The Mediating Role of Organisational Culture in the Audit-Fraud Relationship: Evidence from Ghana’s Local Government

Abstract

Fraud remains a pervasive challenge in Ghana’s public sector, particularly within Metropolitan, Municipal, and District Assemblies (MMDAs), despite robust audit mechanisms. This study investigates the mediating role of organisational culture specifically transparency and ethical leadership ("tone at the top") in the relationship between audit activities (internal, external, forensic) and fraudulent financial practices (asset misappropriation, corruption, procurement fraud). A quantitative cross-sectional survey design was employed, collecting data from 343 finance directors, accountants, and internal auditors across 261 MMDAs using structured questionnaires. Data were analysed via Pearson correlation, multiple regression, and mediation analysis using Baron and Kenny’s method.  Findings revealed mixed relationships: external audits weakly reduced asset misappropriation but correlated positively with corruption and procurement fraud, while internal audits showed weak positive links to the latter. Forensic audits had a weak negative association with corruption. Organisational culture partially mediated the audit-fraud relationship, with transparency unexpectedly showing a weak positive effect on fraud, suggesting superficial implementation. Tone at the Top negatively impacted fraud, though its effect was modest. The study highlights that audits alone are insufficient without a supportive ethical culture.  The findings underscore the need for integrated anti-fraud strategies combining audit reforms with cultural interventions, such as strengthening leadership accountability and genuine transparency measures. This research contributes to agency and fraud theories by empirically validating cultural mediation in audit effectiveness, offering policymakers actionable insights for Ghana’s public sector and similar contexts. Limitations include the cross-sectional design and focus on MMDAs, suggesting avenues for future longitudinal or mixed-methods research.

Keywords: Organisational culture, Audit, Fraud prevention, Public sector governance, Ethical leadership

DOI: 10.7176/RJFA/16-9-05

Publication date: November 30^th 2025