Internal Audit Function And Firm Performance; Evidence From Manufacturing Companies In Kumasi

Abstract

Internal audit plays a vital role in firm performance. The perceived poor internal audit practices mainly caused by lack of independence have resulted in sound corporate governance practices eluding many companies in the Ashanti region; thereby leading to the abysmal performance of manufacturing companies. The study, therefore, seeks to ascertain the practices of internal audit function and firm performance in the manufacturing industry with selected companies in the Ashanti Region, with specific concertration in identifying the impact of internal audit function on financial performance, identifying the challenges associated with internal audit function and identifying the relationship between internal auditing and the performance of an Organization. Adopting logistic and canonical regression techniques as a methodology the objective of this research was demystified and addressed. The primary data collection instrument used in this research was a questionnaire. The target population were 10 manufacturing firms within the Ashanti region, with five (5) respondents from each firm. Results indicate that there is a significant relationship between internal audit and firm performance, internal audit functions encounter a vast number of challenges and there is a positive relationship between internal audit and organizational performance. The findings of the study also revealed that internal audit functions play a critical role in improving firm performance, policy development by management, help to identify risks and ensure compliance. The findings of the study also revealed that there was no policy framework for most manufacturing companies as the source of powers of the Board that strengthens accountability mechanisms and achievement of company goals; with the board undertaking a formal and rigorous annual evaluation of its performance and that of its committees set to check internal control systems.