Internal Audit Reporting Frequencies and Risk Management Effectiveness in Nigeria Healthcare Organizations
Abstract
This study investigated internal audit reporting frequencies and their impact on corporate governance and risk management practices within Nigerian healthcare organizations. A correlational research design was adopted, and data were sourced from secondary sources. SPSS27 was employed to collect, present, and analyze the data. The study used the F-test to test hypotheses and ascertain relationships between variables. Â The findings revealed intriguing insights into the relationship between internal audit reporting frequencies and key governance and performance metrics. Variables such as board size, gender diversity, board leadership, risk management effectiveness, and Return on Asset (ROA) were explored within the context of Nigerian healthcare organizations. Results indicated a significant negative influence of board size, gender diversity, and board leadership on internal audit reporting frequencies. Moreover, the study found no positive correlation between internal audit reporting frequencies and risk management effectiveness, challenging previous assumptions. Based on these findings, the study concluded that internal audit reporting frequencies played a crucial role in shaping governance structures and risk management practices in Nigerian healthcare organizations. The negative impact of certain board characteristics on internal audit reporting frequencies underscored the importance of aligning governance strategies with audit functions to enhance effectiveness. Additionally, the lack of a direct positive correlation between audit reporting frequencies and risk management effectiveness highlighted the need for a nuanceapproach toon managing organizational risks beyond audit activities. As part of the recommendations, the study advocated for tailored governance and risk management strategies that considered the specific context and challenges faced by Nigerian healthcare organizations. It suggested fostering board diversity, promoting transparent communication channels between auditors and boards, and integrating risk management frameworks into audit processes. Furthermore, the study emphasized the role of continuous monitoring, evaluation, and feedback mechanisms to enhance the overall effectiveness of internal audit functions in mitigating risks and improving organizational performance. In conclusion, this study contributed valuable insights to the field of corporate governance, risk management, and performance evaluation within Nigerian healthcare settings. By adopting a rigorous research design and employing advanced statistical techniques, the study provided evidence-based recommendations for policymakers, healthcare executives, auditors, and stakeholders to enhance governance practices and navigate evolving risk landscapes in the healthcare sector.
CHAPTER ONE
INTRODUCTION
1.1 Â Background to the Study
In recent years, the role of internal audit functions has gained significant importance in enhancing corporate governance and risk management practices within organizations (Cohen & Sayag, 2020). This heightened significance is particularly crucial in sectors such as healthcare, where effective risk management directly impacts patient safety, financial sustainability, and overall organizational performance. Healthcare organizations, including those in Nigeria, operate within complex environments characterized by limited resources, regulatory complexities, and evolving risk landscapes (Dellai & Omri, 2022).
Against this backdrop, the frequency and quality of internal audit reporting have emerged as critical factors in assessing risk management effectiveness within Nigerian healthcare organizations (Feizizadeh, 2022). The quality of internal audit functions plays a vital role in ensuring that healthcare institutions adhere to regulatory standards, mitigate financial risks, and maintain operational efficiency. The effectiveness of internal audits directly contributes to the overall governance structure and risk management practices adopted by healthcare organizations in Nigeria (Alzeban & Gwilliam, 2022).
Internal audit functions in healthcare organizations are tasked with various responsibilities, including evaluating internal controls, assessing compliance with regulations, and identifying areas of operational improvement (Endaya & Hanefah, 2022). These responsibilities are paramount in addressing the unique challenges faced by the Nigerian healthcare sector, such as fraud prevention, resource optimization, and quality assurance in patient care (Coram et al., 2018). The ability of internal audit functions to effectively fulfil these responsibilities directly impacts the overall risk management effectiveness within Nigerian healthcare organizations.
Moreover, the role of internal audits in Nigerian healthcare organizations extends beyond traditional financial audits to encompass broader risk management aspects (Eulerich et al., 2019). Internal auditors play a crucial role in identifying emerging risks, assessing their potential impact, and recommending proactive measures to mitigate these risks (Karagiorgos et al., 2021). This proactive approach is essential in addressing the evolving risk landscapes faced by healthcare institutions in Nigeria and ensuring their long-term sustainability.
One of the key challenges faced by internal audit functions in Nigerian healthcare organizations is the need for continuous improvement in audit processes and methodologies (George et al., 2023). As risks evolve and regulatory requirements change, internal auditors must adapt their practices to remain effective in their roles. This necessitates ongoing training, skill development, and the adoption of advanced audit techniques to address complex risk scenarios effectively (Lenz & Hahn, 2021).
Furthermore, the collaboration between internal audit functions and other stakeholders, such as external auditors and regulatory bodies, is crucial in enhancing overall risk management effectiveness (Behrend & Eulerich, 2019). Coordination and cooperation between internal and external auditors can lead to a more comprehensive assessment of risks, increased transparency, and improved governance practices (Endaya, 2020). This collaborative approach is particularly relevant in the Nigerian healthcare context, where regulatory oversight and accountability are paramount.
Consequently, the role of internal audit functions in enhancing risk management effectiveness within Nigerian healthcare organizations cannot be overstated. The quality, frequency, and collaborative nature of internal audit reporting play pivotal roles in addressing the unique challenges faced by the healthcare sector in Nigeria. By continually improving audit practices, fostering collaboration, and staying abreast of evolving risk landscapes, internal audit functions can contribute significantly to the overall governance and risk management frameworks in Nigerian healthcare organizations.
1.2 Statement of Problem
The existing literature on internal audit effectiveness in healthcare organizations, particularly in the context of developing countries like Nigeria, presents several gaps that need to be addressed. First, while there is recognition of the importance of internal audit functions in enhancing governance and risk management (Cohen & Sayag, 2020), there is a lack of specific studies focusing on the Nigerian healthcare sector. This gap limits our understanding of the unique challenges and opportunities faced by Nigerian healthcare organizations regarding internal audit practices.
Second, the literature lacks comprehensive research on the specific determinants that influence internal audit effectiveness in Nigerian healthcare organizations. Factors such as board size, gender diversity, board leadership, and their impact on internal audit practices have been explored in various contexts (Alzeban & Gwilliam, 2022), but their specific implications for the Nigerian healthcare sector remain understudied. Understanding these determinants is crucial for developing tailored strategies to enhance internal audit effectiveness in this specific context.
Third, while some studies highlight the importance of collaboration between internal and external auditors (Endaya & Hanefah, 2022), there is limited empirical evidence on the nature and extent of this collaboration within Nigerian healthcare organizations. This gap hinders the development of effective coordination mechanisms that can optimize risk management practices and ensure regulatory compliance.
Additionally, the evolving risk landscapes and regulatory environments in Nigeria’s healthcare sector pose significant challenges that require continuous adaptation and innovation in internal audit practices (Feizizadeh, 2022). However, the literature lacks in-depth studies on the strategies and tools that internal audit functions can employ to address these dynamic challenges effectively.
Objectives of the Study
The specific objectives of this study include:
- To investigate the influence of board size, gender diversity, and board leadership on the frequency of internal audit reporting in Nigerian healthcare organizations.
- To assess the relationship between internal audit reporting frequencies and risk management effectiveness in Nigerian healthcare organizations.
- To determine how internal audit reporting frequency, along with board size, gender diversity, and board leadership, affects Return on Asset (ROA) in Nigerian healthcare organizations.
Research Questions
The following research questions were asked:
- How do board size, gender diversity, and board leadership influence internal audit reporting frequencies?
- What is the relationship between internal audit reporting frequencies and risk management effectiveness in Nigerian healthcare organizations?
- How does internal audit reporting frequency, along with board size, gender diversity, and board leadership, affect Return on Asset (ROA) in Nigerian healthcare organizations?
Research Hypotheses
The following hypotheses were tested:
Null Hypotheses(H0):
- Board size, gender diversity, and board leadership negatively influence the frequency of internal audit reporting in Nigerian healthcare organizations.
- There is no positive correlation between internal audit reporting frequencies and risk management effectiveness in Nigerian healthcare organizations.
- Internal audit reporting frequency, along with board size, gender diversity, and board leadership, negatively affects Return on Asset (ROA) in Nigerian healthcare organizations.
Alternative Hypotheses(H1):
- Board size, gender diversity, and board leadership positively influence the frequency of internal audit reporting in Nigerian healthcare organizations.
- There is a positive correlation between internal audit reporting frequencies and risk management effectiveness in Nigerian healthcare organizations.
- Internal audit reporting frequency, along with board size, gender diversity, and board leadership, positively affects Return on Asset (ROA) in Nigerian healthcare organizations.
Significance of the Study
This study carries substantial implications that resonate across academia and practical domains, particularly within the unique nexus of Nigerian healthcare. Firstly, it contributes significantly to the ongoing discourse surrounding internal audit practices, risk management, and corporate governance. By delving into these areas within the context of Nigerian healthcare organizations, it adds valuable insights and depth to the existing body of knowledge. This contribution is crucial as it aids in refining theoretical frameworks, understanding practical challenges, and identifying best practices tailored to the Nigerian healthcare landscape.
Secondly, the study offers actionable insights and recommendations with tangible benefits for various stakeholders within the healthcare ecosystem. Policymakers stand to gain valuable perspectives on regulatory frameworks and governance structures that can be refined to foster better risk management practices. Healthcare executives can leverage the findings to fine-tune their strategic approaches, ensuring alignment with industry standards and optimizing organizational performance metrics. Internal auditors, in particular, receive tailored guidance to enhance their strategies and practices, thereby improving the quality and effectiveness of internal audit functions within healthcare organizations.
Moreover, the study’s potential to stimulate further research is noteworthy. By shedding light on key factors influencing risk management effectiveness and internal audit practices in Nigerian healthcare, it lays a foundation for future investigations. Researchers can delve deeper into specific aspects uncovered in this study, exploring nuances, conducting longitudinal studies, or exploring comparative analyses across different healthcare systems. This not only enriches the scholarly dialogue but also fosters a culture of continuous improvement and knowledge dissemination within the healthcare governance sphere.
Furthermore, the broader implications extend to the global discourse on effective governance and risk management in healthcare. Insights gleaned from the study can serve as reference points for international comparisons, highlighting common challenges, as well as unique contextual factors shaping governance practices in diverse healthcare settings. This cross-pollination of ideas and experiences contributes to a more robust understanding of governance models that can withstand the complexities and dynamics inherent in modern healthcare landscapes.
Scope of the Study
This study focuses specifically on Nigerian healthcare organizations and their internal audit practices, risk management frameworks, and governance structures. The study considers variables such as board size, gender diversity, and board leadership as independent variables and measures their impact on internal audit reporting frequencies and risk management effectiveness. The study also examines the relationship between internal audit reporting frequencies and Return on Asset (ROA) as the dependent variable.
Operational Definition of Terms
Internal Audit Reporting Frequencies: Refers to the regularity and quality of reports generated by the internal audit function within an organization, including the frequency of reporting to the board and management.
Risk Management Effectiveness: Denotes the ability of an organization to identify, assess, mitigate, and monitor risks effectively to achieve its objectives while minimizing potential negative impacts.
Board Size: The number of members on the board of directors or governing body of an organization.
Gender Diversity: The representation of both male and female individuals on the board or within leadership positions, aiming for a balanced and inclusive composition.
Board Leadership: Refers to the leadership structure within the board, including the roles of the chairman, CEO, and other key positions that influence governance and decision-making processes.
Return on Asset (ROA): A financial metric that measures a company’s profitability by dividing its net income by its total assets, indicating how efficiently an organization is utilizing its assets to generate profits.
Corporate Governance: The system of processes, practices, and structures by which a company is directed and controlled, encompassing relationships between stakeholders and the goals for which the corporation is governed.
Nigerian Healthcare Organizations: Refers to hospitals, healthcare facilities, and related institutions operating within the healthcare sector in Nigeria, including public and private entities.
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