The effect of internal audit department on company financial performance: Evidence from Ghana

Ing. Priscilla Aninwaa Ennin

Master's thesis

Abstract:

The general objective of the study is to know the role of internal audit department and how it impacts the company financial performance of a chosen company in Ghana. This study aims at identifying the role of internal audit department in risk management and internal control, the relationship between internal audit and audit committee, outsourced internal audit and in-house internal audit, their advantages, and disadvantages. Then further propose a set of recommendations base on the impact of transferring from outsources internal audit to in-house internal audit. The theoretical part covers the Internal Audit department and how it influences risk and internal controls, Function of the internal Audit, IA throughout the business reporting cycle, Overview of outsourced internal Audit and in-house internal audit and how they are created. The practical part starts with the overview of financial ratios, identifying both profitability and investment appraisal ratios, and it continues with identifying the support provided by outsourced IA, which was not sufficient, then impact on the company due to limited support provided by the outsourced IA. It further states the cost invested in creating the in-house internal audit and its impact after the creation of the in-house internal audit on the company financial performance and finally evaluation of the effectiveness of the investment project. The result indicates that after the creation of the In-house IA the controls procedures were effectively utilize hence the risk face initially were eradicated and this had a significant impact on the company financial performance.

Abstract:

The general objective of the study is to know the role of internal audit department and how it impacts the company financial performance of a chosen company in Ghana. This study aims at identifying the role of internal audit department in risk management and internal control, the relationship between internal audit and audit committee, outsourced internal audit and in-house internal audit, their advantages, and disadvantages. Then further propose a set of recommendations base on the impact of transferring from outsources internal audit to in-house internal audit. The theoretical part covers the Internal Audit department and how it influences risk and internal controls, Function of the internal Audit, IA throughout the business reporting cycle, Overview of outsourced internal Audit and in-house internal audit and how they are created. The practical part starts with the overview of financial ratios, identifying both profitability and investment appraisal ratios, and it continues with identifying the support provided by outsourced IA, which was not sufficient, then impact on the company due to limited support provided by the outsourced IA. It further states the cost invested in creating the in-house internal audit and its impact after the creation of the in-house internal audit on the company financial performance and finally evaluation of the effectiveness of the investment project. The result indicates that after the creation of the In-house IA the controls procedures were effectively utilize hence the risk face initially were eradicated and this had a significant impact on the company financial performance.

Keywords

Internal Audit, Internal Audit department, Internal controls, Risk management, financial performance

Language used: English

Date on which the thesis was submitted / produced: 7. 1. 2022

Thesis defence

• Date of defence: 2. 2. 2022
• Supervisor: Ing. Oleksandra Lemeshko
• Reader: doc. Ing. Jana Vodáková, Ph.D.

Masaryk University

Faculty of Economics and Administration

Master programme / field:
Finance / Finance