Gaps in Internal Audit Agency Act, 2003 (Act 658) that could weaken the functions of internal auditor

Act 658 establishes internal audit units in public sector institutions. However, these units often fall under the control of the Chief Director or head of the institution they audit.

This arrangement compromises auditor independence. Auditors may feel pressured to alter reports that could embarrass management. It also creates conflicts of interest when audit findings reflect poorly on those overseeing auditors.

The Internal Audit Agency (IAA) has limited enforcement powers. While it can issue guidelines and monitor compliance, it cannot enforce recommendations. This weakness allows institutions to ignore audit findings without consequences.

There is no legal mandate for timely implementation of audit recommendations. The law does not require public officials to act on these recommendations within a specific timeframe. As a result, many audit findings are ignored, reducing their effectiveness.

Audit committee oversight is weak due to questionable composition and independence. Some members lack technical expertise or are influenced by management. This limits their ability to hold institutions accountable.

Funding and staffing provisions for internal audits are inadequate. Act 658 does not guarantee necessary resources for these units. Consequently, they often operate understaffed and under-resourced.

The Act has outdated provisions that do not align with modern financial management laws. It fails to integrate changes like the Ghana Integrated Financial Management Information System (GIFMIS). This disconnect creates confusion and limits the relevance of internal audits.

There are no clear standards for auditor recruitment or capacity development in the Act. There is no requirement for minimum qualifications or certifications for auditors in public sector institutions. This leads to inconsistent quality in audit work.

To address these issues, Ghana could consider several reforms:

1. Amend Act 658 to ensure operational independence for auditors.
2. Grant enforcement powers to the Internal Audit Agency.
3. Mandate timelines for implementing audit recommendations with penalties for noncompliance.
4. Upgrade auditor training and certification requirements.
5. Harmonize Act 658 with the Public Financial Management Act (Act 921).

The writer is an experienced finance professional with a Doctorate in Business Administration and extensive background in various industries including banking, healthcare, and hospitality. He currently leads multiple consultancy services focused on financial strategy and business growth initiatives.