Role of internal auditing function in performance of state-owned enterprises (SOEs) in Zimbabwe : a corporate governance framework

Abstract

Corporate governance has been seen as an indispensable factor in making sure that misappropriation in state-owned enterprises (SOEs) is deterred. This study examined the role of internal auditing in boosting good corporate governance practices in the SOEs sector in Zimbabwe focusing on performance and to, possibly, provide guidance on strengthening the role of internal auditing in corporate governance. Currently, there is a lacuna of academic work in the public sector on the role of internal auditing as an integral part of corporate governance. Corporate governance is a topical issue in the private and public sectors due to a plethora of corporate failures and a myriad of challenges. Previous researchers have documented studies on internal audit function (IAF). However, there is a dearth of research conducted in Zimbabwe, in particular, and Sub-Saharan Africa, in general, on the role of IAFs on the performance of SOEs using a corporate governance approach as well as studies premised on the agency, institutional and stakeholder theories. The study of the role of internal auditing as a cornerstone of corporate governance is an unexplored area. This study addresses the knowledge gap by examining the role of internal auditing in the performance of SOEs using a corporate governance approach in a Zimbabwean setting. The study elucidates the role of internal auditing, which is assumed to be inimitable, the hindrances, the consequences of SOEs in emerging economies, particularly in Zimbabwe. This study used a constructivist/interpretivist paradigm. A qualitative research approach was chosen, using a case study research design, and data was gathered through semistructured in-depth face-to-face interviews with 20 purposively sampled participants such as senior managers (SMs), senior internal auditors(SIAs), chief audit executives (CAEs), chief executive officers (CEOs), audit coommittees (ACs) and board of directors (BODs) of SOEs as these are connected with IAFs of five (5) Zimbabwean SOEs and documentary review. Thematic content analysis was used for data analysis. Data was analysed using Atlas.ti software version 8. It is recommended that internal audit stakeholders should take cognisance of these components or dimensions when considering the effectiveness of the roles of the IAFs. The results contribute to the current literature through the inside view about the benefits and current challenges of IAFs in varied set-up of entities. Suggestions to enhance the performance of the IAF include effective involvement of ACs in internal audit activities, the employment of competent internal auditors and determining the impact of internal audit on corporate governance. The findings of the study showed that IAFs are viewed in a positive light and respondents do put trust on internal audit. The study further found that IAFs are informants of the ACs who are vital in areas of internal control, risk management, governance and compliance matters. This is underpinned by the fact that internal auditing is regarded as ethical, competent in its core technical areas and able to provide internal audit reports, which are informative, persuasive and calling for action.

The findings elevated by the IAFs should be considered by the leadership and assurance bringers as well as executing their commendation. The research indicates that the IAFs, as currently structured, does have a role to play within legislative frameworks and professional best practices. However, the literature review indicates that the IAF remains a key component of corporate governance for providing valuable guidance on issues relating to control and risk in SOEs. The study recommended that state-owned enterprises should employ workers with experience in internal auditing in order to boost the performance of corporate governance. The work experience will equip internal auditors with certain soft skills such as team working, communication skills and commercial awareness, which improve corporate governance. Imperative areas were elucidated by the study in order for the policy makers, politicians and oversight bodies to consider IAFs valuable in order for IAFs to be able to rescue SOEs who are critical in the nation. However, they are not treated seriously and with care. The study findings support literature on the contribution of internal audit to the performance of SOEs from an emerging market perspective and is the first of its kind in Zimbabwe. The study finding suggests ways of boosting the development of knowledge for upcoming researchers so that they can research further in emerging economies. Besides, the study presented a framework which was informed by the theoretical framework, empirical results and best practice as documented in the literature. This can serve as a practical and sustainability toolkit for use by SOEs on the role of IAFs.