Documentos de Académico
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By
August, 2015
DECLARATION
I hereby declare that this submission is my own work towards the award of Masters
previously published by another person nor material which has been accepted for the
award of any other degree of any University or Professional Institution, except where
Certified by:
Certified by:
i
ABSTRACT
This study is to assess the impact of external audit in accountability and transparency
were used that included questionnaires, interviews, focus group discussions to collect
sample size of sixty four (108) respondent were selected from NGOs, stakeholders
and beneficiaries across board and SPSS was used in the analysis of the data. From
the findings, it is observed that the external audit report of NGOs are not utilised to
bring about compliance and that recommendations of the external auditors are not
enforced by management. This invariably calls for a case by case research on NGO
activities. It was established that external audit report does not have positive effect
evaluation should not be only narrative as has been the case in most evaluations but
External Auditors should not be hired by management of NGOs but by the Board of
Directors or Donors so the external auditors will report to the Board or the donor or
support or intervention such that they can hold NGOs implementing the projects
within their community accountable if they refused to render the agreed support
package.
ii
DEDICATION
Who have given me the support, encouragement and permitted my long absence
from home most of the time to enable me complete this piece of work.
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ACKNOWLEDGEMENT
My first appreciation goes to the Lord Almighty for given me the wisdom, courage,
through the proposal writing. His useful comments and criticisms made me stay on
I wish to acknowledge other researches, without their work this research would not
have come into completion, much was borrowed from them. Also this research
would not have come to a successful completion without the help of a number of
people.
useful comments. Without his dedication, the work would not have become a reality.
4
TABLE OF CONTENTS
DECLARATION......................................................................................................... i
ABSTRACT ................................................................................................................ ii
DEDICATION........................................................................................................... iii
ACKNOWLEDGEMENT........................................................................................ iv
TABLE OF CONTENTS .......................................................................................... v
LIST OF TABLES .................................................................................................. viii
ABBREVIATIONS AND ACRONYMS ................................................................. ix
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2.11 Responsibilities of management and auditors for fraud and error ..................... 21
2.1.1.1 Responsibilities of management .................................................................... 21
2.11.2 Responsibilities of the auditor......................................................................... 21
2.12 Detecting Fraud .................................................................................................. 22
2.14 The Audit Report ............................................................................................... 24
2.15 Internal Audit ..................................................................................................... 26
2.16 Difference between Internal Audit and External Audit ..................................... 27
2.17 Control Procedures............................................................................................. 28
2.19 Audit Committees .............................................................................................. 30
2.19.1 Characteristics of Audit Committees .............................................................. 31
2.19.2 Effectiveness ................................................................................................... 32
2.19.3 Role of Audit Committee ................................................................................ 32
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5.1 Summary of findings............................................................................................ 55
5.1.1 Assess how effective external audit is on NGO‘s in accountability and
transparency. ..................................................................................................... 55
5.1.2 To examine how external audit report is dealt with by NGOs in the Bolgatanga
Municipality. ..................................................................................................... 56
5.1.3 Challenges that NGOs face in ensuring transparency and accountability. ....... 56
5.2 Conclusion ........................................................................................................... 56
5.3 Recommendations ................................................................................................ 57
REFERENCES......................................................................................................... 59
APPENDICES .......................................................................................................... 62
Appendix 1: QUESTIONAIRE TO STAFF AND BENEFICIARY ......................... 62
vii
LIST OF TABLES
TABLE PAGE
88
ABBREVIATIONS AND ACRONYMS
SA Statutory audit
PV Private audit
IA Interim audit
MA Management audit
CA Continues audit
EA External audit
9
EA Effectiveness audit
1
0
CHAPTER ONE
INTRODUCTION
Issues of transparency, honesty and accountability have in recent years been regarded
Nepal News (2001), "only a few of these NGOs appear to be transparent and
Organisation (WTO), Mike Moore in 2001 instituted a code of conduct which would
be ensure and require that NGOs are transparent and accountable in their activities.
Such demands mostly mandate NGOs to deliver what they demand of others:
relationships, and honest reporting of resource use and achievements, which can
emphasize the honesty and efficiency with which resources are used or the impact
and effectiveness of the work‖ (Ramesh, 1996: 8). External auditors are mandated by
law to evaluate and publicly issue an opinion on the transparency and accountability
on NGOs activities. Its purpose, in part, is to ensure that the financial status and
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Internal and external stakeholders need access to timely and adequate information
about the activities of NGOs since it plays significant roles to them performing
effectively. NGOs must thus not only be honest, but they ought to be regarded as
such. This is because, government bodies can politically isolate them, which would
render them incapable of going about their voluntary activities. The development of
NGOs has come up with issues not lonely relating to their task to perform but also on
accountability. There have been rise in the attentions for transparency and
accountable is the standard requirement or expectation of the one whom the report is
given.
including beneficiaries, donors, regulators and staff as well as other NGOs and
regard them as part of the system to ensure accountability. Rajesh further asserts that
since their stake is in relation to their performance and not in its governance, their
accountability to stakeholders. This implies that if NGOs are to have the continued
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access to the flow of funds from donors, then their ―desirable processes and
buttress these views, Tandon further explains that accountability to donors should be
maximising the effectiveness with which NGOs are operating in the beneficiary
organizations (NGOs), which are responsible for how effective the funding is
translated into aid delivery. At both the project (NGO) level and country
deployed.
Furthermore, there is a general lack of independent research into the impact and
perceptions of, beneficiaries of those attempts that some NGOs have made over the
years to expand their accountability and transparency drive. Those studies that have
addressed this issue have tended to be narrowly focused on particular NGOs, and
have therefore not been able to provide broader insights into issues at the
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fundamental level associated with the development and implementation of new
In addition, few concerns have also been raised that most NGOs divert or misapply
funds allocated to them (Gaventa and McGee, 2008). Several attributes have been
The global growth of NGOs has been a specific locus of discussions and initiatives to
improvement (Jordan, 2005; Lloyd, Oatham, & Hammer, 2007; Omelicheva, 2004).
Developing Nations are, by RICK Chohen, July 16 th, 2013, emphasis that NGOs in
Developing Nations are corrupt. September 26th,2003 GNA Mr. Joseph Oji United
Nations Volunteer Program Officer in Ghana, on Friday has criticised Youth related
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Non – Governmental Organisations (NGOs) in Africa that misapply donor funding
Although NGOs are audited by external auditors, the public perceptions and the
In respect of these, the researcher intends to assess the impact of external audit on
1.3.1General objective
The general objective of the study is to assess the impact of external audit in
In order to achieve this objective the following specific objectives are designed in
that direction.
transparency
Bolgatanga Municipality.
and transparency.
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1.4 RESEARCH QUESTIONS
The following are the research questions designed to achieve this objective;
transparency approaches?
It is known that every study play a major role in one way or the other. The findings
of the study are anticipated to be significant because of the primary role external
audit play in promoting the principles of good governance through accountability and
transparency.
The result of the study would identify the internal control practices that ensure
auditing on NGO‘s accountability and transparency and examine how external audit
report is dealt with by NGOs as well as ascertain the major challenges that hinder the
These findings would help the researcher to make prudent recommendations to the
various NGOs and the beneficiaries to ensure efficient accountability. In addition, the
outcome of the study would enable NGOs to implement external audit report so as to
It is again expected that after ascertaining those major challenges that hinder the
accomplishment of external audit by the NGOs would help the NGOs to apply best
strategies to that effect. The report will also be a source of reference for other
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researchers on should more about the impact of external audit instead of only
The study would be conducted in the Bolgatanga Municipality in the Upper East.
The content scope covered the impact of external audit of NGO‘s in the light of
concentrate on the management staff of the NGOs, Audit firms and beneficiary
Bolgatanga Municipality.
Time: The time of the research is very short and this makes it very difficult if not
Cost: The cost of producing this study is substantial considering the fact that one has
to type the manuscript, produce photocopies and commute frequently within twenty
(20) commies in the Bolgatanga Municipality for the information the NGOs.
Co-operation: This research needs a lot of information from both management staff
of the NGOs and some beneficiaries. However, some farmer groups and individuals
were skeptical in providing information with the excuse that they have responded to
a lot of such questions in the past but have not seen any benefit. Never the less,
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1.9 ORGANISATION OF THE STUDY
This study will be organized in five chapters as follows. Chapter One gives an
overview of the study including the background to the study, objectives of the study,
and significance of the study. The second chapter entails the review relevant
literature on the subject matter. Chapter Three provides an insight into the procedures
the researcher would use in carrying out the study. This includes the description of
the study type and design, population, sample and sampling technique to be used,
data collection methods and analysis among others. Chapter Four focuses on the
analysis of the results of the findings. This will consist of tables and charts to give
more meaning to the data that would be collected from the field. Chapter Five will
provide summary of the study findings and draw the final conclusions and
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CHAPTER TWO
LITERATURE REVIEW
2.0 Introduction
The chapter entails the review of literature which relates to the topic the impact of
research would be selected and relevant areas would be appraised, assessed and
evaluated. The chapter further gives relevant information about the aspects of earlier
NGO accountability and transparency issues are concepts that are regarded complex.
This is basically due to the ambiguous nature in which NGOs are known to operate.
According to Jordan and van Tuijl (2006) and O‘Dwyer (2007), intermediary
demands. NGOs from developed nations and governments are further known to
provide funds and other resources as well as locally-based service delivery. There
exits numerous International NGOs (INGOs) from developed nations who also
mobilize resources (funds) and channel them to developing economies via local-
based operations. There are thus NGOs at the local level and local operations of
INGOs who serve as intermediary between international donors and the beneficiary
local communities.
Several research works have revealed that NGOs play important role when it comes
to health care delivery, education and other numerous welfare services in developing
countries. Such works include Dixon et al. (2006); Ebrahim (2003a); Edwards and
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Fowler (2002); Goddard and Assad (2006); Gray et al. (2006); O‘Dwyer and
― the openness of government systems to citizens and the public through clear-cut
and well defined procedures, loose access to information, that in the end promotes
Goetz and Jenkins (2005) further assert that accountability realistically takes into
available the required information and justification about their actions; and
been revealed that concentrate much on development as a need and a gift. There are
which has the aim of ensuring assistance that involves the duty to aid in the
to the INGOs playing the key role in educating those affected by the projects and
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activities of these INGOs. The educational actions are geared towards inculcating
individual. Lastly Nelson and Dorsey (2003) indicate that the design of projects of
INGOs have happened in a more participatory manner, which have recognized the
needs to respect or consider the rights of the people who are affected by such
projects.
A normal requirement attached to the funding provided to these NGOs is that the
locally based NGO has to account to the donor government or INGO for the manner
in which their funds have been used. Although this requirement can help to ensure
also been shown to have problematic consequences. For example, there is some
address this need for so-called upward accountability to donors can prove
beneficiaries (Dixon et al. 2006; Goddard and Assad 2006). To ensure that the
funding provided by donor governments and NGOs gives the greatest benefit to its
and community development processes have tested the extent to which ‗transparency
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More judiciously stated, the relationship of transparency to accountability is as a
necessary but insufficient condition. Relatedly, while some take the ‘accountancy‘
monitored and audited (Newell & Wheeler 2006) , others see it as a set of
relationships, which necessarily involve power and contestation. Fox, for instance,
discusses ‗the arena of conflict over whether and how those in power are held
publicly responsible for their actions‘ (2007a: 12). This arena, which he terms
relationships. Goetz and Jenkins (2005) also stress the important distinction between
de jure and de facto accountability. This review‘s focus on effectiveness and impact
Many NGOs and some donors now recognize that, in addition to ensuring that
effectiveness of NGO service delivery by ensuring that local NGOs, and the local
implemented in such a way as to help the NGO identify the needs of its intended
beneficiaries and assess how well it is addressing these needs (Ebrahim 2003a).
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2.3 Hierarchical and holistic accountability
The concepts used in this research to frame and analyse the evidence about how
aid delivery, draw on these ideas of upward and downward accountability. Upward
1996; Najam 1996; Dillon 2004; Kilby 2004; O‘Dwyer and Unerman 2007;
requested to help ensure that the funds they have donated have been used for the
purposes they have specified. This is usually in the form of a one-way flow of
information from the NGO to the donor, with the focus being on the efficiency with
which the donors‘ funds have been spent (in terms of spending the funds on the
particular projects as specified by the donors) (Edwards and Hulme 1996a, 1996b;
however, provide either the NGO or the donor with information about how
effectively the funding has been, or can be, used to provide the maximum alleviation
of human suffering for each dollar of aid (Fowler 1996; Leen 2006; Najam 1996;
Dillon 2004). It seems to presume that in specifying details of the projects upon
which their funding must be spent, donors know the most effective way to alleviate
poverty at the local level. Where donors have common project requirements and
conditions do not affect the manner in which aid projects should be run to deliver the
maximum benefit.
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In practice, there is a distance between the donors in more developed nations and the
localised aid projects, and differences exist in local conditions that affect the impact
of different aid delivery processes. This implies that to help maximize the
specifying the details of individual aid projects at the local level (Najam 1996;
partiality, late coming to work, abuse of public property, leaking and/or abuse of
government information and the like are common manifestation of this plight.
underlying causes. Repeated attempts have been made over the years to combat
behaviour (Rasheed, 1995). For example, Nigeria enacted a Code of Conduct in 1975
- which was subsequently incorporated into the 1979 and 1989 constitutions -
requiring public officials not to allow personal interests to conflict with their official
responsibilities; not to operate foreign bank accounts; not to ask for gifts; and to
declare their assets immediately after taking office, every four years and at the end of
their terms of office. In addition, the Economic and Financial Crimes Commission
(EFCC) and the Independent Corrupt Practices Commission (ICPC) and other bodies
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In some cases, these initiatives were partially successful in achieving some of the
immediate objectives behind these measures. However, this has not been generally
the case. More crucial has been the fact that the incidence of ethical violation has
increased even where a number of violators have been investigated and/or punished
especially by the EFCC. Therefore, the crucial question here is: why have these
statements present a true and fair view of the concern. It also attempts to ensure that
the books of accounts are properly maintained by the concern as required by law.
This is done with the sole aim of ensuring that funds, resources and valuable of
Auditing has become such an ubiquitous phenomenon in the corporate and the public
Michael. 1999. (The Audit Society: Rituals of Verification. Oxford: Oxford University Press) the
auditor perceives and recognizes the propositions before him/her for examination,
obtains evidence, evaluates the same and formulates an opinion on the basis of his
practices that are primarily imposed by the Institute of Chartered Accountants (ICA
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Gh). The auditing process relies on evidence, analysis, conventions, and informed
declare that:
The independent auditor or auditors should make sure that all aspects of the
examination and the preparation of the audit report are carried out with a high
standard of professionalism.
supervised.
Independent auditors will carry out proper study and evaluation of the
External auditors will make certain that they are able to review all relevant
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Standards of reporting describe auditing standards relating to the audit report and its
observed in the current period in relation to the preceding period; and whether
is included in instances where, for one reason or another, the auditor is unable to
others utilize external or independent auditors to handle this task (some businesses
External auditors are authorized by law to examine and publicly issue an opinion on
the reliability of corporate financial reports. Dennis Applegate describes the history
follows. "The U.S. Congress shaped the external auditing profession and created its
primary audit objective with the passage of the Securities Act of 1933 and the
financial audits of all firms whose capital stock is bought and sold in open markets.
Its purpose, in part, is to ensure that the financial status and operating performance of
17
publicly traded companies are fairly presented and disclosed." Firms not obliged by
law to perform external audits often contract for such accounting services
nonetheless. Smaller businesses, for example, that do not have the resources or
inclination to maintain internal audit systems will often have external audits done on
The primary goal of external auditing is to determine the extent to which the
on a client's financial statements. The attest function of external auditing refers to the
the statements. This is communicated to the officials of the audited entity in the form
may sometimes be requested as well). During the course of an audit study, the
external auditor also becomes well-acquainted with the virtues and flaws of the
Major types of audits conducted by external auditors include the financial statements
audit, the operational audit, and the compliance audit. A financial statement audit (or
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recommendations for improvements, or further action. Auditors perform statutory
audits which are performed to comply with the requirements of a governing body,
such as a federal, state, or city government or agency. A compliance audit has as its
procedures or rules.
external auditors. In order to accomplish this, companies should make sure that they:
Select an auditing firm with expertise in their industry and a proven track
record.
Establish and maintain efficient record keeping systems to ease the task of the
auditor.
Make sure that owners, executives, and managers know the basics of
Recognize the value that external auditors can have as objective reviewers of
Build an effective audit committee that can provide cogent financial and
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2.9 The External Auditing Process
The independent auditor generally proceeds with an audit according to a set process
In planning the audit, the auditor develops an audit program that identifies and
schedules audit procedures that are to be performed to obtain the evidence. Audit
include those activities undertaken by the auditor to obtain the evidence. Evidence-
audit trail enables an auditor to evaluate the strengths and weaknesses of internal
Statements requires auditor to plan the audit engagement. This involves setting up
audit strategy and then devising a plan in the light of strategy. As the engagement
progress, auditor may feel the need to update, extend or change the planned
procedures. How this is done and what needs to be done. Also the Auditor is required
to plan the audit by developing an audit strategy to guide the plan itself. Audit plan is
necessary for number of reasons of which the foremost is to achieve audit efficiency
and effectiveness. Audit plan involves planning risk assessment procedures, further
audit procedures and other audit procedures to obtain sufficient appropriate audit
evidence. During the audit if auditor concludes that initial plan requires alteration
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then auditor shall consider revising audit strategy as well if needed. Change in audit
plan involves change in the scope timing or extent of planned audit procedures.
Auditor shall document the audit plan and any changes thereto.
The auditor is responsible for reporting on whether the financial statements show
a 'true and fair view'. He is therefore only concerned with fraud and error that has
a material effect on the true and fair view. The auditor's responsibility is to
obtain reasonable assurance that the financial statements, taken as a whole, are
free from material misstatement, whether caused by fraud or error. It is not the
primary responsibility of the auditor to prevent or detect fraud error or, although
the audit may act as a deterrent to fraud. Auditors may also discover error or
fraud during the course of their audit work, but they are by no means certain to
the inherent limitations in any audit and the fact that deliberate attempts may be
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'The primary responsibility for the prevention and detection of fraud
rests with both those charged with governance of the entity and
management.'
fraud by the Securities and Exchange Commission (SEC) posted far less than $100
million in assets and revenues in the year preceding the fraud. Not surprisingly, fraud
cropped up most often in companies in the grips of financial stress, and it was
As the study's authors, Mark Beasley, Joseph Carcello, and Dana Hermanson, noted
recording revenues before all terms were satisfied, recording conditional sales,
completed sales. In addition, many firms overstated asset values such as inventory,
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accounts receivable, property, equipment, investments, and patent accounts. Other
types of fraud detailed in the study included misappropriation of assets (12 percent of
errors should not be confused with fraudulent activity. Errors can occur at any time,
in any place with unpredictable financial statement effects. Fraud, on the other hand,
is intentional and is often more difficult to detect than are errors. Part of the job of an
employee or management fraud and then increase the scrutiny of all records
accordingly.
ISA 240 The auditor's responsibilities relating to fraud in an audit of financial statements
regulates this area. It makes the following distinction between fraud and error:
policies)
misappropriation of assets.
statements.
oversights
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unintentional clerical errors, or
Misinterpretation of facts.
The key distinction between fraud and error is therefore whether the effect on the
may be little or no difference between fraud and error as far as the impact on the
audit is concerned. In both cases the auditor will be concerned about the impact
The main difference between fraud and error may arise in relation to any national
The independent audit report sets forth the independent auditor's findings about the
business's financial statements and their level of conformity with generally accepted
statements have general acceptability. This includes such things as 1) the accounting
manner; and 4) the financial statements reflect the underlying events and transactions
in a way that presents an accurate portrait of financial operations and cash flows
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The auditor's unqualified report contains three paragraphs. The introductory
responsible for those statements, and asserts that the auditor is responsible for
expressing an opinion on them. The scope paragraph describes what the auditor has
done and specifically states that the auditor has examined the financial statements in
appropriate tests. The opinion paragraph expresses the auditor's opinion (or formally
announces his or her lack of opinion and why) on whether the statements are in
Various audit opinions are defined by the AICPA's Auditing Standards Board as
follows:
Unqualified opinion — This opinion means that all materials were made
available, found to be in order, and met all auditing requirements. This is the
report. When this is done the opinion is prefaced with the term, explanatory
language added.
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results of operations, or cash flows in conformity with generally accepted
accounting principles. Such an opinion is obviously not good news for the
she feels that the company did not present sufficient information. Again, this
The fair presentation of financial statements does not mean that the statements are
fraud-proof. The independent auditor has the responsibility to search for errors or
should examine the auditor's report for citations of problems such as debt-agreement
statement appears in the report, the investor should understand that there are certain
statements, and that these problems may call into question whether the statements
fairly depict the company's financial situation. These statements typically require the
acceptable.
objective assurance and consulting activity designed to add value and improve an
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bringing a systematic, disciplined approach to evaluate and improve the
amongst other things, examining, evaluating and reporting to management and the
There are several parts to the definition of Internal Auditing which gives the core
evaluate and
governance processes.‖
Internal Audit and External Audit are the two most important types of audit which
can be conducted to review the operational activities of the organization. Let‘s look
the other term External Audit which is obligatory for every separate legal entity,
where a third party is brought to the organization to perform the process of Audit and
give its opinion on the Financial Statements of the company. It happens many times
that we consider both as one, but they are thoroughly different from each other and
27
therefore we have compiled the most important difference between internal audit and
external audit.
Controls procedures are those procedures established to achieve the entity‘s specific
objectives. External auditor in this context tries ensure that proper authorization are
sought, there exist assets register in order to safeguarding of assets and ensuring the
and correct errors. According to Statement of Auditing Standards (SAS) (300), the
operation and internal controls ensure the completeness and accuracy of the financial
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Request by user departments and for appropriate authorization by the head
environment.
Ensure that goods are receipted in stores before requisitions are made
Reconciliations
Comparing the results of cash, security and inventory with accounting records
It is important that the audit committee has an independent point of view on audit
quality.
These requirements are part of recent measures intended to increase the transparency
of the external audit process and the accountability of the auditor to the audit
committee and the audit committee to shareholders. The latest development which
calls for further strengthening in this area is the Competition Commission‘s report.
Audit committees report the results of any external quality inspections of the
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Only audit committees be permitted to negotiate and agree audit fees, the
appointment of auditors and authorize the external audit firm to carry out
Result in constructive and honest dialogue with the audit firm about its
Provide insights for the company into a broad range of areas including
Help inform future audit tender processes that the audit committee will
undertake.
There are a number of definitions for audit committees, each tailored to the
environment and structure in which they operate. According to Wong (2012) an audit
oversight of the financial reporting process, selection of the independent auditor, and
AARF, IIA-Australia, and AICD - Joint Publication Audit Committees 2002: Best
auditors together can deal with issues relating to the management of risk and with
2002 :10).
30
An audit committee operates within a network of relationships. They are reliant on
management, internal audit and external audit to provide the information required to
meet their functions of assessment and exercise of control on behalf of their boards
the board of directors. Directors in the private sector are either executive or non-
organisations are usually independent directors. The audit committee in the public
sector, where the governing body do not have a board audit committee, have
committee report to Boards where it exists while in other countries audit committee
The following are characteristics of audit committee according to Wong (2012) that
having clear authority and definition of its role, legal authority, charter, terms
having audit committee members with the right attributes qualifications and
experience; and
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2.19.2 Effectiveness
DeZoort & Salterio (2001) found that, in the case of auditor-management disputes,
the independent members of an audit committee and the level of members‘ auditing
knowledge were positively associated with support for the auditor, thus assuring that
associated with the appointment of audit committee members who are financially
literate. Regarding financial expertise, Davidson, Xie & Xu (2004) found that
auditing and audit firm experience is more important than corporate financial
verify what management has prepared. Verifying and evaluating presented financial
To perform its role an audit committee must be established and be empowered with
the authority to perform its duties. That is government departments and agencies are
requires Boards to establish boards and audit committees that are independent from
Wong (2012) summarized the role of an audit committee as to ensure that reliable
information about the processes and outcomes of management control and operations
and their accountability are conveyed to the board. Therefore, a major issue for audit
committees to address is their oversight role. Wong further asserted that audit
responsibilities for the financial reporting process, the system of internal control over
financial reporting, the audit process, and the organization‘s process for monitoring
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compliance with laws and regulations. Audit committees (―Audit Committee‖) are
To many, the Audit Committee is the epitome of corporate governance. The role of
the Audit Committee is to lend creditability to the integrity of the internal control and
The Victorian Department of Heath website (2010) cited in Wong (2012) states ―The
the Secretary on the Department‘s risk management and control and compliance
Audit committees are responsible for financial and risk management oversight and
Yusoff (2012) summarized the role of the audit committee in the following
statements as most of the organisation‘s failed due to lack of risk exposure relating to
the organisation‘s governance in relation to; compliance with laws, regulations, &
reliability and integrity of financial and operation information and safeguarding the
assets. They further contend that, audit committee is established with the aim of
the board through its oversight and monitoring role. Among many responsibilities the
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boards entrust the Audit Committee with the transparency and accuracy of financial
robustness of the systems of internal audit and internal controls, effectiveness of anti-
fraud, ethics and compliance systems, review of the functioning of the whistleblower
mechanism. Audit Committee also plays a significant role in the oversight of the
company‘s risk management policies and programs (Adamu and Yusoff, 2012).
According to the State Queensland Treasury and Trade (2012) audit committee can
internal control and risk management functions are operating effectively and
reliably.
performance information.
and
ethical behavior.
34
Adams, Grose and Donald (2004) listed a number of these functions which they
action on them,
Providing a forum for the board, management, or the auditor to raise matters
of concern,
Receiving the necessary information from the auditor as required under the
board,
Coordinating the work of internal audit and external audit, Assessing the
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CHAPTER THREE
RESEARCH METHODOLOGY
3.0 Introduction
This chapter will focus on the methodology the researcher will adopt to undertake the
study. The areas study will cover include the study design, the population, sample
size, sampling techniques; data collection and analysis as well sources of data for the
study.
The researcher used mixed approaches which consist of both qualitative and
2009) is characterized by the collection and analysis of textual data which are
within which the study occurs. It allows the researcher to make connection between
the study and the situation. Due to this research being an explanatory research, both
quantitative and qualitative analysis was needed. The qualitative results served to
The choice of the survey strategy allowed for the collection of large amount of data
from the population. The selection of survey design over other research methods
assertion of Saunders, Lewis, and Thornhill (2007) that survey is an appropriate and
In addition, the research involves quantitative study. Miles and Huberman (1994)
36
measurement of quantity, intensity or frequency. It is about asking people for their
opinions in structured way so that one can produce hard facts and statistics to guide
you. To get reliable statistical results, it is important to survey people in fairly large
numbers and make sure they are representative sample of the target. It is for this
the subject matter which is to assess the impact of external audit on NGOs in relation
The study will focus on the impact of external audit of NGO‘s in the light of
The region has about twenty three (23) NGOs operating in various projects and
programmes. Out of the twenty three (23), sixteen (16) operate within the Bolgatanga
The study focused on these 16 NGOs in addition to some selected beneficiaries. The
various areas.
This study essentially targets Top management staff of these aforementioned offices
and personalities. The researcher therefore will use purposive sampling techniques to
selecting interview respondents. This will ensure that only people with relevant
Staff of the NGOs will be contacted for all needed information in order to achieve
the study target. Sixty four (64) respondents would be selected from NGOs which
37
comprises of 4 staff each to be selected from each NGO and four (44) respondents
Both primary and secondary sources of data will be obtained for the study. The
primary data will be obtained directly from respondents through the administration of
questionnaires and structured interviews. The secondary data will also be obtained
from the library of the schools, internet, journal articles, newspapers and research
reports on these NGOs. The idea of secondary data was to gather necessary
information to guide the conduct of the research project in order to confirm or reject
Both questionnaire and interview would be used for data collection. Questionnaires
will be the main data collection instrument to be used for the study. The
literate and for that reason they could be able to respond to the questions unaided.
collect data for the study. The interviews will cover the Assembly Men, Heads of
Schools, Opinion Leaders in the Commies and Municipal Assembly focal person.
Each interview will be likely to take approximately fifteen (15) minutes. The
interview will take place at the respondents‘ offices and homes. The interview will
involve an informal interaction process and utilization of open ended comments and
questions. The researcher would conduct all the interviews with the aid of interview
guide and then record all interviews within a few days of each interview.
38
3.7. Data Analysis
The researcher would use both quantitative and qualitative techniques to analyse the
data. The data that would be obtained from the field would be analysed using
the Social Sciences (SPSS) version 17.0 will be employed for data analysis. The use
of this version is because there will be the need for data reduction through factor
analysis, for the purposes of regression and correlation analysis. Percentages would
mean scores of the variables. Standard deviation would also be used in the analysis.
Frequency distribution tables and pie charts would be used to present the data.
from the top management of the NGOs where the study expects to be carried out.
The researcher will also ensure that questionnaires are structured in such a way that
confidentiality with which data will be held will be expressly stated in the
questionnaire. Ethical consideration will again take care of by the researcher briefing
the respondents as to the purpose of the research, their relevance in the research
confidential. The researcher assured them that study was for academic purpose and
that the findings would also be of benefit to the organization. With this assurance
39
ii. The time allocated to study was limited since the researcher had other academic
issues to accomplish. Here the researcher scheduled his work properly by use of
iii. Funding gaps may arise in terms of transport costs to the offices of NWSC,
overcome this problems by borrowing from friends and using his personal savings.
Figure 3.1 Map of Ghana, inserted is the map of the Upper East Region.
Source: https://www.google.com
40
The Upper East Region is located at the north eastern corner Ghana with Bolgatanga
as its capital. It has a land area of 8,842 km2 that is about 3.7% of the land area of
The map of the Upper East is presented in figure 2. The map shows all the districts
that were selected form the study. The Upper East Region lies between longitude 00
and 10 west and latitudes 100 and 300 N and 110 N. It has two international
Source: https://www.google.com
The study was conducted in the Upper East Region of Ghana precisely Bolgatanga
Municipality. The Upper East region is located at the north eastern corner of Ghana
with Bolgatanga as its capital. It has a land area of 8842square KM that is about
41
It has two international boundaries: Burkina Faso to the North and Togo to the east.
Annual rainfall is short and scanty (800-900mm) with a long dry season, harmattan
The region is mainly rural with agriculture employing over 80% of the population
and with the problem impinging upon livelihood development and poverty rate of
90%. The rural population are predominately peasant farmers. Compounds houses
42
CHAPTER FOUR
4.1 Introduction
This chapter deals with presentation of the results relating to the study variables. It
analysed the general characteristics of the sample studied and also answers the
research questions. In other words it deals with four major issues, namely
response rate of 79.63%, which is good for any standards. The composition of
One hundred and eight (108) Questionnaires were distributed to both Staff of the
43
questionnaires were Completed and returned representing 48.15%. 34 out of 44
31.48%.This implies that total respondents were 86 out 108 representing 79.63%.
This section shows the background of the respondents, according to gender and age.
Table 4.2 illustrates that out of the total of 108 respondents, Male had the highest
representation of about 62.79% and the female respondents had 37.21%. This was
because the male respondents figure was more than their female counterparts
Table 4.3 illustrates that the highest percentage of respondents (34.88%) were aged
between 21-30 years 30-40 respectively ,followed by 18.60% representing age more
than 40 years and the least number of respondents ( 5%) were below 21 years of age
44
SECTION C: IMPACT OF EXTERNAL AUDIT IN ACCOUNTABILITY
MUNICIPALITY
45
Table 4.4: The Effectiveness of external auditing on NGO’s accountability and transparency approaches?
46
Table 4.5: To examine how external audit report is dealt with by NGO’s in the Bolgatanga Municipality.
Strongly Strongly
Agree Disagree Total Total(%)
S/NO. STATEMENT NO Agree NO NO Disagree NO
(%) (%) (%) (%)
External audit safeguard donor
15 20 23.26 38.00 44.19 12.00 13.95 16.00 18.60 86 100
resources against fraud
External audit safeguard government
16 6 6.98 8.00 9.30 30.00 34.88 42.00 48.84 86 100
resources against inefficiency
The report of external audit is studied
enforced by the audit committee and
17 12 13.95 10.00 11.63 44.00 51.16 20.00 23.26 86 100
ensure that recommendations are
enforced
The audit committee discusses the
18 13 15.12 13.00 15.12 35.00 40.70 25.00 29.07 86 100
report with the management
The content of the report is made
19 9 10.47 8.00 9.30 34.00 39.53 35.00 40.70 86 100
known to people concern
The audit committee ensure that the
20 13 15.12 4.00 4.65 45.00 52.33 24.00 27.91 86 100
recommendations are implemented
Management is tasked to implement
21 4 4.65 8.00 9.30 42.00 48.84 32.00 37.21 86 100
audit reports
AVERAGE 32.23
11.00 12.79 12.71 14.78 34.57 40.20 27.71 86.00 100.00
Source: Field survey, 2015
47
According to the findings indicated on table 4.4 above 17.44 % of the respondents
that the effectiveness of external auditing as a function is not effectively practised for
in their performance. On the part of External audit ensuring that correct procedures
are established and followed by NGOS 52.33 % of the respondents strongly agreed, ,
38.37 % of the respondents agreed, 9.30% disagreed strongly no one (0) disagreed
The findings revealed that 51.16% of the respondents strongly agreed that the audit
committee ensure that the recommendations are implemented, 41.86% agreed to the
same, 4.65% strongly disagreed and whilst 2.33% disagreed. This implies there are
to implement audit reports, 37.21% agreed to the same, 41.86% strongly disagreed,
whilst 2.33% disagreed. The findings also revealed that 17.44% of the respondents
strongly agreed that the report of external audit is studied, enforced by the audit
committee and ensure that recommendations are enforced 15.12% agreed to the
respondents disagreed. This means that audit committees are not able to ensure that
management. The employees however stated that the external audit sometime fails to
provide the reports in time probably due to lack of enough man power. This may
increase on the time taken by management to make decisions based on the audit
reports.
48
However, the findings also revealed that on the aspect of external audit ensuring
that accurate accounts and records of revenue and expenditure are kept,13.95%
strongly disagreed 17.44% disagreed whilst , 33.72% strongly agreed and 34.88%
agreed. External audit promote accuracy and reliability in accounting and operating
agreed that External audit measure the extent of the operating departments
compliance with donor policy. With this 9.30% strongly disagreed, 11.63%
disagreed, 25.58% strongly agreed and 53.49% agreed. External audit evaluate the
overall efficiency of the operating functions was strongly disagreed at 4.65%, 4.65%
disagreed whist 41.86% strongly agreed and 48.84% agreeing. Majority of the
The work also revealed that in terms of External audit safeguarding donor resource
against fraud 23.26% of the respondents strongly agreed, 44.19% agreed, 5.81% of
the respondents strongly agreed, 9.30% agreed to the same, 39.53% strongly
audit been studied, enforce by the audit committee and ensures that
strongly agreed, 11.63% agreed, 51.16% strongly disagreed and 23.26% disagreed.
On the audit committee discusses the external audit report with management, the
work revealed that 15.12% of the respondents strongly agreed, 15.12% agreed,
40.70% strongly disagreed and 29.07% disagreed. On the content of the report made
known to the people concern, It was also revealed that 10.47% of respondents
49
strongly agreed, 9.30% agreed, 39.53% strongly disagreed and 40.70% disagreed.
On the audit committee ensures that the audit recommendations are implemented, It
was also revealed that 15.12% of respondents strongly agreed, 4.65 % agreed,
strongly agreed, 9.30 % agreed, 48.84% strongly disagreed and 37.21% disagreed.
50
SECTION C: IMPACT OF EXTERNAL AUDIT IN ACCOUNTABILITY AND TRANSPARENCY OF NGO’S IN THE
BOLGATANGA MUNICIPALITY
Table 4.6 Challenges that NGOs face in ensuring accountability and transparency
51
Respondents were asked whether they have experience corruption practice which
which apparently become so pervasive exit in NGOS that 43.02% of the respondents
strongly agreed , 44.19% agreed to the same, 6.98% strongly disagreed and whilst
5.81% disagreed. On the part of whether they have encountered unethical behaviour
which has almost becomes norms of the organization. 37.21% of the respondents
strongly agreed, 46.51% agreed to the same, 13.95% strongly disagreed and whilst
2.33% disagreed unethical climate actually exist in of the organizations. On the part
respondents strongly agreed, 34.88% agreed to the same, 11.63% strongly disagreed
and whilst 13.95% disagreed unethical climate actually exist in of the organizations.
On the part of whether people are not prepare to stop accepting outright bribery,
37.21% of the respondents strongly agreed, 47.67% agreed to the same, 6.98%
strongly disagreed and whilst 8.14% disagreed outright bribery in the NGOs. The
23.26% of the respondents strongly agreed, 45.35% agreed to the same, 17.44%
9.30% of the respondents strongly agreed, 5.81% agreed to the same, 39.53%
strongly disagreed and whilst 45.35% disagreed that there is lack of enabling
52
The survey asked whether there is lack of enforcement of accountability and
to the same, 13.95% strongly disagreed and whilst 32.56% disagreed. On whether
agreed, 9.30% agreed to the same, 52.33% strongly disagreed and whilst 24.42%
disagreed. On the lack of support for in for internal community, 5.81% of the
respondents strongly agreed, 9.30% agreed to the same, 39.53% strongly disagreed
and whilst 45.35% disagreed. The work also showed that on whether there is a weak
50.00% agreed to the same, 5.81% strongly disagreed and whilst 3.49% disagreed.
Internal Audit Department helps ensure accountability and integrity within the
organization. Of the 86 respondents who answered the question that 9.3% of the
respondents strongly agreed, 15.12% agreed to the same, 24.42% strongly disagreed
44.19% agreed to the same, only 5.81% strongly disagreed and whilst 9.30%
disagreed. Majority of the respondents agreed to many key finds than those who
disagreed
53
Findings from respondents as from the table above, 74.42% answered that there is
accuracy in assets records whilst 18% said no. But only 4% answered that they were
not sure. Majority of the respondents agreed that there is accuracy in assets records.
Findings from respondents as from the table above revealed that 79.07% that there is
compliance with applicable laws and regulations 12% agreed whilst 6% were not
sure. This reveals that compliance with applicable laws and regulations are weak
with NGOS.
Findings from respondents revealed that 62.79 % transactions are recorded in the
books of accounts whilst 28 % disagreed. But only 4% still maintained that they
54
CHAPTER FIVE
5.0 Introduction
This chapter provides a summary of the major findings of the study, conclusion and
transparency.
It was established that external audit report does not have positive effect on NGOs
According to the findings indicated on table 4.4 above, on the average 21.96 % of
activities and 28.29% disagreed. Out of the total population who responded and
returned the questions majority disagreed strongly with the assertion that external
indicates that though NGOs are audited periodically and report submitted to
management, it does not have any positive impact directly on the lives of
55
Examination of how external audit report is dealt with by NGOs in the
Bolgatanga Municipality.
From the findings, it is observed that the external audit report of NGOs are not
utilised to bring about compliance and that recommendations of the external auditors
are not enforced by management. This invariably calls for a case by case research on
NGO activities.
The research reveal on the average that 12.79% of the respondents strongly agree
that external audit report of NGOs are discussed, and recommendation enforced and
On the basis of the facts from the research, indicators are that the resources, systems
and procedures are all in place but they are challenged in implementing these best
The research revealed that 31.16% of the respondents strongly agree that there are
5.2 Conclusion
From the research work carried out, the following conclusions were arrived at.
55.81% of the total respondents disagree that there is effectiveness in external audit
on NGO in the pursuit to be transparent and accountable. While 44.19 agree with the
56
It was revealed also that the audit reports of NGOs are not discussed with the key
players and recommendations are not enforced and implemented and as such
Finally the challenges NGOs face are as a result of non – compliance to their own
procedures and regulations, though logistically they are not constraint to ensuring
5.3 Recommendations
Project end evaluation should not be only narrative as has been the case in
Board of Directors or Donors so the external auditors will report to the Board
contracts with donor agencies could end if it is clear in external audit report
that there has not been transparency and that funds meant for beneficiaries are
not properly accounted for, so that only credible and accountable and
57
Audit Committees should be established in NGOs so that they can educate
staff on the findings in the audit reports. This will help put information
available to all. The audit committees would ensure that external auditor‘s
disclosure of the entire package of support such that they can hold NGOs
to render the agreed support package. The NGOs also at the time of
have been and the impact thereof. When communities and stakeholders who
these grants are meant to support understand their role in the roll out and
This study has identified the need to assess the impact of external audit in
perspective, future research should be carried out covering the country as a whole
since this research is limited NGOs in Bolgatanga in the Upper East Region of
Ghana.
58
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Edwards, M., & Hulme, D. (Eds.) (1996a). Beyond the magic bullet: NGO
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Goddard, A.R. and Assad, M.J. (2006). Accounting and navigating legitimacy in
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Jordan, L.(2005). Mechanisms for NGO Accountability, GPPI Research Paper Series
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Jordan, L., van Tuijl, P. and O‘Dwyer, M (2007). NGO Accountability: Politics,
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Miles, MB. & Huberman, A.M. (1994). Qualitative Data Analysis (2nd edition).
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60
Transparency International (2009) The Anti-Corruption Plain Language Guide.
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61
APPENDICES
KWAME NKRUMAH UNIVERSITY OF SCIENCE AND TECHNOLOGY
Dear Respondent,
You have been selected to respond to this questionnaire for the study for the
assessment of impact of external audit on NGO’s Activities in relation to
accountability and transparency in Ghana by focusing on NGOs in the
Bolgatanga. This is in partial fulfilment for the award of Master of Business
Administration in Accounting Kwame Nkrumah University of Science and
Technology. You are assured that any information you provide is solely meant for
the research and nothing else. Your response to the questions will be kept
confidential.
Thank You.
QUESTIONAIRE TO STAFF
Dear Respondent,
You have been selected to respond to this questionnaire for the study for the
assessment of impact of external audit on NGO’s in relation to Accountability
and transparency in Ghana by focusing on NGOs in the Bolgatanga. This is in
partial fulfilment for the award of Master of Business Administration in Accounting
from the university of Science and Technology. You are assured that any information
you provide is solely meant for the research and nothing else. Your response to the
questions will be kept confidential.
Thank You.
62
a. less than 3years ( ) b. 3 – 6years ( ) c. 7 - 10 years ( ) d. over 10 years ( )
63
Objective One:
64
S/N STATEMENT NO Strongly NO Agree NO Strongly NO Disagree
Agree Disagree
(%) (%)
(%) (%)
17.
The report of external audit is studied
enforced by the audit committee and ensure
that recommendations are enforced
18. The audit committee discusses the report with
the management
19.
The content of the report is made known to
people concern
20. The audit committee ensure that the
recommendations are implemented
21.
Management is tasked to implement audit
reports
Total
65
Objective: Challenge that NGOs face in ensuring accountability and transparency.
S/N STATEMENT NO Strongly NO Agree NO Strongly NO Disagree
Agree Disagree
(%) (%)
(%) (%)
66
Open-ended questions
32. In your view, how would you suggest the best and effective role of external
audit could take in ensuring accountability and transparency
...................................................................................................................................
...................................................................................................................................
33. Besides the above stated, what are other internal control practices you
recommend to ensure effective accountability and transparency in your
organisation
...................................................................................................................................
...................................................................................................................................
34. In your opinion, suggest other factors that could influence effective
accountability and transparency in your organisation
...................................................................................................................................
...................................................................................................................................
35. How would you recommend your organisation in the reduction of obstacles that
hinder NGOs its attempts to implement accountability systems
...................................................................................................................................
...................................................................................................................................
36. Is there accuracy in assets records
37. Do you ensure that all documents are approved and controlled?
67