The Effectiveness of Internal Audit in Fraud Detection and Prevention: (Case of Grain Marketing Board 2018-2019)

Abstract

The study is aimed at evaluating the effectiveness of internal audit function in fraud detection and prevention. The study was a survey of Grain Marketing Board of Zimbabwe with special emphasis on stakeholders in the financial reporting process. The main objective of this study is to ascertain the effectiveness of internal audit in fraud detection and prevention. The study is also aimed at comparing outsourcing and in-sourcing of the internal audit function in light of fraud prevention and detection. Determining the limitation and hindrances that negatively affect the effectiveness of internal auditing in fraud detection and prevention is one of the reasons of this study. The increase in public interest in fraud scandal that continue to rock scene and absence of one willing to take responsibility over such control failures prompted the researcher into undertaking such a research. Questionnaires and interviews were used to measure the perceptions towards the role of internal audit function in fraud detection and prevention. Two questionnaires were used; one for management and audit committee members and the other for internal auditors. Random stratified sampling techniques were used to arrive at a sample of 30, 10 from each homogeneous sub-groups; internal auditors, management and audit committee from the whole population. The study drew all of the participants from agricultural sector industry headed in Harare. Findings revealed that an organisation that in some way utilise internal auditing are more likely to detect and prevent fraud. Organisation that utilises an in-house internal audit function is more likely to detect and prevent fraud more than an organisation that completely outsource the function. Overally, the research found out that internal audit function is indeed effective in fraud detection and prevention if afforded chances to discharge their duties without interference from management. The study showed positive relationship between having an internal audit function and the rate of fraud detection. Internal auditors should consider professional balance in involvement and responsibility for fraud detection and prevention. Management should consider having a resident internal audit function in order to maximise on the benefits that arise from having a resident internal audit function.