Abstract

Small and medium-size enterprises in Cameroon are an important part of the economy. The aim of this research was to investigate the effect of internal audit on the performance of small and medium size enterprises in Buea Cameroon. The specific objectives of the study were; to determine the effect of expertise of the internal auditing staff on the performance of small and medium size enterprises, to examine the effect of controls on the performance of small and medium size enterprises and lastly to examine top management support on the performance of small and medium size enterprises.

The study was underpinned on two theories namely the agency theory and institutional theory. The study targeted accountants, audit committees and employees of small and medium size enterprises. The study followed a descriptive research design, primary data was collected by the use of questionnaires. Percentages and standard deviations were used.

Content analysis was used to collect the qualitative data. Data analysis was done through the use of statistical package for social science (SPSS). Data was then presented using tables and figures. The relationship between variables was achieved through the use of multiple regression analysis. The results indicated that internal audit had positive and significant effect (p-value of 0.001) on the performance of small and medium size enterprises.

Internal audit expertise controls had a p-value of 0.210 which resulted to positive and but non-significant effect on performance. Top management support of internal audit had a p-value of 0.000 which implied it had a positive and significant effect on performance. The study recommends that managers and policy makers should pay attention to internal audit staff expertise for it has greatest effect on performance of small and medium size enterprises.

CHAPTER ONE

INTRODUCTION

1.1The Background of the study

Small and medium-sized enterprises are expected by citizens, shareholders and even the government to be efficient and effective in their operations and performance in the business world. There are many of such activities that entities can apply towards this end, one of such mechanism is internal audit. This can be defined as an independent review and appraisal of the accounting, financial and other operations of the organization by a special staff or groups of special staffs, usually called (internal auditors).

The impact of internal auditing in the organization is to help in the examination and inquiry into a statement of accounts, the underlying records, documents, assets, liabilities in other to measure and evaluate the adequacy, efficiency and effectiveness of the organizations, internal audit helps to disclose irregularities and also present fraud, as in the recent case in of BICEC Cameroon were fraud carried out by top management was been uncovered by the company’s internal auditor.

A good internal audit control in organizations will help them in the preparations of financial statements, which will reduce the risk of financial statement misstatement or errors. Small and medium size firms are a very important factor in the development of a nation’s economy. In Cameroon, there are varieties of small and medium size firms in different fields such as, in the banking sector, agricultural sectors, marketing sectors and many others.

In most economy, small and medium size enterprises play a major role for their employment creation and economic growth. In Cameroon according to the UNCTAD platform power, registers over 25000 small and medium size enterprise in Cameroon as at 2016 and is continually increasing within the years sited by Mukhisa Kituyi (2020).

When effective functioned, internal audit (IA) play a critical function in monitoring and appraising financial management activities in small and medium size enterprises, thereby helping companies achieve their goal. Further, it helps small and medium size enterprises attain accountability and uprightness, and assist external auditors in performing their audit. This helps to increase the assurance of the owners of the company. Enterprises with good internal auditing committee and carrying out their responsibilities effectively are more advantageous because, they are well positioned to point out any business risk and come up with the best corrective strategy to mitigate the associated risks. All this helps in the survival of most small and medium enterprises

1.2 Statement of the problem and justification of the study

Internal audit plays a vital role in small and medium size enterprises in Cameroon. In Cameroon, almost every small and medium size enterprises has a functioning internal audit committee. Financial Scandals in Cameroon such as that of, Produce Marketing Board, Cameroon Agency and Cameroon Bank, revealed poor internal audit and control performance Which was mainly because of lack of adequate transparency, which resulted to misappropriation of funds. Furthermore, when small and medium size enterprises has a week internal audit process and procedures, the result is an increase in the failure of the same to detect any fraudulent activities and major loses.

Various studies on internal audits have been conducted over the years.   Michael Forzeh Fossung (2013) carried out studies on the role of internal audit in the Cameroonian governance, internal audit for small and medium sized companies in Cameroon by Alpha Mundo (2020), and many others. These findings however, failed to tackle the performance of internal audit on small and medium size enterprises. This knowledge gap occasioned a study, which will examine the effect of internal audit on the performance of small and medium size enterprises in Buea Cameroon.

In addition to that, as pointed out by Juliette Ngole, SME sector was lately viewed as an important contributor to Cameroons economy. This how is a great call for concern in Cameroon because, lack or poor internal auditing may lead to the fall of many small and medium size firms hence this may affect the economy and employment opportunities rendering thousands of Cameroonians unemployed.

1.3 Research Questions

1. What was the effect of internal auditing on the performance of small and medium size enterprises in Buea Cameroon?
2. What was the effect of internal audit staff expertise on the performance of small and medium size enterprises in Buea Cameroon?
3. What was the effect of internal audit control on the performance of small and medium-size enterprises in Buea Cameroon?
4. What was the influence of top management support of internal audit function on the performance of small and medium-sized enterprises in Buea Cameroon?

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