities. Auditors evaluate whether
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programs are achieving their purpose; funds are used as intended; organizations are complying
with policy and the law; and management has in place adequate procedures and internal controls
to manage risks. Auditors also have a major part to play in reducing the risk of corruption in
public organizations, through investigations, audits and reviews of controls.
Insight
Auditors report their findings on which programs work and which do not. In doing so they are
also in a unique position to identify better practices and improvements. With their broad view of
government operations, and with their expertise and analytical technique, auditors are in a
position to evaluate whether policies are in fact achieving what they are intended to achieve, and
to recommend ways to improve delivery. They see how the operations of the organization could
be made more efficient or effective, and make recommendations to improve the operations of the
public organization. Whether as part of the recommendations in a performance audit, or as part
of an internal audit consultation assignment, auditors can provide insight into the organization's
operations that can lead to better government.
Foresight
By looking ahead, auditors can play a major role in identifying the risks facing the organization,
and mitigating those risks. They can also identify opportunities. They can do this directly, by
engaging in risk assessment and playing a part in the organization's risk management (an internal
audit role), or indirectly, by delivering risk-based audit plans that focus audit resources on the
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areas of greatest risk to the organization. Additionally, Lapointe, (2008) believes that the
auditor's role in the public sector in a democratic state derives from the principal/agent
relationship between elected bodies and public servants.
Source: (Lapointe, 2008)
Public sector auditing in the public sector is very important in the sense that there are a lot of
stakeholders including the elected bodies (principals) who provide resources and authority to
government officials (agents) to implement government policies to the benefit the citizenry. The
officials account to the elected bodies for their performance and their stewardship of resources.
The auditor provides independent objective assessments of the agents' performance. However,
Predengast, (2003) believe that this creates bureaucracies to allocate public goods and in effect
leads to a high level of inefficiency in the public sector.
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2.3.3 Key elements of an effective public sector audit function
Public sector audit aims to achieve effective governance. Therefore as a basic component of
sound governance, public sector organizations require effective independent audit functions,
whether internal, external or a combination, with the capacity and capability to provide a wide
range of audit services (Smith, Sagafi-Nejad & Wang, 2008). There are several critical success
factors for effective public sector audit:
Organizational independence – including the right reporting level for the Chief Audit
Executive, to ensure the auditor is free to conduct his or her work and to report without
interference
A formal mandate – ideally legislation, providing the authority to audit the institution
involved.
Unrestricted access – to people and information
Sufficient funding – to enable an adequately resourced function, with some security of
funding to ensure budgets cannot be used to influence the conduct of audit
Competent leadership – a chief audit executive who is an audit professional and can be an
articulate spokesman for the audit activity
Competent staff – accredited and constantly training
Stakeholder support – from key elected and appointed officials, and from the media
Adherence to professional audit standards – preferably as a legal requirement
Audit committees – where appropriate, providing audit oversight and support.
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2.4 Types of audit reforms
Auditing is essentially a process of checking up on persons entrusted with a responsibility and
having an independent auditor is one of the best ways of getting an objective, unbiased opinion
on something or a phenomenon. Public sector audit have been through several reforms in various
jurisdictions. There have been new auditing standards which required auditors to go through
specific steps, tests and procedures, to collect and analyse sufficient evidence for the amounts
and disclosures in the financial report. Based on this evidence, the auditor could then express an
opinion with confidence. These reforms includes regulatory or compliance audit, IT audit,
Performance audit and others. Below is the discussion of the types of audit reforms:
2.4.1 Regularity or compliance audit
Several authors have attempted to define compliance or regularity audit. Gong, (2009) sees
compliance audit as reviewing whether auditees‟ financial statements, accounts, operations and
other related financial information comply with laws and regulations and present true and fair
information. Other scholars like Hatherly and Skuse, 1991; Turkey, 1997; Nosworthy, 1999; and
Ramos, 2006 seem to share same opinion. Russell, (2000), also defined regularity audits as
examining specifications of products and services to see whether or not auditees comply with the
specified requirements or standards. Examining the financial reports of the public sector to seek
information, obtain explanation, and provide justification from auditees in performing their
transparency and accountability in managing public finance and resources (Mulgan, 2003). The
financial (attestation) and compliance auditing were carried out in addition to performance
auditing. The regularity or compliance audit had to do with ascertaining that all reasonable
precautions have been taken to safeguard the collection and custody of public moneys; the
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accounts and records are properly maintained and all expenditures are properly spent in
accordance with laws and regulations in the country (Othman et. al 2013). Moreover, in the
context of public sector, Houghton and Jubb, (2003: 299-300) added that the output of regularity
auditing is opinion of transparency and accountability of audited institutions from auditors. The
auditors‟ opinion is valuable information to reflect the financial and economic condition of a
country in reducing risk for the public and market. This type of audit looked at whether it is
required by law to undertake certain transactions and whether the required documents to support
the transactions. There were some challenges associated with this approach as people are able to
create documents to support non-existing transactions. Therefore, there was the need to adopt
other approaches such as the performance audit to uncover any hidden transaction.
2.4.2 Risk-based audit
Globalisation has brought about changes in auditing. After the introduction of the systems based
auditing, the process seemed to be more cumbersome. This led to the introduction of risk-based
auditing. According to Bell, Peecher, and Solomon, 2005, Knechel, 2007; Lemon, Tatum, &
Turley, 2000 public accounting firms since the late 1990s, have been implementing audit
approaches generically referred to as risk-based auditing. The advancement of information
technology and the sciences of mathematics and statistics allowed auditors to predict and
determine audit risk and its components (inherent risk, control risk, and detection risk)
(Arjmandi, 2001). The auditor assesses the inherent risk and control risk and then solves the risk
by assigning detection risk. By determining detection risk, auditors can identify the appropriate
nature, timing, and extent of substantive testing for covering audit risk. This procedure identifies
the accounts or business areas that have higher audit risk and require further investigation.
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Despite these advancements, current auditing procedures have shortcomings and auditors are
searching for new, more reliable methods with faster and more accurate results (Moradi &
Pourhosseini, 2009; Khodada, 1996). Risk-based auditing is a new approach to the practice
whose aim is to improve the quality and effectiveness of audits, since determining the
appropriate nature, timing, and extent of substantive testing allows for higher quality audits at
shorter time. In addition, substantive testing is limited where there is internal control reliance and
extensive where there is no internal control reliance (Forsati, 2002).
Risk-based auditing is the process of identifying and reporting the risk of significant distortions
in financial statements. This approach not only increases the value of the product (financial
statements), but also makes auditing more profitable. In other words, risk-based auditing satisfies
both the managers and the auditors (Smith, 2006; Harrington, 2004). In this approach, the auditor
first examines the accounting and internal control systems (through written narratives,
questionnaires, and flowcharts, and by performing a walk-through test), and then estimates
inherent and control risks. Initial estimates of inherent and control risks help the auditor in
determining the reliability of the internal control system. If the internal control system is
effective, the auditor performs the tests of control. The results can adjust and finalize the initial
estimates of inherent and control risks (Moradi & Pourhosseini, 2009). The new methodology
allows auditors to control risk at an acceptable level, thus achieving a high level of reliability
while reducing time and cost of auditing. Given the importance of this new auditing approach, it
is imperative to examine and compare it with the traditional auditing approach (Kratchman et al.,
2008; Blay et al., 2008). Risk-based auditing takes a step further than the systems auditing and
not only focuses on audit risks, but also highlights business risk. That is because business risk
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can affect the profitability and the survival of a firm. This increases pressure on management to
misstate financial results and result in decreased resources devoted to accounting for
transactions. Thus, client business risk increases the propensity for misstatements from fraud
and/or error and also increases the auditor's business risk, e.g., as proxied by engagement
profitability and potential litigation (Bedard, 2002).
2.4.3 Performance auditing
Performance auditing is an area new enough in the history of public sector auditing. Performance
auditing is defined as an independent evaluation of the economy and efficiency of auditee
operations, and the effectiveness of programs in the public sector to the citizenry (English,
Guthrie, Broadbent, & Laughlin, 2010; Norton & Smith, 2008; English, 2007). The performance
auditing is about the evaluation of the performance of management and the use of public sector
resources. According to Waring and Morgan (2007), “performance auditing is a systematic,
objective assessment of the accomplishments or processes of a government program or activity
for the purpose of determining its effectiveness, economy, or efficiency”. It is claimed that the
performance auditor's report will lead to improvements in public sector performance because the
performance auditor is expected to identify and indicate inefficient and/or ineffective practices
and would therefore suggest strategies for improvements (Barton, 2009; Lee, 2008; Thompson,
1996). In performance auditing in the public sector, the performance auditor is expected to: (i)
examine the records of the auditee; (ii) form an opinion based on results of the examination; (iii)
write a report based on the opinion; (iv) present the report to Parliament and (v) carry out a
follow-up of the performance audit report recommendations (Ling, 2003; Morin, 2001). The
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performance auditor does so to evaluate the performance of management and the use of public
sector resources.
2.4.3.1 Objectives of public sector performance auditing
The objectives of public sector performance auditing is about economy, efficiency and
effectiveness (English, Guthrie, Broadbent, & Laughlin, 2010; Daujotaite & Macerinskiene,
2008). Below is the explanation of the terms economy, efficiency and effectiveness as used in
the public sector auditing literature.
Economy
Economy is usually associated with acquiring inputs at minimal cost and used to achieve the
objectives of the public sector entity without compromising the quality of the output (see;
Daujotaite & Macerinskiene, 2008; Lee, 2008; Gendron, Cooper & Townley, 2001). The concept
of economy focuses on the costs of acquiring the inputs to achieve the objectives of the public
sector entity. According to Daujotaite and Macerinskiene (2008), input in the public sector
context would be the size and the price or cost of resources consumed to achieve service
objectives of an entity. There are assertions that „economy‟ is linked with „efficiency‟ in the
practice of public sector auditing (Daujotaite & Macerinskiene, 2008). The link is implicit in the
focus on minimising costs, and the usage of the input in achieving the objective of the entity. The
primary focus for both economy and efficiency is the input. Some authors (Daujotaite &
Macerinskiene, 2008; Lee, 2008; Gendron, Cooper & Townley, 2001) also hold the view that
both economy and efficiency focus on acquiring inputs and are concerned with protecting and
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using public sector resources. Explanations are offered that performance auditing includes both
economy and efficiency without specific distinction between the two (Daujotaite &
Macerinskiene, 2008; Dittenhofer, 2001). Instead, their claim is that economy and efficiency are
together determined by establishing: i) whether the entity is acquiring, protecting and using its
resources economically and efficiently; ii) the causes of inefficiencies or uneconomical practices;
and iii) whether the entity has complied with laws and regulations on the matters of economy and
efficiency. Besides, there are suggestions that economy may be associated with inputs but the
interpretations vary. Auditing helps to ensure that public sector resources are acquired
economically without necessary wasting the taxpayers and leaving out its quality.
Efficiency
The distinction between economy and efficiency in terms of public sector is not too clear. Most
authors of public sector auditing literature do not strictly distinguish between economy and
efficiency. Instead, they advocate the view that efficiency includes economy (Grendon et al,
2001; McCrae & Vada, 1997). Viewing efficiency as an input-output relationship suggests that
efficiency is results-oriented and that the result (output) may depend on the amount of input
consumed for a given output. There are claims that efficiency is seen as managing the resources
within an entity, where the management has control over the resources (Daujotaite &
Macerinskiene, 2008; Yamamoto & Watanabe, 1989). This indicates that there is no undue
external or political pressure on the management to use and manage the resources of an entity in
a particular way. In such instances, the management is seen to be responsible for achieving the
objectives of the entity in an efficient and effective way. Management therefore, is accountable
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to the public via the government, on the use and management of public sector resources. Public
sector auditing therefore ensures efficiency in public sector institutions.
Effectiveness
Effectiveness is concerned with the consideration of the success of, or the extent to which
outputs achieve the intended or desired goals of a public sector entity (Daujotaite &
Macerinskiene, 2008; Funnell & Cooper, 1998; McCrae & Vada, 1997; O'Leary, 1996; Glynn
1991, 1989; Yamamoto & Watanabe, 1989). For this reason, effectiveness focuses on the
relationship between the outputs and the objectives of a public sector entity. In examining
effectiveness, the public sector auditor focuses on the objectives of an entity and evaluates how
the outputs have contributed towards the achievement of the entity's objectives. McRoberts and
Hudson (1985), claim that in public sector auditing, the effectiveness of a program can be
assessed by evaluating and reviewing four basic issues regarding the programme. These issues
include: (i) the degree to which the programme continues to make sense and addresses a
continuing need; (ii) the degree to which the programme's objectives are being met; (iii) the
assessment of the programme's intended or unintended effects; and (iv) the relative cost-
effectiveness of the present method of delivering the programme. This explanation suggests that
effectiveness in performance auditing has a focus beyond the inputs, outputs and aims of a
programme; it can also include a political assessment on the need or desirability of continuing a
programme in the public sector. As with economy and efficiency, there are multiple meanings
associated with effectiveness, some of which are linked to the political as well as the objective
assessment of analysis.
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2.5 Challenges in public sector auditing
According to Yang, Zezhong Xiao and Pendlebury (2008), studies have shown that there are
some challenges affecting public sector auditing. These challenges influence the public sector
institutions to undertake reforms to correct the anomalies. The challenges are discussed in the
subsequent sub-sections:
2.5.1 Lack of audit independence
Auditors are to be independent in fact and in appearance. Public concern on auditor
independence may threaten the viability of the auditor‟s role in society as the auditor
independence is one of the foundations of auditing (Shockley, 1981, Mautz & Sharaf, 1961).
These have a strong negative impact on audit planning, the training and appointment of auditing
personnel, the determination of audit tasks, the dealing with problems identified in the audit, and
the disclosure of audit results. As a result, the public sector audit can hardly perform any
independent auditing. The problems identified in the audit should be dealt with in accordance
with law, but if the problems involve the government, the audit office will experience
interference from the governmental official in charge or from other authorities. A study in China
by Yang et al., (2008) acknowledged the lack of independence of government auditing, but at the
same time they did not want to exaggerate the problem. As a department directed by the
government, how can the audit office work independently and freely from the interference of the
government or the chief government officers (CGO)? Another question is; Is the result of
interference inevitably detrimental? The interviewees found it hard to answer these questions.
Besides, the audit office and the government are at different administrative levels and may not
always have consistent perceptions on auditing. Under this circumstance, as was revealed in the
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interviews, the audit office, being at the lower level, would normally follow the government's
will and this is understandable. It was argued that if auditing is supposed to satisfy merely the
needs of the government, or if government audit is supposed to play a supporting role to
governmental work, then the problem of limited audit independence is relatively partial, because
government auditing still achieves its main objective. But if the people's congress and taxpayers
outside the government are also audit clients, and entrust the government audit office to
investigate how the government implemented fiscal budgets approved by the people's congress,
then the control relationship between the audit office and the government becomes a severe
problem. An immediate consequence of the lack of audit independence is that the audit report
may no longer possess objectivity and fairness and it is therefore less likely to gain the trust and
acceptance by the people's congress and the public.
2.5.2 Difficulty in evidence gathering
The nature of the public sector activities usually makes it difficult to gather evidence in relation
to auditing. Audit materiality is also important not only to private sector audit but public sector.
In relation to audit materiality, Jones and Bates (1990), suggest that public sector auditors needed
to consider the level of assurance required by the user groups requesting the audit work and the
expected reactions of the audit report readers. Similarly, in relation to audit evidence, Jones and
Bates (1990), again argued that the time and cost involved in the audit process, the scope of the
audit and the perceived information needs of the users were some of the factors influencing the
evidence gathering process. The marked difference that is observed here is the dual set of
responsibilities of the CAG auditors in the public sector. On one hand, the economic cost of the
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decision has to be borne in mind; on the other hand, the social aspects need to be high on the
agenda. This usually hinders the quality of the report to be presented to the citizenry.
2.6 Implementing public sector reforms
The success of any reforms depends very much on how well they are implemented. Involvement
of all affected parties is essential. Some studies have shown that the audit reforms in the public
sector were implemented successfully (Pearson, 2014; Barrett, 2014). According to these studies,
the reforms require involvement of the people and experts. The processes leading up to
legislation should be reasonably inclusive of the stakeholder community, including experts and
other professional advisers. The government should give commitment to consult widely on the
development of the rules, with extensive consultation within government but also with other
sectors and interested stakeholders. There is the need to have institutional capacity, which is
essential to the success of public sector reforms. There is also a broad consensus that will cater
for ethical norms and weak practice of accountability measures because some studies have
confirmed that as major contributory factors limiting the implementation of reforms. The lack of
transparency in the management of national affairs, coupled with inappropriate information
technology, slows down the flow of information and, hence the ability of stakeholders to
participate in reform process. Also, implementing reforms depends on country wide factors or
characteristics. These characteristics determine the success of the reforms. Samaratunge, Alam
and Teicher (2008) studied reform initiatives in four South and Southeast Asian countries. The
study suggests that each country‟s path to implementing reform practices is different due to the
nature of the political history, party politics, macroeconomic considerations, state tradition, role
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of International Development Agencies and role of civil society. The political commitment and
leadership seem to be the most influential factor in these four countries. Singapore and Malaysia
can be categorized as successful cases with their reform initiatives due to strong political
leadership. The reform package was relatively comprehensive in these two countries. In contrast,
Sri Lanka and Bangladesh opted for selective reform programs which suited the short-term
interests of the ruling elites. The policy prescriptions of international development agencies
influenced these changes. Narrow partisan politics acted as a force against comprehensive
reforms. In the presence of dominance of the state and the momentum of economic growth,
Singapore and Malaysia have implemented some aspects of reforms. Strong political leadership
has played a significant role in implementing radical changes with less resistance from organized
groups. The practices of reform in Sri Lanka and Bangladesh suggest that the main thrust was to
introduce structural changes in the public administration system. No major initiative was taken to
introduce rule-based government and necessary institutional infrastructure to support reform
practices. Therefore, Bangladesh and Sri Lanka found managing the transition very complex and
politically risky. This might lead to the conclusion that countries like Bangladesh and Sri Lanka,
where strong leadership and appropriate accountability systems are not in place, could not expect
successful outcomes from their reform agenda.
2.6.1 Challenges of implementing public sector reforms
The challenges associated with Public sector reforms have emerged as a frightening task of
governments. Some studies believe that the context and the nature of advancing Public Sector
Reforms between developed and developing countries differ considerably on a number of issues
(Kim, 2009; Pollit & Bouckaert, 2011; Pearson, 2014). First, the focus of developed countries is
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to make their public sector more competitive and effective because they are not generally
struggling with political instability, corruption and poverty. On the other hand, developing
countries face much more serious tasks: not only government reform, but also political and legal
reforms, as well as the pursuit of basic economic well-being (Foley, 2008; Kim, 2009). Over the
past three decades, governments across the world have made efforts to improve the efficiency
and quality of public services and its cost-effective delivery to citizens. These reforms have
brought about restructuring, an increased use of technology to offset staff cutbacks, the
introduction and enforcement of service standards for employees and managers, an increase in
managerial discretion, the contracting out of service delivery, and the adoption of flexible
staffing practices (Foley, 2008). These measures are part of the public sector reforms movement,
which have been prevalent in recent public administration practices.
Second, involvement of other government and private agencies. For effective application of
public sector reforms principles, governments must explore, assess, and engage in opportunities
for collaboration both within and outside the public sector. Making the provision of public
services more efficient and responsive through the incorporation of civil society and business
organizations is one of the major challenges faced by governments that can be addressed through
public sector reform initiatives. Public sectors have embarked on profound change processes to
confront the problems of inefficiencies and inadequacies of the state in addressing public
problems. These reforms relate to the quality of relationships between the governments and the
governed. It also involves relationships and cooperation among the public sector, private
agencies and civil society organizations in policy processes, and the delivery of services
(Siddiquee & Mohamed, 2007). Also, public sector reforms require a redefinition of the role of
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the state in society and its relationship with the market, alongside efforts for improving the
competence of public bureaucracies (Mulgan, 2008). This implies that governments must
explore, assess, and engage in opportunities for collaboration both within and outside the public
sector (Mendoza & Vernis, 2008). Public agencies must therefore, be prepared to work in
partnership with other public, civil society and business organizations (Huque, 2005). This multi-
institutional operational arrangement improves cost-effective delivery of public services, and
thus, enhances the quality of governance.
2.7 Chapter summary
Studies have revealed that some selected applications have shown that some African countries
have recorded significant achievements in public service reforms by applying different NPM
techniques, such as decentralized management, subsidiarity, performance contracting, accrual
accounting and commercialization. However, despite experiences from within and outside the
continent, Africa‟s public sector has been facing a number of challenges, which has reduced the
speed of the reform process. For instance, institutional capacity, which is essential to the success
of public sector reforms, is lacking or simply inadequate in many African countries. There is also
a broad consensus that a deficit of ethical norms and a weak practice of accountability measures
are major contributory factors to the inefficiency of the civil services and the inability of the
State to manage development. The lack of transparency in the management of national affairs,
coupled with inappropriate information technology, slows down the flow of information and,
hence the ability of stakeholders to participate in policy formulation and decision-making.
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CHAPTER THREE
RESEARCH METHODOLOGY
3.0 Introduction
This section presents details of how the research was carried out. It looked at the research
paradigm, research approach and design, target population, the sample techniques, sample units
and size for the research. In furtherance of the above, it also discusses the sources of data, data
collection methods and the data analysis.
3.1 Research paradigm
According to Jonker and Pennink (2010), a research paradigm is defined as a set of fundamental
assumptions and beliefs as to how the world is perceived which then serves as a thinking
framework that guides the behaviour of the researcher. Wahyuni (2012), argued that Research
paradigms are used to address the philosophical dimensions of social sciences. This guides the
researcher in choosing the methods for which the objectives of the study can be achieved.
Research paradigms substantially influence how one undertakes a social study from the way of
framing and understanding social phenomena. Studies in the public sector are usually carried out
with an interpretive view which usually seeks to explain the reasons behind certain decisions and
actions. This study was conducted with an interpretive view to explain the reforms in public
sector auditing in Ghana. The study undertaken from an interpretive perspective offered
explanations to the reforms in Ghana‟s public sector audit. That is, why the reforms were
undertaken and why the nature of reforms in audit service.
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The study supports the assertion by Hennink, Hutter and Bailey (2011) that interpretivists believe
that reality is constructed by social actors and people‟s perceptions of it as opposed to
generalisation or the nomonethic approach adopted by post positivist researchers (citation).
Interpretivists use a narrative form of analysis to describe specifics and highly detailed accounts
of a particular social reality being studied, which is termed the idiographic approach (Neuman,
2011). The study revealed that although the reform seem to be same, the explanations given by
the respondents were different some regards and similar in other regards. Therefore,
interpretivism brings to bear the various perspectives of the subject matter of the study.
As noted by Wahyuni, (2012), interpretivist researchers choose a study that uncovers inside
perspectives or real meanings of social phenomena from its study participants as a good social
knowledge. In terms of axiology, interpretivist researchers take the stance of the emic or insider
perspective, which means to study the social reality from the perspective of the people
themselves. During the study, the experiences and values of both research participants and the
researcher substantially influence the collection of data and its analysis thereof. This paradigm is
relevant as it helped the researcher to pose the why and how question so as to probe the issue of
reforms and public sector auditing drawing inspirations from previous studies.
3.2 Research approach and design
The study used a qualitative method research technique. The qualitative research technique was
chosen for this study because the nature of the study is subjective. Therefore, subjective issues
are best examined through qualitative technique and consistent with the nature of study.
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Qualitative research seeks to understand a given research problem or topic from the perspectives
of the local population it involves. Qualitative research is especially effective in obtaining
culturally specific information about the values, opinions, behaviors, and social contexts of
particular populations. According to Cresswell (2014), qualitative approach is one in which the
inquirer often makes knowledge claims based primarily on constructivist perspectives. It also
uses strategies of inquiry such as narratives, phenomenologies, ethnographies, grounded theory
studies, or case studies. The study relied solely on Ghana audit service as the case for the study.
The strength of qualitative research is its ability to provide complex textual descriptions of how
people experience a given research issue. It provides information about the “human” side of an
issue – that is, the often contradictory behaviors, beliefs, opinions, emotions, and relationships of
individuals. Qualitative methods are also effective in identifying intangible factors, such as social
norms, socioeconomic status, gender roles, ethnicity, and religion, whose role in the research
issue may not be readily apparent.
Qualitative methods in exploratory research is that use of open-ended and probing questions
which gives participants the opportunity to respond in their own words, rather than forcing them
to choose from fixed responses, as quantitative methods do. The study used interview guide
made up of open-ended questions and was able to evoke responses that were:
• Meaningful and culturally salient to the participant
• Unanticipated by the researcher
• Rich and explanatory in nature
All these put together makes qualitative study very interesting. One interesting strength of
qualitative research is its ability to provide complex textual descriptions of how people
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experience a given research issue. It provides information about the “human” side of an issue –
that is, the often contradictory behaviors, beliefs, opinions, emotions, and relationships of
individuals. Qualitative methods are also effective in identifying intangible factors, such as social
norms, socioeconomic status, gender roles, ethnicity, and religion, whose role in the research
issue may not be readily apparent. Also, an advantage of qualitative methods is that they allow
the researcher the flexibility to probe initial participant responses. In this scenario, the researcher
asked the why or how question to further understand the phenomenon. The researcher listens to
the view of the respondents, engage with them according to their individual roles and
responsibilities as well as styles, and use “probes” to encourage them to elaborate further on their
answers.
Within the qualitative method, a case study approach was adopted for this study as the study
sought to reveal public sector audit reforms. In the view of Baxter & Jack (2008) qualitative case
study facilitates exploration of a phenomenon within its context using a variety of data sources.
This approach makes it possible to study in detail specific reforms such as those highlighted in
this study and its motivations. Case study has been argued as an approach which is more reliable
for enquiry. Case study research is one of the principal means by which inquiry is conducted in
the social sciences (Acemoglu, Johnson, & Robinson, 2003; Rodrik, 2003; Gerring, 2004).
Thomas (2011), also argues that case studies are analyses of persons, events, decisions, periods,
projects, policies, institutions, or other systems that are studied holistically by one or more
methods. The case that is the subject of the inquiry will be an instance of a class of phenomena
that provides an analytical frame-an object-within which the study is conducted and which the
case lightens and clarifies. As a research strategy, the distinguishing characteristic of the case
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study is that it attempts to examine: (a) a contemporary phenomenon in its real-life context,
especially when (b) the boundaries between phenomenon and context are not clearly evident.
Experiments differ from this in that they deliberately divorce a phenomenon from its context.
Histories differ in that they are limited to phenomena of the past, where relevant informants may
not be available for interview and relevant events may not be available for direct observation by
the researcher. The qualitative design was chosen after a careful study of the research objectives.
Looking at the research objectives, it requires a detail account of the entire process that led to the
implementation of the reforms and the success stories of these reforms. Therefore taking time to
sit with respondents to share their views was more appropriate and could provide exact responses
to address the objectives. This method addresses the limited research on reforms in developing
countries.
A case study is very important because it is able reveal important information about the object of
study. The benefits of case studies for this purpose have been illustrated in prior research,
stemming primarily from their information richness and the ability to answer how and why
questions (Eisenhardt, 1989; Ellram, 1996; Yin, 2009). Yin, (2009) continues by saying that case
study research is also well-suited for the investigation of complex phenomena due to
information-rich cases, which would be too complex for surveys. Selection of the case should be
grounded by exceptional issue or activities by the object of study. That it should be chosen as a
result of a particular trait. Scapens (2004), posits that a critical case or an extreme case should be
sought for a representative case. The former is a case in which the social phenomena being
observed are some critical events that cause the research questions asked to become important in
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the organisation. The latter is mainly chosen to test a theory or to broaden the application into a
wider range of circumstances. The researcher was guided by this assertion, therefore the Ghana
audit service was chosen for the study. Ghana audit service was chosen because, it is the only
institution mandated by law to carry out external audit in the public sector of Ghana. The
organisational profile of Ghana audit service is presented below.
3.2.1 Ghana audit service profile
This section presents the historical context of the study organisation. This shows the historical
trend of activities of the Ghana audit service. Audit service was established in 1910 by the
colonial government and was called the Audit department. It was headed by a director. In the
1950s, the name was changed to Auditor-General's department. On 22nd August 1969, the
constitution of the 2nd republic converted the department into the Audit service headed by an
Auditor-General. This was to increase the degree of independence of the Service. Audit service
of Ghana is a constitutional body under the direction of a seven (7) member governing board.
The service is headed by the Auditor General who is mandated to audit the public accounts of
Ghana and all public offices including metropolitan, municipal and district assemblies, Public
corporations and organisations established by an act of parliament. The Auditor General is
required to report the findings to Parliament. Audit service is therefore the monitoring and
accountability organ of the state, and the Supreme Audit Institution (SAI) of Ghana. The 1969
Constitution made it an oversight body to promote good governance, ensure accountability and
transparency in the Public Sector. The Article 188 of the 1992 Constitution reaffirms this
position of transparency and accountability.
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The Audit service is the Supreme Audit Institution (SAI) of the Republic of Ghana and is a
member of the International Organisation of Supreme Auditing Institutions (INTOSAI), a
standard and guidance - issuing body on governmental auditing. This body is recognised by
Governments and international organisations such as the International Monetary Fund, the World
Bank and the United Nations as discussed in chapter two. The Audit Service currently employs
around 1,760 staff in Accra, the regions and districts. Included within the total are some 1,360
operational field staff and 400 support staff. The Constitution mandates the Auditor-General to
approve of the form of which the various books of account should be maintained. The Act
requires that the Auditor-General's report be completed and submitted to parliament within six
months of the end of the immediately preceding financial year. The Constitution sets out the
scope of the external audit work and the functions that the Auditor-General and his office are
required to perform as enshrined in Articles 187 – 189 of the 1992 Constitution. The scope
includes financial, IT, performance, forensic and environmental audits.
The Audit Service is made up of five (5) departments. A Deputy Auditor-General (DAG) heads
each department. These departments are:
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Source: Authors own construct
All the various departments are headed by the deputy auditor generals who are supported by
assistant auditor generals. The other units provide services that are relevant to all the departments
with the Audit service of Ghana.
AUDITOR-
GENERAL
FINANCE
AND
ADMIN
DAG
PERFORMANCE
AUDIT
DAG
EDUCATION
AL
INSTITUTIO
NS AND
DISTRICT
ASSEMBLIES
DAG
COMMERCIAL
AUDIT
DAG
CENTRAL
GOVERN
MENT
AUDIT
DAG
Other units (Internal
Audit, Legal, Public
Affairs, Quality
Assurance, Parliamentary
and Planning, Research,
Monitoring and
Evaluation Unit).
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3.3 Sources of data
Two sources of data were used for the study. They were primary and secondary data sources.
The primary data is the document created at the time of the research subject or the study. This
source of data is directly related to the events being researched. The primary data for this study
was gathered from the in-depth interviews conducted at the Ghana audit service headquarters.
The interviews covered all the issues that needed to be addressed in other to achieve the stated
objectives of the study.
A secondary data are data that have been collected by other researchers which includes
everything from annual reports, published case descriptions and newspaper reports as well as
government printed sources (Wilson, 2010). Zikmund, (2001) defines secondary sources of data
as data that have been previously collected for some project other than the one at hand. The
secondary data was collected from policy or publicly available documents and other publications
on the subject of the research (Walliman, 2011). The main advantage of using secondary data is
the enormous saving in resources, in particular time and money (Ghauri & Grønhaug, 2005). It is
also less expensive to use secondary data than to collect the data personally. Again it is relatively
easier to analyse far larger data sets such as those collected by government surveys. According to
Saunders, Lewis and Thornhill (2009), using secondary data within organisations may also have
the advantage that, because they have already been collected, they provide an unobtrusive
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measure. The study used secondary data in the data collection process. These were already in
existence before this study was carried. The data include the corporate history of the audit
service, understanding the work of the auditor-general and the auditor-generals report. All these
documents were received during the data gathering process and are publicly available document.
This complemented the primary data gathered from the respondents. Using the secondary data is
convenient and less expensive which made the work quite easier than the primary data.
3.4 Data collection process
Data collection process involves the various ways or techniques used in getting the required or
necessary information for the study. The study relied solely on Ghana audit service as it is the
sole body responsible for public sector external audit. The data process began with a letter which
was sent to the audit service in person. The purpose was to get the relevant data for the study that
both primary and secondary data. The respondents selected for these interviews were based on
experience and position within the Audit service. The researcher chose to rely on experience
because comments about reforms should be from those who were in organisation before the
changes and after changes. This will help give vivid account on what was existence before the
reforms and what has changed after the reforms to enable the researcher to draw significant and
meaningful contributions out of it. The process for selection was based on the fact that most of
the assistant auditor generals were at post during the reform implementation and as such have
great knowledge in the subject area that can be tapped into. The assistant auditor general per the
audit service activities is in charge of monitoring all the activities of the various regional offices
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and reports back to management. This makes them have some insightful ideas on the activities of
the audit service. Primary data was collected for the study through interviews conducted by the
researcher. The number of respondents is presented in the table with the minutes spent on the
interviews.
Interviewees Department Interviews
duration
Number of
years worked
Code
1. Assistant
Auditor
General
Central
Government
Audit
1 hour 20
minutes
20 years AA1
2. Assistant
Auditor
General
Information
Technology
Audit
2 hours 30 years AA2
3. Assistant
Auditor
General
Performance
Audit
34 minutes 14 years AA3
4. Assistant
Auditor
General
Performance
Audit
25 minutes 13 years AA4
5. Assistant
Auditor
General
Performance
Audit
40 minutes 13 years AA5
6. Assistant
Auditor
General
Commercial
Audit
30 minutes 30 years AA6
7. Assistant
Auditor
General
Performance
Audit
45 minutes 15 years AA7
8. Assistant
Auditor
General
Education
Institutions and
District
Assemblies
1 hour, 30
minutes
30 years AA8
9. Assistant
Auditor
Education
Institutions and
District
50 minutes 28 years AA9
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General Assemblies
10. Director of
Audit
Commercial
Audit
45 minutes 25 years DA1
11. Assistant
Director of
Audit
Central
Government
Audit
30 minutes 21 years AD1
Primary data collection is an important piece of many research projects. Using proper techniques
ensures that qualitative data are collected in a scientific and consistent manner. Improving data
collection techniques will enhance the accuracy, validity, and reliability of research findings.
Ultimately, using these methods helped to achieve the goal of carrying out high-quality research
with credible findings.
The questions were prepared to cover the thematic areas of the study so as to obtain as much
information as possible. The respondents were selected based on activities involved and
specifically, based on the experience and position held. Based on the number of respondents
interviewed, majority of them were assistant auditor generals with the few others being directors
and assistant directors. Each interview lasted for a minimum of thirty minutes. The questions
were along lines of themes that were identified in literature. The interview method used involved
semi-structured open-ended questions that allowed free-flowing discussions with organisational
participants. In semi-structured interviews, the interviewer develops and uses an interview guide.
This is a list of questions and topics that need to be covered during the conversation, usually in a
particular order. The interviewer follows the guide, but is able to follow topical issues in the
conversation that may stray from the guide when he or she feels this is appropriate.
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Semi-structured interviews, according to Bernard (1988), is best used when the interviewer will
not get more than one chance to interview someone and when there will be several interviewers
out to the field to collect data. The semi-structured interview guide provides a clear set of
instructions for interviewers and can provide reliable, comparable qualitative data. Semi-
structured interviews are often preceded by observation, informal and unstructured interviewing
in order to allow the researchers to develop a keen understanding of the topic of interest
necessary for developing relevant and meaningful semi-structured questions. The inclusion of
open-ended questions and training of interviewers to follow relevant topics that may stray from
the interview guide does, however, still provide the opportunity for identifying new ways of
seeing and understanding the topic at hand. Typically, the interviewer has a paper-based
interview guide that he or she follows.
Since semi-structured interviews often contain open-ended questions and discussions may
diverge from the interview guide, it is generally best to tape-record interviews and later transcript
these tapes for analysis. While it is possible to try to jot notes to capture respondents' answers, it
is difficult to focus on conducting an interview and jotting notes. This approach will result in
poor notes and also detract for the development of rapport between interviewer and interviewee.
Development of rapport and dialogue is essential in unstructured interviews. If tape-recording an
interview is out of the question, consider having a note-taker present during the interview. Semi-
structured interview is beneficial because many researchers‟ questions can be prepared ahead of
time. This allows the interviewer to be prepared and appear competent during the interview.
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Semi-structured interviews also allow informants the freedom to express their views in their own
terms. Semi-structured interviews can provide reliable, comparable qualitative data.
Following preliminary analysis, follow-up interviews with some respondents became necessary
for clarification on certain key issues. All the interviews were tape-recorded and later transcribed
before the analysis begun. The questions were well responded by the interviewees. Some themes
were identified from the data gathering which has been addressed in the literature review.
The challenges encountered in the data collection process include the following:
First, Preliminary issues. In the preliminary issues, the researcher experienced some problems
which made the researcher to change the approach to research process. In the preliminary stages,
the researcher presented a letter to the head office of the Ghana audit service. The letter was
personally presented in September 2014 and after one month, the researcher followed up. The
response from the office indicated that the letter was missing, therefore there was the need to
present another letter. Another letter was presented in October and the actual interview process
started in the month of November. At the initial stages, the director of the public affairs
scheduled some meetings for me. Those scheduled at the initial stages failed as I went there
several times without the respondents.
From the beginning of the study, the researcher planned of interviewing the deputy auditor
generals in charge of the five departments of the audit service. Upon series of re-appointment
with these top managers, the approach was changed from interviewing the deputy auditor
generals to assistant auditor generals since they are the next in command in terms of hierarchy in
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the Ghana audit service. With that the study was able to interview nine (9) different assistant
auditor generals from the five various departments of the Ghana audit service. After that study
went further to interview two other respondents below the rank of assistant auditor generals to
ascertain whether there will be any differed opinions.
Second, reluctance to provide the needed atmosphere for the interview. Most of the respondents
selected seem to be busy attending to other issues related to their job. Therefore, it was difficult
to even get at least 10 minutes of their time. This made the researcher unable to get data on time
as expected. Others seem not to be friendly which in affected what they said.
Finally, recording of interviewees. The interviewees have some fear that when their voices are
recorded they may be used against them. Some of them doubted that the researcher was indeed a
student aside the identification cards and the letter presented. Some of them explicitly indicated
that I should not record what they are saying rather I should write them. This was quite difficult
because there was the tendency of not writing verbatim what the respondents said. Aside these
problems encountered in the data gathering, the collection of the information was good. Almost
all the respondents were very open, knew what they were doing and provided some evidence to
back their claims. In all, the researcher was able to overcome these challenges to get the
necessary information for the success of the study.
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3.5 Data management and Analysis
The process of data analysis involves making sense out of text and image data. It involves
preparing the data for analysis, moving deeper and deeper into understanding the data,
representing the data, and making an interpretation of the larger meaning of the data. According
to Sapsford and Jupp (2006), the process of data analysis produces the main claims that form the
core of research reports. The qualitative data of this study was analyzed using emergent themes
(Veal, 2011). Themes are defined as recurring patterns, topics, viewpoints, emotions and
concepts (Veal, 2011). Data was analysed using a thematic approach as suggested by Miles and
Huberman (1994). The themes were interpreted for meanings by situating them within the
context in which they occurred. Following from the interviews, the researchers‟ data was
transcribed and at the end had about 42 pages which were scaled down about 20 pages to enable
the researcher present meaningful and insightful analysis. It was reduced to this number of pages
because some of the comments appear to same and others were also not required at that material
moment. It could be used for future research. The once used were chosen because of its relation
to the study objectives. These provided insights for the objective to be achieved. The data for this
study was analysed based along the lines of the research objectives. Specifically, the analyses
made up of the types of audit reforms, factors influencing the audit reforms, the nature of the
audit reforms, improvements from the reform as well as the challenges of implementing the
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reforms in Ghana audit service. The responses gathered were not too different from literature.
There were some revelations which seem not to be popular in literature. All these were analysed
to in line with literature.
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CHAPTER FOUR
ANALYSIS AND DISCUSSION OF FINDINGS
4.1 Introduction
This chapter presents the findings from the data gathered for the study. This chapter presents data
and findings of the study reforms and auditing in the public sector. This chapter is divided into
two main sections. The first section presents the findings in terms of the types of audit reforms,
nature of these reforms, motivation for the reform, improvements by these reforms and the
implementation issues concerning the reforms in terms of public sector auditing. The second
section discusses these findings with reference to the literature presented in earlier chapters to
identify the link.
4.2 Background of respondents and audit service
This part of the study looked at the background of the respondents and that of the Ghana Audit
Service. The background of the respondents is important because it gives the premise on which
respondents answered the question. Usually, a study into historical accounting requires
respondents who in one way or the other experienced the phenomenon and will be in a good
position to address the questions as such. The study relied heavily on some experienced
employees of Ghana audit service to give the needed responses. The respondents were all
selected from the Ghana Audit Service to provide the necessary information for the study.
Eleven (11) respondents were selected and interviewed. These respondents were selected based
on their positions, educational background and the departments that they find themselves. The
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interviewees were made up of the assistant auditor general in charge of public accounts, assistant
auditor generals in charge of commercial audit department, Educational Institutions and district
assemblies, Central government audit department and performance audit department. The
interviewees were stationed at the head office and head office annex of the Ghana Audit Service
in Accra. Most of the interviewees hold bachelor‟s degrees and some with masters‟ degree and
professional qualification in accounting, civil engineering and architecture. From their
background and their responses, it was clear that all the respondents are well educated and have
the capacity to discuss the issue at hand in detail to provide relevant answers to the research
questions.
The length of service sometimes determines one‟s ability to elaborate on reforms. It was
therefore important to find information on the duration of service the employee had worked with
Ghana audit service. The responses indicate that majority of them have worked for more than 13
years in the Ghana audit service. That notwithstanding, most of the interviewees exhibited a high
level of maturity and professionalism with respect to the issue at hand. This clearly shows that
the number of years an individual remains in employment enhances to his/her level of
experience. It can therefore be said that majority of the employees are experienced enough to talk
about the reforms that the Audit service has gone through right from its inception to date. A
background of audit service during the colonial era and after the colonial era and the reasons for
the difference included. A summary of the background of respondents and the audit service at
large is presented in the table below.
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Table 4.1 Background of respondents
Role Position Department Number of
years worked
1. Preparing all
central
government
audit reports
Assistant Auditor
General
Central
Government Audit
20 years
2. Supervising
and
compiling of
the reports
from the
regions
Assistant Auditor
General
Information
Technology Audit
30 years
3. Supervising
and
compiling of
the reports
from the
activities of
public
interest.
Assistant Auditor
General
Performance Audit 14 years
4. Supervising
and
compiling of
the reports
from
activities of
public interest
Assistant Auditor
General
Performance Audit 13 years
5. Supervising
and
compiling of
the reports
from the
activities of
public interest
Assistant Auditor
General
Performance Audit 13 years
6. Coordinating
the activities
Assistant Auditor
General
Commercial Audit 30 years
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of the branch
7. Supervising
and leading
audit teams
Assistant Auditor
General
Performance Audit 15 years
8. Supervising
and
Coordinating
the various
regional
reports
Assistant Auditor
General
Education
Institutions and
District
Assemblies
30 years
9. Supervising
and
compiling of
the reports
from the
regions
Assistant Auditor
General
Education
Institutions and
District
Assemblies
28 years
10. Compiling
the reports of
the branch
Director of Audit Commercial Audit 25 years
11. Leading a
group for
auditing
government
agencies
under the
jurisdiction
this
department
Assistant
Director of Audit
Central
Government Audit
21 years
Field data, (2015)
4.2.1 The Audit Service during the colonial Era (1910-1957)
The history of the present audit service can be traced back to 1910 when the country then known
as Gold Coast was part of the British colonies. In the year 1910, a colonial audit department was
set up in London to oversee the various institutions of the colonies overseas, leading to the
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establishment of the audit department of the Gold Coast headed by directors of audit. Preceding
to 1910, the accounts of the Gold Coast administration (the colonial civil service) had been
audited by a local auditor appointed by British exchequer and Audit department. With the
establishment of the audit department, the director of audit carried out the audit of the account of
Gold Coast administration on behalf of the director of colonial audit in London whose title
changed to Director-general of colonial office and in turn was responsible to the secretary of
state who was therefore carried out under the executive government. From the early 1950s, up to
political independence of the country in 1957, there was transfer of power through self-
government by the crown to the local administration. This affected external arrangements during
the period of self-government, the director of Audit of Gold Coast reported to the governor of the
Gold Coast, who represented the crown as head of state and no more to the director of colonial
office in London, who was under the secretary of state. Throughout the period of self-
government, the audit department also established a link with legislature through the newly
created public accounts Committee. The director of audit served as the technical advisor to the
committee, which examined the audit reports and submitted its findings to the Legislature.
The 1954 constitution of the Gold Coast (order in council), which for the first time explicitly
provided for the external audit function in the financial management system of the country. This
constitution created the post of Auditor-General to replace the director of Audit. Consequently,
the audit department became the Auditor General's department, which was not specifically
mentioned by the constitution and remained part of the civil service. All operational staff of the
department was, however, recognized by this constitution as the "deputies" of the Auditor-
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General but were subjected to the general's orders and other rules of the civil service. Prior to the
political independence of the Gold Coast in 1957, the senior staff and operational officers of the
Audit Department/Auditor-General's department were appointed by the colonial office in
London. This was intended to ensure the administrative independence of the audit
department/audit- General's department from the local administration and ministerial control and
authority. Junior officers were, however, appointed locally. This was made to give some level of
authority to the Auditor-general.
4.2.2 The Audit Service after the colonial Era (1957 – Date)
The country gained independence in 1957. This independence led to the transfer of power from
the British. The independence led to the promulgation of the 1957 constitution. The 1957
constitution of Ghana ushered the country into political independence, the provision of the 1954
constitution on the Auditor-General and his “deputies “were repeated. The Auditor General's
department continued to remain a civil service department, this time not under the colonial office
in London but within the bureaucratic system of the government in Ghana. There was therefore
no mention of Auditor-General's department in the 1957 constitution. The Auditor-General‟s
department was then under the Ministry of Finance. Under the 1969 constitution, the Auditor-
General's department represented by the "deputies" of the Auditor-General in previous
constitutions was converted into the present Audit Service as a constitutional body and made part
of the public services of Ghana. This was a significant milestone in the existence of the external
audit function and was due to the acceptance of the recommendations of the 1968 constitutional
commission by the constituent assembly, which debated the constitutional proposals of the
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commission and came out with the 1969 constitution. With the suspension of the 1969
Constitution in 1972, through a military takeover of the administration, the Audit Service
Decree, (NRCD 49)1972 was published to give effect to the provisions in 1969 constitution.
Section 1 of this Decree repeated the provisions of Article 136 of 1969 constitution .Article 152
of the 1979 Constitution, Section 4 of the Provisional National Defense Council (Establishment)
Proclamation, 1981 ,Article 188 of the 1992 Constitution and Section 1 of the Audit Service Act,
2000, Act 584 have all maintained successively, the 1969 constitutional provision establishing
the Audit Service. In terms of reforms to reflect modern requirements for an independent audit
institution to support the work of the Auditor–General Ghana went ahead of the United Kingdom
by the establishment of the audit service under the 1969 constitution. This is a clear testimony of
the far-sightedness of the framers of the law in Ghana, on the need, as required by internally
recognized governmental auditing standards, for an independent of the audit service, which is
politically and administratively independent of the executive branch of Government.
The structure of the audit service from its inception to date has experienced a lot of differences.
This indicates that the structure from the colonial period is entirely different to that post-colonial
era. The difference in structure is as a result of the different legal regimes that country has gone
through. An interviewee indicated that the structure is different because
“the Ghana audit service existed since 1910 which was then a department under the Ministry of
Finance. Since it was a department under the Ministry of finance, it lacked independence to
operate. For instance auditing the ministry that the audit service finds itself under was a difficult
task. Therefore the various governments changed the status quo to grant them some level of
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independence through the various constitutions that the country has had. This dates back to
1954. Currently the Ghana audit Service is a government institution working independently”.
In addition, an interviewee had this to say:
“The structures are different because it was under a ministry which was difficult to audit. The
independence was very minimal because the department was virtually controlled by the sector
minister”.
4.3 Types and nature of public sector audit reforms
Under this objective, the key issues discussed are the understanding exhibited by the employees
on the reforms, the form in which the reforms took and the significant reforms that has taken
place in the Ghana audit service. The nature of the reforms were basically the internal and
external whiles the significant reforms were the systems based audit, risk-based audit, IT audit,
performance audit and regularity audit.
4.3.1 Types of audit reforms
The reforms refer to the changes in the processes and practices that take place in organisations.
The have been several reforms that has taken place in the Ghana audit service. The respondents
were asked to indicate the various reforms that Ghana audit service has gone through from its
inception. The respondents indicated the following reforms namely, system based-audit, risk-
based audit, IT audit, performance audit and regularity or compliance audit. The respondents
gave some explanations to the reforms above.
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4.3.1.1 Systems audit
The systems based approach was the first approach to auditing that was introduced after the
traditional audit approach where the auditors only focused only government finances or
revenues. With this the audit was seen mostly as military – civilian relationship where the
auditees were asked to do before complaining. At this point when the revenues collected are not
properly accounted for, the auditor takes an action by inviting the police to arrest the auditee.
The challenge associated with this system is that it only focused on the finance departments of
the auditee organisations. This made the other management members to just act in a manner that
seem to be favourable to them. This led to the introduction of the system-based audit. System-
based audit is about looking at how the various systems in the organisation function to achieve
the organisational objectives. For instance, on the issue of the systems audit, this is what an
interviewee had to say:
“System-based audit approach was introduced in the 1990’s in Ghana audit service. The system
based approach assesses the entire organisation and how it works, that is the processes and
practices in what they do. It is an extension of the traditional auditing system. The system audit
approach evaluates all what the organisation is expected to do. It is not only about the finances
but the entire management. The system enhances interaction between the auditor and auditee. It
is more like an interview, where responses are expected and must be backed by adequate,
sufficient and reliable documentation”(AA8).
Another respondent also supported this claim by saying:“the introduction of the systems based
auditing which was meant to help the audit service to audit the systems of various public
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institutions. With this reform the various systems are checked to ensure that the complying with
the various financial regulations”(AA9).
The system-based auditing approach has some challenges which made the audit work quite
difficult for the audit service to meet its statutory deadlines. An interviewee had this to say:
The system was very cumbersome since it takes a lot of time to complete and often delays the
audit report because every activity must be evaluated (AA9).
4.3.1.2 Risk based audit
This led to a new system called the risk based audit approach. The risk-based system evaluates
the organisation to determine the risky areas in the organisation. This is less cumbersome than
the system-based approach. An interviewee explained the risk-based approach as follows:
“Risk-based audit approach was introduced in the year 2000. In the risk based approach, the
auditor looks at the major areas that are risky in the organisation. Therefore, the work becomes
quite reduced as compared to the system based. This is just a matter of selecting the risky based
areas which narrows the audit work” (AA8).
Another interviewee with slightly different explanation on risk-based approach had this to say:
“This approach helps the audit service to understand the clients business and identify the risk
associated with the business. Applying this approach, the audit service will be required to audit
only the risky part of the clients business. This was introduced to move along with the modern
trends in the industry” (AA1).
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This made the work quite easier for the audit service because there was no need audit the entire
activities of the auditee.
4.3.1.3 IT audit
Determining the risky areas is sometimes not easy in situations where the organisations use some
level of information technology. It was always difficult to determine the risk associated with IT
based transaction as the audit was manual based. This brought about the IT audit which was
introduced in the process of using the risk-based approach. This approach is used to determine
the risk associated with IT based transactions to help auditors ascertain the needed information.
An interviewee explained how the IT audit works as:
“IT Audit is able to determine the weaknesses in clients’ computerized system where
management should focus attention and make sure they are remedied. It also gives indications to
financial auditors with regard to the weaknesses to plan the financial audit”(AA2).
4.3.1.4 Performance audit
After introducing all these reforms, the management of the Audit service then decided to join
international organisation of supreme audit institutions (INTOSAI) because the audit service had
the opportunity to audit the United Nations therefore management thought it wise that joining the
INTOSAI could give them more of such opportunities. After joining the INTOSAI, it was
required that members of the supreme audit institutions perform their audit according to some
standards. These include performance audit and regularity or compliance audit. Therefore in the
year 2001, the audit service introduced performance audit. The performance audit is about going
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beyond just the compliance with rules and regulations but the impact of the project and activities
of public sector organisations. Performance audit department seek further clarification of the
activities of the organisation. The performance audit goes beyond what the money was used for
and whether it followed the due process. Performance audit measures economy, efficiency and
effectiveness of public sector activities. In some jurisdictions, for example India and Canada,
performance audit measures environment and equity in addition with economy, efficiency and
effectiveness. Respondents gave their respective understanding of performance audit.
An interviewee explained performance audit as follows:
“Performance audit seems to be the new face of audit in Ghana. Performance auditing has to do
with the audit of the 3Es namely Economy, efficiency, effectiveness and environment. The
economy has to do with minimising cost without compromising on the quality of the product or
service. It is important to note that the comparison is based on the same product and services but
when they are different, economy may not be audited. Efficiency looks at the level of
performance that describes a process that uses the lowest amount of inputs to create the greatest
amount of outputs. Efficiency relates to the use of all inputs in producing any given output,
including personal time and energy. Therefore where a certain activity is achieved with minimal
inputs or resources then it can be concluded that efficiency is achieved. Effectiveness also
examines the degree to which objectives are achieved and the extent to which targeted problems
are solved. In contrast to efficiency, effectiveness is determined without reference to costs”
(AA3).
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In addition, an interviewee presented this:
“Performance auditing is about assessing programmes and activities whether they were
procured economically, efficiently and effectively. Performance auditing goes beyond the figures
and its corresponding evidence. Economy is concern with low prices without compromising on
quality. It is expected that before a programme or activity is undertaken, there is the need to
compare prices or cost to determine the lowest price without leaving out the quality. In effect the
economy is all about prices. Efficiency looks at how well the inputs are used to achieve the stated
objective. Effectiveness also looks at how the objectives are achieved and its impact on the
citizenry” (AA5).
This makes the performance audit quite different from the other approaches to auditing. This is
unique and very involving getting to the root of the issue at hand. In performance audit in Ghana,
the performance audit department gets their audit topic from the discussions in the media and
other sources which are likely to attract the citizenry. Performance audit sometimes go beyond
the usual one year for the auditor general to present his or her report to parliament. It may take
more than two years to complete one audit activity.
4.3.1.5 Regularity audit
The joining of the INTOSAI also influenced the audit service to adopt another way of auditing
which is modern and practiced by member countries. Regularity audit has to do with the
assessment of all government entities with respect to its operations at the end of each year. The
objective of regularity audit is to enable the auditor general to express an opinion of fair
presentation of financial statements as well as the compliance with the laws, regulations and
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other directives pertaining to the entity. This approach is used for financial audit. An interviewee
explained the regularity audit as:
“The regularity / compliance audit is a hybrid of the traditional system, system-based and the
risk-based system. This system is aimed at efficiency”(AA8).
The regularity audit requires the audit to follow some steps.
An interviewee described the steps as follows:
“In a applying this approach, the audit activity is divided into four aspects namely:
Administrative planning The administrative planning has to do with the
composition of the audit team. At this point the
head will select the people with the required or
relevant skills for the audit. The selection by
the head will have to be justified why those
people have been selected. The people who
will be selected are taken through the code of
ethics of the profession so as to present a
credible report of the audit activity.
Strategic audit planning At this level, there is an interaction between
the auditor and the auditee. The auditor
presents the letter of understanding introducing
the auditor and what the auditor expects from
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the auditee. Within it, the time that the audit
will last are all indicated to give the auditee an
understanding of the activity. The auditee also
presents the letter of representation indicating
what they will do. The concluding aspect of
carrying the audit is the overall audit strategy
to indicate the key deliverables.
Audit Execution The execution has to do with the actual activity
that is been carried. At this point the various
strategies will be applied.
Audit Reporting The final stage of the audit work is the
reporting. The various activities are all
documented for the purpose of peer review by
other supreme audit institutions. The peer will
review help know whether the audit is meeting
the international standards as stipulated”
Source: (AA8).
The reforms above shows how far the audit service has come with its processes and practices
since the inception of the then audit department to the current audit service. All these reforms
were geared towards the independence of the Ghana audit service. The reforms were also aimed
towards the achievement of international recognition.
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4.3.2 Nature of public sector audit reforms
Here the study seeks to know whether the reforms are internally induced or externally induced.
That is whether the reforms were introduced from within or they were introduced as a result of
external pressures from some institutions. The reforms that are internally induced are those that
were introduced as a result of some pressures within the organisation to correct some
inefficiency in the process and practices of the audit service. The external induced factors are
those pressures from external parties to change the way an organisation behaves. The external
influences may come from development partners such as World Bank, European Union and
international organisation of supreme audit institutions (INTOSAI). The International
organisation of supreme audit institutions requires some specific practices and processes for
auditing public sector institutions worldwide. Since the Ghana audit service was not a member
from its inception, there was therefore the need to adopt the practices and processes as expected
by the INTOSAI.
It was important to examine the interviewees on the nature of reforms in the audit service. From
the interviews, the interviewees indicated that the reforms were as a result of some pressures
which came from within the audit service and outside the audit service.
An interviewee had this to say:
“The nature of the reform is both internally and externally induced. It is internally induced
because the change of name was not influenced by any external pressure. It was just a national
policy. The others are externally induced because it was influenced by the external parties such
as supreme audit institutions, European Union and others. The international organisation of
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supreme audit institutions requires member countries to perform their audit according to a laid
down standard, therefore if the standard is not up to what they expect, then there is the need to
reform to meet the international standard”(AA4).
In addition an interviewee had this to say:
“The nature of the reforms was internal and external. The nature of the reforms may be
considered as internal because, the constitution right from the 1954 has given some level of
powers to the audit service to undertake its activities. The constitution served as the tool for
several changes in the Audit service. For instance, the 1954 constitution expanded the scope of
audit from only the central government to public or government institutions in Ghana. This
brought some level of autonomy to the service. Again, the 1969 constitution brought about the
change in name, which is from the auditor general’s department to the Audit Service to grant the
organisation more independence or autonomy. Finally, the 1992 constitution of the republic
however maintained the name but rather strengthened and expanded the mandate of the Ghana
Audit Service” (AA6).
Most of the respondents expressed similar ideas indicating that the reforms were both externally
and internally induced. That is the reforms were caused by some internal and external factors.
However, an interviewee had a differing opinion indicating that the reforms were caused mainly
by external factors which the Ghana audit service had no absolute control over. The interviewee
had this to say:
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The nature of the reforms was externally induced. This is because some external factors pushed
for this changed. Examples of the externally induced factors are the pressure from supreme audit
institutions and the donor agencies such as the World bank, European Union and others” (AA1).
The interviewees were further asked why the reforms took this nature. It may be assumed that
some nature of reforms is embarked based on some reasons. Based on this, an interviewee had
this to say:
“The reforms took this nature because of modernization and standardization of audit activities
by the supreme audit institutions worldwide.” (AA2)
Another interviewee who seem to have similar reason also said:
“The nature of reforms was embarked on because of the need to give a face lift to the audit
service to move in line with other countries.” (AA1)
An interviewee reiterated why both internally and externally nature of reforms was adopted. The
interviewee explained both factors differently. This is what the interviewee said concerning the
internal factors:
“The internally induced nature was adopted because there was the need to strengthen the audit
service in the wake of the expanding nature of government activities”(AD1).
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4.3.2.2 Externally induced reforms
On the external factors, this is what the interviewee has to say:
“The externally induced posture was accepted because Ghana is a member of supreme audit
institutions worldwide therefore whenever there is change in the processes and practices of this
association, there should be a reform to cater for the change. Also, the reforms were to ensure
that the audit service activities are aligned to that of the private sector to realise the full benefit
of audit”(AA9).
An interviewee further elaborated why the reforms took external nature:
“The reforms took this nature because there was the need for standardization of activities world-
wide. That is, as the various countries have signed on to international agreements, whenever
there is a change there must be a corresponding change in member countries. This will make the
countries meet the international requirement where its reports are widely accepted as the true
and fair view” (DA1).
The views by the respondents confirm the fact that reforms in public institutions may be
internally and externally influenced.
4.4 Factors influencing the audit reforms
Reforms usually do not evolve suddenly, but is caused by some factors that are sometimes
beyond the control of the management team. When such pressures begin, there is the need to
change the activities, processes and practices to meet the demand of these stakeholders. From the
study, it was realised that there are several factors that influenced the reforms namely:
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Internationalisation, policy, quest for good governance, restructuring of the audit service and
others.
4.4.1 Internationalisation
An interviewee described the need for internationalisation as:
“The management of the audit service thought it wise to join supreme audit institutions to put the
service on its toes. Because of this, there was the need to change how the audit service works to
suit what the other supreme audit institutions are doing”(AA3).
In addition, another respondent confirmed this by saying:
“The other reasons include that of the international requirements. The Supreme Audit
Institutions worldwide are expected to ensure that the activities are line with all other Supreme
Audit Institutions therefore this brought some changes to how the Audit Service works in Ghana.
It was also as a result of other reason such as the regulatory institution that is the INTOSAI
which introduces guidelines on how public sector audit should be carried. This allows the
supreme audit institutions world-wide to follow a certain pattern in its activities. Again, the
reforms were to ensure that the Ghana Audit Service activity is accepted world-wide as that of
any supreme audit institution” (AA8).
4.4.2 Governmental policy
The reforms were caused as result of governmental policy which was meant to give
independence to audit service. The independence was to enhance practices and make them more
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relevant in public sector accountability. These policies made the audit service activities in line
with other international organisations. An interviewee shared his opinion on this:
“The reforms somehow were seen as a policy because there is an international agreement
binding on member countries to follow specific practices and processes. Therefore when these
processes are absent, they must be introduced. Again, it was considered as a policy because
these reforms had it legal backing from the 1957, 1969 and 1992 constitutions. The audit service
gave a further boast to its legal environment by becoming an autonomous institution” (AA1).
In addition to this, another respondent had this to say:
The cause for the implementation of audit reforms was considered as a policy because some of
the reforms were supported by the constitution and the audit service act. For instance the change
of name from the audit department to the audit service had it legal support from the 1969
constitution where as the performance audit had it support from the audit service act 2000
(AA9).
It was a policy because of the promulgation of the audit service act and the various constitutional
regimes that the country has experienced. The various constitutions gave the Ghana audit service
some new mandate and powers to execute its activities. These include the 1954, 1969 and 1992.
In summing up, an interviewee had this to say:
“The reforms were introduced as a result of a policy. For instance the introduction of the
PURFMAP brought some reforms to the audit service. These reforms became necessary because
the approach to government financial management has changed therefore there is the need to
match the audit activities with the financial management practices” (AA2).
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4.4.3 Quest for good governance and accountability
Research has shown that citizens in recent times have realised the need to demand accountability
from public officials. These demands have brought some pressure on the management of audit
service to adopt new or modern auditing techniques to satisfy the demands of the citizenry. This
demands affected the need for reforms in Ghana Audit service.
An interviewee explained this factor as:
“The reforms were caused by the quest of good governance and accountability in the public
organisations. This is because the scope of government activities has expanded therefore there
was the need to decentralize the activities of the audit service to match up. Again, there was the
need to adopt new strategies to align itself with the international community as the audit service
strives to be one of the best supreme audit institutions”(AA5).
In conclusion, the reforms may be considered as a restructuring of the Ghana audit service
because whenever there is a change in the financial management practices of government, there
must be a corresponding change in the activities of the audit service to meet the expectation of
the entire citizenry. Others were initiatives from the Ghana audit service which was supported by
the European Union to put the audit service in line with the international standards. For instance
the ongoing reform in public financial management requires a corresponding change in the audit
techniques so as to be well equipped to audit this new system and also be well prepared for
challenges that may arise.
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4.5 Improvements in public sector auditing
Ghana was the first country to experience World Bank reforms in the sub Saharan Africa.
Reforms may range from introducing very micro-scale alterations, such as the introduction of
new software in an office, to large-scale organisational restructuring, including the creation of
new organisations or divisions and the termination of existing ones. It is useful to note that
reform is a key to surviving and growing in today‟s global economy. The challenge then is to
learn to move through this valve of transition as easily and creatively as possible to the
organisational activities. The reforms were not easily accepted by the other employees because
most of them felt they were not involved and also they felt threatened by the change in process
and practices. After series of meetings and trainings, employees became so interested and
embraced the change process.
The issue with reforms are whether the reforms undertaken achieved its intended objectives. The
intended objectives of reforms are usually to improve the existing system to create some level of
efficiency. The respondents were asked to indicate whether the reforms brought some
improvements to the audit service. All the respondents unanimously agreed that the reforms
brought significant changes to the processes and practices of the Ghana audit service.
The respondents indicated that the following are the improvements, namely; meeting of statutory
deadlines, international acceptance, enhanced accountability, enhanced institutional capacity,
cost-effectiveness, quality assurance, interactive approach to auditing and others. The
respondents explained the various improvements brought as a result of the reform. On the issue
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of meeting statutory deadlines, the respondents indicated that the auditor general is able to
present the auditor‟s report on time for possible debates and actions to be taken.
4.5.1 Meeting of statutory deadlines
On the issue of statutory deadlines, an interviewee had this to say:
“The reforms have enhanced the timing of the audit reports. Information by auditees is provided
quickly to avoid any delay in their reports. Nowadays, the public institutions have realised the
need to present their financial statements. This has made the audit service to present its reports
to parliament on time for discussion” (AA1).
Another respondent reiterated the fact that the reforms have indeed contributed to the submission
of the audit report to parliament. This is what the respondent said:
“The audit service now has devised new ways of auditing the public institutions although there
have been massive increases in government activities overtime. Since government activities are
expanding, one would conclude that the audit service may not be able to present the report to
parliament on time but rather the auditor-general is able to present even faster than the previous
years where the activities seemed to be less. This means that the audit service has lived to
expectation” (AA2).
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4.5.2 International acceptance of the audit reports
Also, the respondents talked about the international acceptance of the auditor-generals report.
When a country is a member of the organisation of supreme audit institutions, the country should
conduct its audit in accordance with international standards. Therefore, since the Ghana audit
service is still a member, their audit must be according to the standards, making it easier for peer
review by other supreme audit institutions. A respondent had this to say on the international
acceptance:
“The audit report presented by the auditor general to parliament is widely accepted by supreme
audit institutions. This is because it follows the guidelines by international organisation of
supreme audit institutions” (AA6).
In addition to that, this is what another interviewee had to say:
“The public audit institutions world-wide are all in an association which demands that they
conform to certain practices and procedures. Therefore, if an institution acts differently, that
country may be considered not to be line with what the association does or accepts. The reforms
undertaken by the audit service has led to the acceptance of the audit reports of Ghana audit
service as credible and reliable” (DA1).
4.5.3 Enhanced accountability and institutional capacity
The reforms according the respondents have enhanced accountability and institutional capacity
of the Ghana audit service. This has enhanced accountability in the sense that the audit report is
able to identify fraudulent transaction which has made the citizenry more interested in
government activities as compared to that of the previous years. This has given rise to civil
society organisations springing up to demand for accountability from public officials. This has
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also enhanced its institutional capacity. The reforms have brought new ways of undertaking audit
in the public sector. For instance the introduction of performance audit is able to reveal the
impact of government spending on the citizenry. Performance audit is able to detect the
inefficiencies in the activities.
In interviewee hinted that:
“The reforms have enhanced public sector accountability in the sense that the citizenry see the
auditor general’s report as an important document and as such can demand accountability from
public officials. The audit report reveals the activities carried by public institutions. Whenever
accountability is lacking, the citizens have the moral right to demand for it” (AA1).
An interviewee further elaborated that:
“The reforms have made it easier for accountability and good governance. People can be held
accountable for their actions and inactions. There is some form of transparency therefore
citizens or civil society organisations can now demand for accountability”. (AA4)
In summing up an interviewee concluded that:
“The reform has raised the capacity of the audit service dealing with the new way of auditing in
the public sector institutions. This has made the audit service an autonomous institution. The
audit service now has the capacity to conduct more specialised audit” (AA5).
4.5.4 Interactive approach to auditing
The reforms has made auditing much flexible than the previous years where the auditors was
more aggressive and unapproachable by the auditees. The auditees are able to express themselves
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in the audit process and this even helps the auditors gather more evidence through the interactive
process.
An interviewee stressed on this matter:
“Previously, auditing was seen as a struggle between the auditor and auditee. Currently,
because of the reforms, the auditee feels free to interact with the auditor. Whenever there is the
need to explain, the auditee has the opportunity to do so. This makes the auditee happy to give
reliable evidence. With this, there must be documentation in all activities for review.” (AA8)
4.5.5 Cost efficiency
Another improvement that the respondents stressed most is on the issue of cost-efficiency on the
part of the Ghana audit service. When the audit process is cumbersome, it requires more auditors
and other resources to undertake the audit activity. Therefore, when the audit activity reduces,
the cost of the audit is likely to reduce which will save government some revenue. The reforms
have made some departments inter-linked making their work easier.
This is what the respondent shared on the cost-efficiency:
“Public sector auditing is cost effective as compared to the previous systems where the service
was required to assess the entire organisation. This time round the risky areas are audited which
requires few days and few employees for some audits” (AA4).
Another respondent supported the claim by saying:
“The reforms were seen as an approach for audit service to be cost-effective. Some activities of
the activities previously were more separated or disjointed. The reforms have brought some
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coordination in the activities of the various departments within the audit service and other
government agencies in Ghana” (AA3).
In conclusion, the reforms in Ghana‟s audit service have improved the activities of the audit
service. This has made the auditing activities very interesting for both parties. This has led to
quality assurance and peer review. This is where someone outside or within the organisation is
asked to check the evidence gathered and the corresponding auditors reports. The auditor is
monitored in his or her activities with the institutions he or she is auditing. Therefore, there is the
need to exhibit high level of professionalism. This is because there is a possibility for another
person to review the work done by an auditor.
4.6 Challenges in the implementation of the reforms
Reforms should be managed with the change management process in mind. First, the
management together with the board made the employees to realise that there is the need to
change the processes and practices in this modern day. This involves creating the initial
motivation to change by convincing staff of the undesirability of the present situation. This was a
difficult stage for management. Secondly, there is the stage where the change actually takes
place.
4.6.1 Resistance of change
The change process itself is mainly concerned with identifying what the new processes and
practices should be. This stage will often involve establishing new patterns of auditing and so on.
Management made sure they communicated the necessary information to the employees. At
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some point, a pilot audit was organised for employees. The employees were made to form teams
to try their hands on new issues arising out of the reforms. Finally, there was the need to ensure
that the change has come to stay. This was successfully done by the management and the reforms
are sustainable. Although management had this in mind, there were a lot of challenges associated
with the implementation of audit reforms. From the study, the most significant ones include
financial challenges, acceptance of change by employees, political support and host of others.
A very difficult issue in organisations usually arises when there is the need to change from one
process to another. Some employees resist this change with the notion that the change is likely to
affect what they are doing. Therefore, when there are any benefit associated with the old system,
they are going to loose it. Some employees also believe that the change will affect the positions
that they hold in the organisation. Such employees always work extra hard to protest the change.
There it is very serious issue for management to overcome. It sometimes takes a lot of time to get
employees convinced and involved in the process. A respondent had this to share on the reform
implementation:
“The reforms encountered some challenges in its implementation such as resistance from some
employees as they saw it as something that will affect their job. Change as it is may be difficult
for employees to accept. There was the need to sensitize the employees to feel that their job is not
at stake or affected” (AA9).
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4.6.2 Financial constraints
The respondents indicated for the reforms to be successful, there should be funds available to
cater for the implementation. Sometimes employees need to be trained so as to appreciate the
importance of this new concept and apply it as management expect. Therefore, where the
logistics are not available, the reform may not achieve its intended objective. A respondent
elaborated on how the financial challenges affected the implementation of the reform:
“There were some financial constraints in the implementation of the reform. The reform requires
some financial commitment on the part of the audit service to be able to achieve its intended
objectives. The funds were not flowing as expected therefore at some point there was the need to
halt the activities. For instance, the introduction of the Ghana Integrated Financial Management
Information Systems requires some changes in the activities to the audit service but because
there funds are not coming, this activity is halted making the audit service incapable to audit this
new system”(AA2).
4.6.3 Governmental support
The success of implementing a reform in the public sector is linked to the government‟s ability to
support the change. It is important that the government will help the implementing agency so as
to make it a successful one. Some reforms were not successful because the government did not
support it. The reform will achieve its intended objectives when there the needed support from
the government. The reform had some challenge in that regard. An interviewee had this to say:
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“Reforms require the political support of the government. When the necessary support is not
given, the implementation of the reform becomes difficult to achieve its intended objectives”
(AA1).
4.7 Discussion of findings
4.7.1 Types of audit reforms
Public sector reform is about strengthening the way that the public sector is managed. The public
sector may be overextended and attempting to do too much with too few resources may lead to it
been poorly organized; its decision-making processes may be irrational; staff may be
mismanaged; accountability may be weak; public programs may be poorly designed and public
services poorly delivered. As a result, there have been several reforms in public institutions such
as the audit service. The types of reforms that are implemented affect how the practices and
processes are undertaken. The have been various reforms in Ghana audit service. The results
from the interviews indicate that the types of audit reforms improved the services provided by
the audit service. The respondents indicated systems-based audit, risk-based audit, IT audit,
performance audit and regularity or compliance audit.
In addition, it was realised that performance audit has made citizenry more interested in public
sector audit. This has made the auditor-general‟s office more relevant in terms of accountability.
The responses support the view of Othman, Nath & Mahzan (2013), English, Guthrie,
Broadbent, & Laughlin, (2010), Norton & Smith, (2008); and English, (2007). According to
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Othman, Nath and Mahzan (2013), regularity or compliance audit had to do with ascertaining
that all reasonable precautions have been taken to safeguard the collection and custody of public
moneys; the accounts and records are properly maintained and all expenditures are properly
spent in accordance with laws and regulations in the country. Performance auditing is defined as
an independent evaluation of the economy and efficiency of auditee operations, and the
effectiveness of programs in the public sector to the citizenry (Broadbent, & Laughlin, 2010).
The purpose of performance auditing is the objective assessment of the accomplishments or
processes of a government program or activity for the purpose of determining its effectiveness,
economy, or efficiency. The response points to the fact that the focus is to achieve economy,
efficiency and effectiveness of public sector programs and activities.
Respondents once again indicated that the objective of performance auditing consists of elements
such as economy, efficiency and effectiveness. This has been supported by several scholars such
as English, Guthrie, Broadbent and Laughlin, (2010); Daujotaite and Macerinskiene, (2008);
Lee, (2008); Gendron, Cooper and Townley, (2001); Daujotaite and Macerinskiene, (2008) for
example state that “the objective of public sector performance auditing is about economy,
efficiency and effectiveness”. Notwithstanding this, the respondents added that in some
jurisdictions, the objectives of performance auditing is no longer three that is economy,
efficiency and effectiveness but rather five including environment and equity. This is been
practiced in Canada and India.
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4.7.2 Nature of audit reforms
In order to examine how the reforms came about, there was the need to look at the nature of the
reforms. With respect to the nature of reforms, almost all the responses were the same. The
respondents said that the nature of the reforms was externally and internally induced in nature.
Respondents were with the view that some of the reforms were promoted by international
organisations or development partners such as European Union, World Bank and others. Others
were from government and within the audit service. The responses are supported in literature.
Public sector reforms are meant to reduce the inefficiencies in the economy. The nature in which
the reforms take determines its objectives. Public Sector Reforms are mainly classified in two
forms namely; externally induced and internally induced reforms. These are supported by
scholars such Mutahaba and Kiragu, (2002) Stevens and Teggemann, (2004) and Owusu, (2006).
According to Owusu (2006), the search for reforms has been led by the World Bank and other
international development agencies. Indeed, many African countries, including Ghana, with the
support of donor agencies – especially the World Bank – have been experimenting with various
reform strategies since the 1980s.
4.7.3 Factors influencing the audit reforms
The reforms were influenced by so many factors. The factors identified in the study include, the
desire for standardisation, governmental policies, quest for good governance, market efficiency
and others. Some of these are supported in literature. The standardisation has put the audit
service in the lime light where various institutions and countries are accepting and relying on the
reports of the audit service.
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The reforms that were caused as result of governmental policy were meant to give independence
to audit service. The independence was to enhance practices and make them more relevance in
public sector accountability. An interviewee shared his opinion on this:
“The reforms somehow were seen as a policy because there is an international agreement
binding on member countries to follow specific practices and processes. Therefore when these
processes are absent, they must be introduced. Again, it was considered as a policy because
these reforms had it legal backing from the 1957, 1969 and 1992 constitutions. The audit service
gave a further boast to its legal environment making it an autonomous institution”.
These factors are supported by the following scholars Ayee, 2001; Owusu, 2006; Pollit and
Bouckaert, 2011; Pearson, 2014. For instance, according to Owusu (2006), for government
institutions to improve their ability to deliver on their promises, governments try to get officials
to focus on outputs and outcomes, rather than processes and structures. A strong bond of
accountability between citizens and the public sector generates demand for Public sector
reforms. Public sector performance is determined to an important extent by the interplay between
the public sector and the country‟s key institutions of accountability. Others which were not
specifically stated by respondents but implicitly shown are as follows:
Market Alignment
Market alignment as a key idea has been based on the notion that the public sector organisation
would be more efficient and effective if it were more like the private sector entity. The reforms
suggested hinge on trying to use private sector methods, and market-style strategies and
incentives to drive public policy, strategies and behaviour. This makes public sector entities to
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rely on private-based techniques grow or improve on its programmes and activities to the benefit
of the citizenry.
Productivity Enhancement
Again, one motive for reforms has to do with productivity enhancement. This is to ensure that
public sector institutions produce as expected from the public. The persistent search for greater
efficiency is often driven by public demand for more services to be provided without
commensurate increase in taxes. This leads public administrations or institutions to review their
key processes, eliminating or streamlining the activities of the where possible.
Service Orientation
One of the influencing factors of reform is to make the government more customer-friendly and
service conscious, public sector institutions have tried to reinvent their service delivery
programmes. Instead of designing programmes from the perspective of the service providers
(especially government officials) and managing them through existing bureaucracies, reformers
have literally turned the system on its head and tried to put the service recipients (mainly citizens
and businesses) first.
4.7.4 Improvements in public sector auditing
To a greater extent, reforms are carried to bring improvements in the activities of the
organisations involved. Respondents were asked whether the reforms brought some level of
improvement. The unanimous decision of the respondents indicated that the reforms have
brought improvement in the activities of the audit service. The improvements according to the
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respondents are meeting of statutory deadlines, international acceptance, enhanced
accountability, enhanced institutional capacity, cost-effectiveness, quality assurance, interactive
approach to auditing and others. These improvements are clear manifestations of economy,
efficiency and effectiveness of the activities of the Ghana audit service. This made the
employees and management happy when the reforms carried achieved its intended objectives.
An interviewee shared his opinion:
“Previously, auditing was seen as a struggle between the auditor and auditee. Currently,
because of the reforms, the auditee feels free to interact with the auditor. Whenever there is the
need to explain, the auditee has the opportunity to do so. This makes the auditee happy to give
reliable evidence. With this, there must be documentation in all activities for review.”
This assertion by the respondents that reforms have brought improvement is supported in
literature (Pearson, 2014; Barrett, 2014). According to these studies, the reforms require
involvement of the people and experts. The processes leading up to the legislation should be
reasonably inclusive of the stakeholder community, including experts and other professional
advisers. The government should give commitment to consult widely on the development of the
rules, with extensive consultation within government but also with other sectors and interested
stakeholders. There is the need to have institutional capacity, which is essential to the success of
public sector reforms. The involvement leads to successful implementation. This study does not
support the assertion by some scholars such as Uddin and Hopper, (2003); Uddin and Tsamenyi,
(2005) reforms may not achieve their intended objectives.
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4.7.5 Challenges in the implementation of the reforms
The interviewees indicated that the Audit service did not easily move through the
implementation of the reforms due to a number of challenges. Some of these challenges revealed
by the respondents include the following: proper communication mechanism, financial
challenges, acceptance of change by employees, political support and host of others. Some of the
respondents felt that the reforms in the early stages were imposed on them and for that matter
they were not consulted at its inception. The revelation that some employees of the service were
not consulted at the inception of the reforms has crucial implications in terms of employees‟
commitment and attitudes towards the reform. This situation creates some apathy in the
implementation of the reform. When the employees are not involved and communicated to
properly, they are likely to feel that the reforms will affect their job and are likely to resist such
implementation process. A respondent had this to share:
“The reforms encountered some challenges in its implementation such as resistance from some
employees as they saw it as something that will affect their job. Change as it is may be difficult
for employees to accept. There was the need sensitize the employees to feel that their job is not at
stake or affected”.
These challenges have basis in literature where various reforms undertaken experienced some
challenges but sometimes the impact of the challenge on the implementation. The study
confirmed that the reform implementation is not likely to be successful without challenges.
Authors such as Kim, (2009); Pollit and Bouckaert, (2011); Pearson, (2014) claim that reform
implementation may not be without challenges. These authors believes that the context and the
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nature of advancing public sector reforms between developed and developing countries differ
considerably on a number of issues and this may bring some challenges.
Others identified by these scholars include the involvement of other government and private
agencies. For effective application of public sector reforms principles, governments must
explore, assess, and engage in opportunities for collaboration both within and outside the public
sector. Public sectors have embarked on profound change processes to confront the problems of
inefficiencies and inadequacies of the state in addressing public problems. These reforms relate
to the quality of relationships between the governments and the governed.
4.8 Reforms and theoretical explanations
From the study one theory emerged namely the institutional theory. As theories are meant to
explain a group of facts or phenomenon, the study therefore classifies how the reforms were
explained by the respondents and why those patterns were chosen as against the available
options. This will be in a theme namely institutional theory and audit reforms.
4.8.1 Institutional theory and audit reforms
DiMaggio and Powell (1983), suggest that the various actors operating in and around
organisations can create the institutional pressures that lead individual organisations to adopt
specific structures and procedures. The study reveals that the audit reforms were undertaken
because of some reasons or factors created by some institutional pressures.
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4.8.1.1 Mimetic isomorphism and audit reforms
The institutional pressures according to respondents were strongly linked to mimetic
isomorphism. Mimetic pressures center on the influence of „best‟ or „good‟ practice on the
structural choices that organization makes. This manifest in the tendency some organizations
have to emulate or copy what appear to be desirable or accepted practices in the sector or
industry they find themselves, even if these have not been proven effective. Organizations
dealing with uncertainty are particularly vulnerable, especially when uncertainty clouds the
relationship between organizational means and ends, complicating the choice of means
(DiMaggio and Powell, 1983). The Ghana audit service embarked on the various reforms mainly
due to mimetic pressures. The institution decided to emulate what other countries is doing which
is seen as the best practice for the industry. A respondent narrated why audit service decided to
embark on the reforms:
“The reforms took this nature because there was the need for standardization of activities world-
wide. That is, as the various countries have signed on to international agreements, whenever
there is a change the must be a corresponding change in member countries. This will make the
countries meet the international requirement where its reports are widely accepted as the true
and fair view” (DA1).
This means the Ghana audit service tried to copy best practice as expected and demanded by the
international organisations.
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4.8.1.2 Coercive isomorphism and audit reform
Coercive pressures involve one organization exerting power and influence over another to force
the adoption of preferred structures or institutions, often through political and legal means or by
controlling resource access. Highly dependent, politically vulnerable organizations are
particularly susceptible to such pressures (DiMaggio and Powell, 1983). There was some form of
coercive isomorphism where Ghana audit service was made to change some practices and
processes because the audit service was a member of international organisation of supreme audit
institutions (INTOSAI). Members of INTOSAI cannot do anything different from the association
requires therefore as a member the audit was coerced to adopt certain practices that were not
known or in existence in the service. A respondent described how the audit service changed its
practices according to the demands of the international association:
“The other reasons include that of the international requirements. The Supreme Audit
Institutions worldwide are expected to ensure that the activities are line with all other SAIs
therefore this brought some changes to how the Audit Service works in Ghana. It was also as a
result of other reason such as the regulatory institution that is the INTOSAI which introduces
guidelines on how public sector audit should be carried. This allows the supreme audit
institutions world-wide to follow a certain pattern in its activities. Again, the reforms were to
ensure that the Ghana Audit Service activity is accepted world-wide as that of any supreme audit
institution (AA8)”.
As institutions join associations, their activities become highly regulated, therefore as a member
of INTOSAI, the Ghana audit service was mandated to go according to the laid down processes
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and practices. An organisation can decide to change when that organisation is no more a
member.
4.8.1.3 Normative isomorphism and audit reforms
Normative pressures “describe the effect of professional standards and the influence of
professional communities on organizational characteristics” (Ashworth et al, 2007). They are
particularly strong where a professional grouping accredits certain practices, establishing them as
norms. The normative isomorphism basically entails adhering to international best practice
which may be demanded by citizens and some civil society organisations in Ghana.
A respondent had this to say:
“The reforms were caused by the quest of good governance and accountability in the public
organisations by citizens. This is because the scope of government activities has expanded
therefore there was the need to decentralize the activities of the audit service to match up.
Again, there was the need to adopt new strategies to align itself with the international community
as the audit service strives to be one of the best supreme audit institutions”(AA5).
Aside citizens causing for change, government also introduced a policy which made the
institutions change their processes and practices. A respondent indicated that there was a
government policy that changed their activities. This is what the respondent said:
“The reforms were introduced as a result of a policy. For instance the introduction of the
PURFMAP brought some reforms to the audit service. These reforms became necessary because
the approach to government financial management has changed therefore there is the need to
match the audit activities with the financial management practices” (AA2).
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This implies that international best practices should be adhered in order not to deviate from the
accepted norm in society.
4.9 Chapter summary
Reforms are planned interventions to raise the level of public service performance. Before
reforms are undertaken, it must carefully have defined goals and strategies to attain these goals
set for them. The ultimate aim of the public service reform is to see remarkable improvement in
the public service outputs, such as more effectiveness and responsive service deliveries. In this
chapter, the data gathered is analysed and presented. The analysis and the discussions focused on
four main themes which forms the objectives of the study.
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CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.0 Introduction
This chapter presents a summary of the study, conclusions arising as well as the
recommendations. In addition, the directions for future research have also been provided.
5.1 Summary of key findings
Reforms in the public sector continue to be a challenge for many organizations. Employees
believe that the reforms may affect their work and as such are likely to fight against it, making it
unable to achieve its intended objectives. The study sought to investigate reforms and public
sector auditing in Ghana. Specifically the study investigated the specific reforms, its nature, the
improvements through the reforms as well as the challenges faced by the Ghana Audit service in
implementing the reforms. The study was undertaken from an interpretivist perspective as this
offered explanation to the reforms and its implementation in Ghana audit service from the
perspectives of the employees. This paradigm is relevant as it helped the researcher to pose the
what, the why and how questions so as to probe the issue of reforms and public sector auditing in
Ghana. The study adopted a qualitative approach to research. Although, several studies have
been conducted in the area of reforms, little is known on audit reforms and therefore approaching
this study from a qualitative perspective was in the right direction taking into consideration the
experiences of the employees as well. The specific design that was adopted is case study because
the study examined only the Ghana audit service. The data for the study was obtained from the
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two main sources namely primary and secondary data. The primary data for this study was
gathered from some observations and the in-depth interviews conducted by the researcher.
Eleven (11) employees made up of nine (9) assistant auditor generals, one director of audit and
an assistant director of audit were selected and interviewed. A purposive sampling technique was
used in selecting the interviewees. The respondents were chosen for the interview due to the fact
that they have first-hand experience, information and requisite knowledge on the subject matter.
They were chosen based on the number of years that they have worked. The data gathered from
the interviews was analysed using the Miles and Huberman, (1994) approach to qualitative data
analysis. The data was coded to identify and describe themes from the perspective of the
respondent(s), so as to understand and explain these patterns and themes and come out with the
relevant conclusions.
The study first revealed that the motive behind reforms is to promote efficiency and
independence in the activities of the Ghana audit service. This was to ensure that the
inefficiencies in the system are eliminated. From the responses the various reforms that were
undertaken by the audit service includes the system-based audit, risk-based audit, IT audit,
performance audit and regulatory or compliance audit. The respondents added that the change in
the practices and processes were as a result of the challenges faced and the dynamic nature of the
government activities. The respondents were quick to add that the reforms were both internally
and externally induced in nature. This means that the reforms were not only caused by factors or
pressures within the government machinery but also pressures from outside the government
machinery such as the World bank, European union and the international organisation of
supreme audit institutions. As reforms are not caused on their own, the study revealed that the
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following factors influenced the implementation of the reforms namely, the desire for
standardisaton, governmental policies, quest for good governance, market efficiency and others.
It was realised that the government policies were aimed to give independence to the Ghana audit
service so that their reports will not be manipulated. References of such policies can be cited
from the 1954, 1969, and 1999 constitutions as well as the audit service act 2000. These factors
have strengthened the audit service.
Again it was revealed that the reforms introduced have improved the activities of the Ghana
audit service. This has given the audit service a competitive edge to be among the international
organisation of supreme audit institutions. The improvements as revealed by the respondents
include the timely presentation of audit report. The reforms to some extent have reduced the
workload which has made the audit service to be able to meet its statutory deadlines. The other
improvements as indicated by the respondents are international acceptance, enhanced
accountability, enhanced institutional capacity, cost-effectiveness, quality assurance and
interactive approach to auditing. For instance, the respondents indicated that there is a strong
collaboration between the audit service and the auditees as the audit is carried with notification
to the institutions involved. Both the auditors and auditees interact very well to be able to come
out with their findings.
The study revealed that as already sated in literature, reforms come with some challenges. Some
of these challenges revealed by the respondents include the following: proper communication
mechanism, financial challenges, acceptance of change by employees and the political support.
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The challenges were not new in the area of reforms. On the issue of financial challenges, the
audit service could not sponsor the reforms and the government was not also interested in
supporting the reform. Currently, there is planned reform which is yet to take place but because
the financial resources are not available, the project has been suspended.
5.2 Conclusions
The study looked at reforms and public sector auditing in Ghana. It was realised that
implementing a successful reform is not an easy task therefore the Ghana Audit service has to
put in more efforts than what it is doing at the moment. The basic assumption underlying reform
implementation is that if employees are involved and know what is expected of them, they are
more likely to accept the reform and make sure it achieves its intended objectives. This is also
essential for employee engagement. These results in improved individual performance, enhanced
institutional capacity, enhanced accountability and ultimately ensured better organizational
performance in the wake of dynamic government activities. The responses gathered calls for a
strong governmental support since the audit service is not financially independent. All their
activities are largely financed by government so that they can move in line with the international
trends.
Consideration should be given to instituting punitive measures to enforce section 30 of the Audit
Service Act, 2000 (Act 584). Under the above section, Audit Report Implementation Committees
(ARICs) - the intra-departmental units in public offices - are charged with enforcing the Auditor-
General‟s recommendations. However, they are non-existent in a significant number of public
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institutions. Consequently, the recommendations from external and internal audits to address
institutional lapses are not implemented. Addressing these failings should be a priority. Measures
such as withholding allocations meant for public offices which have not established ARICs, or
failed to implement audit recommendations, should be considered and as such their appointment
should also be considered. This is because the chief directors in these ministries are required to
appoint members of these committees, therefore the ARICs when set up may not be able to deal
with the enforcement of recommendations involving the chief directors. These committees
should be given some independence.
Again, the financial and technical capacity of Parliament needs to be strengthened. Ghana‟s 1992
Constitution requires audit reports to be presented to Parliament for scrutiny. The House is also
empowered to recommend necessary corrective action. The recurrence of identical financial
malpractices, however, indicates that Parliament‟s response has been ineffective over the years.
On the other hand, the Public Accounts Committee (PAC) lacks adequate financial and logistical
capacity and this impacts its work. Further, while the diversity of talents on the PAC is valuable,
building the technical capacity of its members has to be taken up as an issue of priority.
5.3 Contribution of the study
This study contributes significantly to literature on reforms and public sector auditing in
developing African countries. The previous studies have been conducted with the focus to
explain the historical, socio-economic and political contexts within which auditing has been
reformed and how individuals and institutions have influenced the processes in both developed
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and developing countries. This study therefore has contributed to literature from an African
perspective. The study indicated that audits have been widely accepted, albeit with different
interpretations of how these were used as a tool by Parliament to hold the public sector managers
and office holders to account for their stewardship role of the government. First, the study
investigated the reforms in public sector auditing in Ghana and concluded with the significant
ones being systems-based audit, risk-based audit, performance audit and regulatory or
compliance audit. The study also touched on the improvements in public sector auditing as a
result of the reforms. The respondents indicated that the reforms have indeed changed the face of
auditing in Ghana. These improvements include enhanced institutional capacity, enhanced
accountability, meeting of statutory deadlines and others. The study clearly shows these
improvements and how it has impacted on accountability. Again, the study contributes to
literature by providing the challenges faced in implementing reforms in public sector setting. The
challenges include logistical challenges, lack of political support and funding being the major
hindrance to the implementation process. The study established that once again change comes
with resistance and it was not different in audit service. As usual, there was some resistance in
the earlier stages of implementation.
The study contributes to research in terms of theory. The researcher did not impose any theory
on the study. The theory emerged out of the study. The behaviour and the responses of the
respondents made the researcher to realise the theoretical underpinnings of this behaviour.
Hence, the researcher concluding that the reforms were as a result of mimetic institutional
isomorphism. According DiMaggio and Powell (1983), mimetic pressures center on the
influence of „best‟ or „good‟ practice on the structural choices that organization makes. This
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manifest in the tendency some organizations have to emulate or copy what appear to be desirable
or accepted practices in the sector or industry they find themselves, even if these have not been
proven effective. Organizations dealing with uncertainty are particularly vulnerable, especially
when uncertainty clouds the relationship between organizational means and ends, complicating
the choice of means. The reforms according the respondents were highly geared towards
international standardisation. The study used qualitative techniques with the help of in-depth
interviews to explain the reforms and Auditing in Ghana.
5.4 Recommendations
From the findings and discussions made in the earlier chapter, the following are recommended:
First, looking at the employee capacity and the ability of some of the supervisors, there is the
need to adequately prepare and train them to make them learn the modern trends in auditing.
Managing the performance of an employee is not an easy task and requires many skills. Training
is required to ensure managers feel adequately prepared to effectively complete all the tasks
related to the auditing. This is especially the case for newly promoted or engaged employees.
Heads of the various districts are likely to face this challenge since some employees being
engaged or employed have no prior knowledge of the auditing environment. The audit activities
require continuous training to upgrade their skills. The best practice is that whenever there is any
change in government financial activities, auditors should be trained as such to be able to
monitor the system approve of it. But what has been happening is that the system is implemented
before auditors are trained which makes it difficult to audit. Staff training requires more financial
commitment therefore the budgetary support by government should be adequate for the audit
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service to carry the intended training sessions for employees to gain new knowledge and skills.
Therefore, there is the strong need to give them continual training to always be line with the
modern techniques to auditing.
Looking at the nature of activities undertaken by the audit service, there is the need to provide
them with adequate logistics. The activities of the audit service require more logistics to be able
to deliver to expectation. The logistics required includes vehicles, employees, internet
connectivity and others. All these when provided will give the audit service the capacity to carry
out its mandate effectively and efficiently. Audit requires serious research in this modern day to
learn and read about the new techniques employed by auditees but unfortunately, the internet
service is not stable to assist the audit service. The audit service by law is expected to audit all
government institutions nationwide and missions abroad but their logistics is woefully
inadequate to be able carry out this activity. There is the need for government to provide these
logistics to make the work easier and reliable. It is therefore recommended that the needed
resources for effective work should be provided on time in other to perform their job devoid of
any influences from the auditees.
Thirdly, for Ghana audit service to be completely independent, there is the need for government
to fulfill its financial obligations. There are a lot of challenges associated with the finances of the
audit service. The resources are not enough for the service to do a very good job as expected by
the citizenry. Audit service needs financial independence in the sense that carrying out a good
audit requires a sound financial background. The audit service suffers high budgetary cuts year
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127
in, year out. At beginning of every budgetary period, the audit service get not less than 60
percent budget cut which makes the activities of the audit service difficult. When such situations
occur, the audit service is forced to cancel out some important audit activities. It is therefore
recommended that audit service is made to audit the various government institutions for a fee so
that they raise their own funds without relying on the government. When the audit service does
this for a fee, it will compel the institutions to keep proper records. This is because some
institutions do not present proper records which make the audit very difficult. When such
situation happens, these institutions will be made to pay more for their inability to produce
proper accounts. This in effect will generate more money for the Audit service.
Also, for the audit service to fully achieve the purpose for which it was established, it is
important to ensure that the necessary information needed to carry effective audit are managed
well by the auditees. It seems to be normal in government or public institutions to keep records
poorly. These institutions usually forget that they are not only keeping records for themselves. It
is kept anyhow which makes auditing difficult. In some instances, they go to institutions where
they are told that the one who was in charge has retired therefore the documents relating to
certain transactions cannot be traced. This situation has been a detracting factor for the audit
service. It is recommended that serious punishment be meted out to these personalities and
institutions so as promote public sector accountability to the entire citizenry. By so doing, the
employees will appreciate what they are doing better and do whatever they can to make it a
success.
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Finally, the Auditor-General‟s reports in Ghana are predictable and gloomy. The predictability of
the reports lie in the fact that, year-on-year, identical cases of misappropriation of public funds
are documented, often within the same public institutions. In some sections of the public sector, a
culture of impunity to embezzle has taken grip. It will be appropriate to describe public financial
management as in a state of permanent crisis. The evidence from audit reports confirm that
perennial issues of financial irregularities are a substantial drain on public finances and paints a
gloomy picture for our country‟s long term economic development. Ghana has elaborate
legislation to ensure sound public financial management. However, the recurrent financial
irregularities are, partly, as a result of failure to implement laws, weak public institutions and lax
internal controls. Hence the current focus on prosecution, whilst critical to accountability, is not
enough to stem the scale of irregularities. It is therefore recommended that there should be
effective institutional checks and balances to prevent abuse of public resources, implementing
the laws on the statute books and ensuring that procedures and processes are followed. This has
not been a focal point of the recent debate. Indeed, until the fundamental issues of institutional
weaknesses are addressed, the financial irregularities in the public sector will persist.
One of the challenges revealed by the respondents had to do with the effective monitoring of the
staff in the hinterlands. The service is expected to monitor all staff to ensure that their activities
comply with international standards or with the ethical requirements. They are expected to
without any influence and be objective in all their dealings. This will make them present the true
findings of their work. In such situations, there is a possibility of that the auditors may not be
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objective as they are likely to be influenced. It is therefore important for the audit service to put
in place stringent measures to prevent this challenge.
5.5 Limitations of the study
The limitations of the study were discussed along three main issues namely generalization,
validity and reliability.
5.5.1 Generalization
The criticisms leveled against qualitative researchers are usually on the basis of their inability to
generalize the findings arising out of the study outside the designated case(s). The study may be
criticized for not being statistically generalizable. However, the study can be analytically
generalised. Meaning, the findings are generalizable to similar circumstances (Ryan et al., 2002).
The term qualitative generalization is used in a narrow way in qualitative studies since the intent
of this form of research is not to generalize results to entities, sites, or places outside the scope of
the study. The value of this qualitative research lies in the particular context and themes
developed in that setting. This study does not seek to draw general conclusions, however the
shortcomings arising from this study have been well noted. Nonetheless, the study was able to
examine in detail the reforms and public sector auditing in Ghana, considering the motivations,
nature, types and nature of audit reforms in Ghana.
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5.5.2 Reliability
Reliability on the other hand addresses, the extent to which the data collection methods will yield
constant/reliable results, and comparable observations or inferences can be made by other
researchers, or whether there is transparency in how the raw data was analysed. Reliability
according to Joppe, (2000) is the extent to which results are consistent over time and an accurate
representation of the total population under study and if the results of a study can be reproduced
under a similar methodology, then the research instrument is considered to be reliable.
Reliability requires consistency in data and findings and it involves demonstrating that the data
collection process and data produced can be repeated with the same results (Saunders et al.,
2007). In this study, the data collected was coded and the emerging themes examined in detail.
Nevertheless the issue of consistency discussed above, it is extremely possible to have findings
using the same methods which is one of the features of qualitative studies such as this.
5.5.3 Validity
Validity is a factor which any qualitative researcher should be concerned about while designing a
study, analysing results and judging the quality of the study. This corresponds to the question
that “How can an inquirer persuade his or her audiences that the research findings of an inquiry
are worth paying attention to?" (Lincoln & Guba, 1985, p. 290; Patton, 2001). To answer to the
question, Healy and Perry, (2000) assert that the quality of a study in each paradigm should be
judged by its own paradigm's terms. To this end, the researcher made use of multiple and
different sources of evidence. The researcher solicited the views of interviewees with the motive
of enhancing the credibility of the data collected and the findings and interpretations from the
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study. The researcher relied on some of the respondents who were useful in reviewing the
findings and reports to ensure validity of the data and findings. The study relied on different
levels of respondents in terms of position and experience to draw meaningful conclusion.
5.6 Future research directions
First, future research can look at the impact of the audit reforms on public sector accountability
where other government institutions would be involved share their respective views on the
subject matter. The citizens should be considered in this so that they can share what they have
seen in terms of public sector accountability. A study of this nature must be approached from a
positivist approach where hypothesis can be formulated and tested on selected public sector
organisations to confirm or disapprove the findings of studies in this arena. Again, a multiple
case studies can also be conducted where more than one public sector organisation will be
selected and studied in detail so as to compare the implementation of reforms amongst these
institutions. This will help broaden the literature base. Few studies have been done on the impact
or effect of reforms on the performance of public sector institutions in general and therefore
future research can consider a comparative study.
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