Usefulness of Internal Controls in achieving value for money

The study by Wallace & Kreutzfeldt (1991) was among the first to demonstrate the importance of the control environment in explaining the existence of an internal audit function. More recently, Goodwin-Stewart & Kent (2006) provided evidence that the existence of an internal audit function is related to the level of commitment to risk management. Recent case studies on internal auditing in Belgium illustrate the importance of the control environment when studying internal auditing practices. Sarens & De Beelde (2006a, 2006b) found that certain control environment characteristics (e.g., tone-at-the-top, level of risk and control awareness, extent to which responsibilities related to risk management and internal controls are clearly defined and communicated) are significantly related to the role of the internal audit function within an organization. The tone-at-the-top refers to a company’s ethical values, management’s philosophy and operating style (Cohen et al., 2002) which are reflected by the company’s code of conduct or code of ethics. Based on Sarens & De Beelde (2006), we assume that when the company pursues integrity and clear ethical values reflected in a formal code of conduct/ethics, the internal audit function will take on greater importance. This is because the internal audit function is often seen as a way of
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translating and communicating the tone-at-the-top throughout the company (Sarens et al., 2009).
Therefore, management is more likely to invest in a relatively larger internal audit function.
The American Bar Association (ABA) directors’ guidebook states that “an important aspect of the board’s responsibility, often referred to the audit committee, is oversight of the corporation’s policies and procedures regardi...

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...ntial critical factor in achieving value for money is the level in which set objectives and missions are fulfilled in the basis of being economical, effective and efficient. The Internal Control system is a solution in achieving the mission and objectives of organisations which is Value for Money. According to the Audit Manual for Local Authorities in Malawi published in 2007, the main approach to Value for Money is the District Council’s control over the use of resources. The Internal Audit is required to carry out regular reviews to ascertain whether councils receive Value for Money in all their activities.

Conclusion
From the literature reviewed, several researchers seem to concur that there is a correlation between Internal controls and Value for money. These conclusions will however be confirmed after empirical evidence has been obtained from the research.