The Strategic Role of Internal Audit in Enhancing Risk Management in Zambian Water and Sanitation Utilities

Abstract

This study examins the role of internal audit (IA) in enhancing the effectiveness of risk management in the water and sanitation utilities of Zambia, which are at risk due to non-revenue water, infrastructure destruction, and regulatory pressure. Using Agency Theory, IA is conceptualised in terms of a governance and assurance service which removes information asymmetry by means of independent evaluation of controls, testing of risk responses, and exposures disclosure. These results are obtained through a cross-sectional survey of 120 audit and risk-related employees that were analysed using reliability tests, multiple regression, and correlation analysis. The instrument was found to have internal consistency with the alpha coefficients of Cronbach of 0.860 in IA, 0.872 in Risk Management, and 0.861 in Challenges. The practices that were found to have a positive relationship with the contribution of IA were the implementation of formal ERM frameworks (r = 0.405), implementation of mitigation and monitoring of the implementation (r = 0.461), and service delivery improvement (r = 0.416, p = 0.001). The regression analysis revealed that IA was the most significant predictor of effectiveness (b = 0.462, p < 0.001), overriding the effect of board oversight (b = 0.385, p < 0.001); issues challenged were negatively but non-significantly related. The model explained the 42.8% of effectiveness (R2 = 0.428). These results underscore the significance of IA in the improvement of accountability, quality, and risk responses in these utilities.