Intimidation of internal auditors and board decisions has been cited as impediments to good governance in the public and private sector. This, sector leadership says has led to plunder in various institutions.
According to the Public Sector Accounting Standards Board (PSASB) and the Institute of Internal Auditors Kenya (IIA), internal auditors have continued to query suspicious transactions within organisations but they are dismissed, only to blow out during external audits.
This, the two organisations reflects the continued flagging of irregular expenditure in government by the Auditor-General and independent audits in the private sector, which the two say can be avoided if internal audit queries and recommendations are considered.
“They (internal auditors) need to be at a level where they cannot be intimidated, they can report independently and given the powers that they deserve in order to raise these issues and then they can be addressed even at the public level. Internal audit reports do not get their way for instance, to Parliament,” IAA chief executive Joyce Omina said.
She spoke in Nairobi on Thursday during the launch of the Internal Audit and Risk Awards 2025, which seeks to recognise excellence in internal audit and risk management in the public sector, while promoting compliance with the latest internal audit standards.
One of the latest audit reports that has shaken the industry is the Sh13.3 billion heist at the Kenya Union of Savings & Credit Co-operatives Ltd (Kuscco), which led to the arrest of top officials, with the scandal exposing Saccos to millions in losses.
“There must have been a lot of whistleblowing that was going on because we have internal auditors in almost all the Saccos manning the operations but again, we have a lot of override of controls where people collude and that makes it difficult for internal auditors to raise some of these issues,” Omina said.
Similar overrides were in the cases of the collapsed Chase Bank and Kenya Medical Supplies Agency (Kemsa) among other institutions, she noted.
“Because they (internal auditor) are reporting to the board, those reports are being shut down at that level,” she noted, “And yes, they had already raised these issues. Even for KEMSA, because the heads of internal audit are members of IIA so we are privy to that information.”
PSASB chief executive Georgina Muchai said the shift from cash to accrual accounting remains key in helping improve transparency, mainly government.
The decision to adopt the accrual-based system was approved by Cabinet on March 7, 2024, following recommendations from the National Treasury.
Accrual accounting is a method where revenue or expenses are recorded when a transaction occurs verses when payment is received or made.
“State corporations are already on accrual basis of accounting for the last ten years. The national government, ministries and departments and county governments are the ones that are now transitioning from cash to accrual basis of accounting. And what accrual basis of accounting means is that now we will be able to account for our assets and liabilities in our balance sheet as a government,” Muchai noted.
Meanwhile, the two entities have called for comprehensive whistleblowing process in public and private sectors to help curb illegal activities within institutions and ensure good financial management practices.
