The Institute of Internal Auditors Ghana has charged external auditors to collaborate with internal auditors to ensure that firms follow controls and comply the necessary accounting standards.
President of the Institute, Juliet Aboagye-Wiafe, said strong collaboration between internal and external auditors is likely to halt the breaches by management that resulted in the collapse of some seven Ghanaian controlled banks.
Some seven locally controlled banks have in recent times been liquidated due to the lack of good corporate governance practices and the excessive liabilities and failure to improve their balance sheet.
In an interview with JoyBusiness, Madam Aboagye-Wiafe said the lack of collaboration between the external and internal auditors can also be blamed as one of the several reasons that led to the collapse of the banks.
“In theory and in practice the external auditor must see the internal auditor because he or she sits in the organisation and have done some auditing that the external auditor might not be aware.
Therefore, it’s better for them to see the internal auditor because we are colleagues and that is the reason why the external auditor talks to the internal guy to understand and appreciate the real issues in the organisation.”
She further stated that “to decide to want to rely on their reports or not is not the best thing to do, it must be a must that they will rely on that. Because external auditors come in to basically to do financial audits and overlook the other aspects of the business but they should not forget that procurement and the other activities that we have in the organisation we end up paying monies and they ought to be checked.”
A 2014 Bank of Ghana (BoG) Examination and Inspection Report by Boulders and Advisors Limited, found that there was a significant amount of inter-group lending within the bank.
This was after a review of two forms of related party transactions; first was loans granted to individuals and companies related to the bank and also loans granted to companies connected to one another by ownership and directorship but unrelated to the bank group.
The action was triggered by the inability of the two banks to turn around their negative capital adequacy position which has lingered on for some time now.
“Therefore will have to move away from looking at the financial bits of the business only and leave but they should understand the business and this is possible by engaging the internal auditor,” Madam Juliet Aboagye-Wiafe said.
BoG in liquidating the banks said the action had to be taken against the affected banks due to their “terrible” financial situation and their inability to perform within the banking industry. Although it is a fact that the liquidity crisis and bad loans resulted in the collapse of the banks.