Internal auditors should make a difference

When the Institute of Internal Auditors (IIA) Malawi Chapter held its 18th Annual Conference in Mangochi in 2018 under the theme Gaining the Edge with Partners in Excellence, I commented that it was time internal auditors reclaimed their positions in organisations.

My position stemmed from the fact that in recent years, audit reports have exposed pure theft and abuse of public resources. In fact, private sector institutions have not been spared.

Two years down the lane, IIA-Malawi Chapter members returned to the shores of Lake Malawi in Mangochi with yet another catchy theme Insightful Internal Auditing: Pushing Traditional Boundaries. The IIA-Malawi Chapter 20th Annual Conference had no lesser mortal than Vice-President Saulos Chilima as its guest of honour.

There could not have been a better guest of honour and indeed a better time than now. Chilima, who is also Minister of Economic Planning and Development; and Public Sector Reforms, and the new Tonse Alliance administration led by President Lazarus Chakwera are championing zero tolerance to abuse of public resources, corruption and all.

He said the theme could not have come at a right time than now when organisations continue to face many challenges, including fragmented systems, lack of skills and knowledge.

The public sector reforms agenda being pursued will count to nothing if the private sector does not equally embrace the same and indeed if the internal audit function is weak.

There are several types of audits. They include internal, external and forensic audits.

Technically, by definition, a forensic audit is an examination and evaluation of an organisation’s or individual’s financial information for use, mostly as evidence in court.

Normal audits, on the other hand, usually involve internal and external auditors.

Internal auditors or auditing put in place controls in organisations and ensure that systems are working whereas external auditors or auditing involve testing of the systems set by internal auditors. In external auditing, there is usually no physical check of receipts, invoices, petty cash, payments and compliance with international financial reporting standards.

Internal audit provides assurance on the effectiveness of an organisation’s risk management, governance and internal controls.

In a nutshell, audits examine adherence to set systems and standards in terms of procurement, supply and payments. It is also worth highlighting that auditing is different from a commission of inquiry.

While Malawi has some of the best pieces of legislation, in recent years the concern has been lack of concrete action to implement recommendations of the auditors to seal the loopholes. This is where the country is losing the battle against fraud and corruption, vices estimated to drain about 30 percent of the resources allocated in the annual national budget.

In reaction to one of my earlier articles, one reader observed that the Financial Services Act in fact provides for internal auditors, external auditors and examiners.

Said the reader: “So, when you write in your last paragraph ‘I understand we have some Malawians qualified in forensic auditing but are rarely used by the State’ it is an understatement. Not that they are rarely used, they are not used because the State does not know how or what to use them for!!

“Malawi not only has forensic auditors, but some of them are also ‘Certified Fraud Examiners’. There are over 15 certified fraud examiners in Malawi nearly all of whom are either qualified auditors or accountants. There is also one or two from the legal background.”

For Malawi to win the fight against fraud and corruption, empowering internal auditors is critical. To achieve this, authorities should stop fighting fraud and corruption through podium rhetoric and instead switch to action by ensuring that laws are put to use. There are laws such as the Public Finance Management Act which provide that controlling officers under whose watch public funds are mismanaged should be disciplined. But since the law was enacted in 2003, year-in and year-out, we read reports about over-expenditure or abuse of office, but none about controlling officers being disciplined.

Like I did in 2018 when I challenged internal auditors to reclaim their rightful roles to check abuse and fraud, this time around my appeal is for the internal auditors to strive to make a difference. I appreciate the challenges they go through, but the fact that they had the country’s Second Citizen speaking their language in Mangochi should give a flicker of hope that things could work for the better.

Effective and efficient auditing is critical to ending or minimising losses through abuse of resources and fraud.