Well performing internal audit function has been argued as one of the strongest means of internal control to monitor and promote good governance system in an organization. While internal audit can be used in order to assist management in order to instill a strong ethical tone in the entire organization, a poor attitude by the management can make it hard for the internal auditor to uphold ethical behaviour. As a result, many countries have increased attention on internal audit as an important component of government financial management and as a tool for improving the performance of the government sector. The objective of this study was to establish the effectiveness of internal audit in promoting good governance in the public sector in Ghana with special focus on the Ministries, Department and Agencies (MDAs) and Metropolitan, Municipal and District Assemblies (MMDAs). The research was both quantitative and qualitative in nature with both descriptive cross-sectional design method and regression analysis preferred for the study. The study also uses logistic estimation technique on the primary data collected to find out the association between corporate governance and internal systems of risk management, compliance and consultancy and internal controls.
The research established that internal audit significantly affects internal controls, risk management and compliance and consultancy. However, internal control and compliance and consultancy are less likely to ensure good corporate governance. The study therefore recommend that the government should recognize the contribution of internal auditing and embrace it as an effective tool so as to realize their objectives set.

Background to the Study
A system of effective internal controls is a critical component of company management and a foundation for the safe and sound operation of organisations. As such, ineffective internal controls result in ineffective programmes and losses (Financial Management Manual, 2005). According to Baltaci and Yilmaz (2006), the effort to reform a fiscal system should include internal control and audit due to the crucial role they play in enhancing accountability and effectiveness. Internal audit provides both governments and related parties with a powerful tool for understanding the extent to which the public institution in question has delivered on budget and effective services.
Well performing internal audit function is one of the strongest means of internal control to monitor and promote good governance system in an organisation. Internal auditing is an integral part of the corporate governance framework in both the public and the private sectors (Cohen & Hanno, 2002). As a result, in many countries it has received an increasing attention as an important component of government financial management and as a tool for improving the performance of the government sector. The definition of internal audit contains two fundamental roles:
Assurance Services to the administration, audit committee, and management, guidance on assessing the effectiveness of corporate management, risk management, and control processes established by management, and
Consulting Services to the management on risk management and controls (The Institute of Chartered Accountants in England and Wales, 2011).
Analyzing this definition, it seems that the internal audit has evolved from a function of independent evaluation to a function of risk management, so that today it is the primary need of any organisation (Munro & Stewart, 2011). This is because it provides the creation of the added value of organisations through independent, objective assurance and consulting activities (Pickett, 1997).
By assessing the management process, the internal audit provides appropriate recommendations to improve it by fulfilling the following objectives (from the framework of professional activity, Croatian Institute of Internal Auditors, 2011):
promoting appropriate ethical principles and values within the organisation,
ensuring effective management of performance and establishing responsibilities in the company,
effective communication of information on risks and control to the relevant parts of the company,
effective coordination of activities and communication of information to board members, external and internal auditors, and management.
Good governance is considered as a tool that is used in order to achieve the strategies of an organisation (Belay, 2007). Thus, a number of issues including allegation of financial improprieties and lack of corporate governance structure joined with allegations of financial statement fraud of many government departments has helped to grind the ever increasing attention on corporate governance in wide-ranging and the audit committee in particular. As a result, the function of the committee had changed over years (Rezaee & Olibe, 2003).
Cohen and Hanno (2000) using the Public Oversight Board’s perspective, defined corporate governance as “those oversight activities undertaken by the board of directors and audit committee to ensure the integrity of the financial reporting process” However, the best way to define the concept is to adopt the definition shared by the Organisation for Economic Cooperation and Development (OECD, 2004) countries: “Corporate governance is the system by which a business corporation (or a nonprofit organisation) is directed and controlled, at its senior level, in order to achieve its objectives, performance and financial management, and also accountability, integrity and openness”.
Roe (2004) defines corporate governance as the relationships at the top of the firm-the board of directors, the senior managers, and the stockholders. In his opinion institutions of corporate governance are those repeated mechanisms that allocate authority among the three and that affect, modulate and control the decisions made at the top of the firm. The above definition of corporate governance indicates idea of objectives correspondence, incentives, monitoring and control.
Corporate governance has been reflected upon since the beginnings of the modern corporation (Kim & Nofsinger, 2007), it certainly has received increased attention and scrutiny over the last two decades. In this period, corporate governance issues have become important not only in the academic literature, but also in public policy debates. Corporate governance ranges throughout countries and firms. A higher quality of corporate governance allows firms to gain access to capital markets more easily, which is greatly significant for firms, which mean to boost their funds.

This view of governance focuses on the control environment and control activities. Corporate governance issues are in general receiving greater attention as a result of the increasing recognition that a firm’s corporate governance affects both its economic performance and its ability to access long-term, low investment capital (Mordelet, 2009). Other recent research shows the assurance, compliance and consultant roles of internal auditing are now being recognized at board level in many organisations as valuable contributors to good governance practices.

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Item Type: Ghanaian Topic  |  Size: 79 pages  |  Chapters: 1-5
Format: MS Word  |  Delivery: Within 30Mins.


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