What Do Audit Committees Really Do? Evidence from the Nanumba South and North District Assemblies

Abstract

Audit committees are designed to strengthen governance through financial oversight; however, their actual activities and effectiveness in local government settings remain poorly documented. This study provides a comparative analysis of audit committee functions in Ghana’s Nanumba South District and Nanumba North Municipal Assemblies, utilising official 2023 audit committee reports, meeting records, and statutory documents. Both committees largely fulfilled their mandated oversight roles by reviewing numerous audit findings and ensuring that management rectified nearly all identified issues. Nanumba South addressed all 22 infractions identified during the year, while Nanumba North achieved notable cost savings of GH₵2.88 million through the implementation of audit recommendations. However, significant operational challenges emerged: Nanumba North’s committee struggled with irregular meetings due to funding constraints, while Nanumba South faced administrative hurdles, including delayed document submissions. Drawing on agency theory and Schwartz-Ziv & Weisbach’s (2013) framework on board behaviour, we assess committee effectiveness through systematic content analysis. The findings demonstrate that audit committees in local government contexts function as active monitors, diligently supervising financial processes and compliance, rather than serving merely ceremonial roles. However, their impact depends critically on adequate resources, management support and adherence to governance best practices. The study reveals that while these committees can effectively reduce information asymmetries and align management behaviour with stakeholder interests, their effectiveness is constrained by institutional factors beyond their direct control. The study recommends ensuring independent funding mechanisms, improving the timeliness of information flow, and investing in capacity-building initiatives to strengthen accountability and financial governance at the district level.