Internal Audit: A Government Tool for Corporate Governance in Zimbabwe’s Health Parastatals

The research was motivated by a diminishing audit quality in the sphere of corporate governance due to the changes in business processes. Ever since the 2000s the structure and operations of institutions has changed greatly. Agency theory today is cognizant of the fact that stakeholder’s theory has expectations on what the agents’ fiduciary responsibilities are. Modern day concept of corporate governance is for that reason driven by an agency based theory. It seeks to get the most out of the agency of the personnel that control and guide companies to meet their objectives or the profitability of performance. Only now is it being conceived that Internal Audit as an agent also was quickly becoming a critical tool for institutional performance. It therefore requires them to monitor governance trends in the public sector there where gaps have become pronounced. Failure to recognise Internal Audit as a key governance mechanism had not positioned them to serve as an effective defence mechanism in institutions. Consequently, stakeholders ascribed this expectation gap as Internal Audit (IA) failure to prevent company failure. 

 The study responds to a call by researchers to fill a gap of study in the interrelationships of Internal Auditandinstitutional administration in developing countries. It is not a secret that many Zimbabwean State Enterprises and Parastatals (SEPs) had failed and made huge losses. This is unlike what had been expected of them given that they were previously ahead to Asian countries. Today the Asian block economies which were once behind Africa have exceeded it in terms of economic classification. Elsewhere, China benefitted from the development of its public sector as 40% of China’s GDP came from the performance of its SEPS. This was an indictment on state instituted boards, managements, Internal and External Auditor in state firms in Zimbabwe and other developing nations in Africa. The past supervisory mechanisms of the 1990s and after the 2000s have not been effective. The reports of the Auditor General to Parliament were a manifestation of poor corporate governance in state firms of Zimbabwe. The Auditor-General’s Office (AG) 2016 reported issues surrounding the misuse of public funds by government departments and parastatals. This shows that corporate governance gaps were still glaring and needed to be attended to. The main focus of this study was to critically consider whether Internal Audit units had responded to the recommendations of the changed universe of corporate governance (CG) in health parastatals of Zimbabwe. The study examined the components to a study of the IA’s contribution to corporate governance. This ranged from the appointment, duties of board such as oversight duties of the Audit Committee and the co-role of External Audit as co-defences in institutions.

 A mixed study incorporating a questionnaire survey, interviews and a document analysis of sampled institutions was used as its study tools. This was also supported by a wide consultation and in depth review of literature. The study obtained key responses from respondents and investigated other underlying factors in the operations of Internal Audit Auditors. The study triangulated data through a qualitative as well as quantitative research. It was when the researcher noted that there was very little literature on the area under study. This was the major reason why empirical was data sought and obtained from the field of study. A qualitative Grounded Theory Methodology was employed to mine data from institutions. An SPSS software package, MS Word and Excel spread sheets were used to interpret and analyse the data that resulted from the study.

The findings revealed that, previously Internal Auditors had not been considered to be an important element of CG. This was supported by the view after the 2000s compared to the one that exists now. As a result of this positioning, IA was far from complying with the recommendation of the changed Corporate Governance Frameworks and Codes (CGFCs). Most Internal Audit Functions’ concentration was based on the traditional financial audits and they left other aspects of governance untouched. A challenge of audit scope arose as a result.

Though the scope of coverage to IA work plan had expanded, it was far from being covered. Moreover, this scope had not adjusted to incorporate the recommendation of CGFCs ranging from the 19912 to the 2000s. There were issues of IA having not evolved to be effective and in step with developments or changes in business processes and technological changes. Beside this, there were other underlying issues that were prohibiting the effectiveness of Internal Auditors; firstly it was their competencies as well as the environment that they worked in. There were also matters that pertained to objective reporting, audit independence, Audit quality, skills and capacitation and resources for them to meet their objectives. The issue of incorporating CGFC as a framework for governance in firms is bound to improve institutional administration.