Internal, External, and Forensic Audits as Determinants of Fraud Prevention in Ghana’s Metropolitan, Municipal, and District Assemblies

Abstract

Fraud and corruption are major global challenges that have a profound effect on individuals, countries, and economies. They incur substantial costs and hinder societal advancement. In Ghana, fraud and corruption present serious obstacles for the Metropolitan, Municipal, and District Assemblies (MMDAs), compromising governance and development efforts. This research assesses how well internal, external, and forensic audits function in curbing fraudulent financial activities within Ghana's MMDAs. A quantitative cross-sectional survey design was utilised to gather data from 343 finance directors, accountants, and internal auditors across 261 MMDAs. Descriptive statistics and multiple regression analysis were used to evaluate the data.  The results indicate that internal audits are viewed as effective for identifying early indicators of financial mismanagement (mean = 4.87) and for preventing fraud (mean = 4.60), although issues like lack of independence (mean = 4.23) and insufficient resources (mean = 4.23) exist. External audits are conducted regularly (mean = 5.44) but face challenges with the weak enforcement of their recommendations (mean = 2.56). Forensic audits, despite their limited usage (mean = 1.68 regarding the hiring of forensic auditors), show the most substantial association with fraud reduction (β = 0.228, p < 0.001). Together, audit activities account for 12.2% (R² = 0.122) of the variance in fraudulent practices, revealing their significant yet constrained effectiveness. The study concludes that although audits are vital for preventing fraud, their success is undermined by systemic shortcomings. It suggests enhancing forensic audit capabilities, ensuring the enforcement of external audit recommendations, and preserving the independence of internal audits to improve fraud prevention in Ghana's local governments. These findings add value to both academic discussions and practical policy reforms in the management of public sector finances.