ABSTRACT
This research focuses on auditors’ perceptions about internal controls in the public sector, how it affects the work of auditors in terms of audit reviews and the extent to which reliance is placed on internal controls. The qualitative case study approach was employed in order to gain a deeper understanding auditors’ construct of internal controls within the public sector context. Furthermore, purposive sampling technique was applied in this study and thematic analysis was used to analyze the responses from the semi-structured interviews conducted.
The study revealed that auditors had convergence views about internal controls as a structure with human agents responsible for its establishment. This was analyzed using Giddens’ Structuration Theory as a lens. Also, the study found out that internal controls were assessed by auditors in order to know whether to increase the workload by way of engaging substantive procedures during the audit or to reduce the workload in terms of testing and review. Finally, the study found out that most of the auditors interviewed placed their reliance upon internal controls based on the components of the COSO framework such as a control environment, risk assessment, control activities and monitoring.
In terms of research, this study offers several potential contributions to the understanding of how both internal and external auditors construct their perceptions about internal control systems of public sector organisations particularly, that of Metropolitan, Municipal and District Assemblies (MMDAs) such as Nkwanta South in Ghana. Also, in terms of practice, this study stands to unearth the effectiveness or deficiencies in the internal control systems of some public sector organisations in Ghana. Finally, in terms of policy, the Auditor General can adopt the recommendations of this research and suggest policies and measures that will strengthen internal controls within public sector organisations in Ghana as a whole.
CHAPTER ONE INTRODUCTION
Background of the study
In the past, successive governments were chastised for failure to demonstrate commitment towards protecting the public purse to ensure state resources in any form are utilized judiciously. The public sector of Ghana is highly characterized by financial irregularities beyond imagination, since December,2009, the nation performed below average according to the Auditors Generals annual report on the procurement and use of public funds so far as accountability is and compliance to ethical practices are concerned (Banyen & Nasamu, 2015). This calls for urgent steps to address the menace as efforts by government and foreign partners failed to yield desired outcome. Lack of transparency, objectivity and accuracy in financial reporting in recent time has called for standardized mechanisms potent enough to address the vulnerability of the financial systems and reporting accounting information to users (Feiveson, 2015). The concept of internal control systems gained much popularity among scholars in finance and corporate governance affairs due to the famous Enron’s case in the United States which was considered one of the biggest financial scandals that took the entire business and financial sector by surprise in 2001 (Ofoegbu, 2014). According to ter Bogt & Tillema, (2015), in order to maintain confidence and trust in state institutions, efforts must be made to enforce the laws governing the establishment of these public organizations with a conscious effort to adequately sanction public officers who contradict. The efforts required are therefore known as internal controls. Sulaiman et. al. (2008) defined internal control —which is the key focus of this study— as “the policies and procedures put in place to ensure the protection of an organization’s assets and the reliability of financial reporting.” Furthermore, Puttick (2008) also asserted that “internal controls as a set of organizational policies
and approved internal processes (internal controls) crafted by management of an organization are intended to ostensibly achieve management’s primary objective of ensuring that the business operates flawlessly.” Therefore, evaluating the presence of internal control systems in any public institution requires an independent assessment and monitoring mechanisms to ensure compliance to accounting standards, safeguarding assets and maintaining an orderly working environment that will encourage performance according policies and ethical values contained in the mission and vision of the organization (Acheampong, 2016). This is normally done by auditors, both internal and external. However, the context of the Public Sector in Ghana presents certain challenges for auditors in terms of the effectiveness of internal controls and the level of reliance which auditors can place on the internal controls.
