CHAPTER ONE

INTRODUCTION

1.1Back ground of the Study.

There are many definitions of internal audit (Control) as it affects various constituencies (stakeholders) of an institution in various ways and at different levels of aggregation. Internal audit (controls) is systematic measures such as reviews, checks and balances, methods and procedures instituted by an organization to conduct its business in an orderly and efficient manner, safeguard its assets and resources. (Business dictionary .com).

Internal audits are “The whole system of controls, financial and otherwise, establishments in order to provide reasonable assurance of effective and efficient operation, external financial control and compliance with laws and regulations” (CIMA, 2006) The internal audit is integrated with all other processes within an organization and it’s a technique used by mangers to help an institution achieve its objectives (Internal audit files, internal control overview August 2020).

Adequate internal audit allows managers to delegate responsibilities with reasonable assurance that what they expect to happen, actually does. The three fundamental elements of management planning, sorting out, guiding and controlling are essential to any effective government institution.

However, there is a fourth function which is internal audit control. This is needed to provide accountability for the resources entrusted to them. To defend the advantages, unwavering quality of information’s and advance operational effectiveness; administrators must create internal audit control for every activity that they are in charge. To help an institution achieve its strategic goals and objectives, audit controls are established, monitored and maintained by the people at all levels within the institution. Internal audit control must be practical and the expense of implementation ought not to surpass the advantages gotten from having the audit control setup. The system of internal control in a government institution is the obligation of the directors, administration and staffs of the institution. Such frameworks are for the staffs to screen and execute them.

The main objective of financial control in an institution is to monitor the reliability of financial reporting, timely feedback on the achievement of operational and strategic goals and compliance with laws and regulations.

Financial institutions have seen significant change in their mode of operation over the years. They are becoming more complex over time, mechanically determined and worldwide in outlook. In the meantime, stakeholders are more drawn in looking for greater transparency and responsibility for the integrity of internal control frame work that bolster because of the decisions and administration of the institution.

Most of these institutions have in place control policies to aid the smooth flow of operations. These controls monitor financial activities and ensure that the desired return on investment is met. A system of viable control is a basic component in any financial institution.

In line with the bank of international settlement, (Basel committee) on banking supervision in 1998 designed a frame work of principles for the effective supervision of internal audit control systems in financial institutions. The committee emphasized that sound internal audit control was essential to prudent banking operations and to promoting stability in the financial system as a whole. It stated that heightened interest in internal audit controls was a result of significant losses incurred in many finance houses which could have been avoided if the institutions had maintained effective internal audit control systems.

Such a system helps to ensure that the institutions complies with the laws and regulations as well as policies, plans, internal rules and procedures and decrease the risk of unexpected losses or damage to its reputation. It is clear from the above that internal audit control is a fundamental component in any institution and this study seems to throw more lights on how internal audit control policies aid the operational processes of non-banking (government or nonprofit making) institutions in Cameroon.

1.2 Problem Statement.

Huge amount of money is lost due to Internal Control inadequacies and other criminal temptations, which to say the least, drains the nation’s insufficient resources with its far-reaching and associated consequences on the development or even socioeconomic or political programs of the nation. Thus, government financial institutions do not have strong policies and systems to check these activities in the government financial institutions.

Some of the challenges experienced concerning internal control at the government institution level include; fight with performance problems, late financial reports, the need for financial resources responsibility, embezzlement of County resources and funds, and finally, many rulings have not produced the intended outcome. The aim of internal control policies formulated in financial (Government) institutions is to make certain that it gives credit only to customers who follow the laid down conditions including payments on time.

This is a fundamental element of control that keeps the institution from becoming illiquid or with a poor control report from its auditors because of its improper and un-facilitated financing. In spite, of these financial audit (control) policies, some government institutions fail within the cause of their operational years.  Little studies or no studies have been carried out I government financial institution in the southwest of Cameroon which is call for concern.

1.3 Research Questions:

1. To what extend does the internal audit control policies formulated has to affect the performance of government financial institutions in Cameroon?
2. What are the components of an internal audit control system in government institutions in Cameroon?
3. How does control policies affect the operational activities of government institutions in Cameroon
4. What are the challenges faced in caring out internal audit control in a government financial institution in Cameroon?

1.4 Objectives of the Research.

The main objective of this research is to determine the extent to which internal audit control actually affect the performance of government institutions in Cameroon (The Limbe Divisional Treasury). Other objectives include;

1. To examine the components of internal control system at the level of government financial institutions in Cameroon.
2. To examine the effects of control policies on the operational activities of government institutions in Cameroon.
3. To analyze the challenges of internal control systems on government financial institutions in Cameroon.
4. And finally To make recommendations based on the findings.

1.5 Hypothesis Statement.

H0: The Internal Control System of Limbe Divisional Treasury does not have a significant impact on its performance.

HA: The Internal Control System of Limbe Divisional Treasury has a significant impact on its performance