INVESTIGATING THE INFLUENCE OF INTERNAL AUDITING ON MANAGERIAL SUCCESS OF BUSINESS ORGANIZATIONS IN CAMEROON (A CASE STUDY OF CAMAIR- CO)

CHAPTER ONE

INTRODUCTION

Background of the Study

Auditing is necessary for organisations worldwide, whether they are public, private, or otherwise, in order to accurately examine their financial accounts. Auditing refers to the objective evaluation of a financial statement of a company or organisation by an assigned auditor, who is required to fulfil their duties and adhere to any applicable legal obligations (Chamber, 2018). Its objective is to address the inherent issue of credibility in reports and financial statements. It serves to avoid and identify errors and fraudulent activities, while also generating a report that assesses the accuracy and integrity of the financial statement (Coper, 2020). They also get comprehensive comprehension of the operations under examination. The significance of internal audit has significantly increased in the majority of organisations in recent times. This can be partly due to the expansion of the organisations, which involves extensive operations and the necessity to guarantee that the organisations' policies and fundamental accounting controls are adhered to in every aspect of the organisation. Once again, this can be seen as a proactive step taken by management to guarantee that government legislation regarding the activities of both public and private organisations are fully adhered to, in order to prevent any conflicts or violations of the law. 

In contemporary times, internal audit is often regarded as the foremost and essential element of company governance (Gramling et al., 2019). Internal auditors must prioritise effectiveness as a key factor in establishing good governance within their functions and organisations. The significance of internal audit's function in the domain of corporate governance leads to ongoing interest in the efficacy of internal audit (hereinafter referred to as IAE) (Endaya & Hanefah 2021). The profession of internal audit is characterised by its dynamic nature, requiring a constant process of updating in order to effectively adapt to the ever-changing conditions of the business environment. Aside from offering assurance services to business operations, the internal audit profession is also responsible for delivering consultation services to senior management as a strategic partner to address their evolving demands. By assuming a consultant role, internal auditors have the opportunity to elevate their professions to a position of high regard, hence enhancing the value they contribute to their firms. In addition to its conventional function of overseeing internal control and financial compliance, internal audit can contribute to establishing effective governance inside an organization by providing extensive consultation services in the realm of risk management activities. The dynamic nature of today's company environment has increased the importance of examining the extent to which internal audit achieves its objectives (Alzeban & Gwilliam, 2019). 

Significantly, as the organisation grows and the scope of supervisory duties increases, the leader cannot possess firsthand knowledge of every part of the organisation. He is unable to maintain control or oversee the ongoing efficiency of all controls. This necessitates the assignment of this obligation to a distinct division known as the internal audit department. The Internal Audit Department is a department established by management, typically staffed by a Chartered Accountant, in accordance with section 358 of the Companies Act 1976. Its purpose is to oversee the activities of other employees, thereby strengthening controls inside the organisation.Control by management Achievement Decisions are made for diverse purposes and can differ amongst businesses. Internal control ensures the reliability and trustworthiness of financial statements used for decision-making. Consequently, auditing is necessary to assess whether individuals in positions of financial responsibility in government and business are behaving and reporting honestly. Given the importance of this function, this study aims to investigate the influence of internal auditing on managerial success of business organizations in Cameroon.

Statement of the Problem

Modern organisations must navigate intricate and ever-changing environments that pose various challenges. Consequently, there is a need to prioritise both the daily operations of the business and the organization's ability to adapt to these changing conditions. This includes efforts to enhance performance by improving effectiveness, efficiency, and flexibility. Internal auditing enables managers to assess the efficiency of an organization's functioning and the performance of its resources (Shannak et al., 2022). Organisations in the business sector in Cameroon typically experience a lack of success or accomplishment, as indicated by Masa’deh et al. (2018). This issue is frequently discussed and tackled at various levels within the country (Almajali et al., 2020). 

Despite the fact that Cameroonian human resources possess exceptional skills compared to other countries in the region, and Cameroon has a remarkable reputation in various fields such as ICT and regulatory sectors (Kateb et al., 2019; Obeidat et al., 2019; Altamony et al., 2018). The field of internal audit, a profession that adapts to evolving corporate requirements, warrants greater attention and consideration for future academic research (Lenz et al., 2018). Several studies (Arena & Azzone 2019; Mihret et al. 2020; Coetzee & Erasmus, 2021) highlight the need for research on the factors that influence the efficiency of internal audits and their interrelationships. Extensive empirical investigations are required in the literature to investigate additional variables that may potentially influence IAE. The limited body of work on Internal Audit Effectiveness (IAE) in private sector businesses has revealed that the elements influencing effectiveness and potential linkages have not been thoroughly investigated. Additional investigation is required in these particular domains.Hence, it is in the light of these that the study seeks to investigate the influence of internal auditing on managerial success of business organizations in Cameroon.

 1.3  Objectives of the Study

The main purpose of this study is to investigate the influence of internal auditing on managerial success of business organizations in Cameroon. Specifically, the study will;

Evaluate the internal auditing practices employed by Camair-Co.

Assess the impact of internal auditing on decision-making processes in Camair-Co.

Evaluate the influence of internal auditing on the financial performance of Camair-Co.

Analyze the role of internal auditors in risk management and control in Camair-Co.

1.4  Research Questions

The following questions have been prepared for the study:

How effective are the internal auditing practices employed by Camair-Co?

To what extent does internal auditing impact decision-making processes in Camair-Co?

Does internal auditing influence the financial performance of Camair-Co?

What role do internal auditors play in risk management and control within Camair-Co?

1.5 Research Hypotheses

H0:Internal auditing does not have a significant influence on the managerial success of business organizations in Cameroon.

Ha: Internal auditing has a significant influence on the managerial success of business organizations in Cameroon.

1.6 Significance of the Study

The findings will provide a basis for refining theoretical approaches to financial regulation, emphasizing the role of audits as a critical component of regulatory oversight. This can inform future research on the interplay between regulation, auditing, and financial stability. Nevertheless, subsequent researchers will use it as a literature review. This means that other students who may decide to conduct studies in this area will have the opportunity to use this study as available literature that can be subjected to critical review.

1.7 Scope of the study   

The scope of this study is boarded on the influence of internal auditing on managerial success of business organizations in Cameroon. Empirically, the study will evaluate the internal auditing practices employed, assess the impact of internal auditing on decision-making processes, evaluate the influence of internal auditing on the financial performance and analyze the role of internal auditors in risk management and control.

Geographically, the study will be delimited to employees of Camair-Co.

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 auditing: an independent, objective assurance and consulting activity designed to add value and improve an organization's operations.

Managerial success: refers to the effectiveness of managers in achieving organizational goals and objectives.