Chapter One: Introduction

1.1 Introduction

This chapter delineates the research findings on the pivotal role of internal audit in enhancing the performance of local government authorities. The focus of this research is particularly on the financial dimension of management control systems within organizations. It investigates the current state of the council’s internal audit functions in relation to their contribution to financial performance enhancement.

The research was conducted within the Buea Municipal council over the period from January 2020 to May 2020. This chapter also aims to elucidate the background of the local government council, the essence of the problem, the statement of the problem, the aims of the study, research queries, the significance of the study, its scope, the constraints encountered during the study, and the delimitations. These aspects will collectively aid in thoroughly examining the subject matter, leading to conclusive insights and recommendations. The theoretical underpinnings of audits, as well as other controlling entities that advocate for public sector accountability through solid corporate governance, effective risk management, and transparency in governmental operations, are also to be explored in depth.

1.1.2 Background to Local Government Authority (Buea Council)

1.2.1 Local Government System in Cameroon

Cameroon comprises ten regions, including eight French-speaking and two English-speaking regions that unified on 11th February 1961 during the tenure of President Ahmadou Ahidjo. The English-speaking Southern Cameroon experienced British colonialism, which instituted Indirect Rule, greatly influencing the council’s performance. Conversely, the French introduced Assimilation. The fusion of these two mandated territories has led to an evolution in their systems, shaping them into what they are today. The Buea Municipality is located at the foothills of Mount Cameroon and extends to the sandy beaches of the Atlantic Ocean. It is bordered by towns like Limbe, Muyuka, Tiko, and Idenau district and experiences an equatorial climate with moderate temperatures and slight seasonal variations. Buea boasts a modest economy centered around agriculture, administration, business, tourism, and finance.

1.2 The Research Problem

In local government entities, the management system pertains to organizational policies and procedures that ensure program goals are met, resources align with the agency’s mission, compliance with laws and regulations is upheld, and reliable and timely information is acquired, maintained, and reported for decision-making. Councils are regulated by acts that provide for revenue sources, fund management, and financial governance, ensuring proper financial management within the council system. The finance office oversees budget planning and financial management.

Internal audit serves as an independent evaluative activity within ministries, departments, agencies, or reporting units, offering services to the heads of these units. It functions by examining and evaluating the adequacy and effectiveness of internal controls and conducting value-for-money audits to ensure robust internal control systems and accounting systems are in place. Internal auditors are charged with reviewing, appraising, and reporting to the council’s board members, safeguarding assets from losses due to fraud, waste, extravagance, inefficient administration, and other causes. Failures in these areas lead to an expectation gap between auditors and the general public.

The goal of this study is to assess the role of internal audits in enhancing the financial performance of local government entities by curbing financial resource mismanagement and bridging the expectation gap.

1.3 Research Questions

With the financial rules of the finance office guiding the local council’s financial operations, the research aims to address the following questions:

1.3.1 Main Research Question

Why is gross financial mismanagement still reported within the council?

1.3.2 Specific Research Questions

) What is the role of internal audit in Buea council?

ii) Is the internal audit in Buea council performing its duties as dictated by the rules and guidelines?

iii) What are the limitations affecting the role of the internal auditors in Buea council?

iv) What improvements can be made to enhance the performance of the internal audit unit?

v) What is the impact of internal control components on output performance in Buea council?

1.4 Research Objectives

1.4.1 Main Objectives

The primary aim of the research is to evaluate the role of internal audit in enhancing financial management systems within the council and propose potential improvements and measures to rectify shortcomings.

1.4.2 Specific Objectives

i) To ascertain the presence of a robust internal control system in the Buea Municipal Council.

ii) To determine whether expenditures in the council comply with the established rules and guidelines.

iii) To assess the independence and efficacy of the internal audit function.

iv) To suggest initiatives to augment the performance of the internal audit unit in the Buea Municipal Council.

v) To examine the influence of internal control components on output performance in Buea council.

1.5 Research Hypothesis

HO: Internal auditing does not significantly influence the financial performance of councils.

HA: Internal auditing significantly influences the financial performance of councils.

1.6 Scope of the Study

The study will be carried out within the Buea Municipal Council, aiming to uncover the factors contributing to the effectiveness of internal auditing within the council. Resources such as human capital, time, and money will be optimized, omitting other information deemed irrelevant to the topic’s requirements. This approach will facilitate a comprehensive analysis and the formulation of solid conclusions.

1.7 Significance of the Study

The importance of this study lies in its anticipated practical and strategic recommendations for improving identified weaknesses within the council’s financial management systems.