External performance auditing, ethical behaviour and fraud management in the Ugandan public sector

This paper aims to examine the relationship between external performance auditing, ethical behaviour and fraud management in public sector institutions (PSIs). The study is cross-sectional and quantitative. The authors collected data using a questionnaire on a sample of 168 PSIs and used ordinary least squares regression to test the pre-specified hypotheses. Ethical behaviour is essential to the improvement of fraud management and for all fraud management dimensions of prevention, detection and response. And where ethical behaviour is, external performance auditing is only significant for the fraud detection dimension of fraud management, and this is by the audit of economy. Normative ethical behaviour is important for both fraud prevention and response. External performance auditing is a crucial technology of governmentality for fraud management, with the audit of economy explaining significant variations in fraud management, particularly in enhancing fraud detection. External performance auditing may play a critical role in fraud management (such as fraud prevention), ultimately fortifying internal controls and discouraging fraudulent activities. Since a strong ethical culture inside an organisation discourages fraud, it makes it simpler to prevent and respond to fraudulent actions. The results support the role played by Uganda’s Directorate of Ethics and Integrity in coordinating anti-public sector fraud activities that promote ethics and integrity as crucial drivers in the fight against public sector fraud. The results contribute to the precedent literature in applying Foucault’s theory to explain fraud management. The paper makes a case for the development of external performance auditing and ethical behaviour to improve fraud management. As audit of economy has featured prominently for fraud management in this study, it has vindicated previous scholars who suggested that performance auditing should focus on it.