Several gaps and limitations in Ghana’s Internal Audit Agency Act, 2003 (Act 658) and related legislation has contributed to the weakening of internal audit functions in the public sector.

Here are key gaps that undermine the effectiveness and independence of internal auditors in Ghana.

Lack of Functional Independence

Although Act 658 establishes internal audit units within public sector institutions, these units are often placed under the administrative control of the Chief Director or head of the institution they are meant to audit.

Impact:

This compromises auditor independence, as auditors may face pressure to suppress or water down reports that could embarrass or implicate management.

It also creates conflicts of interest when audit findings reflect negatively on the same individuals who oversee the auditors' performance, promotions, or budgets.

Limited Enforcement Powers of the Internal Audit Agency

Gap:

The Internal Audit Agency (IAA) lacks direct sanctioning authority. While it can issue guidelines and monitor compliance, it cannot compel MDAs or MMDAs to implement audit recommendations or penalize institutions that fail to comply.

Impact:

This weakens the accountability mechanism and allows institutions to ignore audit findings or delay corrective action without consequence.

No Legal Mandate for Timely and Full Implementation of Audit Recommendations

Gap:

The law does not impose strict timelines or legal obligations on public officials to implement internal audit recommendations, nor does it specify penalties for inaction or non-compliance.

Impact:

Audit findings are often ignored or not implemented, reducing the preventive and corrective value of the internal audit process.

Weak Audit Committee Oversight

Gap:

Although the Public Financial Management Act (PFMA), 2016 (Act 921) mandates the establishment of audit committees, the composition and independence of these committees are sometimes questionable.

Some members may lack the technical expertise or operate under the influence of management.

Impact:

This limits the committee's ability to demand accountability or support the internal audit function in enforcing recommendations.

Inadequate Funding and Staffing Provisions

Gap:

Act 658 does not provide statutory guarantees for the funding and staffing needs of internal audit units. Their resources are often controlled by the same institutions they are meant to audit.

Impact:

Audit units are frequently understaffed and under-resourced, limiting the scope and frequency of audits, especially in decentralized agencies like MMDAs.

Outdated Provisions and Lack of Integration with Modern PFM Laws

Gap:

Act 658 has not been significantly updated to reflect changes in Ghana’s public financial management landscape, such as the introduction of GIFMIS (Ghana Integrated Financial Management Information System), or align fully with the Public Financial Management Act, 2016.

Impact:

This legal disconnect creates operational confusion and limits the relevance of the internal audit framework to modern risk-based and IT-enabled audit practices.

Absence of Clear Standards for Auditor Recruitment and Capacity Development

Gap:

There is no binding provision in the Act requiring minimum professional qualifications, continuing education, or certification (e.g. CIA, CISA) for internal auditors across all public sector institutions.

Impact:

This leads to uneven quality of audit work, poor risk identification, and weak recommendations, especially at the district and municipal levels.

Recommendations for Reform

To address these gaps, Ghana could consider:

Amending Act 658 to provide true operational and financial independence to internal auditors.

Granting enforcement powers to the Internal Audit Agency to sanction non-compliant institutions.

Mandating implementation timelines for audit recommendations, with legal penalties for noncompliance.

Upgrading audit capacity, including standardized training, certifications, and digital audit tools.

Harmonizing Act 658 with the PFM Act (Act 921) to ensure legal consistency and efficiency.