The Effect Of Internal Auditing On The Performance Of Small And Medium Size Enterprises In Buea
Abstract
Small
and medium size enterprises in Cameroon are important part of the economy. The
aim of this research was to investigate the effect of internal audit on the
performance of small and medium size enterprises in Buea Cameroon.
The
specific objectives of the study were; to determine the effect of expertise of
the internal auditing staff on the performance of small and medium size
enterprises, to examine the effect of controls on the performance of small and
medium size enterprises and lastly to examine top management support on the
performance of small and medium size enterprises.
The
study was underpinned on two theories namely the agency theory and
institutional theory. The study targeted accountants, audit committees and
employees of small and medium size enterprises. The study followed a
descriptive research design, primary data was collected by the use of
questionnaires.
Percentages
and standard deviations were used. Content analysis was used to collect the
qualitative data. Data analysis was done through the use of statistical package
for social science (SPSS). Data was then presented using tables and figures.
The
relationship between variables was achieved through the use of multiple
regression analysis. The results indicated that internal audit had positive and
significant effect (p-value of 0.001) on the performance of small and medium
size enterprises. Internal audit expertise controls had a p-value of 0.210
which resulted to positive and but non-significant effect on performance.
Top
management support of internal audit had a p-value of 0.000 which implied it
had a positive and significant effect on performance. The study recommends that
managers and policy makers should pay attention to internal audit staff
expertise for it has greatest effect on performance of small and medium size
enterprises.
CHAPTER ONE
INTRODUCTION
1.1 The Background of the study
Small and medium sized enterprises are expected by citizens, shareholders and even the government to be efficient and effective in their operations and performance in the business world.
There are many of such activities that entities can apply towards this end, one of such mechanism is internal audit.
This can be defined as an independent review and appraisal of the accounting,
financial and other operations of the organization by a special staff or groups
of special staffs, usually called (internal auditors).
The impact of internal auditing in the
organization is to help in the examination and inquiry into a statement of
accounts, the underlying records, documents, assets, liabilities in other to
measure and evaluate the adequacy, efficiency and effectiveness of the
organizations, internal audit helps to disclose irregularities and also present
fraud, as in the recent case in of BICEC Cameroon were fraud carried out by top
management was been uncovered by the company’s internal auditor.
A good internal audit control in organizations will help them in the preparations of financial statements, which will reduce the risk of financial statement misstatement or errors.
Small and medium size firms are a very important factor
in the development of a nation’s economy. In Cameroon, there are varieties of
small and medium size firms in different fields such as, in the banking sector,
agricultural sectors, marketing sectors and many others.
In
most economy, small and medium size enterprises play a major role for their employment
creation and economic growth. In Cameroon according to the UNCTAD platform
power, registers over 25000 small and medium size enterprise in Cameroon as at
2016 and is continually increasing within the years sited by Mukhisa Kituyi
(2020).
When effective functioned, internal audit (IA) play a critical function in monitoring and appraising financial management activities in small and medium size enterprises, thereby helping companies achieve their goal.
Further, it
helps small and medium size enterprises attain accountability and uprightness,
and assist external auditors in performing their audit. This helps to increase
the assurance of the owners of the company. Enterprises with good internal
auditing committee and carrying out their responsibilities effectively are more
advantageous because, they are well positioned to point out any business risk
and come up with the best corrective strategy to mitigate the associated risks.
All this helps in the survival of most small and medium enterprises
1.2 Statement of the problem and justification of the study
Internal
audit plays a vital role in small and medium size enterprises in Cameroon. In
Cameroon, almost every small and medium size enterprises has a functioning
internal audit committee. Financial Scandals in Cameroon such as that of ,
Produce Marketing Board, Cameroon Agency and Cameroon Bank, revealed poor
internal audit and control performance Which was mainly because of lack of
adequate transparency, which resulted to misappropriation of funds. Furthermore,
when small and medium size enterprises has a week internal audit process and
procedures, the result is an increase in the failure of the same to detect any
fraudulent activities and major loses.
Various studies on internal audits have been
conducted over the years. Michael
Forzeh Fossung (2013) carried out studies on the role of internal audit in the
Cameroonian governance, internal audit for small and medium sized companies in
Cameroon by Alpha Mundo (2020), and many others. These findings however, failed
to tackle the performance of internal audit on small and medium size
enterprises. This knowledge gap occasioned a study, which will examine the
effect of internal audit on the performance of small and medium size
enterprises in Buea Cameroon.
In addition to that, as pointed out by
Juliette Ngole, SME sector was lately viewed as an important contributor to
Cameroons economy. This how is a great call for concern in Cameroon because,
lack or poor internal auditing may lead to the fall of many small and medium
size firms hence this may affect the economy and employment opportunities
rendering thousands of Cameroonians unemployed.
1.3 Research Questions
- What was the effect of internal auditing on the performance of small and medium size enterprises in Buea Cameroon?
- What was the effect of internal audit staff expertise on the performance of small and medium size enterprises in Buea Cameroon?
- What was the effect of internal audit control on the performance of small and medium size enterprises in Buea Cameroon?
- What was the influence of top management support of internal audit function on performance of small and medium size enterprises in Buea Cameroon?
