Abstract
This paper has focused much on the independence and performance of internal audit in public
sector organizations. The research objectives of this project are to examine the relationship
between internal audit and the management in all council operations, to assess effectiveness of
internal audit controls both existing and proposed functions, to examine challenges faced by Ifo
municipality in upholding independence of internal audit and accountability including
management’s behaviour, to determine types of internal audit and their subsequent efficient
methods at the council, to investigate how size and resourcing of internal audit affect objectivity
and efficiency and to recommend strategies of establishing an effective and independent internal
audit. In the literature review methods of measuring the effectiveness of internal audit activity
were discussed in detail. This study provides empirical evidence as to the main factors
influencing internal audit independence. I
Introduction
The purpose of this chapter as the opening interval is to envelop the background to the study,
thus the dramatic environment where the research is being taken, a statement of the problem
demonstrating the problems which drove the need for research. Other crucial aspects such as
research objectives, research purpose, and aim and research questions will also be covered in the
opening episode. The section has also wrapped the delimitation of the study, limitations,
definition of terms and a summary. This would be of major importance to various entities such as
the general public mainly residents, local authorities mostly Ifo municipality.1.1 Background of the study
Internal auditing has gradually become a crucial profession in good governance especially in
public sectors. However, much emphasis has been credited to external auditing which left
importance and independence of internal audit a nagging question in the minds of many.
Independence is the cornerstone of the internal auditor’s profession. Proficient and qualified
auditors draw their significance and credibility from the deep-seated postulation of independence
of behaviour, mentality, appearance and functionality. Preamble research of auditing and its
purpose for many years has been designed for the context of external audit. Apart from this,
countless record keeping errors, asset misappropriation and fraud has escalated the need for
autonomy and impartiality of internal audit. The inspiration for this study is mainly channelled to
the gradually transforming duties, functions and growing responsibilities of internal audit in local
authorities. Independence of internal audit is the most distinctive corporate governance’s
transparent and accountability mechanism .The main functions of internal auditing are financial
controlling, management, internal safe guarding of funds and assets, internal consultancy service
and risk management .
Much emphasis has been put on effective components of public good governance relating to
internal audit. Effective powers and authority has been mandated to external auditors than
internal auditors. Furthermore, according to Stewart and Subramaniam (2009) the main rationale
why internal auditors have grown in importance is that they reduce self-review, social pressure,
economic interest, personal relationship and familiarity, cultural and cognitive biases. They also
produce and identify a variety of safeguards against these threats. The current situation in the
world is full of substantial pressures on public finances and resources; this demand requires all
national and local authorities to manipulate public resources objectively and efficiently with a
developmental vision, ensuring that essential basics have been given brisk attention. The
pressures of fraud, corruption and misuse of resources have been evidenced by workshops of
Public Internal Control Systems worldwide for instance, the European Union compendium
which was initiated by 27 countries in order to refurbish internal audit operations in public sector
organizations, according to the compendium of Public Internal Control Systems of European
Union members (2012). More over the Southern Africa Development Commission Protocol on
Corruption (2001) emphasised much on the improvement of public sector auditing in order to
promote economic development among its member states.1.2 Statement of the problem
There have been many descriptions on operations of internal audit. Internal audit as a
department within an organization is responsible for examining all financial and non financial
transactions of an organization to ensure that there is adherence and compliance. The
establishment of internal audit as an independent department within an organization is to make
sure there is efficiency and effectiveness in service delivery because issues of service delivery
are at the centre of good governance nowadays.
Most of the public sector management working papers do not provide adequate documentation
because of this problem. Staff of the internal audit department is not well remunerated and it
makes them to lack interest in their work. Many adduce the argument that internal auditors being
employees in public sector do not have the liberty to exercise the unbiased and independent
attitude so necessary to an auditor.
In the heat of controversies for inept public sector performance, hence, this research into the
effectiveness of using internal audits as instrument of improving public sector management.1.3 Research Objectives
ï‚· To examine the relationship between internal audit and the management in all council
operations.
ï‚· To assess effectiveness of internal audit controls both existing and proposed functions.
ï‚· To examine challenges faced by Ifo municipality in upholding independence of internal audit
and accountability including management’s behaviour?
ï‚· To determine types of internal audit and their subsequent efficient methods at the council.
ï‚· To investigate how size and resourcing of internal audit affect objectivity and efficiency.
ï‚· To recommend strategies of establishing an effective and independent internal audit.1.4 Research Questions
ï‚· What is the relationship between management and internal audit towards establishment of
independent internal audit?
ï‚· How effective are the present and proposed internal audit functions, checks and controls?
ï‚· What are the challenges faced by Ifo municipality in establishing independent internal audit
including management’s behaviour?
ï‚· Which types of audits does internal audit at Ifo municipality use in examining compliance
and how does management subsequently accept them?
 How do the size, resourcing and attitude of management affect achievement of council’s
goals and functionality of the internal auditors at the municipality?
ï‚· What are the recommendations to establish independent, objective and effective internal
audit at Ifo municipality?1.5 Significance of the Study
The significance of internal auditing has grown in importance. This research may be capable of
providing constructive and functional glow to various stakeholders. It may fabricate procedures
and mechanisms of improved accountability and transparent operations to residents on effective
resource use. National government, as the central authority may realize the importance of
establishing strong internal auditing progression and internal audit committee rather than putting
much emphasis on external auditing. Furthermore, the research will discover financial and assets
policy areas which are in need of attention, unfolding drawbacks and areas of improvement.
Apart from this, Ifo municipality may instigate and extract the validity of this research to be of
great magnitude considering improved record keeping, asset and cash receipting, use of
accounting methods which are compatible with the modern technology, improved transparency
through electronic government (e-government) and to improve on social accountability
mechanisms .In addition, the research may help the stakeholders to realise their importance, role
and responsibility in enhancing independent effective internal auditing methods. Moreover, the
local authority may formulate by laws supporting the national fiduciary functions of public
sector accounting officers. They may use this research to improve the size, competence,
equipment and attitude of management and councillors towards the internal audit department.1.6 Limitations
ï‚· The research was limited due shortage of resources such as time and funds. The inadequacy
of these two resources confined the accuracy and scope of this research. In this context, the
researcher ensured that 6 interviews were done in a day and also administration of
questionnaires and interviews at some point were done simultaneously in order to be time
effective.
ï‚· Various executives and representatives have hidden useful information arguing that
information about independence of internal audit is crucial, private and confidential. The
researcher used communication and education as a panacea to this challenge by explaining to
audit officials that the information is for pure academic reasons and shall remain convinced
and undisclosed to unauthorized persons.1.7 Definition of terms
 Independence – a virtue whereby one’s judgment is not affected by a circumstance or
relationship Mallin (2009).
 Auditing – are procedures in which independent third parties systematically examine the
evidence of adherence of some practices to set norms and standards of business. Auditing is the
accumulation and evaluation of evidence about information and established criteria Zhou and
Zinyama (2012).
 Internal auditor- an employee who is mandated with the responsibility of examining
organization’s position of financial transactions and assets who is permanently employed in
auditing as one’s lifetime profession within the same organization earning stipulated salary
every month, Brody and Lowe (2000).
 Corruption- abusing public resources for non public and personal gain, Networks (2004).
 Stakeholders- a corporate fraction that can affect or be affected by the actions of the community
or organization as a whole, without whose support the organization would cease to exist.
Dankovetal (2014)
 Risk- is the potential negative anticipated that is undesirable and leads to loss. Matzenbaum
(2002)