The Impact of Poor Corporate Governance on the Effectiveness of Internal Audit at the Road Development Agency (RDA) in Zambia

Abstract

Various research findings on the collapse of Enron Corporation in 2001 reveal that despite having structures and mechanisms for good corporate governance, everybody at the company disregarded these rules and regulations. Like Enron, the RDA has laid down regulatory provisions that specify the governance structures and processes including the Internal Audit function at the institution. However, these guidelines and principles are either circumvented or manipulated, resulting in poor performance and wastage of resources, thereby adversely affecting the effectiveness of the Internal Audit function at the institution. Therefore, research was conducted using a cross-sectional descriptive study design with both qualitative and quantitative methods to ascertain the impact of poor corporate governance on the effectiveness of Internal Audit at the RDA. The objectives of the study were to evaluate the corporate governance practices and ascertain whether or not there was control circumvention, distortion, and manipulation of these structures and mechanisms resulting in challenges for the Internal Audit activity at the institution with a view to coming up with measures to enhance or strengthen existing corporate governance structures in the Road Sector in general and the RDA in particular. Poor corporate governance practices affect the efficiency and effectiveness of operation for not only the institution but also the internal audit activity in an organization and lead to failure to achieve organizational objectives. Factors that contribute to poor corporate governance at the RDA, included, making appointments to the Board and Audit Committee outside the provisions of the statutes and without regard to specified qualifications. The results showed a direct and significant relationship between poor corporate governance and the effectiveness of the Internal Audit activity at the RDA. To strengthen the supervision and oversight role of the board, members should be appointed in line with the statutes and taking into account, skills, and competencies.