Internal Auditing and Performance of Local Government in Uganda. A Case Study Buyende Town Council

ABSTRACT

This study sought to establish the effect of internal control system on performance of local government in Buyende Town Council. Buyende district. The study was driven by three objectives. These were; to examine the effectiveness of the internal audit in Buyende Town

Council, to determine the different types of internal audit practices used in Buyende Town Council. and to establish the relationship between internal audit and performance in Buyende Town Council.

To achieve these objectives, the researcher sampled fot·ty respondents (40) from Buyende Town Council.

The research was guided by three research questions. The first research question sought to find out the effectiveness of internal audit function in Buyende Town Council. research question two sought to find out the different types of internal audit practices used in Buyende Town Council

and the third research question therefore sought to find out the relationship between internal audit and performance in Bu yen de Town Counci I.

The findings revealed that there existed positive relationship between the variables of study as conceptualised and that local Government performance had generally been fairy satisfactory and that internal Audit function tt1 Local governments ,,as also fairy performing. The fair

performance being attributed to lack of complete independence of the internal auditors. inappropriate internal controls. and managements· reluctance to attend to the recommendations of the internal auditor produced In a bid to improve performance. the district management should ensure that politicians have limited influence in the works of the internal auditor and that internal controls are always reviewed and evaluated so that they are limited to manipulations and also put in place or strengthen disciplinary measw-es regarding manipulation or override ol'these controls

TABLE OF CONTENTS

DECLARATION ............................................................................................................................ i

APPROVAL ................................................................................................................................... ii

DEDICATION .............................................................................................................................. iii

ACKNOWLEDGEMENT ........................................................................................................... iv

TABLE OF CONTENTS .............................................................................................................. v

LIST OF TABLES ........................................................................................................................ ix

LIST OF FIGURES ....................................................................................................................... x

ABSTRACT .................................................................................................................................. xi

LIST OF ACRONYMS ............................................................................................................... xii

CHAPTER ONE ............................................................................................................................ l

INTRODUCTION ......................................................................................................................... 1

I. I Background to the Study ............................................................................................................ I

1.2 Statement of the Problem .......................................................................................................... 3

1.3 Purpose of the Study .................................................................................................................. 4

1.4 Objectives of the Study .............................................................................................................. 4

1.5 Research Questions .................................................................................................................... 4

1.6 Scope of the Study ..................................................................................................................... 4

1.6.1 Geographical Scope ................................................................................................................ 4

1.6.2 Content Scope ......................................................................................................................... 4

I .6.3 Time Scope ............................................................................................................................. 4

1.7 Conceptual frame work ............................................................................................................. 5

1.8 Significance of the Study ........................................................................................................... 6

V

CHAPTER TWO ........................................................................................................................... 7

LITERATURE REVIEW ............................................................................................................. 7

2.0 Introduction ............................................................................................................................... 7

2.1 Overview of Internal Auditing .................................................................................................. 7

2.2 The History and Evolution of Internal Auditing ....................................................................... 8

2.3 The independence of internal audit department ...................................................................... I 0

2.4 Internal control systems ........................................................................................................... I I

2.4.1 Control environment ............................................................................................................. 12

2.4.2 Risk Assessment ................................................................................................................... 12

2.4.3 Control activities ................................................................................................................... 13

2.4.4 Information and communication .......................................................................................... 13

2.4.5 Monitoring ............................................................................................................................ 13

2.5 Performance of Local Governments ........................................................................................ 14

2.6 Internal audit in relation to service delivery ............................................................................ 15

2.7 Internal audit and perfonnance ................................................................................................ 17

CHAPTER THREE ..................................................................................................................... 20

METHODOLOGY ...................................................................................................................... 20

3.0 Introduction ............................................................................................................................. 20

3.1 Research Design ...................................................................................................................... 20

3.2 Location of the Study .............................................................................................................. 20

3.3 Research Population ................................................................................................................ 20

3.4 Sampling Technique ................................................................................................................ 20

3.5 Sample Size ............................................................................................................................. 21

3 .S Procedures or the Study ........................................................................................................... 21

3.6 Instruments or Tools for the Study .......................................................................................... 21

3 .6.1 Questionnaire ........................................................................................................................ 2 I

3.6.2 Observation ........................................................................................................................... 21

3.6.7 Interview ............................................................................................................................... 22

3.7 Data Quality Control ............................................................................................................... 22

VI

3.8 Validity and reliability ............................................................................................................. 22

3.9 Data Analysis ........................................................................................................................... 22

3.10 Ethical considerations ............................................................................................................ 22

3.11. Limitations of the study ........................................................................................................ 23

CHAPTER FOUR ....................................................................................................................... 24

PRESENTATION, ANALYSIS AND INTERPRETATION OF FINDINGS ....................... 24

4.0 Introduction ............................................................................................................................. 24

4.1 Biographic Data of the Respondents ....................................................................................... 24

4.1.1 Gender Composition of the Respondents ............................................................................. 24

4.1.2 Age Composition of Respondents ........................................................................................ 25

4.1.3. Highest Level of Education of Respondents ....................................................................... 26

4.1.4 Designation of the respondents ............................................................................................. 28

4.2 Respondents Opinions on the Impact of Internal Audit on Performance of Local

Governments in Buyende Town Council ...................................................................................... 28

4.2.1 Findings on whether the internal Audit depart111ent is independent.. ................................... 30

4.2.2 Findings on whether the internal Audit's repm-iing relationship is appropriate ................... 3 I

4.2.3 Findings on whether internal auditors routinely capture infor111ation on performance

effectiveness and operational efficiency ........................................................................................ 32

4.3 Perfor111ance of local govern111ents .......................................................................................... 33

4.3.1 Findings on whether the district local govern111ent provides works and water facilities to the

com111unity in ter111s of roads rehabilitation and maintenance ....................................................... 33

4.3.2 Findings on whether the District Public Accounts Co111mittee always reviews internal Audit

reports ............................................................................................................................................ 34

4.4 Characteristics ofa Good Internal Audit Syste111 .................................................................... 35

4.5 Relationship between internal audit function and the perfor111ance of local governments of

Uganda ........................................................................................................................................... 36

4.6 Satisfaction of Respondents on the Way Auditing Is Done In Buyende Town Council Local

Government ................................................................................................................................... 37

VII

CHAPTER FIVE ......................................................................................................................... 39

DISCUSSION OF FINDINGS, CONCLUSION AND RECOMMENDATIONS ................. 39

5.0 Introduction ............................................................................................................................. 39

5.1 Summary of findings ............................................................................................................... 39

5.2.1 Performance of internal Audit .............................................................................................. 39

5.1.2 Perfonnance of Local Governments ..................................................................................... 39

5.1.3 Relationship between Internal Audit and Performance of Local Government ................... .40

5.2 Conclusions ............................................................................................................................. 40

5.3 Recommendations ................................................................................................................... 41

5.4 Areas offorther research ......................................................................................................... 41

REFERENCES ............................................................................................................................ 42

APPENDICES .............................................................................................................................. 45

APPENDIX I: RESEARCH QUESTIONNAIRE ................................................................... .45

APPENDIX II: INTERVIEW GUIDE ..................................................................................... 50

APPENDIX III: TIME FRAMEVORK I WORK PLAN ....................................................... 51

APPENDIX IV: BUDGET .......................................................................................................... 52