AN EVALUATION OF THE ESSENTIAL FUNCTIONS OF EXTERNAL AUDITORS IN STRENGTHENING CORPORATE GOVERNANCE IN SELECTED ORGANIZATIONS IN CAMEROON

CHAPTER ONE INTRODUCTION 1.1 Background of the Study The separation between ownership and control in corporate structures often leads to conflicting interests between shareholders and management, creating the risk that managers may misuse entrusted resources for personal gain rather than prioritizing shareholders’ interests (Wright, 2018). To reinforce the trust of shareholders and other stakeholders, companies are required by law or regulatory standards to engage external auditors, whose primary role is to deliver an independent evaluation of the organization's financial statements. Users of financial reports—including investors, regulatory bodies, and the general public—rely on the objectivity of auditors to make sound economic decisions (Sane et al., 2017). Louise (2017) emphasizes that effective corporate governance is fundamental to organizational success. Governance plays a pivotal role in shaping investment decisions, with many investors weighing governance practices on par with financial metrics when assessing potential ventures. Within the corporate governance framework, management is tasked with preparing annual financial statements that provide a clear and accurate depiction of operational outcomes and the entity's financial standing. These reports serve as a tool for accountability and managerial responsibility. However, such statements may sometimes lack credibility, making it difficult for shareholders to trust the information provided (Chemangui, 2019). Corporate governance, therefore, functions not as an end in itself but as a strategic tool to achieve organizational and societal goals. To improve the credibility of financial disclosures, an independent external auditor is appointed to examine management’s reporting. The objective is to validate whether the financial statements truthfully and objectively represent the company's financial health and performance (Louise, 2017). Corporate governance consists of a set of principles and processes that guide how corporations are directed and controlled, aiming to align organizational performance with societal and institutional goals while ensuring optimal resource utilization (Théophile, 2023). Strong governance frameworks help organizations navigate complex economic conditions. Mikky (2019) notes that effective corporate governance provides a structured mechanism for realizing business objectives. Incorporating the perspectives of key stakeholders—such as employees, suppliers, and communities—enriches decision-making processes, promotes inclusivity, and fosters a culture of shared responsibility. Eden et al. (2019) further suggest that robust governance practices can offer firms a sustained competitive edge by fostering standardization and transparency. Through such frameworks, organizations can build systems grounded in fairness and accountability, thereby promoting individual responsibility and collective commitment to value creation (Julio, 2018). According to Faraday (2020), external auditors occupy a vital position in corporate governance by ensuring that both management and boards act in ways that protect shareholder interests. Their independent perspective not only enhances shareholder value but also strengthens internal controls (Marvel, 2017). Auditor independence from management is a key prerequisite for their function, yet their responsibilities often include evaluating managerial performance and offering advisory support in certain areas. The principal role of the external auditor is to issue an audit opinion on the fairness and integrity of the financial statements, serving the needs of shareholders and other relevant stakeholders (Kola et al., 2019). External audits, therefore, represent a critical element of corporate governance by enabling stakeholders to assess the truthfulness of reported financial information and the quality of organizational stewardship (Xiang, 2019). Consequently, engaging an impartial and technically proficient auditor is essential. Jon (2018) underscores that evaluating internal control systems is a fundamental aspect of the auditor’s duties. This evaluation helps auditors understand the operational environment and tailor audit procedures accordingly. As outlined in ISA 400, auditors are required to report any internal control weaknesses to management through a formal communication referred to as a “Letter of Weakness of Internal Control” (Polsen et al., 2020). Research has shown that external audits, which include the assessment of internal operations and governance, can enhance corporate governance by implementing accountability mechanisms. For example, if financial reports are found to have been manipulated, auditors can recommend sanctions and propose corrective strategies (Polsen et al., 2020). External auditors are, therefore, instrumental in safeguarding shareholder interests through their unbiased evaluations, which are free from managerial interference (Chen et al., 2019). Moreover, Boseman (2019) highlights the significant role of auditors in corporate governance through risk assessment. Risk evaluation helps identify potential vulnerabilities and assess whether the company has instituted adequate measures to prevent fraud and corruption. By determining an organization’s risk exposure and mitigation strategies, auditors contribute to shaping resilient governance structures (Manasseh, 2020). In addition, audit processes can support crisis preparedness and recovery strategies by offering insightful feedback on internal capacity and recommending improvements (Zuma, 2019). Pedro et al. (2021) explain that crisis management facilitated by audits enables firms to evaluate the efficacy and scope of emergency plans. It also identifies internal weaknesses that could jeopardize crisis response, thereby impacting the company’s reputation and overall brand equity (Abioye et al., 2021). External auditors, through their impartial review of financial statements, play a key role in bolstering confidence in corporate governance systems. Independent audits validate the credibility and reliability of financial reports, which in turn enhances trust in the management and financial stewardship of the organization. In Cameroon, as in many other developing nations, corporate governance practices are evolving. The country has taken steps to align its governance mechanisms with international standards. Nevertheless, challenges persist, including weak regulatory enforcement, limited transparency, and a need for stronger managerial and board competencies. Given the complexities of the Cameroonian business environment, external auditors have a particularly important role in reinforcing governance structures. Studying their involvement in selected organizations provides valuable insight into how these professionals contribute to the advancement of corporate governance in Cameroon. This underpins the rationale for the present study. 1.2 Statement of the Problem Corporate governance has garnered increasing global interest in recent years, with external auditors recognized as central to fostering transparency, accountability, and ethical conduct within organizations (Gbadebo, 2022). In Cameroon, concerns around financial mismanagement, corruption, and poor oversight have brought renewed attention to the role of external auditors in ensuring sound governance practices. Fossung (2022) notes that auditors in Cameroon frequently face challenges in maintaining independence and objectivity. Close ties with company management or weak regulatory frameworks often compromise the quality and impact of audit functions. According to Verges (2021), additional challenges—such as limited audit resources, lack of professional experience, and non-compliance with international auditing standards—further diminish audit effectiveness. The contribution of external auditors to promoting governance practices in Cameroonian organizations remains unclear and underexamined (Ndjetcheu, 2017). This ambiguity undermines governance mechanisms and reduces accountability within corporate institutions. Moreover, audit effectiveness relies heavily on the technical knowledge, skill set, and field experience of practitioners (Raphael, 2021). Professional capacity can be enhanced through certification programs, targeted training, and mentorship. However, Cameroon currently lacks institutionalized systems to support the development of auditing expertise (Mahmour et al., 2022). The evolution of the auditing profession is further constrained by weak demand from client organizations, whose expectations significantly shape the scope and relevance of audit services. The absence of structured professional development programs—comparable to those available in fields like accounting, procurement, or IT—hampers auditor competency and career growth, thereby impacting overall audit performance (Raphael, 2021). In essence, the core issue lies in understanding how effectively external auditors fulfill their responsibilities in enhancing corporate governance within selected Cameroonian firms. Addressing these gaps is essential for improving audit quality, strengthening governance systems, and ensuring that external auditors make a meaningful contribution to transparency and accountability in the corporate sector. Accordingly, this study aims to examine the roles, challenges, and potential interventions needed to enhance the effectiveness of external auditors in supporting strong corporate governance frameworks. 1.3 Objectives of the study The primary objective of this study is to evaluate the Essential Functions of External Auditors in Strengthening Corporate Governance in Selected Organizations in Cameroon. Specific objectives of this study are to: To identify responsibilities of external auditors in corporate governance in Cameroon i.To evaluate the Impact of External Auditors on Corporate Governance in organizations in Cameroon ii.To analyze the effectiveness of auditors in mitigating financial fraud in organizations in Cameroon. iii.To identify barriers that external auditors encounter in performing their roles effectively in organizations in Cameroon iv.To suggest strategies for addressing identified barriers and enhancing the overall impact of external audits on governance. 1.4 Research Questions The following research questions which are in line with the objectives of this study will be answered in this study: i.What are the responsibilities of external auditors in the context of corporate governance in Cameroon? ii.What is the Impact of External Auditors on Corporate Governance in organizations in Cameroon? iii.How effective are auditors in mitigating financial fraud in organizations in Cameroon? iv.What are the barriers that external auditors encounter in performing their roles effectively in organizations in Cameroon? v.What are the strategies for addressing identified barriers and enhancing the overall impact of external audits on governance? 1.5 Research Hypotheses To determine the effectiveness of this study, the following research null hypotheses will be formulated to guide the study and it will be tested at 0.05% levels of significance.: Ho: External auditors have no significant impact on Corporate Governance in organizations in Cameroon Ha: External auditors have significant impact on Corporate Governance in organizations in Cameroon. 1.6 Significance of the study The importance of this study rests in its ability to improve corporate governance practices, provide information for policy and regulatory development, boost organisational performance, assist professional development, and contribute to both academic and practical knowledge. The report offers a thorough analysis of how the actions of external auditors might impact governance and lead to favourable results for organisations. The study emphasises the contribution of external auditors in enhancing corporate governance mechanisms. Efficient external audits play a crucial role in ensuring that organisations comply with optimal procedures and regulatory obligations, promoting openness and responsibility. The study highlights the significance of external auditors in establishing confidence among stakeholders, such as investors, customers, and regulatory organisations. Superior audits bolster the trustworthiness of financial statements and organisational procedures, which is vital for recruiting investment and upholding public trust. Moreover, the results might provide valuable insights to legislators and regulators regarding the efficacy of existing auditing standards and methods. This can result in more focused and efficient regulatory reforms with the goal of enhancing corporate governance. Gaining insight into the function of external auditors in governance is crucial for developing policies that promote efficient auditing procedures and improve compliance in the business sector. Moreover, through the assessment of the impact of external auditors on corporate governance, the research can elucidate the correlation between enhanced governance practices and superior organisational performance. Efficient resource utilisation and prudent management of financial risks are ensured by effective governance. The study's findings can assist organisations in enhancing their internal controls and decision-making processes, hence promoting more efficient management and strategic planning. Moreover, the study enhances the professional growth of auditors by pinpointing critical domains where their functions are vital. This can result in improved training and development programs specifically designed for auditors in the context of corporate governance. Emphasising the responsibility of auditors in upholding ethical standards underscores the significance of integrity and professionalism in the field of auditing, fostering an ethical environment within organisations. In conclusion, the study contributes to the existing academic knowledge on auditing and corporate governance, serving as a significant resource for scholars and researchers with an interest in these areas. The findings provide valuable information for business leaders, auditors, and corporate governance specialists on how to improve governance procedures through efficient auditing. 1.7 Scope of the study Broadly, this study focus is to evaluate the Essential Functions of External Auditors in Strengthening Corporate Governance in Selected Organizations in Cameroon. Specifically, this study seeks to identify responsibilities of external auditors in the context of corporate governance in Cameroon, evaluate the Impact of External Auditors on Corporate Governance in organizations in Cameroon and analyze the effectiveness of auditors in mitigating financial fraud in organizations in Cameroon.  Further, this study will focus on identifying barriers that external auditors encounter in performing their roles effectively in organizations in Cameroon and it also seeks to suggest strategies for addressing identified barriers and enhancing the overall impact of external audits on governance.  The study is carried out in Cameroon. Selected organizations used as case study includes Nestle Cameroon, Afriland First Bank and Tridem Pharma Cameroon 1.8 Limitations of the study As with any human endeavour, the researchers faced many minor constraints during the investigation. The main limitation was the lack of extensive literature on the subject, due to the limited availability of data about the evaluation of the essential functions of external auditors in corporate governance within specific organisations in Cameroon. Hence, a significant allocation of time and energy was necessary to ascertain the appropriate materials, books, or information and gather data.  Furthermore, this study is constrained by its small sample size and narrow geographic scope, focussing just on Cameroon. Therefore, the conclusions of this study cannot be extended to other situations, thus requiring further investigation.  Moreover, the researcher's restrictions were primarily due to financial constraints, as they are a student without any source of income to sustain themselves. The exorbitant transportation charges at the research location posed a challenge in covering the expenses for transportation fees. Furthermore, the researcher faced a time constraint due to the need to conduct this study while still fulfilling the obligations of attending lectures and participating in other educational activities. 1.9 Definition of terms External audit: An external audit is a financial review that is conducted by a party not associated with the company or department that is voluntarily or involuntarily under audit. An external audit takes place within a defined set of rules or laws. Corporate governance: Corporate governance is the structure of rules, practices, and processes used to direct and manage a company. A company's board of directors is the primary force influencing corporate governance. Accountability: Accountability is the practice of being held to a certain standard of excellence. It is the idea that an individual is responsible for their actions and, if that individual chooses unfavorable actions, they will face