There could not have been a better moment for Reserve Bank of Malawi (RBM) Governor Dalitso Kabambe to challenge internal auditors than the 18th Institute of Internal Auditors (IIA) Malawi Annual Lakeshore Conference in Mangochi on August 31.
Delivering his keynote address at the conference held under the theme Gaining the Edge with Partners in Excellence, the governor spoke of the critical role internal auditors play towards ensuring adherence to internal controls and governance issues in both the public and private sectors.
He said: “Effective and efficient internal audit function closes loopholes in the business systems and avoids losses from happening; hence, sorting out the internal audit function is equally important.”
Internal auditors play critical roles in organisations, especially through audits.
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 devise controls in organisations and ensure that systems are working whereas external auditors or auditing, on the other hand, test the systems set by internal auditors. In external auditing, there is also physical check of receipts, invoices, petty cash, payments and compliance with international financial reporting standards.
Thus, internal audit provides assurance on the effectiveness of an organisation’s risk management, governance and internal controls.
Generally, audits examine adherence to set systems and standards in terms of procurement, supply and payments.
In recent years, audit reports have exposed pure theft and abuse of public resources. Private sector institutions have not been spared the rot either.
From the Mangochi conference, IIA-Malawi president Thokozire Kuwali stated that as internal auditors, their role is advisory. It is up to their clients to take it or leave it. Further, she declared that “internal auditors are now ready to position themselves to an insightful mode” and proactively advise stakeholders to be winners.
It is also worth appreciating that auditing is different from a commission of inquiry.
Malawi has some of the best pieces of legislation. But the concern has been lack of concrete action to implement recommendations of the auditors to seal the loopholes. That 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.
It would help the cause to fight fraud and corruption and restore confidence in the country’s public finance management if timelines were set for every step of an investigation into a case. That way, the public and stakeholders would be able to see where the problem lies when a case stalls. That way, mantras such as “we are still investigating” will be eliminated. Progress will be visible.
Reacting to one of my earlier articles, one reader observed that the Financial Services Act actually 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 and nearly all of whom are either qualified auditors or accountants. There is also one or two from the legal background.”
If Malawi is to win the fight against fraud and corruption, it is critical that authorities abstain from fighting fraud and corruption through podium rhetoric and switch to ensuring that laws are put to use. For instance, the Public Finance Management Act provides that controlling officers under whose watch public funds are mismanaged should be disciplined. But since the law was enacted in 2003 or thereabouts, year-in and year-out, we read reports about over-expenditure or abuse of office, but no controlling officers have been disciplined.
That said, my appeal to internal auditors is for them to rise to the occasion and take up their rightful spaces. Investigations and prosecution of cases, as the governor indicated, will not end losses. Effective and efficient auditing will.