ABSTRACT

This study examines the relationship between whistleblowing mechanisms and internal audit effectiveness in the Nigerian public sector. To accomplish this, relevant research questions were developed, hypotheses were established, and existing literature related to the subject was reviewed. A total of ninety (90) questionnaires were distributed among selected federal, state, and local government institutions in Enugu State. Seventy-nine (79) properly completed questionnaires were returned and used for the study. The data obtained were organised and presented in tables, while mean scores were used for analysis. Levene's test for equality of variances was employed to examine the hypotheses with the assistance of SPSS. The findings revealed significant variations in the level of whistleblowing policy implementation across the three tiers of government, with federal government institutions recording the highest level of implementation. The study also established a significant relationship between whistleblowing policy and fraud prevention in the Ministry of Finance, particularly at the federal level. Based on these findings, the study recommends that state and local governments establish and formally adopt whistleblowing policies to improve the prevention and detection of fraudulent activities. It further recommends the introduction of a common whistleblowing framework across the three tiers of government to ensure effective supervision, monitoring, and control.

Keywords: Whistleblowing, internal audit effectiveness, fraud prevention, public sector, Nigeria.

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Public sector institutions are established by government to provide social services, public goods, and merit goods at reasonable costs while ensuring balanced and equitable development throughout the country. Achieving these objectives requires public officials to perform their responsibilities according to established laws, regulations, administrative guidelines, and ethical standards. Over time, successive governments in Nigeria have introduced various legal and institutional measures to prevent misconduct and promote accountability among public servants. These measures include the Constitution of the Federal Republic of Nigeria 1999 (as amended), the Audit Ordinance of 1956, the Finance (Control and Management) Act of 1958, the Financial Regulations, and the Revenue Allocation Laws. However, the existence of these regulations does not automatically guarantee compliance. Their success largely depends on the commitment of the officials responsible for enforcing them and the effectiveness of accountability mechanisms established to prevent the misuse of public authority. Recent evaluations of Nigeria's institutional accountability system have continued to identify weaknesses, particularly in the independence of audit committees and oversight institutions, which are sometimes unable to operate freely from the influence of the executives they are expected to supervise (Ashiru, Adegbite, Frecknall-Hughes & Daodu, 2024). These institutional weaknesses contribute to the continued occurrence of fraud, revenue losses, and the misuse of public offices within Nigeria's public financial management system.

In response to these challenges, successive administrations have explored different approaches to identifying and addressing misconduct before it develops into more serious financial or administrative problems. One of the mechanisms that has received considerable attention is whistleblowing. In December 2016, Nigeria's Federal Ministry of Finance officially introduced a whistleblowing policy that provided financial incentives ranging from 2.5 to 5 per cent of recovered stolen or concealed public funds to individuals who supplied credible information concerning financial misconduct (Federal Ministry of Finance, Budget and National Planning, 2024). Although the policy initially contributed to notable achievements in the recovery of public assets, its implementation and public momentum have reduced considerably over time. In December 2022, the Federal Executive Council approved a draft Whistleblower Bill intended to establish a legal foundation for the policy and provide protection for individuals who report wrongdoing (Premium Times, 2022). Nevertheless, the bill had not become law by 2025, while anti-corruption organisations, including the Independent Corrupt Practices and Other Related Offences Commission, continued to appeal to the National Assembly to ensure its passage (African Centre for Media and Information Literacy [AFRICMIL], 2025). Comparative assessments of Nigeria's whistleblowing arrangements have also highlighted important differences between the Nigerian system and other jurisdictions, such as the United States, where the Securities and Exchange Commission operates a whistleblower reward programme that has generated billions of dollars in recovered sanctions. In contrast, Nigeria's policy remains largely an administrative directive without comprehensive legislative protection against victimisation, demotion, or dismissal for individuals who report misconduct (Templars Law, 2025).

Existing research presents different perspectives on the extent to which whistleblowing can influence behaviour and promote accountability within public institutions. Ojobo (2023) maintains that the limited acceptance of whistleblowing in Nigeria is partly connected to cultural practices that discourage junior employees from challenging individuals in positions of authority. This situation is made worse by the absence of a strong legal framework that guarantees protection for people who disclose wrongdoing. Similarly, the Platform to Protect Whistleblowers in Africa (2023) explains that the Nigerian whistleblowing policy has experienced a decline in public participation because individuals who provide information about corrupt practices remain vulnerable to retaliation. The organisation also identifies the absence of adequate compensation arrangements and penalties for retaliatory actions as important weaknesses in the existing framework. Ezeoha, Akinyoade, Ehrhardt and Uche (2025), in their assessment of almost ten years of whistleblowing policy implementation in Nigeria, also observe that the policy's concentration on financial recovery, together with inadequate protection and limited institutional trust, has affected its ability to encourage continuous public participation in anti-corruption activities. However, research findings are not entirely negative. A nationwide study conducted in Nigerian higher education institutions found that the willingness of employees and students to report misconduct through internal whistleblowing channels was strongly influenced by organisational attitudes, individual self-efficacy, and subjective norms (Ogunfowokan et al., 2024). This finding indicates that the organisational environment and the design of reporting procedures are important considerations in encouraging whistleblowing. It also challenges the assumption in some earlier corporate governance discussions that simply establishing a formal reporting channel is enough to encourage employees to report misconduct.

Internal audit functions also play an important but different role in promoting accountability and strengthening institutional control. Internal audit serves as an assurance and advisory component of an organisation's internal control structure. It is expected to complement whistleblowing mechanisms by systematically examining internal controls, confirming compliance with established procedures, and assessing the effectiveness of an organisation's overall control environment. While whistleblowing provides information about suspected wrongdoing from employees, former employees, or members of the public, internal audit provides a structured process for investigating risks, evaluating procedures, and identifying weaknesses within the organisation (Badamasi & Ahmad, 2024). However, recent studies conducted in Nigeria indicate that internal audit departments in several ministries, departments, and agencies have not fully achieved their expected responsibilities. Mahmoud and Damagun (2023), in their examination of internal audit effectiveness in six Nigerian paramilitary agencies over a ten-year period, discovered that audit quality, the independence of audit personnel, and the extent of audit activities significantly influenced internal audit effectiveness. Their findings further showed that management support had the strongest statistical influence among the factors examined. In another study involving public teaching hospitals in Oyo State, Obafemi and Opadijo (2023) established that internal audit independence and management involvement were positively related to operational performance. Likewise, Idowu and Ibrahim (2023) identified a significant relationship between internal audit quality and the performance of state-owned tertiary institutions in Osun State. These findings collectively suggest that internal audit effectiveness in Nigeria's public sector differs across institutions and is strongly influenced by management support, auditor independence, and staff competence. These same factors can also determine whether whistleblowing disclosures receive appropriate attention and whether corrective action is taken after reports are received.

Based on these circumstances, particularly the existence of a whistleblowing policy without adequate legal protection and the varying effectiveness of internal audit departments across public institutions, this study examines whistleblowing mechanisms and internal audit effectiveness in the Nigerian public sector. The study focuses specifically on selected federal, state, and local government institutions in Enugu State to investigate the implementation of whistleblowing policies, their contribution to fraud prevention, and their relationship with internal audit effectiveness.

1.2 Statement of the Problem

The increasing need for transparency, accountability, and integrity in public financial management has made whistleblowing an important instrument in contemporary public sector reforms. At the international level, frameworks developed by the Committee of Sponsoring Organizations of the Treadway Commission, alongside legislation such as the Sarbanes-Oxley Act of the United States, recognise whistleblowing as an essential part of an effective internal control system. Consequently, several countries have incorporated whistleblowing provisions into their corporate governance regulations and public financial management laws. In Nigeria, however, the whistleblowing policy introduced in 2016 has continued to operate without the legislative support required to guarantee its long-term sustainability, protect individuals who report misconduct, and establish uniform reporting standards across the different levels of government (Templars Law, 2025). This situation has implications for internal audit effectiveness because internal audit departments require reliable and protected channels through which information about fraud, financial irregularities, and control weaknesses can be received. When individuals are afraid of possible victimisation, they may decide not to report wrongdoing, thereby preventing internal auditors from obtaining important information until financial losses or other forms of misconduct have already occurred.

The problem is particularly important at the state and local government levels, where institutional accountability arrangements often face additional difficulties. Available empirical findings indicate that audit committees and internal control systems in Nigeria operate under significant institutional pressure, with their independence sometimes restricted by the influence of executives whose financial activities they are expected to examine (Ashiru et al., 2024). Federal government institutions, including the Ministry of Finance and major anti-corruption agencies, have received greater attention through policy initiatives, public awareness programmes, and institutional capacity development than many state and local government institutions. Some of these lower levels of government still lack clearly documented and formally established whistleblowing procedures (Federal Ministry of Finance, Budget and National Planning, 2024). This creates differences in the ability of government institutions to prevent and identify fraudulent practices. Consequently, the effectiveness of accountability arrangements may vary considerably across the federal, state, and local government levels, even though all three levels are responsible for managing public resources.

Previous studies have also produced different findings regarding the effectiveness of whistleblowing in encouraging the reporting of misconduct. Ezeoha et al. (2025) and the Platform to Protect Whistleblowers in Africa (2023) argue that the Nigerian whistleblowing system has not achieved sustained public participation, largely because of inadequate protection and weaknesses in the existing policy framework. In contrast, Ogunfowokan et al. (2024) found that employees and other members of Nigerian institutions could demonstrate a strong willingness to report misconduct internally when the organisational environment, attitudes, and individual confidence support such behaviour, even in the absence of a comprehensive national protection law. These contrasting findings suggest that the effectiveness of whistleblowing may depend not only on the existence of legal protection but also on the quality of institutional arrangements and the effectiveness of internal audit departments responsible for receiving and responding to reported cases. However, the connection between these factors has not received sufficient attention within the Nigerian public sector.

Furthermore, a considerable part of the existing literature on whistleblowing in developing countries, including Nigeria, has concentrated on the banking and financial services industries. As a result, the relationship between whistleblowing mechanisms and internal audit effectiveness within public sector institutions has received comparatively limited research attention (Mahmoud & Damagun, 2023; Idowu & Ibrahim, 2023). This represents an important research gap, considering that public institutions are responsible for managing substantial public resources and are frequently associated with cases of financial misconduct and corruption. Therefore, this study seeks to address the identified gap by examining whistleblowing mechanisms and internal audit effectiveness in selected federal, state, and local government institutions in Enugu State.

1.3 Objective of the Study

The main objective of this study is to examine the whistleblowing mechanism and internal audit effectiveness in the Nigerian public sector. For the purpose of this study, whistleblowing policy is considered the independent variable, while fraud prevention and internal audit effectiveness constitute the dependent variables. The specific objectives are to:

i. determine the extent to which whistleblowing policy has been implemented across the three tiers of government in the Nigerian public sector;

ii. examine the effect of whistleblowing policy on fraud prevention in the Nigerian public sector; and

iii. evaluate the relationship between whistleblowing mechanisms and internal audit effectiveness in the Nigerian public sector.

1.4 Research Questions

The following research questions are formulated in line with the objectives of the study:

i. To what extent has whistleblowing policy been implemented across the three tiers of government in the Nigerian public sector?

ii. What effect does whistleblowing policy have on fraud prevention in the Nigerian public sector?

iii. What relationship exists between whistleblowing mechanisms and internal audit effectiveness in the Nigerian public sector?

1.5 Hypotheses of the Study

The following null hypotheses are developed to guide the investigation:

HO1: There is no significant difference in the level of implementation of whistleblowing policy across the three tiers of government in Nigeria.

HO2: There is no significant relationship between whistleblowing policy and fraud prevention across the three tiers of government in Nigeria.

HO3: There is no significant relationship between whistleblowing mechanisms and internal audit effectiveness in the Nigerian public sector.

1.6 Significance of the Study

The importance of this study can be considered from theoretical, practical, and policy perspectives. From a theoretical standpoint, the study contributes to the growing body of Nigerian research examining the connection between whistleblowing and internal audit effectiveness. Although recent studies have discussed these two areas, they have often examined them as separate aspects of organisational accountability rather than as related components of an effective internal control system (Badamasi & Ahmad, 2024; Mahmoud & Damagun, 2023). By investigating both issues across the three levels of government, the study broadens existing discussions of internal control weaknesses beyond the individual institutions that have formed the focus of many previous Nigerian studies.

In practical terms, the findings will be valuable to heads of internal audit departments, accountants-general, and audit committees in federal, state, and local government institutions. It will provide useful information on how the effectiveness of whistleblowing channels can influence the quality and availability of information received by internal audit departments. The study will also benefit anti-corruption agencies that have continued to advocate the introduction of a legally binding whistleblower protection framework (AFRICMIL, 2025). In particular, its findings may provide empirical evidence on how inadequate protection for individuals reporting wrongdoing affects fraud prevention, especially within state and local government institutions.

The study will also be relevant to policymakers responsible for designing and implementing public sector accountability policies. Its findings may support existing recommendations for establishing consistent whistleblowing procedures across all levels of government and speeding up the enactment of a comprehensive Whistleblower Protection Bill (Premium Times, 2022; AFRICMIL, 2025). Such measures could strengthen the reporting of misconduct, improve institutional accountability, and support the effective management of public resources. In addition, the study will provide useful reference material for students, academic researchers, and institutions interested in further examining whistleblowing practices and internal audit effectiveness in developing-country public sectors.

1.7 Scope and Limitation of the Study

This research focuses on whistleblowing mechanisms and internal audit effectiveness within the Nigerian public sector, particularly in selected federal, state, and local government institutions located in Enugu State. These institutions include the Enugu State Ministry of Finance. The study considers the period covering the operation of Nigeria's whistleblowing policy, beginning with its introduction in December 2016 and extending to the present period.

One of the major limitations of the study is the difficulty of accessing detailed and direct information from certain public sector stakeholders. This challenge is particularly relevant at the state and local government levels, where formal whistleblowing arrangements are generally less developed. To address this limitation, the study makes use of primary information obtained through structured questionnaires, alongside secondary materials from academic journals, government publications, civil society organisations, and legal advisory institutions. Particular attention is given to relevant publications and reports released between 2022 and 2025 to ensure that the discussion reflects recent developments and available evidence.

1.8 Definition of Terms

Whistleblowing: This refers to the act of disclosing information about suspected wrongdoing, corruption, illegal activities, fraud, or dangerous practices by a current or former member of an organisation to an individual or institution considered capable of investigating the matter and taking appropriate corrective measures (Ojobo, 2023).

Internal Audit: This is an independent and objective assurance and advisory activity established to improve organisational operations and create value through the assessment and improvement of risk management, internal control, and governance processes (Badamasi & Ahmad, 2024).

Internal Audit Effectiveness: This describes the degree to which an internal audit department successfully fulfils its assurance and advisory responsibilities. Its effectiveness is commonly influenced by factors such as auditor independence, employees' professional competence, management support, and the extent of audit activities performed (Mahmoud & Damagun, 2023).

Public Sector: This refers to government institutions and organisations operating at the federal, state, and local government levels, including publicly funded or government-controlled agencies and enterprises responsible for providing public services, programmes, and goods.

Fraud: Fraud is an intentional act of deception, false representation, or misuse of entrusted authority for unlawful personal or financial benefit, usually resulting in loss or damage to an organisation or the general public.

Internal Control: This refers to the policies, procedures, and organisational arrangements established to provide reasonable assurance that an institution achieves its objectives, protects its resources, and maintains reliable and accurate financial records.

Corruption: This is the improper use or abuse of entrusted public authority or official position for personal benefit. It includes activities such as bribery, embezzlement, and the unlawful diversion or misappropriation of public funds.

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