ABSTRACT

The main objective of this study was to examine the effect of internal audit on the quality of financial statements of corporate organizations in Buea. The research design for this study was a descriptive research design, which made use of the primary sources of data collection. Data was collected from thirty employees of corporate organizations in Buea using a selfadministered questionnaire. Convenience sampling technique was used for this study. Descriptive and the inferential statistics were used to analyze the data.

The descriptive statistics analysis was done by the use of tables, simple bar charts and pie charts on which the measures of central tendency such as the frequencies, mean, and standard deviation were indicated. An ordinary least squares (OLS) analysis was conducted to test each hypothesis established for the study. The multiple linear regression analysis revealed that the independent variables (competence, independence, and objectivity of internal audit staff) collectively have a significant effect on the quality of financial statements, explaining 76% of the variation in the dependent variable. The individual analyses showed that competence, independence, and objectivity of internal audit staff have positive and significant effects on the quality of financial statements, while management support to internal audit staff has a positive but not statistically significant effect.

The researcher therefore recommended that corporate organizations in Buea should focus on enhancing the objectivity, competence, and independence of their internal audit staff, as these factors have a significant impact on the quality of financial reporting. Strategies should be developed to promote the objectivity of internal audit staff, such as establishing clear reporting lines, implementing robust performance evaluation systems, and ensuring adequate resources and support for the internal audit function. Another recommendation was for efforts to be made to improve the competence of internal audit staff through ongoing training, professional development, and recruitment of individuals with relevant skills and expertise. Key words: Internal Audit, Quality of Financial Statements.

CHAPTER ONE
INTRODUCTION

1.1 Background of Study

In recent times, auditors have been put under pressure to ensure that their reports constitute assurance to investors that their funds are put into good use and properly accounted for. In Cameroon, every incorporated company is required to appoint an external auditor, who is required to render an independent opinion on the financial statements; whether or not they show a true and fair view. The OHADA uniform act relating to commercial companies and economic interest groups (UACCEIG) states that every auditor of a company shall have a right of access, at all times, and to the books of accounts and vouchers of the company and to such information and explanations as may be necessary in the course of an audit. The auditor shall make a report to the members of the company on the accounts
examined by them. The auditor in performing his duties is expected to exercise all care, diligence and skills as is reasonably necessary in each particular circumstance. Audit report is the medium through which the auditor expresses his opinion on the financial statement examined by him. Due to familiarity, threat of replacement of an auditor, provision of book-keeping services by the auditor and many other factors, the auditor mayNwant to issue an unqualified audit report even when the situation on ground provedotherwise. This situation raises doubt about the independence of an auditor. Independence is the cornerstone of accountability. The challenge is that corporate management hires, fires, and pays both their internal and external auditors. Auditors, therefore, develop good relationships with management to keep the job of the client. They may not, therefore, be independent of the corporate management.