INVESTIGATING THE CHALLENGES OF AUDITING IN FINANCIAL INSTITUTIONS: A CASE STUDY OF INSURANCE COMPANIES IN CAMEROON

CHAPTER ONE

INTRODUCTION

Background of the Study

An audit is the process of assessing and scrutinising an organization's financial records. The main objective of this activity is to guarantee the accuracy and fairness of the transactions documented in the financial statements. Furthermore, audits function as a protective measure against corruption and embezzlement perpetrated by both personnel and management. Internal audits are conducted to assess the efficiency of an organization's internal controls. This is done by collecting information on the functioning of a department, identifying potential areas where mistakes or inefficiencies may occur, and identifying system controls that are put in place to avoid or detect such incidents. Subsequently, the application and performance of those controls are tested to evaluate their effectiveness. Managers should regularly assess the controls in their department's operations using the identical procedure. 

Apparently, computers and networks are the primary sources of information required for auditing. To ensure effectiveness, auditors must utilise the computer as a tool for auditing, examine automated systems and data, comprehend the business objectives of the systems, and have a thorough understanding of the operational context in which the systems function. Another significant application of computers and networks in the field of auditing is in audit administration. Auditors enhance their capacity to evaluate systems and information and optimise their operations by exploring novel applications of technology and communications. Automated tools enable auditors to enhance both their personal efficiency and the overall effectiveness of the audit process.  Out of all the technologies that have been produced in several decades, Information Technology (IT) has surpassed all of its predecessors (Garitte, 2020).

 The rapid growth and constant evolution of IT have rendered it difficult for statisticians to precisely quantify its benefits or its impact on the economy (Garitte, 2020). Some experts foresee a future in which every organization, regardless of its objective or position, will rely heavily on IT in all aspects of its operations. Analysts who have examined the progress in IT assert that processing power is expanding at a rate of twice its current capacity during a span of less than two years. Furthermore, the decreasing cost of utilising new technology for commercial purposes, coupled with the rising prices in non-technical sectors, enhances the appeal of IT as a valuable business tool (Garitte, 2020). The remarkable expansion, along with the reasonable cost, has led an increasing number of organisations to evaluate the advantages and drawbacks of IT. This is crucial because organisations need to maximise the benefits derived from technological advancements while ensuring the security and protection of their assets (Garitte, 2020). Therefore, a survey will be conducted in order to assess the influence of information technology on internal auditing practices in manufacturing companies in Cameroon.

Statement of the Problem

Manufacturing firms are making significant investments in information technology (IT). Expenditure on IT has consistently increased as a percentage of organizations’ budget, surpassing even spending on research and development (R&D) or advertising (Mithas et al., 2022). Organizations have increasingly incorporated sophisticated technologies (Dewan et al., 2018). The advent of the first functioning business computer in 1954 marked the beginning of the technological revolution in accounting and auditing. The utilisation of information technology revolutionized the storage, retrieval, and management of accounting data. Deloitte & Touche (2019) analyzed the present influence of information technology on the Internal Audit department. The "Internal Auditing Self-Assessment Tool" survey assists the author in evaluating the effectiveness of the internal auditing process, the level of technological utilisation inside organizations, and the impact of technology on the organization. 

As stated by Salehi and Alipour in their 2020 study information systems have become valuable aids for auditors in their daily tasks, and most organizations like manufacturing sector has consider themselves equally vulnerable to any technology and responsible for conducting audits effectively. Moreover, the growing focus on cybersecurity and data protection has emerged as a crucial obstacle in the field of auditing. The increasing dependence on digital technology and online platforms has elevated the vulnerability to cyberattacks and data breaches, resulting in significant financial and reputational consequences for financial institutions. Ernst & Young, 2019) mentioned that information technologies are progressively capable of facilitating remote personnel and facilities. Network technologies, groupware, and online services like the Internet have reduced the physical separation between people.  However most existing studies revealed that the most extensive utilisation of technology is concentrated on workflow-oriented technologies such as computer networks, email, electronic documents, and presentation graphics whereas more recent technologies that specifically facilitate the auditing process, such as file interrogation, automated risk analysis, decision assistance, and neural networks, are not widely utilised. Additionally, it is worth mentioning that technologies have revolutionised the utilisation of information systems, shifting their primary purpose from computing to communication. Conversely, the swift advancement of information technologies gives rise to ongoing concerns regarding emerging auditing hazards. Thus  it is within these challenges faced that this research has been carried to assess the influence of information technology on internal auditing practices in manufacturing companies in Cameroon.

 1.3  Objectives of the Study

The main purpose of this study is to assess the influence of information technology on internal auditing practices in manufacturing companies in Cameroon. Specifically, the study will;

Examine the extent of information technology adoption in internal auditing practices within manufacturing companies.

Investigate the role of IT in enhancing the accuracy and reliability of audit outcomes in manufacturing companies.

Evaluate the challenges faced by internal auditors in integrating IT into their auditing practices.

1.4  Research Questions

The following questions have been prepared for the study:

To what extent has information technology been adopted in internal auditing practices within manufacturing companies?

What role does IT play in enhancing the accuracy and reliability of audit outcomes in manufacturing companies?

What challenges do internal auditors face in integrating IT into their auditing practices?

1.5 Research Hypotheses

H0: Information technology has no significant influence on internal auditing practices in manufacturing companies in Cameroon.

Ha: Information technology has significant influence on internal auditing practices in manufacturing companies in Cameroon.

1.6 Significance of the Study

The study will provide insights into best practices for implementing IT solutions that align with the specific needs of manufacturing firms, ultimately leading to more reliable and transparent internal audits. Furthermore, this research will explore how IT tools such as data analytics, audit management software, and electronic documentation systems can improve audit planning, execution, and reporting. By leveraging these technologies, auditors will be able to adopt more advanced techniques, increase their efficiency, and deliver more insightful recommendations to management. The study will also address challenges related to IT integration, including data security issues and the necessity for continuous training, providing guidance on how to overcome these obstacles. Nevertheless, the research will contribute to the theoretical understanding of how information technology influences internal auditing practices. It will also expand existing theories by examining how technological advancements can enhance the effectiveness and efficiency of internal audits.

1.7 Scope of the study   

The scope of this study is boarded on the influence of information technology on internal auditing practices in manufacturing companies in Cameroon Empirically, the study will examine the extent of information technology adoption in internal auditing practices within manufacturing companies, investigate the role of IT in enhancing the accuracy and reliability of audit outcomes in manufacturing companies and evaluate the challenges faced by internal auditors in integrating IT into their auditing practices.

Geographically, the study will be delimited to some selected manufacturing companies in 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.

Information Technology (IT): encompasses tools and systems used for data analysis, audit management, risk assessment, and reporting.

Internal Auditing Practices: The methods and procedures employed by internal auditors to evaluate and improve the effectiveness of an organization's risk management, control, and governance processes.

Manufacturing Companies:Businesses engaged in the production of goods through the use of machinery, tools, and labor.

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