Internal audit practices on financial accountability in Uganda’s local governments: a case of Mukono District Local government

Abstract

The study examined the effect of internal audit practices on financial accountability in Mukono District Local Government. The study was guided by three objectives: to examine the effect of audit quality on financial accountability, to determine the effect of compliance with audit standards on financial accountability, and to assess the effect of follow-up mechanisms on financial accountability in Mukono District Local Government. The study was guided by Agency Theory developed by Jensen and Meckling (1976), which explains the role of monitoring and control mechanisms in enhancing accountability and reducing misuse of organizational resources. A cross-sectional research design employing both quantitative and qualitative approaches was adopted. Data was collected from 70 respondents using questionnaires and interview guides. Quantitative data was analyzed using descriptive statistics, Pearson correlation analysis, and multiple regression analysis with the aid of SPSS, while qualitative data was analyzed using thematic analysis. The findings revealed that audit quality positively influenced financial accountability, although its effect was not statistically significant at the 0.05 level (β = 0.137, p = 0.052). The study further established that compliance with audit standards had a positive and statistically significant effect on financial accountability (β = 0.255, p = 0.001 < 0.05). In addition, follow-up mechanisms had the strongest positive and statistically significant effect on financial accountability (β = 0.597, p = 0.000 < 0.05). Correlation analysis also revealed strong positive relationships between all dimensions of internal audit practices and financial accountability. The regression model indicated that internal audit practices jointly explained 96.3% of the variation in financial accountability (Adjusted R2 = 0.962). The study concluded that effective internal audit practices significantly enhance financial accountability in local governments, with follow-up mechanisms emerging as the most influential factor. The study recommends strengthening internal audit independence, enforcing compliance with audit standards, enhancing management support towards implementation of audit recommendations, and improving monitoring systems to promote accountability and transparency in the management of public resources within local governments.