Project Work Final

THE EFFECTIVENESS OF EXTERNAL AUDITING ON THE FINANCIAL
PERFORMANCE OF LOCAL GOVERNMENT ORGANISATIONS: THE
CASE OF LA NKWANTANANG MUNICIPAL ASSEMBLY.
A thesis submitted to the Faculty of Accounting and Finance in partial fulfillment of the
requirements for the award of the degree of Master of Business Administration in accounting and
finance by the University of Professional Studies Accra, Ghana.
PRESENTED BY:
Mah-fuz Mohammed Abul-khair
Index Number: 10282293
And
Imoro Zakari Sham-deen
SUPERVISED BY:
Dr. Asumadu Edward
I
May 2023
II
DECLARATION
I, Mah-fuz Mohammed Abul-khair and Imoro Zakari Sham-deen, declare that this dissertation is
our original work and has not been published and/or submitted for any award in any other
university.
Signed…………………………………………
Mah-fuz Mohammed Abul-khair
Signed…………………………………………
Imoro Zakari Sham-deen
Date…………………………………………….
I
DEDICATION
We dedicate this project to God Almighty our creator, our strong pillar, our source of inspiration,
wisdom, knowledge and understanding. He has been the source of our strength throughout this
program. We also dedicate this project work to family and many friends. A special thanks to our
supportive parents for their encouraging thoughts. We dedicate this Project to all the people who
have worked hard to help us complete this project.
II
ACKNOWLEDGEMENT
We express our profound gratitude to the Almighty God for his protection during our study. We
couldn't finish our academics without Him.
Our heartfelt gratitude goes to our family, particularly our parents and guardians, for their
financial and moral support.
We would want to express our heartfelt appreciation to our friends, colleagues, and students
who, in one way or another, make our time joyful. We also thank everyone who helped us
achieve academic excellence who isn't listed in our work appreciation. Your contribution is
significant.
As a result, we would like to express our heartfelt gratitude to our supervisor, Dr. Asumadu
Edward, for his unconditional guidance and professional efforts.
Thanks also to the UPSA administration and lecturers for their efforts and support in preparing
me academically.
Thanks to the management of the La Nkwantanang Municipal Assembly for allowing us to
conduct the research freely and to all workers who assisted us in completing the study.
Almighty God blesses you all.
Thank you.
Contents
III
DECLARATION i
DEDICATION ii
ACKNOWLEDGEMENT iii
ABSTRACT v
CHAPTER ONE 1
Background of the study 1
1.1.1 Financial management 1
1.1.2 External audit 2
1.1.3 Effectiveness of external audit 3
1.1.4 Local government organizations 4
Statement of problem 5
Objectives of the study 6
General objectives 6
Specific Objectives 6
Research Questions 6
Significance of the study 6
1.3.5 Structure of the Study 7
CHAPTER TWO 8
2.1 Introduction 8
2.2. Theoretical Literature 8
2.2.1 Origin of auditing 8
2.2.2 Role Conflict Theory 10
2.2.3 Financial Management 10
IV
2.2.4 Local government organizations 11
2.2.5 Financial management in public organizations 12
2.3 Review of Empirical Literature 14
2.3.1 Independence of Auditors 14
2.3.2 Effectiveness of internal controls 18
2.3.3 Quality of audit delivery 18
2.3.4 Quality of external audit and the reliability on their service 20
2.3.5 Impact of Auditing in Public Organizations 20
2.4 Conclusion and Gaps 23
CHAPTER THREE 24
METHODOLOGY 24
3.1 Research Design 24
3.2 Study Population 24
3.3 Sample size 26
3.4 Data collection 26
3.4.1 Reliability and validity 26
3.5 Data Analysis 27
CHAPTER FOUR 28
DATA ANALYSIS, INTERPRETATION AND DISCUSION 28
4.0 Introduction 28
4.1 Socio-Demographic Background of Respondents 28
4.1.1 Socio-Demographic Background of staffs of the bank 28
4.1.1.1 Gender 28
V
4.1.1.2 Age 29
4.1.1.3 Marital Status 30
4.1.1.4 Education level 31
4.1.1.5 Level of Formal Education 31
4.1.1.6 Religion 32
4.1.1.7 Occupation 33
4.1.1.8 Position in the Organizations 33
4.1.1.9 Years worked in the Municipal Assembly 34
4.2 Descriptive analysis of the objectives of the study 35
4.2.1(Part 1a) Effectiveness of Audit 35
4.2.1.1 Steps auditors take to ensure their independence and objectivity 35
4.2.1.2 Auditors understanding of the organizational risk and issues that are considered
important. 36
4.2.1.3 Firmness of the auditors with challenges to management. 37
4.2.1.4 Internal Quality Control Procedures 38
4.2.1.5 Internal audit function and auditors. 39
4.2.2 (Part 1b) Quality of Delivery 40
4.2.2.1 Auditors-Management relationship 40
4.2.2.2 Explanation of audit plan and findings. 41
4.2.2.3 Management accounting stance and the views of auditors 42
4.2.2.4 Auditors work duration and reporting period 43
4.2.2.5 Emergence of issues and the readiness to act 44
4.2.2.6 Auditors-Audit committee relationship 45
VI
4.2.3 (Part 2) Quality of People and Service 46
4.2.3.1 Auditors and their characteristics in the field of work. 46
4.2.3.2 Audit and its Professionalism 47
4.2.3.3 Level of independency in the audit work. 48
4.2.3.4 Practicality and effectiveness of recommendations 49
4.2.3.5 Auditors Judgments 50
4.2.3.6 Auditors and financial discipline 51
4.2.3.7 External Auditors and value for money. 52
4.3 Measures to improve the quality of auditing in local governments organizations 53
CHAPTER FIVE 55
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS 55
5.1 Introduction 55
5.2 Summary of the study 55
5.3 Major findings 56
5.3.1 Financial Performance in Local Government Organizations 56
5.3.2 Factors that hinders the effectiveness of internal control system in the assembly 57
5.3.3 Specific roles external auditors play in enhancing effective local government financial
activities 58
5.3.4 How can the challenges of external auditors be minimized 59
5.4 Conclusion 60
5.5 Recommendation 61
6.0 References 62
VII
7.0 APPENDICES 65
VIII
ABSTRACT
The study is on the Effectiveness of External Audit on the Financial Performance of Local
Government Organization, using a case of La Nkwantanang Municipal Assembly. The case
study technique was chosen to give an in-depth assessment of the Municipal Assembly auditing
methods as a fair representative of public entities in Ghana. Purposive sampling method was
utilized to select sample units. Data for the study were gathered by observation, a review of the
literature, and an interview supplemented by a questionnaire that was pilot tested to verify data
reliability and validity. The obtained data was summarized, coded, and statistically evaluated to
produce descriptive statistics, which were then presented in the form of tables. It attempted to
identify the contributions of external audit to efficient financial management in public
organizations, as well as to determine whether external auditors exercise professional ethics and
competencies when auditing public organizations. The findings revealed that external auditors
play a critical role in ensuring that the Municipal Assembly adheres to financial reporting
requirements and standards. It also established that internal auditors collaborate with external
auditors to make their jobs easier. The study findings will be useful to government and finance
management in developing rules to streamline external auditing in public organizations. Strict
measures should be put in place to monitor record keeping techniques and procedures in the local
government organizations in Ghana.
IX
CHAPTER ONE
INTRODUCTION
1.0 Background of the study
1.1.1 Financial management
Financial management is the usage of financial estimates that have an impact on an
organization's financial condition. Financial management involves planning, organizing and
controlling of an organization financial activities, such as procurement and usage of
organizations resources. Financial management is linked to procurement, allocation and control
of organizations financial resource. Financial management refers to the part of the management
activity, which is concerned with the planning and controlling of firms financial resources. It
deals with finding out various sources for raising funds for the firm (Kirti Pandye 2016).
Importance of financial management is to ensure regular and adequate supply of funds to the
concern as well as adequate returns to the shareholders and optimum utilization of organizational
funds (Steven, 2005). Financial Management involves the process of planning, budgeting,
accounting and controlling of financial resources deployed within an organization. It is a system
that provides funds for an organization, ensures the maintenance and the control of the funds as
well as reports on the use of the funds (Awaitey, 2003).
Public financial management is a crucial part of the governance process. The term “public
financial management” has only come into common use over the past twenty years, with a
coherent and compact definition of PFM surprisingly absent in the literature (Allen, Hemming,
and Potter 2013). Public financial management is the linchpin that ties together available
resources, delivery of services, and achievement of government policy objectives. If it is done
1
well, PFM ensures that revenue is collected efficiently and used appropriately and sustainably
(PEFA Secretariat 2016).
1.1.2 External audit
An external audit is a type of assurance engagement that is carried out by an auditor to give an
independent opinion on a set of financial statements. The objective of an audit of financial
statements is to enable the auditor to express an opinion on whether the financial statements are
prepared, in all material respects, in accordance with an applicable financial reporting
framework. An audit of financial statements is an example of an assurance engagement.
(Association of Chartered Certified Accountants (ACCA) 2010).
External audit serves an important economic purpose to the public by reinforcing the confidence
and trust in financial reporting and strengthening accountability (Institute of Chartered
Accountants in England and Wales (ICAEW), 2005). Auditing also protects the concerns of the
stakeholders to an organization. Stakeholders expect that external audit should enhance the
credence of the financial statements, that the information so contained does not contain material
error and fraud because an audit has been conducted by an independent professionally competent
auditor who possess sound knowledge of the company’s business and the requirements of
financial reporting (Dawkins, 2015).
External auditor has the responsibility for the prevention, detection and reporting of fraud, other
illegal acts and errors ( Oluwagbemiga 2010). This is one of the most controversial issues on
external audit and has been one of the most frequently debated areas amongst auditors,
politicians, media, regulators and the public. This debate has been especially highlighted by the
collapse of both small and big corporations across the globe. The financial statement of the
external audit is a monitoring mechanism that helps reduce information asymmetry and protect
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the interest of various stakeholders by providing reasonable assurance that the management’s
financial statement are free from material misstatements and errors. The external audit is subject
to many direct and indirect influences. In tandem with the stakeholder theory Okolie (2014),
perceptions of the external audit vary amongst stakeholders depending on their level of direct
involvement in audit and on the perspective through which they evaluate the external audit.
The increasing issues of financial misappropriation and material misstatement in the financial
operations of various local government organizations is on the rise and the various audited
reports of Metropolitan, Municipal, and District Assemblies year on year shows no significant
improvement from previous.
The audited reports on the various MMDAs in the country showed approximately GHC 70.1
million mismanaged funds and resources, which according to the report represents a 32% (almost
GH 17 million) increase in the 2015 financial irregularities of the assemblies that the Auditor
General’s Report pegged at almost GH53.2 million. According to the 2016 Auditor-General’s
Report, management and staff of the assemblies continued to violate measures put in place to
safeguard the public purse.
Cash irregularities totaling GH32,684,459.20 was recorded by the 216 assemblies. Under this
category, 93 assemblies were involved in unsupported payments worth a little over GH21
million; 18 assemblies recorded unretired impress of GH 540,301; 12 misapplied funds worth
GH1.5 million; 13 could not account for GH543,294.
In light of the various misstatements and misappropriation of the funds of the state reported on
by the Auditor General every year, it was prudent to conduct a study on the effectiveness of
external auditing on the financial performance of the local government organizations.
3
1.1.3 Effectiveness of external audit
External audit practices are effective tools for improving resource management in private and
public organizations. That is to carry out external audit practice that promotes proper utilization
of resources, promoting accountability by improving on recommendations provided from audit
reports and lastly promoting efficiency in financial institutions (Sridhar, 2016). Furthermore, the
external audit function has been identified as a tool for ensuring the internal control system's
effectiveness. Salehi (2010) stated that the effectiveness of external audit established that audit is
an important part of the capital market framework. This is because it not only decreases the cost
of information exchange between managers and shareholders, but it also serves as a signal to
markets that the information provided by management is reliable.
According to (Njoroge, 2016) there are a number of factors that hinder the effectiveness of
external audit. Cases of fraud, corruption, misappropriation of funds public funds and poor
management.
1.1.4 Local government organizations
According to the International Encyclopedia of Social Sciences, local government may be
loosely defined as a public organization authorized to decide and administer a limited range of
public policies within a relatively small territory which is a sub-division of a regional or national
government. Public institutions play a crucial role in the society through implementation of
government policies to promote national economic, social and other developmental goals. In
general terms, local governments are public legal entities with special revenues, budgets and
personnel who have duties and powers laid down by law, whose decision bodies are determined
by the local people to meet the common needs of the local community living in a particular
geographical area (Özer & Akçakaya 2014). Genuine and effective external audit is a crucial
4
requirement for ensuring accountability and creating transparency in the use of public funds.
Such an audit provides assurance that information in financial reports is accurate and contains no
material errors that would affect the reports’ interpretation. This helps to ensure budget outcomes
by giving stakeholders an accurate picture of financial results. External audit in public
institutions (local government organizations) involve a review of the budget, the allocation of
funds and the actual expenses to ensure the budgeted revenues and expenses were accurately
compiled and used. The objective is to promote the proper and effective use of public funds, the
development of good financial management (Lowe and Pany, 1995).
Statement of problem
Internal auditing and internal control play a crucial role in the financial management of public
organizations because they demonstrate how taxpayer money has been spent, help to assess
whether the financial statements present a true and fair picture, and reveal the organization's true
financial situation. These institutions consistently undermine the efficacy of external auditors due
to poor financial management. Moreover, financial managers in public institutions believe that
the work done by internal audits and controls is enough to guarantee sound financial
management. They view outside auditors as investigators tasked with finding mistakes. and
frauds alone, which causes misunderstandings between the auditors and other employees or
authorities.
Public funds are not managed effectively despite internal control and internal audit; as a result,
an independent authority is required to examine books of accounts. It is thought that the use of
external auditors has enhanced financial management in public companies.
Despite this benefit, there is little research on how it affects financial management in public
institutions. This is due to the fact that the majority of empirical literatures focus on external
5
audit in private companies while excluding public institutions. By evaluating the effect of
external audit on the financial performance in public organizations, specifically the local
government organizations, this study seeks to close this empirical gap (Effectiveness of external
auditing on the financial performance of Local Government Institution; case of LAKMA)
Objectives of the study
General objectives
The main purpose of the study is to examine the extent to which the activities of external
auditors will help reduce misappropriation of government funds and help curb the instances of
corruption perception in La NKWANTANA MADINA MUNICIPAL ASSEMBLY.
Specific Objectives
 To assess the effectiveness of internal controls in the La NKWANTANA MADINA
MUNICIPAL ASSEMBLY
 To assess the quality of audit delivery
 The quality of external audit and the reliability on their service.
Research Questions
Research questions formulated are:
 What are the factors that hinders the effectiveness of internal control system in the
assembly?
 What specific roles do external auditor play in enhancing effective local government
financial activities?
 How can the challenges of external auditors be minimized?
6
Significance of the study
This study is aimed at asserting the degree to which the introduction of external auditing as part
of control measures in the LA NKWANTANANG MUNICIPAL ASSEMBLY has helped in
improving the financial performance and discipline in the utilization of resources and how the
level of confidence that the citizens have in their activities have been revived. The study is also
aimed at asserting the level of compliance to legal requirements proposed by the local
government Act since the inception of external Auditors as part of control measures for the LA
NKWANTANG MUNICIPAL ASSEMBLY.
1.3.5 Structure of the Study
The study is organized into five chapters as follows:
Chapter 1: It comprises an introduction presenting the background of the study, statement of the
problem, objectives of the study, research questions, significance of the study, and structure of
the study.
Chapter 2: The Chapter will focus on literature review.
Chapter 3: This Consists of the research methodology.
Chapter 4: The chapter will focus on presentations and analysis of Data collected from the field.
Chapter 5: Summary, Conclusions, and recommendations of the study.
7
CHAPTER TWO
LITERATURE REVIEW
2.1 Introduction
2.2. Theoretical Literature
2.2.1 Origin of auditing
The origin of auditing can be traced back to the 18th century, when the practice of large scale
production developed as a result of the Industrial Revolution. Systems of checks and counter-
checks were implemented to maintain public accounts as early as the days of ancient Egyptians,
Greeks, and Romans. The last decade of the 15th century was a crucial period during which a
great impetus was given to trade and commerce by Renaissance in Italy, and the principles of
double-entry bookkeeping were evolved and published in 1494 Venice in Italy by Luca Paciolo.
External audit is considered as one of the most important processes contributing to the
achievement of reliable accounting information, which produces accurate and reliable
information through using controls tools for different activities in the organization (Youssef,
2013). The external audit represents the audits operations for the parties outside of the entity
under auditing, by experts specialized independent of entity under auditing, or its staff or
officers, called the external auditors. These auditors are qualified and independent, and the
external auditor performs the audit in accordance with the international auditing standards
(Lotfii, 2005). According to American Accounting Association committee auditing is a
systematic process of objectively obtaining and evaluating evidence regarding assertions about
economic actions and events to ascertain degree of correspondence between those assertions and
established criteria and communicating the results to interested users.
8
As a systematic process: Auditing is a logical, purposeful, structured approach to decision-
making; it is not an unplanned, haphazard process.
Objectively obtaining and evaluating evidence: Auditing involves the collection of evidence.
Evidence represents the information collected by the auditor that will affect the auditor’s
decision process. Although evidence itself may be more or less conclusive in nature, the process
of collecting and evaluating evidence should be objective.
Assertions about economic actions and events: Assertions are related to the financial statements
of the organization being audited. The auditor is given information and statements from the
auditee. These statements represent the auditee’s assertions about actions and events and include
not only the statements themselves but also the accounting system and process. (This statement
looks, at first glance, to relate only to economic issues and financial statements. However, if you
understand that property is in fact a function of economic values and that financial statements
include statements of assets and inventories, you can see where property issues fit.)
The degree of correspondence between assertions and established criteria: Correspondence here
means the comparison of the assertions of the auditee to the established criteria. The established
criteria may include, but are not limited to, the following sources: Generally Accepted
Accounting Practices (GAAP), Federal Acquisition Regulations (FAR), State or Municipal
Regulations, and Corporate Policies and Procedures. In countless situation however, the auditor
examines assertions other than those contained in the financial statements (IFAC 2001).
Communicating results to interested users: The communication of the auditor’s assurance or
information is referred to as attestation, or the attest function. Attestation is a communicated
statement of opinion (judgment) based upon convincing evidence by an independent, competent,
9
authoritative person concerning the degree of correspondence in all material respects of
accounting information communicated by an entity with established criteria.
2.2.2 Role Conflict Theory
Role Conflict Theory provides a theoretical explanation for the existence of an expectation gap.
The theory is developed by Rizzo, House and Lirtzman in 1970. Role Conflict Theory is based
on the following assumptions: the auditor is required to monitor the client‘s financial statements
and the public expects the auditor to faithfully carry out that role (Koo and Sim,1999). The
auditor is in conflict because he or she must firstly serve the professional regulations and rules
governing auditor independence. Then, this must be balanced against his or her role as the watch
dog‘ who should be serving the interests of the users and the client as well as looking after his or
her own self – interest (Alleyne and Devonish, 2006). The role of the auditor is subject to the
interactions of the normative expectations of the various interest groups in the society having
some direct or indirect relationship to the role position (Davidson, 1975). He noted that these
different groups may hold varying expectations of the auditor and these expectations may change
from time to time depending on the specification of their own role requirements and the
interaction of other forces in the society. Hence, the auditors are put in situations with multiple
roles and expectations. Furthermore, Koo and Sim (1999) argue that role conflict may arise
because of the expectation gap that exists between the auditors and users. Users expect auditors
to serve the public and to uncover management fraud (Mills and Bettner, 2012).
2.2.3 Financial Management
Financial management is the usage of financial estimates that have an impact on an
organization's financial condition. Financial management involves planning, organizing and
controlling of an organization financial activities, such as procurement and usage of
10
organizations resources. Financial management is linked to procurement, allocation and control
of organizations financial resource. Financial management refers to the part of the management
activity, which is concerned with the planning and controlling of firms financial resources. It
deals with finding out various sources for raising funds for the firm (Kirti Pandye 2016).
Importance of financial management is to ensure regular and adequate supply of funds to the
concern as well as adequate returns to the shareholders and optimum utilization of organizational
funds (Steven, 2005). Financial Management involves the process of planning, budgeting,
accounting and controlling of financial resources deployed within an organization. It is a system
that provides funds for an organization, ensures the maintenance and the control of the funds as
well as reports on the use of the funds (Awaitey, 2003).
2.2.4 Local government organizations
According to the International Encyclopedia of Social Sciences, local government may be
loosely defined as a public organization authorized to decide and administer a limited range of
public policies within a relatively small territory which is a sub-division of a regional or national
government. Public institutions play a crucial role in the society through implementation of
government policies to promote national economic, social and other developmental goals. In
general terms, local governments are public legal entities with special revenues, budgets and
personnel who have duties and powers laid down by law, whose decision bodies are determined
by the local people to meet the common needs of the local community living in a particular
geographical area (Özer & Akçakaya 2014). Genuine and effective external audit is a crucial
requirement for ensuring accountability and creating transparency in the use of public funds.
Such an audit provides assurance that information in financial reports is accurate and contains no
material errors that would affect the reports’ interpretation. This helps to ensure budget outcomes
11
by giving stakeholders an accurate picture of financial results. External audit in public
institutions (local government organizations) involve a review of the budget, the allocation of
funds and the actual expenses to ensure the budgeted revenues and expenses were accurately
compiled and used. The objective is to promote the proper and effective use of public funds, the
development of good financial management (Lowe and Pany, 1995).
2.2.5 Financial management in public organizations
Public financial management is a crucial component of the governance process, just as managing
finances is a crucial management function in any organization. According to the Association of
Chartered Certified Accountants (ACCA 2021) on rethinking public financial management
defined public financial management as a way governments manage public resources, including
collecting revenue and controlling expenditure, and the impact such resources have on the
economy and society. The success of this will depend on the effectiveness of governments,
which itself depends on how effective they are at financial management. Public financial
management is about both the processes governments use to manage their money, and the results
they achieve from financial flows, in the short, medium and long term. Resource generation,
resource allocation and expenditure management or resource utilization are the essential
components of a public financial management system (Pany and Reckers 1988).
Functions of financial management:
To estimate required capital: The first and foremost responsibility of financial manager is to
predict the sum of required capital. There are a few regions for utilizing financial management
and execution like foundation, development, and modernization of business, investing in fixed
resources and meet day by day required working capital (Azam, 2018).
12
To determine capital structure: When financial managers estimate required capital of the
organization then after that they have to make imperative decisions about forms and fraction of
various sources financial resources. In this point, the suitable blend of equity and debt resources
and different short and long term debt proportions are estimated by finance managers.
Minimizing the expense of capital and raising the wealth of shareholders is the main aim of
finance managers (Azam, 2018).
To evaluate and select sources of funds: Financial management of the organization will have
different opportunities from which they can increase their earnings of the organization. But they
will avail only those opportunities which are very beneficial and increase the earnings of
organization with lower expenses. And ultimately the wealth of shareholders will be increases.
To allocate and control funds: The role of financial management is to calculate the required
amount of capital which is needed for each department of the organization and then they
distribute those capitals to respective department according to their needs. The changes in
financial decisions will be made according to changes in needs of the departments and then
finance managers will alter their capital accordingly (Market Business News, 2020).
Distribution of surplus: The finance manager has to take decision about net profits. Such can be
done by the way of Dividend declaration and Retained profits. The former will be done by
recognizing the rate of dividend and other benefits such as bonus and the latter will be done on
the bases of expansion, innovation, diversification plans of the venture (Ravindranath N. Kadam
2012).
Administration of cash and financial control: Administration of available money and
achieving control over money are challenging tasks before finance manager. Taking decision
regarding cash management is a very important duty of finance manager. Ready money is
13
necessary for payment of wages and salaries, electricity bills and water bills, interest payment,
meeting existing liabilities, maintenance of enough stock, purchase of raw materials, etc.
Financial control is a critically important activity to help the business in meeting its objectives.
The finance manager has to have control over finance for which he has to answer important
questions like- Are assets being used efficiently? , Are the businesses assets secure?, Do
management act in the best interest of shareholders and in accordance with business rules? , etc.
Depending on the earning ability, market price of the share, shareholders’ expectations proper
plans are to be prepared for which he has to follow techniques like ratio analysis, financial
forecasting, cost and profit control, etc.(Ravindranath N. Kadam 2012).
Utilization of funds: Funds should be invested in those ventures which provide safety
and adequate return with least cost (Ravindranath N. Kadam 2012).
2.3 Review of Empirical Literature
2.3.1 Independence of Auditors
In the field of auditing, independence is a top priority. Audit independence refers to the ability
of the external auditor to act with integrity and impartiality during his/her auditing functions
(Akpom and Dimkpah, 2013). The significance of audit credibility was confirmed by corporate
scandals like the Enron failure. The value of auditing services depends upon the fundamental
assumption that certified public accountants are independent of their clients (Shockley 1981).
What is auditor independence? According to the Independence Standards Board (ISB, 2000)
defined independence as the: freedom from those pressures and other factors that compromise, or
can reasonably be expected to compromise an auditor’s ability to realize unbiased audit
decisions. Independence of auditor can be described as having an unbiased viewpoint while
performing an audit test, analyze the results and confirm the audit report. Auditor independence
14
increases “the effectiveness of the audit by ensuring that the auditor plans and carries out the
audit objectively” (Chepkorir 2013). The likelihood that an auditor will be thought to be biased
rises when that auditor lacks independence. This means that the auditor will not likely report a
discovered breach (DeAngelo, 1981).
Although auditor independence is beneficial for auditing purposes, it is crucial to consider how
users view auditor independence and whether it negatively impacts or undermines public trust in
auditors. Professional accounting bodies have identified potential weak areas for independence,
including unpaid fees, personal relationships, conflicts of interest, and high levels of financial
involvement (ICAEW, 2001). Therefore, it is crucial for standards-setters and regulators to
establish and enhance the public's opinion of external auditors. Citron (2003) suggests that the
ICAEW framework does not focus sufficiently on third party perceptions of independence and
ultimately promotes the profession’s own view of auditor independence. ICAEW framework
identifies threats and safeguards to objectivity. Subsequent frameworks issued by the EC (2001)
and IFAC (2001) adopt a similar approach in regards to threats and safeguards but be more
specific about the difference between independence in fact and independence in appearance,
thereby explicitly acknowledging the significance of independence in appearance. ICAEW, EC
and IFAC frameworks identify five main threats to independence as self-interest threat, self-
review threat, advocacy threat, familiarity or trust threat, and intimidation threat.
On the specific topic of auditor independence, there are extensive academic publications
(Bartlett, 1993; Firth, 1980; Knapp, 1985; Gul, 1989; Lindsay, 1992; Shockley, 1981; Geiger and
Rama, 2003). Numerous researchers have sought to identify variables that could affect auditor
independence in appearance. Majority of studies have emphasized finding the elements that
might seem to pose a threat to auditor independence in appearance. However, less focus has been
15
placed on the elements that improve financial statement users PAI (Gul, 1989; Beattie et al.,
1999). Beattie et al. (1999) measured how interested parties, including finance directors, audit
partners, and financial journalists, perceived the impact of a large pool of 45 economic and
regulatory factors on auditor independence. According to the authors, the main threat factors
were economic dependence and the provision of nob-audit services (NAS), while the main
mitigating factors were regulatory changes such as the presence of an audit committee, the risk
of being referred to the Financial Reporting Review Panel, and the risk to the audit firm of losing
its Registered Auditor Status. The four principal factors believed to impact auditor independence
are: the economic dependence of the auditor on the auditee, competition within the external audit
market, the provision of NAS (non-audit services) by the auditor, and the degree of laxity of the
regulatory framework Beattie et al. (1999, p. 71). Economic dependency is evident in the
significant portion of the auditor's overall fees paid by one client as a stronghold, the auditors'
competitive pricing, the auditees' threats of tenders, and the budgetary constraints they confront.
There has been much discussion over NAS provision, as it provides an economic relationship
between auditor and auditee, thereby resulting in financial dependence on the client. The
provision of NAS to audit clients has increased the risk of perceived dependence, according to a
few empirical studies (Shockley, 1981; Schulte, 1965; Pany and Reckers, 1983; Pany and
Reckers, 1984). Several empirical studies discovered that NAS have only minor negative effects
on the PAI (Pany and Reckers, 1988; Dopouch and King, 1991; Lowe and Pany, 1995).
According to (Teoh and Lim, 1996) additional factors that likey to impair PAI include lengthy
tenure, financial condition of the clients (Knapp, 1985), unpaid fees, existence of audit
committees and disclosure of non-audit fees (Teoh and Lim, 1996; Beattie et al., 1999), size of
16
firm (Beattie et al., 1999), auditee financial interest (Lindsay et al., 1987), size and closeness of
society by (Canning and G. William 1999).
For many years, it has been recognized that auditor independence is a critical part of the external
audit function’s credibility and serves as a monitoring tool for financial management in public
organizations. External system of audit, the audit opinion and the audit final product adds
credibility to the financial statements of public organizations so that users can rely on the
information and the entire financial reporting system is upgraded as a result. The auditor is
assumed to be independent of both the company being audited and its managers because he or
she has no motive to falsify financial statements (Knapp 1985).
A study conducted by (Maina & Kibanga, 2016) focused on factors that affect independence of
auditors in Nairobi. The study discovered that audit fees were one of the most significant
variables affecting auditor independence. Mekonnen, Agmas, & Shibru (2016) conducted a study
in Ethiopia based on efficiency of external audit engagement and its determinants in the
country’s share companies registered by the Federal Office of Auditor. According to the findings
of the study, external audit is an important factor to consider in the performance of the
companies under consideration. However, auditor independence hinders the effectiveness of
external auditing, owing to disagreements with management over fees and other factors.
Auditors are expected to help society, which establishes the reasons for the auditor’s
independence. The auditors develop an opinion on truth and fairness of the financial reports
based on management assertions rather than information that can be independently validated.
(Power 1997) further suggest that auditors need to have informational and epistemic
independence. The former aspect refers to the need to have an independent base of audit
knowledge (Power 1997). Jeppesen advances Power (1997) work with respect to epistemic
17
independence to indicate that, with the rise of new business process oriented audit procedures,
this ability to be epistemically independent is being lost as audit and consultancy become more
intertwined (Jeppesen, 1998). Independence has been the focus of almost constant controversy,
debate and analysis (Law, 2008, p.917). The level of independence required for the audits
impacts how credible and accurate financial statements are to users.
2.3.2 Effectiveness of internal controls
According to Osita (2002:106) internal control is the whole system of controls, financial or
otherwise, established by management in order to secure as far as possible, the accuracy and
reliability of the records, run the business in an orderly manner and safeguard the company’s
assets, its objectives being the prevention or early detection of fraud and errors. It may include
internal auditing.
According to Azzone and Arena (2009) effectiveness is the capacity to obtain results that are
consistent with targets objective. Dittenhofer (2001) defined effectiveness as the ability toward
the achievement of the objectives and goals. Further, (Ahmad et al, 2009; Mihret et al, 2010)
stated that a, program can be seen as effective if its outcome goes along with its objectives.
Glance (2006) asserts that internal control system refers to “the local government process and
procedure that is been established with the aim of objective achievement.” Additionally, (Amudo
& Inanga, 2009; Baltaci & Yilmaz, 2006; Jokipii 2010) stated the internal control system also
serves as a process that guides an organization towards achieving its established objectives.
According to the above definition of internal control system, it is clear that it is all about the
provision that will aid in the achievement of objectives.
18
2.3.3 Quality of audit delivery
Audit quality is critical in every organization for resource management and financial
performance improvement. The quality of audit is an important aspect that plays a role in
verifying financial transactions, law, and compliances, in addition to cross-checking budgeting
decisions, financial management decisions, operational control and expenses, administrative
expenses, and short and long-investment decisions and growth plans \ with respect to expansion
or termination. It also plays a vital role in each business organization for efficient use of its
resources, leading to an improvement in performance (Hassan & Farouk, 2014).
According to (IAASB, 2014; Heil, 2012) audit quality has become an essential issue in audit
practice today because, both internal and external stakeholders have interest in the quality of
audited financial reports of entities, DeAngelo 1981) further defined audit as the market-assessed
joint probability that an auditor discovers a breach in the client’s accounting system and is able
to report the breach. As a result, researchers have defined audit quality using these two-
dimensional approaches. The European Supreme Audit Institution (EUROSAI) defined audit
quality as the extent to which a set of inherent audit characteristics meets its requirements.
Farouk and Hassan, (2014), Eshitemi, & Omwenga (2016),asserts that many researchers used
one or a combination of proxies such as audit tenure, audit fees, audit client importance,
litigation effect, audit firm size, audit opinion, expertise and so on to measure audit quality and
compare its relationship with firms’ performance.
Audit quality is reasonable when all auditing standards, best practices, and assurance are
followed in order to provide a true picture of the organization's performance over time. Quality
in audit functions reflects the quality of financial statements, which builds trust among
stakeholders. In addition, it shows the credibility of the company’s audit committee, corporate
19
governance structure, and good management practices, leading to financial stability (Enekwe et
al., 2020).
2.3.4 Quality of external audit and the reliability on their service
External audit quality is a requirement for all audit participants. The Association of Certified
Public Accountants in 1994 in Auditing Standards stated that the quality of external audit is
achieved through adherence to auditing standards by applying a set of considerations for quality
control in auditing companies (Al-Ayeb Bin Abd Al-Rahman, 2017). The American Accounting
Association defined it as the organized process of obtaining and evaluating evidence related to
economic events in objective ways to ensure the degree of conformity of these elements with
objective standards and to present the results to the concerned parties (Ben Barika Abdel-Wahab,
2016). From the above definitions, the researchers defined the quality of the external audit as the
auditor’s ability to discover irregularities and errors in the financial statements and to ensure that
they were prepared in accordance with generally accepted standards and principles.
The auditor is concerned that the audit process is carried out correctly in order to validate the
audit results. The organization's management ensures that the audit process is carried out in a
high-quality manner in order to provide confidence in the auditors' financial statements, and in
order to ensure the financial information contained in the audited financial statements that will be
used in the decision-making process is accurate and fair. The increasing reliance of these entities
on the audited financial statements as a source of appropriate information has led to the adoption
of appropriate economic decisions and the increased accountability of the auditor to these entities
( Amjed Kareem Ghadhab, Adnan Kadhum Matrood and Ali Mahdi Hameed, 2019).
20
2.3.5 Impact of Auditing in Public Organizations
External audit serve an important economic purpose while also serving the public interest by
strengthening accountability and reinforcing trust and confidence in financial reporting. External
auditing improves the reliability of management's inherent assertions in financial statements by
obtaining and assessing audit evidence. (Beattie, Fearnley and Brandt 2001).
The public expects people in charge of handling public funds to be held completely accountable
for their actions. Ministers, Local government officials, governing bodies, managers, and
bureaucrats have the primary responsibility for making sure that public funds are managed with
the utmost honesty and intelligently used. According to Goodson et al. (2012), auditing is a
fundamental element of efficient government as it supports the governance roles of insight,
foresight and oversight, to which they added detection and prevention.
Internal and external auditing are indisputably effective monitoring mechanisms for ensuring the
effectiveness and efficiency of public sector spending. Proper external audit reliance on internal
audit, on the other hand, can result in considerable efficiencies, such as: managing myriad
stakeholders; communicating planned objectives; ensuring timely audits are conducted; and
avoiding duplication (McPhee, 2005). Internal auditors are placed in a position that enables them
to suggest improvement in the clients accounting system and controls as well as to offer ideas for
improving financial planning, tax planning and clerical efficiency (Beattie, Fearnley and Brandt
2001). However, audit processes are also influenced by the relationships that surround the
organization being audited. In the case of the public sector organizations these relationships are
very complex. As a result, the relationship between internal and external audit is critical to
achieving an efficient and effective audit outcome. Several enhancements have been
implemented to improve internal audits. Compared to external auditors, internal auditors are
21
believed to be much more vulnerable to management manipulation. The emphasis on internal
control review has led to the development of new audit goals for the examination of internal
controls. Internal auditors are placed in a position that enables them to suggest improvement in
the clients accounting system and controls as well as to offer ideas for improving financial
planning, tax planning and clerical efficiency (Beattie, Fearnley and Brandt 2001). The function
of internal auditor is to implement an internal audit function carrying out an independent
assessment of an organization to examine and evaluate the activities of organizations (Boynton et
al 2003). According to Government Finance Officers Association (GFOA) internal auditors can
provide significant benefits to state and local governments in a variety of ways. In particular,
they frequently assist management in monitoring the creation and implementation of internal
control policies and procedures. In this capacity, internal auditors serve as an additional level of
control and thereby contribute to the improvement of the government's overall control
environment. According (Diamond, 2002; Asare, 2009) internal auditing is playing a significant
role in public sector governance and PFM reforms for improvement of performance in
developing countries. The broader nature of public sector governance calls for an effective
internal auditing function to meet the demanding responsibilities imposed by stakeholders (Asare
2009). Further, Asare (2009) stated that that internal audit can help to improve governance
processes by focusing on how values are established to ensure effective and efficient control and
management of public sector entities. Asare (2009) asserts that the internal auditor’s role in risk
management involves assessing and monitoring the risks that the organization faces,
recommending the controls required to mitigate those risks, and evaluating the trade-offs
necessary for the organization to accomplish its strategic and operational objectivities.
22
Asare (2009) stated further that the key risks that requires attention by management is fraud and
corruption but it is the role of internal audit to gather sufficient objective information for
management to carry out its stewardship function.
The primary goal of auditing is to verify the accuracy and correctness of accounting to a large
extent. Auditing frequently identifies mistakes that may exist in organizational processes,
allowing the organization's owners to make changes to correct them. Financial audits verify
whether an organization's financial statements accurately portray the financial activities of the
organization. Errors and frauds committed by employees of the organization can be detected
promptly. It tends to keep records of the business up to date; any desired information can be
obtained from the account in no time without any difficulty (Ghosh and Moon 2005).
2.4 Conclusion and Gaps
There is an increasing huge public outcry in Ghana regarding mismanagement of public finances,
corruption on the part of government employees, large recurrent expenses, and poor budget
performance by the various governments.
23
CHAPTER THREE
METHODOLOGY
The section on methodology discusses the population, sample, the research design, and technique
of analysis as well as the tools and methods utilized for data collection.
3.1 Research Design
According to (Creswell & Plano Clark 2007) research design is the ‘procedures for collecting,
analyzing, interpreting and reporting data in research studies'. It is a blue print followed by the
researcher to collect measure and analyze data (Silverman, 2011). The study employed a
quantitative research design, which involved the collection and analysis of numerical data on a
number of potential independent and dependent variables. The foundation of the quantitative
approach is theoretical statements that lead to the formulation of hypotheses. Following that, the
relevant dependent variables (external auditing) were compared to fixed independent factors. The
processes were deductive in nature and added to the body of scientific knowledge regarding how
external audit impacts financial management in public organizations. For determining and
predicting the correlations and associations between research variables, the quantitative method
was appropriate.
3.2 Study Population
Population is the sum total of all the objects, subjects, or members with specific sets of
characteristics (Polit & Hunghler 1995), and According to Selvam (2017) research population
refers to the elements under study.
The La Nkwantanang Madina Municipal Assembly (LaNMMA) comprises of numerous
departments with total staff of 287. As a result of the challenges in communicating with every
employee, the researcher is obligated to limit the study area by concentrating on the finance,
24
budget, procurement, stores, business advisory unit, the information and internal audit
department of the Municipal Assembly, which is expected to be used as a representative of the
total population. The target population for this study will be 35 employees from different
divisions and departments.
Study population
Study units Population Sample
Agricultural Department 3 2
Revenue Department 7 5
Internal Audit Division 3 2
Finance Department 1 1
National Commission for 5 5
Civic Education (NCCE)
National Disaster Management 4 3
Organization (NADMO)
Human Resource Department 5 3
Physical Planning Department 3 2
Trade & Industry Department 3 3
Works Department 5 4
Birth and Death Registry 7 5
3.3 Sample size
25
The sample size for this study was obtained from 35 employees from key divisions and
departments in the La Nkwantanang Madina Municipal Assembly (LaNMMA). In order to
obtain a representative sample for the study population, purposive sampling method was used.
Purposive sampling is believed to provide units with useful information to the auditing process
and financial management in the La Nkwantanang Madina Municipal Assembly (LaNMMA).
3.4 Data collection
Primary data was gathered using interviews and structured questionnaires to answer all of the
study's research questions. The questions were divided in two sections. The first section collected
demographic information and socio economics from respondents, while the second sought
information on study questions. A random sample of study participants was given printed
questionnaires. Some of the senior department heads were interviewed, this was due to a lack of
time to go through the questionnaires, and therefore a one-on-one interview was suitable.
3.4.1 Reliability and validity
Saunders et al. (2007) stated that, one needs to be sure that the data will answer the research
questions or objectives and the data will be easily accessible. Therefore, Secondary sources
should be treated with the same caution as primary sources when conducting research. It is also
important that the dissertation collect empirical findings that reflect the reality of situations. The
ideas of validity and reliability can be utilized for evaluating primary and secondary sources. The
degree of reliability measures the extent to which data collection can be trusted (Saunders et al.
(2007). Christensen el al. (2001) further states a limitation with the measure of reliability. All of
the questionnaires were pretested before being finalized in order to achieve the desired findings.
3.5 Data Analysis
26
After administering questionnaires, the mass of collected raw data was systematically organized
in a way that facilitates analysis. Data from completed questionnaires were collected and
checked for accuracy, this involves presenting the findings logically and sequentially in order to
draw conclusions. Data analysis is carried out using descriptive statistics to provide information
about demographic questions and the factors that influence the success of external auditing in the
La Nkwantanang Madina Municipal Assembly (LaNMMA). Excel and statistical software for
social scientist version would be used for data analysis.
27
CHAPTER FOUR
DATA ANALYSIS, INTERPRETATION AND DISCUSION
4.0 Introduction
This section of the study elaborates on the empirical results from data gathered using the
methodology described in the previous chapter. This chapter contains three main sections. The
first section contains the socio demographic background information, the second section contain
the descriptive analysis of the objectives and the last section contains the measures to improve
the quality of auditing in local government organizations. The data obtained from the study were
analyzed using SPSS.
4.1 Socio-Demographic Background of Respondents
The section of the study captured the socio-demographic background characteristics of staffs of
La-Nkwantanang Madina Municipal Assembly
4.1.1 Socio-Demographic Background of staffs of the bank
The demographic background information captured under the employees in the study were
Gender, Age, Marital Status, Education level, Level of Formal education, Religion, Occupation,
Position in the organization and years worked in the Municipal Assembly.
4.1.1.1 Gender
From table 4.1.1.3 out of the thirty-five respondents involved in the study, 22(62.9%) of
respondents were Males while 13(37.1%) of respondents were females.
28
Table 4.1.1.1 Gender
Valid Frequency Percent Cumulative
Percent
Male 22 62.9 62.9
Female 13 37.1 100.0
Total 35 100.0
Source: Field Survey, 2023
4.1.1.2 Age
The results as indicated in table 4.1.1.2 revealed that 8(22.9%) of respondents were between the
ages of 18-28 years, 23(65.7%) of respondents were between 29-39 years and 4(11.4%) of the
respondents were aged between 40-50. Hence majority of the respondents involved in the study
were between the ages of 29-39 years.
Table 4.1.1.2 Age

29
Percent
18-28 8 22.9 22.9
years
29-39 23 65.7 88.6
years
40-50 4 11.4 100.0
years
Total 35 100.0
4.1.1.3 Marital Status
Additionally, making reference to table 4.1.1.3 the marital status of the respondents was captured
in the study. The results from the study revealed that 9(25.7%) of the respondents were married
and 26(74.3%) were single. Hence, majority of the respondents involved in the study were
single.
Table 4.1.1.3 Marital Status

30
Percent
Married 9 25.7 25.7
Single 26 74.3 100.0
Total 35 100.0
4.1.1.4 Education level
The study also captured the education level of the respondents, the study revealed from diagram
4.4 that 35(100%) of the respondents had formal education.
Table 4.1.1.4 Education Level
Percent
Formal 35 100.0 100.0
Education
4.1.1.5 Level of Formal Education
The study also captured the level of formal education of the respondents, the study revealed from
diagram 4.1.1.5 that 4(11.4%) of the respondents were working with a diploma certificate whilst
the other 31(88.6%) were working with a bachelor’s degree.
Table 4.1.1.5 Level of Formal Education
31
Percent
Diploma 4 11.4 11.4
Degree 31 88.6 100.0
Total 35 100.0
4.1.1.6 Religion
The study also captured the religious background of the respondents, the study revealed from
diagram 4.1.1.6 that 26(74.3%) of the respondents were Christians whilst the other 9(25.7%)
were Muslims
Table 4.1.1.6 Religion
Percent
Christianity 26 74.3 74.3
Islam 9 25.7 100.0
Total 35 100.0
4.1.1.7 Occupation
32
The study also captured the occupational background of the respondents, the study revealed as
shown in diagram 4.1.1.7 that 4(11.4%) of the respondents were students whilst the other
31(88.6%) employed.
Table 4.1.1.7 Occupation
Percent
Student 4 11.4 11.4
Employed 31 88.6 100.0
Total 35 100.0
4.1.1.8 Position in the Organizations
Positions of the staffs of the assembly were also captured in the study. 2(5.7%) of the
respondents were finance officers, 2(5.7%) were internal auditors and the remaining 31(88.6%)
of the respondents were with the procurement department, business advisory unit, information
unit, central administration and human resource department.
Table 4.1.1.8 Position in the organization
33
Percent
Finance 2 5.7 5.7
Officer
Internal 2 5.7 11.4
Auditor
Others 31 88.6 100.0
Total 35 100.0
4.1.1.9 Years worked in the Municipal Assembly
The study finally captured the years the staffs has worked with the Municipal assembly making
reference to diagram 4.1.1.9. The results from the study revealed that 19(54.3%) have worked
with the assembly foe less than 5 years, 15(42.9%) respondent have worked for 6-10 years now,
1(2.9%) a staff who has worked for more than 10 years with the assembly. Thus, the results
revealed that majority of the staffs have worked with the assembly for less than 5 years.
Table 4.1.1.9 Years worked in the Municipal Assembly

34
Percent
Below 5 years 19 54.3 54.3
6-10 years 15 42.9 97.1
10 and above 1 2.9 100.0
Total 35 100.0
4.2 Descriptive analysis of the objectives of the study
4.2.1(Part 1a) Effectiveness of Audit
4.2.1.1 Steps auditors take to ensure their independence and objectivity
This section of the study contains the descriptive analysis of a statement asked in relation to
whether the auditors inform the staffs at least annually about the steps they take to ensure their
independence and objectivity, a likert scale of 1-5 (where, A being agree, SA representing
strongly agree, SD represent strongly disagree, D is disagree, and N being Neutral) was used to
rate the items. The results from the study are indicated in table 4.2.1.1. The highest score of
23(65.7%) respondent indicated that they strongly agreed with the statement because the auditors
inform them about their annual meetings.
Table 4.2.1.1 The Auditors inform you at least annually about the steps they take to ensure their
independence and objectivity.
Percent
35
Strongly 23 65.7 65.7
Agree
Agree 8 22.9 88.6
Disagree 2 5.7 94.3
Neutral 2 5.7 100.0
Total 35 100.0
4.2.1.2 Auditors understanding of the organizational risk and issues that are considered
important.
whether auditors show understanding of the organizational risks and issues that are considered
important., a likert scale of 1-5 (where, A being agree, SA representing strongly agree, SD
represent strongly disagree, D is disagree, and N being Neutral) was used to rate the items. The
results from the study are indicated in table 4.2.1.2. The highest score of 17(48.6%) respondent
indicated that they strongly agreed with the statement because the respondents indicated that, the
auditors educates them about the risks and issues in relation to the works of the assembly.
Table 4.2.1.2 The Auditors show understanding of the organizational risks and issues that are
considered important.
Percent
36
Strongly 17 48.6 48.6
Agree
Agree 15 42.9 91.4
Disagree 1 2.9 94.3
Neutral 2 5.7 100.0
Total 35 100.0
4.2.1.3 Firmness of the auditors with challenges to management.
whether auditors are firm with their challenges to management where appropriate, a likert scale
of 1-5 (where, A being agree, SA representing strongly agree, SD represent strongly disagree, D
is disagree, and N being Neutral) was used to rate the items. The results from the study are
indicated in table 4.2.1.3. The highest score of 25(71.4%)of the respondents indicated that they
strongly agreed with the statement.
Table 4.2.1.3 The Auditors are firm with their challenges to management where appropriate
Percent
37
Strongly 25 71.4 71.4
Agree
Agree 6 17.1 88.6
Neutral 4 11.4 100.0
Total 35 100.0
4.2.1.4 Internal Quality Control Procedures
This section of the study contains the descriptive analysis of a statement the researcher asked
respondents in relation to whether auditors provide the staffs with information to explain their
internal quality control procedures where requested, a likert scale of 1-5 (where, A being agree,
SA representing strongly agree, SD represent strongly disagree, D is disagree, and N being
Neutral) was used to rate the items. The results from the study are indicated in table 4.2.1.4. The
highest score of 22 (62.9%)of the respondents indicated that they strongly agreed with the
statement. This is because the respondents stated that the auditors provide them with information
to explain their internal quality control procedures during orientation process.
Table 4.2.1.4 The Auditors provide you with information to explain their internal quality control
procedures where requested
Percent
38
Strongly 22 62.9 62.9
Agree
Agree 8 22.9 85.7
Strongly 2 5.7 91.4
Disagree
Disagree 2 5.7 97.1
Neutral 1 2.9 100.0
Total 35 100.0
4.2.1.5 Internal audit function and auditors.
respondents in relation to whether auditors liaise effectively with internal audit function, a likert
scale of 1-5 (where, A being agree, SA representing strongly agree, SD represent strongly
disagree, D is disagree, and N being Neutral) was used to rate the items. The results from the
study are indicated in table 4.2.1.5. The highest score of 19 (54.3%)of the respondents indicated
that they strongly agreed with the statement. This is because the respondents stated that the
auditors work as a team in order to work accordingly with the internal audit function.
Table 4.2.1.5 The Auditors liaise effectively with internal audit function
Percent
39
Strongly 19 54.3 54.3
Agree
Agree 15 42.9 97.1
Neutral 1 2.9 100.0
Total 35 100.0
4.2.2 (Part 1b) Quality of Delivery
4.2.2.1 Auditors-Management relationship
respondents in relation to whether auditors have a constructive relationship with management., a
likert scale of 1-5 (where, A being agree, SA representing strongly agree, SD represent strongly
study are indicated in table 4.2.2.1. The highest score of 19 (54.3%)of the respondents indicated
that they strongly agreed with the statement. This is because the respondents stated that
management prepares documents for the auditors.
Table 4.2.2.1The Auditors have a constructive relationship with management.
Percent
40
Strongly 19 54.3 54.3
Agree
Agree 11 31.4 85.7
Disagree 1 2.9 88.6
Neutral 4 11.4 100.0
Total 35 100.0
4.2.2.2 Explanation of audit plan and findings.
respondents in relation to whether the explanation of the audit plan, any deviations from it and
subsequent audit findings are clear and precise., a likert scale of 1-5 (where, A being agree, SA
representing strongly agree, SD represent strongly disagree, D is disagree, and N being Neutral)
was used to rate the items. The results from the study are indicated in table 4.2.2.2. The
cumulative score of 34(97.1%)of the respondents indicated that agreed with the statement.
Table 4.2.2.2 The explanation of the audit plan, any deviations from it and subsequent audit
findings are clear and precise
Percent
41
Strongly 17 48.6 48.6
Agree
Agree 17 48.6 97.1
Neutral 1 2.9 100.0
Total 35 100.0
4.2.2.3 Management accounting stance and the views of auditors
respondents in relation to whether the important accounting stance made by management, their
impact on the financial statements and views of the auditors on their treatment are clearly
explained, a likert scale of 1-5 (where, A being agree, SA representing strongly agree, SD
results from the study are indicated in table 4.2.2.3. The highest score of 18(51.4%)of the
respondents indicated that agreed with the statement. The respondents stated that, the auditors
often help management to work on the financing statement.
Table 4.2.2.3 The important accounting stance made by management, their impact on the
financial statements and views of the auditors on their treatment are clearly explained.
Percent
42
Strongly 18 51.4 51.4
Agree
Agree 8 22.9 74.3
Strongly 4 11.4 85.7
Disagree
Disagree 4 11.4 97.1
Neutral 1 2.9 100.0
Total 35 100.0
4.2.2.4 Auditors work duration and reporting period
respondents in relation to whether auditors conduct their work in the specified period and issue
their statements within their time limit., a likert scale of 1-5 (where, A being agree, SA
representing strongly agree, SD represent strongly disagree, D is disagree, and N being Neutral)
was used to rate the items. The results from the study are indicated in table 4.2.2.4. The
cumulative score of 24(68.6%)of the respondents indicated that agreed with the statement. The
respondents stated that, the external auditors report every 4 months in the year(quarterly) whilst
the internal auditors also audit on a weekly basis.
Table 4.2.2.4 The Auditors conduct their work in the specified period and issue their statements
within their time limit.
Percent
43
Strongly 13 37.1 37.1
Agree
Agree 11 31.4 68.6
Strongly 5 14.3 82.9
Disagree
Neutral 1 2.9 100.0
Total 35 100.0
4.2.2.5 Emergence of issues and the readiness to act
respondents in relation to whether identified issues are prudently dealt with without any room for
surprises., a likert scale of 1-5 (where, A being agree, SA representing strongly agree, SD
results from the study are indicated in table 4.2.2.5. The cumulative score of 34(97.1%)of the
respondents indicated that agreed with the statement. The respondents stated that management
are always to work with staffs to deal with issues as they may pose threats to the assembly.
Table 4.2.2.5 Identified issues are prudently dealt with without any room for surprises
Percent
44
Strongly 17 48.6 48.6
Agree
Agree 17 48.6 97.1
Total 35 100.0
4.2.2.6 Auditors-Audit committee relationship
respondents in relation to whether the auditors have a constructive relationship with the audit
committee, a likert scale of 1-5 (where, A being agree, SA representing strongly agree, SD
results from the study are indicated in table 4.2.2.6. The cumulative score of 30(85.7%)of the
respondents indicated that agreed with the statement. The respondents stated that internal and
external auditors collaborate to do the audit work.
Table 4.2.2.6 The Auditors have constructive relationship with the audit committee
Percent
45
Strongly 19 54.3 54.3
Agree
Agree 11 31.4 85.7
Neutral 5 14.3 100.0
Total 35 100.0
4.2.3 (Part 2) Quality of People and Service
4.2.3.1 Auditors and their characteristics in the field of work.
respondents in relation to whether auditors exercise professional competence, technical
knowledge, integrity and objectivity in their work., a likert scale of 1-5 (where, A being agree,
SA representing strongly agree, SD represent strongly disagree, D is disagree, and N being
Neutral) was used to rate the items. The results from the study are indicated in table 4.2.3.1. The
cumulative score of 33(94.3%) of the respondents indicated that agreed with the statement.
Respondents stated that, workshops are organized for technical knowledge sharing and also
auditors prepare, arrange and manage their books of accounts.
Table 4.2.3.1 The Auditors exercise professional competence, technical knowledge, integrity
and objectivity in their work.
Percent
46
Strongly 22 62.9 62.9
Agree
Agree 11 31.4 94.3
Neutral 2 5.7 100.0
Total 35 100.0
4.2.3.2 Audit and its Professionalism
respondents in relation to whether the audit team are made up professionals with utmost
expertise and professional judgment, a likert scale of 1-5 (where, A being agree, SA representing
strongly agree, SD represent strongly disagree, D is disagree, and N being Neutral) was used to
rate the items. The results from the study are indicated in table 4.2.3.2. The cumulative score of
29(82.9%)of the respondents indicated that agreed with the statement.
Table 4.2.3.2 The Audit team are made up professionals with utmost expertise and professional
judgment
Percent
47
Strongly 17 48.6 48.6
Agree
Agree 12 34.3 82.9
Neutral 6 17.1 100.0
Total 35 100.0
4.2.3.3 Level of independency in the audit work.
respondents in relation to whether the auditors demonstrate high level of independence in their
work, a likert scale of 1-5 (where, A being agree, SA representing strongly agree, SD represent
strongly disagree, D is disagree, and N being Neutral) was used to rate the items. The results
from the study are indicated in table 4.2.3.3. The cumulative score of 21(65.7%)of the
respondents indicated that agreed with the statement. They stated that, when the auditors detect
an error they draw the attention of the immediate staff for it to be rectified.
Table 4.2.3.3 The Auditors demonstrate high level of independence in their work
Percent
48
Strongly 11 31.4 31.4
Agree
Agree 12 34.3 65.7
Disagree 1 2.9 68.6
Neutral 11 31.4 100.0
Total 35 100.0
4.2.3.4 Practicality and effectiveness of recommendations
respondents in relation to whether practical and effective recommendations are given in respect
of the organization, a likert scale of 1-5 (where, A being agree, SA representing strongly agree,
SD represent strongly disagree, D is disagree, and N being Neutral) was used to rate the items.
The results from the study are indicated in table 4.2.3.4. The cumulative score of 18 (51.4%)of
the respondents indicated that agreed with the statement.
Table 4.2.3.4 Practical and effective recommendations are given in respect of the organization
Percent
49
Strongly 11 31.4 31.4
Agree
Agree 7 20.0 51.4
Neutral 17 48.6 100.0
Total 35 100.0
4.2.3.5 Auditors Judgments
respondents in relation to whether judgments given by the auditors are highly reliable, a likert
scale of 1-5 (where, A being agree, SA representing strongly agree, SD represent strongly
study are indicated in table 4.2.3.5. The cumulative score of 21 (60%)of the respondents
indicated that agreed with the statement. 13(37.1%) of the respondents were neutral and had no
specify stand as to agreeing or disagreeing because they said they are left behind at certain stage
in the audit process and at the end of the process they do not get any feedback.
Table 4.2.3.5 Judgments given by the auditors are highly reliable
Percent
50
Strongly 10 28.6 28.6
Agree
Agree 11 31.4 60.0
Disagree 1 2.9 62.9
Neutral 13 37.1 100.0
Total 35 100.0
4.2.3.6 Auditors and financial discipline
respondents in relation to whether financial discipline is enhanced due to the work of the
auditors, a likert scale of 1-5 (where, A being agree, SA representing strongly agree, SD
results from the study are indicated in table 4.2.3.6. The cumulative score of 30(85.7%) of the
respondents indicated that agreed with the statement.
Table 4.2.3.6 Financial discipline is enhanced due to the work of the auditors
Percent
51
Strongly 23 65.7 65.7
Agree
Agree 7 20.0 85.7
Neutral 5 14.3 100.0
Total 35 100.0
4.2.3.7 External Auditors and value for money.
respondents in relation to whether there is value for money in the organization due to the work of
the external auditors, a likert scale of 1-5 (where, A being agree, SA representing strongly agree,
SD represent strongly disagree, D is disagree, and N being Neutral) was used to rate the items.
The results from the study are indicated in table 4.2.3.7. The cumulative score of 29(82.9%) of
the respondents indicated that agreed with the statement.
Table 4.2.3.7 There is value for money in the organization due to the work of the external
auditors
Percent
52
Strongly 27 77.1 77.1
Agree
Agree 2 5.7 82.9
Disagree 1 2.9 85.7
Neutral 5 14.3 100.0
Total 35 100.0
4.3 Measures to improve the quality of auditing in local governments organizations
This section of the study contains measures suggested by respondents in order to improve the
quality of auditing in local governments organizations. Below are the respondents’ suggestions;
 Auditors should be resourced so that they will be able to perform.
 Workshops should be organized for auditors in order to enhance their duties.
 Auditors should function as a separate body
 Appropriate audit committee with the composition of skills, competence and expertise
should be formed.
 Management should periodically rotate auditors in order to solve the issue of familiarity
among workers.
 Management should make sure that there is acceptance and continuance of client
relationship and specific engagements.
 Payment of issues of revenue collectors must be addressed.
 Management should draw an internal audit plan to help determine the proposed internal
audit work
53
 Individual departments must be quarterly audited.
 There should be a channel of disbursement of fund to help track the allocation of funds.
CHAPTER FIVE
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
5.1 Introduction
54
The chapter summarizes the major findings based on the study objectives regarding the
effectiveness of external auditing on the financial performance of Ghanaian local government
organizations. The presentation is structured in accordance with the research objectives, and
finally, conclusions and recommendations are provided.
5.2 Summary of the study
This study aimed to investigate the effectiveness of external auditing on the financial
performance of Ghanaian local government organizations using a case study of La Nkwantanang
Municipal Assembly in the Greater Accra Region. The following specific objectives guided the
study:
To assess the effectiveness of internal controls in the La NKWANTANA MADINA
MUNICIPAL ASSEMBLY.
To assess the quality of audit delivery.
The quality of external audit and the reliability on their service.
In order to achieve these goals, the researcher used a case study design to collect detailed data.
This design was chosen as a suitable research design because it made it easier to collect the
original data required to achieve the research objectives. A sample of 35 was identified using
purposive sampling method to obtain the representative sample. The researcher conducted
structured interview with 10 respondents and a total of 35 questionnaires were satisfactory filled
and returned to the researcher.
The survey instrument was divided into sections. Part one of the research instruments was
designed to collect information on the respondents' selected personal and professional
demographic characteristics. To assess the effectiveness of external auditing on the financial
performance of local government organizations and the quality of delivery. Part two of the
55
survey instrument sought information on the quality of people and services. Data was gathered
through observation, literature reviews, and examination of financial documents, and interviews
aided by questionnaires that were pilot tested to ensure data reliability and validity. The collected
data was summarized, coded, and quantitatively analyzed to compute descriptive statistics, which
were then presented in the form of tables.
5.3 Major findings
5.3.1 Financial Performance in Local Government Organizations
Financial performance is a measure of an organization's financial management in relation to
accountability. Individual and organizational financial performance is defined as the
achievement of goals. Financial performance is an analysis to see the extent to which a company
has carried out its activity well and correctly Fahmi (2011). Halim (2007) stated that the ability
of local government to manage local finance outlined in the Regional Budget (APBD) which
directly or indirectly reflect the ability of local governments to finance the implementation of the
duties of government, community development and social services. Local financial performance
can be measured by the level of independence, effectiveness, and efficiency of local budgeting,
spending harmony, and the level of uptake of the budget (Halim, 2007). External auditing is one
of the most important tools for improving accountability for the use of public funds (Glover and
Prawtt 2004). According to the findings of the study, the majority of public organizations have
adequate accounting systems that identify, assemble, analyze, classify, record, and report
financial transactions in accordance with the prescribed formats and best practices. However,
public institutions do not have enough human resources to manage financial resources
effectively. Nonetheless, specialized officials available to audit books of accounts and check
internal financial controls. The study discovered that internal audit assists external auditors by
56
facilitating the manner in which external audit is conducted, thereby minimizing queries from
external auditors. They assist firms in maintaining internal control systems and aid in the
implementation of audit recommendations, easing the work of external auditors. Surveyed
internal auditor confirmed that external auditors use internal auditors report to aid in calculating
financial risks and acknowledged that they help reduce internal control risks.
5.3.2 What are the factors that hinder the effectiveness of internal control system in the
assembly?
 The study finds out that auditors in the assembly inform the staffs at least annually about
the steps they take to ensure their independence and objectivity.
 The study also finds out that auditors show understanding of the organizational risks and
issues that are considered important.
 The study also finds out that auditors are firm with their challenges to management where
appropriate.
 Staffs of the assembly affirmed that, auditors provide the staffs with information to
explain their internal quality control procedures where requested.
 The study finds out that auditors liaise effectively with internal audit function.
In general, regarding how to assess the effectiveness of internal controls in the La
NKWANTANA MADINA MUNICIPAL ASSEMBLY, respondents responded to majority of
the questions asked positively which means that internal controls have a positive impact on the
financial performance in the municipal assembly.
57
5.3.3 What specific roles do external auditors play in enhancing effective local government
financial activities?
 The study finds out that auditors have a constructive relationship with management.
 The study also finds out that the explanation of the audit plan, any deviations from it and
subsequent audit findings are clear and precise.
 The study finds out that the important accounting stance made by management, their
impact on the financial statements and views of the auditors on their treatment are clearly
explained.
 Staffs of the assembly affirmed that auditors conduct their work in the specified period
and issue their statements within their time limit.
 The researcher was able to reach an understanding that, identified issues are prudently
dealt with without any room for surprises.
 The study also finds out that the auditors of the assembly have a constructive relationship
with the audit committee.
All in one, to assess the quality of audit delivery, staffs of the assembly positively responded to
the questions asked by the researcher under this goal.
5.3.4 How can the challenges of external auditors be minimized?
 The study finds out that auditors exercise professional competence, technical knowledge,
integrity and objectivity in their work.
 The study finds out that the audit team in the assembly are made up professionals with
utmost expertise and professional judgment.
58
 The study finds out that the auditors demonstrate high level of independence in their
work.
 The study finds out that there are practical and effective recommendations given in
respect of the organization.
 The study finds out that judgments given by the auditors are highly reliable by the
assembly.
 The study finds out that financial discipline is enhanced due to the work of the auditors.
 The study finds out that there is value for money in the assembly due to the work of the
external auditors.
Summing up, the researcher was able to get the quality of external audit and the reliability on
their service and concluded that external audit affects the financial performance of the assembly.
The study affirms Mekonnen, Agmas, & Shibru (2016) study conducted in Ethiopia based on
efficiency of external audit engagement and its determinants in the country’s share companies
registered by the Federal Office of Auditor. According to the findings of the study, external audit
is an important factor to consider in the performance of the companies under consideration.
5.4 Conclusion
Auditing and accounting are closely related but distinct activities. A company's directors are
responsible for creating records that accurately document transactions and are utilized to prepare
the yearly financial statement. It is also the directors' responsibility to use consistent and proper
59
accounting policies when preparing financial statements. The financial statement must adhere to
legal requirements as well as accounting standards.
Auditing, on the other hand, is concerned with the end result of accounting work; whether the
financial statements present a "true and fair" view. In order to reach their conclusion, the auditor
must have an in-depth understanding and knowledge of accounting.
This research examined the effectiveness of external audit on financial performance of
public organization. Findings revealed that the external auditor play a very important role in
ensuring that the Municipal Assembly complies with financial reporting standards and
guidelines.
It also established that internal auditors fully cooperate with external auditors; this makes the
work of the external audit team easy and effective. An external auditor's role is to provide an
opinion on the financial reports prepared by management. The opinion presented is based on the
decision taken once the audit procedure is completed. The auditor is expected to provide the
shareholders with an unbiased and honest opinion. In order for this to happen, the auditor must
maintain his or her independence in order to avoid undue influence and compromise of his or her
work. Sufficient safeguards should be put in place to ensure the independence of external
auditors, for example, the appointment of independent audit committee, audit partner
rotations and regulation on external auditor providing non-audit services (Ojo, 2009).
5.5 Recommendation
According to the findings of the study, whenever a fiduciary relationship with financial
implications exists, an outsider with sufficient independence and objectivity is required to review
60
the accounts of stewards and express an opinion on their honesty or otherwise. This is handled
by the external auditor.
In light of this, policymakers and all stakeholders in the financial and accounting industries must
pay close attention to the types of data records organizations preserve. As a result, I recommend
that strong measures be put in place to examine record-keeping techniques and procedures in
public organizations in order for external audit effectiveness to spread to other public
organizations.
Auditor independence is significantly related to auditing standard compliance. External auditors
would gain a competitive advantage by adhering to the appropriate auditing standards in their
operational environment. Organizations would also be assured of audit quality if they created an
atmosphere that encourages auditor independence. As a result, audit firms should endeavor to
adopt and apply the applicable auditing standards in order to maintain auditor independence,
which leads to audit quality in the long run. All Accounting Associations and Auditing Firms
should develop standard information necessary of all firms requiring the services of external
auditors.
I also recommend a collective effort by all to support the Audit service of Ghana to collaborate
with other related accountability and law enforcement institutions established to promote good
governance and transparency which is a major threat to achieving good governance over
accountability deficiencies in Ghana.
6.0 References
Association of Chartered Certified Accountants. (2015). Audit quality –a perpetual current issue
_ P7 Advanced Audit and Assurance _ ACCA Qualification _ Students _ ACCA Global.
61
Retrieved from
http://www.accaglobal.com/gb/en/student/exam-support-resources/professional-exams-
study-resources/p7/technical-articles/audit-quailty.htm.
AI-Ani, M. K., & Mohamed, Z. (2015). Auditor quality and firm performance: Omani
experience. European Journal of Economics, Finance and Administrative Sciences.
Auditing Concepts and Standards. Patrick j. Costello, CPPM, CF, SHAMROCK CHAPTER.
BPP Learning Media. (2015). Audit and assurance. London: BPP Learning Media Ltd.
Bob Kyalo Charles and Oluoch Oluoch. Determinants of the effectiveness of the auditor general
in Kenya in public financial management oversight April 22, 2017.
Chairunnisa Arumsari. The Role of Internal Auditor in Public Sector. International conference on
education 2016.
Dua Agyeman, Auditor General of Ghana, and Frank Grogan, UK National Audit Office.
Improving the effectiveness of public external audit April 2008.
Denyse Umurerwa, the impact of external audit on the financial management in public
organizations: a case study of Rwanda development board, October 2016.
Emmanuel Austin and Siriyama Kanthi Herath. Auditor independence: a review of literature, Int.
J. Economics and Accounting, Vol. 5, No. 1, 2014.
Firas A. N. Al-Dalabih. (2018) the Role of External Auditor in Protecting the Financial
Information Listed in the Financial Statements in the Jordanian Industrial Companies.
Journal of Modern Accounting and Auditing, January 2018, Vol. 14, No. 1, 6-16 doi:
10.17265/1548-6583/2018.01.002.
Geiger, M, and Rama, D. (2003), “Audit fees, non –audit fees, and audit reporting on
stressed companies”, auditing: A journal of Practice & theory, Vol. 22.
62
Ghosh, A. And D. Moon (2005). “Auditor tenure and perceptions of audit quality.” The
Accounting Review 80(2): 585-612Goldman, A. and Barley, B. (1974), “The auditor –
firm conflict of interest: its implications for independence”, The Accounting Review,
October.
Hero Priono, Indrawati Yuhertiana, Siti Sundari, and Devy Sylvia Puspitasari. Role of financial
management in the improvement of local government performance. Humanities & Social
Sciences Reviews eISSN: 2395-6518, Vol 7, No 1, 2019, pp
77-86https://doi.org/10.18510/hssr.2019.7110
ICAEW (2001), Auditor Independence: A robust, Practical and International Approach, ICAEW,
London. IFAC (2001), independence: Code of ethics for professional Accountants, IFAC,
New York, NY. Jeppesen, K. K. (1998), “Reinventing auditing: redefining consulting
and independence”. European Accounting Review.
Moore, D. A., Tetlock, P.E., Tanlu, L. And Bazerman, M. H. (2003), “Conflicts of interestand
the case of auditor independence: moral seduction and strategic issue cycling”, Working
Paper No. 03 –115.
Nelson Mose Osioru, Dr. Gladys Rotich, and Mr. Wicliffe Anyango. Effect of auditing on
management of the public finances in Kenya: the case of government ministries April 25
2017 Vol 4.
Silverman, D. (2011). Qualitative Research: Issues of Theory, Method and Practice. (3rd Edn).
London, Thousand Oaks
Steven A. F. (2005). Financial Management for Public, Health, and Not-for-Profit Organizations,
2ndEdition, Prentice Hall. Van H (2002). Financial Management Policy, 12trh Ed.
Pearson Ed. Inc., New Delhi, India.
63
Sherzad Saeed, Nawzad Majeed Hamawandy, Raqeeb Omar. Role of internal and external audit
in public sector governance. A case study of Kurdistan regional government,
International Journal of Advanced Science and TechnologyVol. 29, No. 8s, (2020), pp.
1452-1462.
Zayol Patrick I. (PhD), Kukeng Vitalis, IORTULE MDOOM. Effect of Auditor Independence on
Audit Quality: A Review of Literature. International Journal of Business and
Management Invention ISSN (Online): 2319 –8028, ISSN (Print): 2319 –
801Xwww.ijbmi.org Volume 6 Issue 3 March. 2017 PP—51-59
7.0 APPENDICES
7.1 Appendix 1: Questionnaire
64
Part A - DEMOGRAPHICS AND SOCIO ECONOMICS OF RESPONDENTS
1. Gender of Respondent Male Female
2. Age (years): 18-28yrs 29 - 39vrs 40 - 50yr above 50yrs
3. Marital status: Married Single
4. Educational Level: Informal Education Non- Formal Education
Formal Education
4a. Level of Formal Education: Secondary Diploma Degree
5. Religion: Christianity Islam Traditionalist
6. Occupation: Student Employed Self-employed unemployed
7. Position in the Organization: Finance Officer Internal Auditor
Other
8. Years worked in the Municipal Assembly: Below 5years 6-10yrs
10 and above
Please indicate your answer by ticking each statement using 5 Likert scale
(1) = Strongly Agree (SA) (2) = Agree (A)
(3) =Strongly Disagree (SD) (4) = Disagree (D)
(5) = Neutral (N)
PART 1 A. EFFECTIVENESS OF AUDIT
I No
65
No Questions SA A S D N
1 The Auditors inform you at least annually about steps they take
to ensure their independence and objectivity
2 The auditors show understanding of the organizational risks and
issues that are considered important
3 The Auditors are firm with their challenges to management,
where appropriate
4 The auditors provide you with information to explain their
internal quality control procedures where requested
5 The auditors liaise effectively with internal audit function
PART 1B QUALITY OF DELIVERY
1 The auditors have a constructive relationship with management
2 The explanation of the audit plan, any deviations. from it and
subsequent audit findings are clear and precise
3 The important accounting stance made by management, their
impact on the financial statements and views of the auditors on
their treatment are clearly explained
66
4 The auditors conduct their work in the specified period and issue
their statements within their time limit
5 Identified issues are prudently dealt with without any room for
surprises
6 The auditors have constructive relationship with the audit
committee
APPENDIX D
PART 2- QUALITY OF PEOPLE AND SERVICE
1 The auditors exercise professional competence, technical
knowledge, integrity and objectivity in their work
2 The audit team are made up professionals with utmost expertise
and professional judgement
3 The auditors demonstrate high level of independence in their
work
4 Practical and effective recommendations are given in respect of
the organization
5 Judgements given by the auditors are highly reliable
6 Financial discipline is enhanced due to the work of the auditors
7 There is value for money in the organization due to the work of
the external auditors
67
PART 3 -MEASURES TO IMPROVE THE QUALITY OF AUDITING IN
LOCAL GOVERNMENT ORGANIZATIONS
1. What necessary measures should be taken to improve the efficiency and effectiveness of the
audit function in the local government organizations?
a)
……………………………………………………………………………………………………
………………………………………………………………………………………………………
b) …………………………………………………………………………………………………...
………………………………………………………………………………………………………
c)
……………………………………………………………………………………………………
68

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THE EFFECTIVENESS OF EXTERNAL AUDITING ON THE FINANCIAL

PERFORMANCE OF LOCAL GOVERNMENT ORGANISATIONS: THE

CASE OF LA NKWANTANANG MUNICIPAL ASSEMBLY.

finance by the University of Professional Studies Accra, Ghana.

Mah-fuz Mohammed Abul-khair

Index Number: 10282293

Imoro Zakari Sham-deen

Dr. Asumadu Edward

Mah-fuz Mohammed Abul-khair

Index Number: 10282293

Imoro Zakari Sham-deen

Index Number: 10282944

have worked hard to help us complete this project.

couldn't finish our academics without Him.

financial and moral support.

Edward, for his unconditional guidance and professional efforts.

Thanks to the management of the La Nkwantanang Municipal Assembly for allowing us to

Almighty God blesses you all.

Background of the study 1

1.1.1 Financial management 1

1.1.2 External audit 2

1.1.3 Effectiveness of external audit 3

1.1.4 Local government organizations 4

Objectives of the study 6

Significance of the study 6

1.3.5 Structure of the Study 7

2.2. Theoretical Literature 8

2.2.1 Origin of auditing 8

2.2.2 Role Conflict Theory 10

2.2.3 Financial Management 10

2.2.5 Financial management in public organizations 12

2.3 Review of Empirical Literature 14

2.3.1 Independence of Auditors 14

2.3.2 Effectiveness of internal controls 18

2.3.3 Quality of audit delivery 18

2.3.4 Quality of external audit and the reliability on their service 20

2.3.5 Impact of Auditing in Public Organizations 20

2.4 Conclusion and Gaps 23

3.1 Research Design 24

3.2 Study Population 24

3.3 Sample size 26

3.4 Data collection 26

3.4.1 Reliability and validity 26

3.5 Data Analysis 27

DATA ANALYSIS, INTERPRETATION AND DISCUSION 28

4.1 Socio-Demographic Background of Respondents 28

4.1.1 Socio-Demographic Background of staffs of the bank 28

4.1.1.3 Marital Status 30

4.1.1.4 Education level 31

4.1.1.5 Level of Formal Education 31

4.1.1.8 Position in the Organizations 33

4.1.1.9 Years worked in the Municipal Assembly 34

4.2 Descriptive analysis of the objectives of the study 35

4.2.1(Part 1a) Effectiveness of Audit 35

4.2.1.1 Steps auditors take to ensure their independence and objectivity 35

4.2.1.3 Firmness of the auditors with challenges to management. 37

4.2.1.4 Internal Quality Control Procedures 38

4.2.1.5 Internal audit function and auditors. 39

4.2.2 (Part 1b) Quality of Delivery 40

4.2.2.1 Auditors-Management relationship 40

4.2.2.2 Explanation of audit plan and findings. 41

4.2.2.3 Management accounting stance and the views of auditors 42

4.2.2.4 Auditors work duration and reporting period 43