Internal Audit As Anti Corruption Accounting Essay


The existence of corruption has been for ages in one form or another. Corruption is a term with many meanings involving either monetary and non-monetary benefit, that entails misuse of office for personal again or unofficial end (William, 2003). The term corruption differ from person to person, nation to nation and culture to culture (Yadong, 2005). Morley (1998) definition of corruption is exchange of resources for use or abuse of office for private ends in an illegitimate way.

Usually, work environment and culture could either foster or discourage corrupt practices depending on cultural perception of corruption. (Barth and Schipper, 2008). For example, until recently, United Kingdom's anti-bribery act previous did not contain a "facilitating payments" exception (Bribery Act 2010).

According to Hjalmar and Weaver (1960), organisational managers in an organisation are saddle with different roles and functions at different management level. The hierarchy of these levels is called as "Level of Management". However, each these levels are of vital importance to ensuring effective overall operation of the organisation. The three well known level management hierarchies are;

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Top Level of Management.

Middle Level of Management.

Lower Level of Management.


Top management level is also referred to as administrative level and consists of the board of directors, Chief Executive Officer (CEO)/General Manager (GM)/Managing Director (MD) with the responsibility of enforcing and strengthening a company capability of dealing with financial scandals as they bear the final responsibility of the internal control the organizational system.

The Middle Level Management or the executives are Departmental Heads (Finance Managers and Purchase Managers, Branch Managers Branch or Unit Heads), and the Junior Assistant Managers. These levels of Managers are selected by the Top Level Management (Webb, 2010).

The lower level management or Operative/Supervisory level or First Line of Management are selected by middle level management and consists of the Foremen and the Supervisors. (Webb, 2010).

Corruption exists at different level of management in an organisation. Though each level reinforces each other, the more hierarchical levels involved the more incidences and severity organizational corruption (Argandona, 2003). For the purpose of this study, focus would be on middle level managers. In the prevention of corruption, systemic change becomes eminent. As important as general system changes is also looking for ways of fighting corruption at different level within the system because organisational credibility may be at stake if exposed; thus the need for reasonable strategies, policies and plans to minimise risks (Ackkerman, 2001).

System Auditing are important for correcting implementation of standards and create an ethical business environment that supports organisation's image preservation, improves employee morale, and reduces fraud.

Until recent, organizations did not recognize the importance of a department of internal audit department. Ali and Owais (2013) reported that advanced countries have recently shown an increasing interest in the internal audit profession because of the exposure of large companies to scandals in the late nineties of the last century. Therefore, internal audit has become an integral component of organisations' corporate governance mechanisms to strengthen risk management systems and enhance financial reporting quality (Sucherand and Zelenka, 1996). Many other authors sees internal auditing as crucial resource in corporate governance providing services at different management levels and external auditors (DeZoort et al., 2002; Dillar et al., 2004).

Internal auditing is an independent activity, established by management, to examine and evaluate organisational risk, management processes and control systems and make recommendations for improvements.

The establishment of Institute of Internal Auditors (IIA) corrected the notion about internal audit. The institute pointed that internal audit department role is not to judge the appropriateness of the objective or strategies set in place to achieve the objectives of an organisation but rather add value to it. For example, organisational management could be assisted in identifying risks and control weaknesses if internal audit has a good knowledge of its operational system. The new dimensional role of internal audit is in enabling it function to combat corruption (Laura et. al. 2003).

Gramling and Hermanson, (2006) defined internal auditing as a designed activity that is independent and of objective assurance that would add value to an organization's operations. Also internal auditing is a tool used by organizations to achieve set objectives through a systematic and disciplined approach to effectiveness risk management control evaluation (Balkaran 2010). This definition emphasis assured that all management levels think proactively and at the same time, top managers put an anticorruption mechanisms place. Here, focus is placed on good system practices with sound risk management. Balkaran (2010) stated that both the account and audit has a vital role to play in preventing, detecting and reporting corruption.

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This study proposes to examine the impact of how internal audit strategies structure helps to minimize the incidence of corruption practices among middle level managers.


One major impediment to economic development of any organisation is corruption which often could cause other organised crimes. Equally corruption could damage the integrity of organisation and subsequently development of various organisational system problems. It is not sufficient to develop a plan for fighting corruption without analysis of probability of corruption practices within different management levels and the impact of constituted department within the organisational framework of control system.

Middle level managers give recommendations or advice to the top level management and mainly executors of organisational policies made by the administrators. They also act as anintermediary between top and lower management. It is therefore pertinent that when corruption is prevalent in middle level managers, it poses a threat to not only the organisation but also to the larger society. Among the corruption practices within middle level managers that easily come to mind include; bribery or kickbacks, extortion, nepotism, fraud, and opportunism among others.

This issue is a large concern for the companies because value maximization and company wealth often depend on its members. Therefore, this study is vital to shedding light on the impact of internal auditing in controlling corruption among middle level managers in order to add value and achieve company's strategy.



The general objective of this study is to determine the impact of internal auditing in controlling corruption in middle level managers.


To define the concept of corruption

To discuss the impact of corruption on organisational sustainablity

To discuss the level of corruption among middle level managers.

To discuss at least two UK and one international standards setting and regulations for internal audit use

To clarify the effectiveness or impact of internal audit in preventing corruption among middle level managers.

To understand the components of internal control in preventing corruption among middle level manager.

To identify the role of internal audit system in preventing corruption among middle level manager.


It is pertinent that corruption practice exist in an organisation. The middle level serves as intermediary to the top and low level managers thereby, giving them direct contacts to all categories of company staff. Yadong, (2005) reported that most corruption occurs in the low level managers. The middle level managers are face with the risk of being part of organizational fraud or incompetence. A focus on mechanism for corruption control among middle level managers as well as protecting them against incompetence warrants particular attention.

Corruption among these groups of manager could in turn cause great damage to the organization. Therefore, there is need to but a system in place to rectify or avoid these damages. The only way to this by Argandona (2003) is the establishment of a formidable system to resist corrupt practices. Internal audit has a unique role in influencing management of risks by ensuring proactive, preventive, detective and combative measures in fighting corruption


This study main hypothesis is that the existence of internal audit structure plays has an impact in reducing the corruption among middle level managers. The statements of hypothesis for this study include:

Hâ‚€: There is no evidence that suggests internal audit as an anti-corruption measure among middle level managers.

HÑ-: There is evidence that suggests internal audit as an anti-corruption measure among middle level managers.


Argandona, A. (2003). Private-to-private corruption. Journal of Business Ethics, 47(3), 253-67.

Asare, S.K., Ronald, A. Davidson and Gramling A.A. (2008). Internal Auditors' Evaluation of

Fraud Factors in Planning an Audit: The Importance of Audit Committee, Quality and Management Incentives. International Journal of Auditing, 12: 181-203.

Balkaran , L. (2010) The Role of Accountants and Auditors in Fighting Corruption. Part 1 - Understanding the Nature and Impact.

Barth, M.E., Schipper, K. (2008), "Financial Reporting Transparency", Journal of Accounting, Auditing & Finance, 23(2), 173-190

Bribery Act (2010).

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Laura F. Spira, Michael Page, (2003) "Risk management: The reinvention of internal control and the changing role of internal audit", Accounting, Auditing & Accountability Journal, Vol. 16 Iss: 4, pp.640 - 661