STRATEGIES FOR IMPROVING INTERNAL AUDITING IN SMALL SCALE BUSINESSES IN YAOUNDE, CAMEROON

CHAPTER ONE

INTRODUCTION

Background of the Study

Contemporary businesses must negotiate complex and constantly evolving contexts that present numerous obstacles. Hence, it is imperative to give precedence to both the day-to-day functioning of the business and the organization's capacity to adjust to these evolving circumstances. This encompasses endeavours to enhance performance through the improvement of effectiveness, efficiency, and flexibility. Internal auditing allows managers to evaluate the effectiveness of an organization's operations and the utilisation of its resources (Shannak et al., 2022). According to Masa’deh et al. (2018), organisations in the business sector in Cameroon often face a lack of success or achievement. This matter is commonly debated and addressed at many levels within the nation (Almajali et al., 2020). Cameroonian human resources exhibit extraordinary skills in comparison to other countries in the region. Cameroon has gained a notable reputation in different sectors, including ICT and regulatory industries (Kateb et al., 2019; Obeidat et al., 2019; Altamony et al., 2018). The field of internal audit, which is a profession that adjusts to changing company needs, deserves more focus and contemplation for future academic investigation (Lenz et al., 2018). Multiple studies (Arena & Azzone 2019; Mihret et al. 2020; Coetzee & Erasmus, 2021) emphasise the necessity of investigating the elements that impact the effectiveness of internal audits and their interconnectedness. Further empirical research is necessary in the existing body of literature to explore additional variables that could potentially impact IAE. The existing research on Internal Audit Effectiveness (IAE) in private sector organisations is sparse and has not extensively examined the factors that influence effectiveness and potential connections. Further inquiry is necessary in these specific areas. Therefore, this study aims to investigate the strategies for improving internal auditing in small scale businesses in Yaounde, Cameroon.

Statement of the Problem

Despite the significant theoretical significance of this influential industry, SMEs have not achieved substantial financial success. The primary business challenge is in the incapacity of small and medium-sized enterprises (SMEs) to sustain themselves beyond the initial five years of operation. A significant proportion of small and medium-sized enterprises (SMEs) fail within five years of being established. A smaller percentage of these businesses cease to exist within 6 to 10 years of its inception. Conversely, just 5% to 10% of SMEs manage to survive and thrive until they reach maturity. Onyewu, Muoneke, and Abayomi (2021) observed that small and medium-sized enterprises (SMEs) in Cameroon have a sluggish rate of company expansion. The lacklustre expansion of small and medium-sized enterprises (SMEs) has considerably diminished their impact on the nation's gross domestic product (GDP). It has also affected the ability to compete with larger enterprises, particularly global corporations, and has resulted in decreased advantages from economies of scale, as well as lower profitability and long-term viability. Bunyasi and Bwisa (2019) have identified a sectorial void known as the "missing middle" that arises from the failure of SMEs to expand. The term "missing middle" refers to the phenomenon when the economy experiences a loss in the contribution of a sector to its growth, including the supply of inputs to the industrial sector and employment creation. Therefore, it is necessary to implement management controls and principles in order to guarantee organisational efficiency and effectiveness. Endaya and Hanefah (2023) stated that internal auditing (IA) has become an essential function in organisations. However, there has been a lack of focus on studying IA compared to external auditing. Hence, it is in the light of these that the study seeks to investigate the strategies for improving internal auditing in small scale businesses in Yaounde, Cameroon.

 1.3  Objectives of the Study

The main purpose of this study is to investigate the strategies for improving internal auditing in small scale businesses in Yaounde, Cameroon. Specifically, the study will;

Evaluate the internal auditing strategies employed by small-scale businesses in Yaounde.

Determine whether technological advancement enhances the efficiency of internal auditing in small-scale businesses.

Determine whether internal auditor training and professional development enhances audit quality.

Assess the impact of internal auditing practices on the overall financial performance and decision-making processes of small-scale businesses.

1.4  Research Questions

The following questions have been prepared for the study:

What internal auditing strategies are employed by small-scale businesses in Yaounde?

Does technological advancement enhance the efficiency of internal auditing in small-scale businesses?

Does internal auditor training and professional development enhance audit quality?

How do internal auditing practices impact the overall financial performance and decision-making processes of small-scale businesses?

1.5 Research Hypotheses

H0:Internal auditing strategies employed by small-scale businesses in Yaoundé do not significantly improve their financial and operational performance.

Ha: Internal auditing strategies employed by small-scale businesses in Yaoundé significantly improve their financial and operational performance.

1.6 Significance of the Study

The study will provide priceless insights on the internal auditing tactics used by Yaounde's small enterprises, as well as helpful advice on best practices for risk management and financial supervision. Understanding the precise internal auditing strategies that can be used in their companies to guarantee accurate financial reporting, improve operational effectiveness, and identify possible fraud or mismanagement will be beneficial to business owners and managers. Additionally, the study will help policymakers and regulatory bodies in formulating policies and regulations that encourage the adoption of robust internal auditing frameworks, thereby promoting transparency and accountability in the small business sector. 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 investigate the strategies for improving internal auditing in small scale businesses in Yaounde, Cameroon. Empirically, the study will evaluate the internal auditing strategies employed by small-scale businesses,determine whether technological advancement enhances the efficiency of internal auditing in small-scale businesses,determine whether internal auditor training and professional development enhances audit quality and assess the impact of internal auditing practices on the overall financial performance and decision-making processes of small-scale businesses.

Geographically, the study will be delimited to some selected auditors in Yaounde, 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

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

SMEs: also known as small and medium enterprise, defined as businesses with a limited number of employees and annual revenues, often operate with less formalized structures compared to larger corporations (OECD, 2020).

Auditors: professionals responsible for examining and evaluating financial statements, accounting records, and other financial and non-financial data within an organization.