INTERNAL AUDIT: EXAMINING ITS ROLE IN ENSURING ETHICAL CONDUCT IN CHENWI-ASSOCIATES, CAMEROON

CHAPTER ONE

INTRODUCTION

Background of the Study

Auditing plays a crucial role in guaranteeing transparency, accountability, and integrity inside organizations. Eze (2018) states that auditing is a mandatory process designed to verify the accuracy and credibility of financial reports and statements issued by accountants and managers inside an organization. Consequently, organizations are required to have distinct and strong departments for internal auditing in order to validate the veracity of these financial reports (Abiola, 2019). Internal auditing is essential for boosting organizational performance by providing value and strengthening the operations of the organization. 

In contemporary organization, internal auditing has experienced significant transformations and has expanded its range of responsibilities in order to make a more substantial impact on the organization's objectives. It is also fulfilling its function in various cultural and legal contexts inside numerous organizations, which range in terms of size, structure, goal, and individuals involved. Walker (2022) mentioned that conducting an internal audit can be beneficial for corporations as it helps in detecting and assessing risks, placing the profession at the forefront of risk management. In addition, Kwan (2019) asserts that inside a corporation, it is crucial to foster a risk-based culture in order to establish a firm commitment to risk management, namely through the creation of an integrated risk management framework.  By encouraging accountability and bolstering confidence in financial reporting, audits serve a critical economic role and serve the public interest. By increasing the variety, quantity, and value of transactions that people are willing to engage in, audits thereby promote economic prosperity. Additionally, internal audit (IA) facilitates the effective operation and functioning of the audit committee since the audit function's goals coincide with the audit committee's duties in overseeing financial reporting (Fatimah & Ainulyaqin, 2022; Joshi, 2021). Internal governance procedures are improved through the use of internal audit (Collier & Gregory, 2019; Goodwin, 2023). 

Essentially, an independent service that assesses an organization's internal controls, procedures, business practices, and techniques is known as internal audit. It assists in guaranteeing adherence to numerous laws that are relevant to the company (IIA, 2019). Furthermore, IA plays a major role in both the entity's goal achievement and the implementation strategies used to reach those goals. In a similar vein, the responsibility of supporting the audit committee and management in their decision-making falls on the internal auditor function (IAF) (Fatimah & Ainulyaqin, 2022; Joshi, 2021). But Quality Assurance (QA) is in charge of reporting and revealing any infractions, including ethical code violations, during the audit process. Hedwig & Gerardus Polla (2018)'s code of ethics is intended to make sure internal auditors uphold high standards of conduct in their work. 

Emphatically, promoting an ethical culture among professionals who assist others is the main goal of a code of ethics for a professional organization. Given that the profession of internal auditing is predicated on the confidence that its objective assurance regarding governance, risk management, and control is held in high regard, it is imperative that it adhere to a code of ethics. Furthermore, internal auditors need to adhere to ethical principles for two reasons: first, they frequently face difficult situations that may make it difficult for them to follow standards (Larkin, 2000; Goodwin & T.Y. Yeo, 2021; Thompson, 2023); second, with the current emphasis on corporate governance, it is becoming more and more clear that internal auditors are essential to preserving corporate integrity and business ethics. When deciding whether a behaviour is morally right or wrong, consistency is established through the Code of Conduct. Wicaksono & Moningka (2018) assert that the Code of Ethics establishes guidelines for moral conduct among professionals. By using this code, the public can assess an auditor's compliance with the ethics and standards set out by their industry (Brincau, 2020). In addition, the Code of Ethics is an effort by professional associations to protect the integrity of the profession against pressures from both internal and external sources. Ethical dilemmas often relate to the relationship between the auditee and QA in understanding the philosophy of Quality Assurance itself. 

Studies on ethical decision-making, as reviewed by Ford & Richardson (2018), Louwers et al. (2019), Loe et al. (2020), and Vitell & Paolillo (2018), have revealed various empirical findings. They suggest that a key determinant of honest decision-making behavior is individual factors, which are shaped by the socialization and development processes unique to each person. These elements include intrinsic qualities like gender, age, and nationality, as well as effects from the organization, environment, work, profession, and more. Ethics study has been approached from many domains such as psychology, sociology, and economics. However, internal auditors also confront challenges related to leadership, career, relationships, changing situations, or economic interests that may drive them to make contradicting choices. Likewise, on the other hand, audit conflicts also develop when internal auditors undertake audits, especially if management or the audit subject offers incentives or encourages them to create a desired audit report, leading to ethical issues. Consequently, auditors must make choices between ethical and unethical decisions, as exemplified by the concerns and problems discussed above. Therefore, a survey will be conducted in order to examine the role of internal audits in ensuring ethical conduct in Chenwi- associates, Cameroon.

Statement of the Problem

In recent times, owing to incessant corporate scandals and failures brought about by unethical conduct over time have exposed weaknesses in control systems and a lack of accountability in some organisations the role of Internal Audit (IA) has grown to include all aspects of organisational operations, rather than its previous primary focus of fraud detection and compliance (Grima, 2022). Assuring internal controls, risk management, and compliance, it is essential to the "governance framework" (Soh & Martinov-Bennie, 2021). Conflicts arise, nevertheless, because of personal interests or managerial ethical demands (Siegel et al., 2019). Internal auditors frequently deal with a variety of moral conundrums and challenges while attempting to uphold their professional integrity because of their close relationship with management. 

Contextually,  serious flaws may be seen in Cameroon's internal auditor code and guidelines, which lack clarity, are inadequately responsive to new difficulties, and do not provide enough information on contemporary ethical challenges. But instead of concentrating only on achieving strategic objectives, a lot of these incidents could have been prevented if the organisations had been more proactive in identifying unethical behaviour. Notwithstanding these difficulties, auditors have a major influence on corporate ethical thinking, upholding principles like honesty, integrity, and business ethics (Brincau, 2020).As a result, corporate ethics and codes of conduct are receiving more attention, and internal auditors are essential in drawing attention to this increased significance.Hence, it is in the light of these that the study seeks to examine the role of internal audits in ensuring ethical conduct in Chenwi- associates, Cameroon.

 1.3  Objectives of the Study

The main purpose of this study is to examine the role of internal audits in ensuring ethical conduct in Chenwi- associates, Cameroon. Specifically, the study will;

Evaluate the effectiveness of internal audit procedures in identifying and addressing unethical practices in the organization.

Evaluate the role of internal auditing in promoting ethical conduct within Chenwi-Associates, Cameroon.

Evaluate the impact of internal audits on the ethical culture of Chenwi-Associates.

Evaluate the challenges faced by internal auditors in ensuring ethical compliance in the organization.

1.4  Research Questions

The following questions have been prepared for the study:

How effective are internal audit procedures in identifying and addressing unethical practices in the organization?

What role does internal auditing play in promoting ethical conduct within Chenwi-Associates, Cameroon?

What impact do internal audits have on the ethical culture of Chenwi-Associates?

What challenges do internal auditors face in ensuring ethical compliance in the organization?

1.5 Research Hypotheses

H0: Internal audits do not play a significant role in ensuring ethical conduct in Chenwi-Associates, Cameroon.

Ha: Internal audits play a significant role in ensuring ethical conduct in Chenwi-Associates, Cameroon.

1.6 Significance of the Study

The study will offer Chenwi-Associates' management a comprehensive understanding of how internal audits contribute to promoting ethical conduct within the organization. However, the insight will assist management in implementing stronger internal controls, enhancing transparency, and fostering a culture of integrity, thereby protecting the company's reputation and ensuring long-term success.Additionally, the study finding will enable the audit team to take a proactive role in encouraging ethical behavior and preventing unethical practices. The findings will also deepen the understanding of the relationship between internal audits and corporate governance in upholding ethical standards. Moreover, the theoretical contribution will be valuable for academics and practitioners interested in the ethical dimensions of corporate management.

1.7 Scope of the study   

The scope of this study is boarded on the role of internal audits in ensuring ethical conduct in Chenwi- associates, Cameroon. Geographically, the study will be delimited to Chenwi- associates, Cameroon.

1.8 Limitation of the study

In the course of carrying out this study, the researcher experienced some constraints, which included time constraints, financial constraints, language barriers, and the attitude of the respondents. In addition, there was the element of researcher bias. Here, the researcher possessed some biases that may have been reflected in the way the data was collected, the type of people interviewed or sampled, and how the data gathered was interpreted thereafter. The potential for all this to influence the findings and conclusions could not be downplayed. More so, the findings of this study are limited to the sample population in the study area, hence they may not be suitable for use in comparison to other schools, local governments, states, and other countries in the world.

 1.9 Definition of Terms

Auditing:The systematic examination and evaluation of financial records and transactions of an organization to ensure accuracy, reliability, and compliance with established accounting standards and regulations.

Internal Audit:involves the systematic evaluation of risk management, control, and governance processes to ensure compliance with ethical standards and regulations.

Ethical Conduct: refers to the behavior and practices of employees and management in an organization that align with ethical guidelines and regulatory requirements.

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