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THE ROLE OF INTERNAL AUDITING IN CORPORATE GOVERNANCE: A CASE STUDY OF DANGOTE CEMENT PLC’S AUDIT COMMITTEE (2021-2025)
Abstract
This work examines the role of internal auditing in enhancing corporate governance, using Dangote Cement PLC’s Audit Committee as a case study from 2021 to 2025. It explores how internal audit functions contribute to transparency, risk management, and compliance within the organization. The study employs a qualitative case study approach, utilizing content analysis of annual reports, corporate governance disclosures, and sustainability documents to assess audit practices. Key findings reveal that Dangote Cement’s Audit, Compliance, and Risk Management Committee effectively oversaw internal controls, with no material weaknesses reported and satisfactory compliance with the Nigerian Code of Corporate Governance. Internal auditing supported robust risk mitigation, contributing to resilient financial performance amid economic challenges, including record EBITDA growth and improved ESG ratings. Recommendations include further strengthening internal audit independence, expanding ESG-focused audits, and enhancing training for audit committee members to address emerging risks. In conclusion, internal auditing plays a pivotal role in sustaining strong corporate governance at Dangote Cement, promoting accountability and long-term shareholder value in Nigeria’s manufacturing sector.
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
Corporate governance constitutes the fundamental system of rules, practices, and processes that guide and regulate companies, fostering accountability, fairness, transparency, and ethical conduct among directors, management, and stakeholders (Financial Reporting Council of Nigeria, 2018). This framework harmonizes interests across shareholders, management, employees, customers, suppliers, and communities while mitigating agency conflicts where managerial self-interest may supersede shareholder welfare.
Internal auditing has risen in prominence as a cornerstone of corporate governance reinforcement, particularly in emerging economies like Nigeria, where regulatory structures evolve amidst economic instability and enforcement gaps (Adeyemi et al., 2023). By delivering independent evaluations of risk management adequacy, internal controls, and governance mechanisms, internal auditors bridge the separation between strategic oversight and operational execution (Institute of Internal Auditors, 2024). This function gains critical importance in sectors such as manufacturing, where complex supply chains, commodity price volatility, IFRS compliance, and operational hazards necessitate vigilant safeguards for asset protection and regulatory adherence (Ehiedu & Toria, 2021).
The Nigerian Code of Corporate Governance 2018 (NCCG 2018), promulgated by the Financial Reporting Council of Nigeria, has markedly shaped governance benchmarks (Financial Reporting Council of Nigeria, 2018). Principle 18 of the NCCG expressly requires organizations to establish potent internal audit operations that provide governance, risk, and control assurances. Mandates include board-approved audit charters, sufficient resource allocation, direct audit committee reporting lines, and regular external quality assessments. Conformity with these stipulations enables entities to detect control gaps, propose refinements, and cultivate ethical practices, thereby strengthening governance-performance linkages (Abudu & Salman, 2025).
Dangote Cement PLC, Africa’s premier cement manufacturer with pan-continental operations exceeding 52 million tonnes annual capacity, epitomizes rigorous compliance with these governance tenets (Dangote Cement Plc, 2025). As a Nigerian Exchange-listed entity, its 14-member board comprises executive, non-executive, and independent directors spanning financial, technical, legal, and industrial competencies (Dangote Cement Plc, 2025b). The corporation’s governance architecture incorporates exhaustive policies addressing anti-corruption, conflict management, whistleblower protection, and related-party dealings, regularly updated to harmonize with NCCG 2018, CAMA 2020, and global standards (Dangote Cement Plc, 2025).
Between 2021-2025, Dangote Cement maintained uninterrupted governance adherence through internal board assessments, reporting full alignment with regulatory codes and affirming no significant financial control deficiencies (Dangote Cement Plc, 2025b). The Board Audit, Compliance and Risk Management Committee chaired by Ernest Ebi MFR oversees internal audit operations, approving audit plans, scrutinizing risk profiles, and ensuring strategic congruence amid macroeconomic turbulence (Dangote Cement Plc, 2025).
A key leadership change occurred with Arvind Pathak’s 2023 appointment as Group Managing Director/CEO, succeeding Michel Puchercos (Dangote Cement Plc, 2023). Pathak’s three-decade cement industry tenure includes transformative leadership at Dangote Cement, Birla Corporation, and Reliance Cement, yielding expertise in operational revitalization and efficiency optimization (Dangote Cement Plc, 2025).
Contemporary internal audit functions increasingly incorporate ESG dimensions, advising on sustainability risks and facilitating alignment with SDGs, GRI, and CDP frameworks (Baharom, 2025). Dangote Cement’s ESG integration materializes through comprehensive sustainability reporting, exemplified by its upgraded CDP climate/water rating, alternative fuel initiatives achieving 10% TSR, and ₦13 billion annual social investments predominantly directed at education, healthcare, and community development (Dangote Cement Plc, 2025).
In Nigeria’s context, internal auditing additionally combats financial malfeasance risks like money laundering, augmenting governance through transparency enhancements (Adegbie et al., 2025). Dangote Cement’s 2021-2025 financial resilience evidenced by ₦3,580.6 billion group revenue and ₦1,382 billion EBITDA in 2024 demonstrates how robust internal controls and ESG assimilation sustain performance despite fiscal volatilities (Dangote Cement Plc, 2025). This analysis illuminates internal auditing’s dual role as both compliance safeguard and value generator, substantiated through Dangote Cement’s audit committee practices during the review period.
1.2 Statement of the Problem
Despite significant advancements in corporate governance frameworks globally and in Nigeria, such as the issuance of the Nigerian Code of Corporate Governance 2018 (NCCG 2018) by the Financial Reporting Council of Nigeria, persistent challenges continue to undermine the effectiveness of internal auditing functions, particularly in Nigerian firms. These challenges stem from inconsistent regulatory enforcement, institutional weaknesses, and socio-political factors that hinder full compliance and implementation (Adegbite, 2015; Chijoke-Mgbame et al., 2024). In many cases, governance mechanisms become symbolic or “box-ticking” exercises rather than substantive tools for accountability, leading to vulnerabilities in internal controls and heightened risks of financial irregularities (Yakasai, 2001; Okpara, 2014).
Weak internal controls have historically contributed to notable issues in Nigeria, including financial misreporting, fraud, and risk mismanagement, which erode shareholder confidence and investor trust (Okafor, 2025; Otusanya, 2014). For instance, past scandals in the manufacturing and financial sectors, such as the 2006 Cadbury Nigeria overstatement of profits by over ₦13 billion, highlighted deficiencies in oversight, internal audit independence, and board vigilance, resulting in reputational damage and regulatory interventions (Bakre, 2007). Although more recent high-profile cases in manufacturing appear limited during 2021–2025, broader systemic issues persist, including political interference, inadequate training for auditors, limited technological adoption, and conflicts of interest that compromise audit objectivity (Akinbuli, 2010; Dawuda & Syed, 2025). These factors exacerbate agency problems, where management may prioritize short-term gains over long-term sustainability, further undermining stakeholder interests.
In emerging markets like Nigeria, enforcement of regulations remains inconsistent due to resource constraints, corruption risks, and weak institutional oversight, making it difficult for internal audit functions to operate independently and effectively (World Bank, 2020; Adegbite, 2015). Studies indicate that internal auditors often face pressures that limit their ability to identify control deficiencies or recommend robust improvements, particularly in environments with dominant ownership structures or family-controlled enterprises (Olaoye et al., 2023). Additionally, challenges such as skills shortages, insufficient resourcing of audit committees, and low adoption of international standards (e.g., IIA standards) contribute to suboptimal governance outcomes (Institute of Internal Auditors, 2024).
At Dangote Cement PLC, a flagship Nigerian manufacturing firm and Africa’s largest cement producer, the Board Audit, Compliance, and Risk Management Committee has demonstrated active oversight of internal audits from 2021 to 2025. The company has consistently reported satisfactory compliance with the NCCG 2018 through internal board evaluations and confirmed no material weaknesses in internal controls over financial reporting across this period (Dangote Cement Plc, 2025; Dangote Cement Plc, 2025). Independent auditors, such as KPMG, have affirmed the effectiveness of these controls, supporting resilient performance amid economic headwinds like naira devaluation and inflation (Dangote Cement Plc, 2025). However, even in well-governed entities like Dangote Cement, there remains a critical need for ongoing evaluation of how these internal audit practices have specifically contributed to governance outcomes during a period of significant economic volatility, regulatory evolution (e.g., updates to CAMA 2020 and sector-specific guidelines), and external pressures.
Without detailed, empirical assessments, potential gaps, such as subtle compromises in audit independence, resource allocation for emerging risks (e.g., cybersecurity or ESG-related audits), or alignment with evolving global standards, may go unaddressed. These gaps could hinder the company’s ability to maintain optimal governance, potentially impacting long-term sustainability, operational resilience, and stakeholder trust in an increasingly scrutinized market (Baharom, 2025; Financial Reporting Council of Nigeria, 2018). This study addresses this imperative by examining Dangote Cement’s Audit Committee practices, offering insights to strengthen internal auditing’s role in mitigating risks and enhancing accountability in Nigeria’s manufacturing sector.
1.3 Objectives of the Study
The main objective of this study is to examine the role of internal auditing in corporate governance at Dangote Cement PLC’s Audit Committee from 2021 to 2025. The specific objectives are:
- To analyze the structure and functions of the Audit Committee in supporting internal auditing.
- To evaluate the impact of internal audits on risk management and compliance within the company.
- To assess how internal auditing has influenced shareholder value and ESG integration during the study period.
- To provide recommendations for enhancing internal audit effectiveness in similar Nigerian corporations.
1.4 Research Questions
- What is the structure and operational framework of Dangote Cement PLC’s Audit Committee in relation to internal auditing from 2021 to 2025?
- How has internal auditing contributed to risk management and regulatory compliance at Dangote Cement PLC?
- In what ways has internal auditing mediated the relationship between corporate governance and shareholder value in the company?
- What challenges and opportunities exist for improving internal audit practices in Nigerian manufacturing firms?
1.5 Significance of the Study
This study significantly contributes to the academic discourse on internal auditing and corporate governance by offering detailed empirical insights from Dangote Cement PLC, one of Africa’s leading manufacturing firms and Sub-Saharan Africa’s largest cement producer with operations in 10 countries and a capacity exceeding 52 million tonnes per annum (Dangote Cement Plc, 2025a). The research highlights how effective internal auditing mediates governance structures and firm performance, providing nuanced evidence for emerging market contexts.
For practitioners, including audit committee members and internal auditors, the study provides actionable recommendations to enhance governance mechanisms, such as strengthening audit independence, resource allocation for emerging risks like ESG, and alignment with the Nigerian Code of Corporate Governance 2018. These insights can guide improvements in risk management, compliance, and operational efficiency, potentially influencing broader policy reforms in Nigeria through bodies like the Financial Reporting Council of Nigeria.
Shareholders, investors, and regulators stand to benefit from a deeper understanding of how robust internal audits drive value creation, evidenced by Dangote Cement’s sustained financial resilience, dividend payouts (e.g., ₦30 per share proposed for 2024), and ESG advancements, including a CDP rating upgrade to B and a 10% Thermal Substitution Rate through alternative fuels (Dangote Cement Plc, 2025). This demonstrates tangible links between audit oversight and long-term shareholder returns.
Finally, Dangote Cement and similar large-scale Nigerian corporations can leverage the findings to refine their internal audit practices, fostering better compliance, sustainability integration (aligned with UN SDGs and GRI standards), and stakeholder trust. Overall, this research underscores the pivotal role of internal auditing in promoting accountability and sustainable growth in Nigeria’s manufacturing sector, offering a model for other emerging market firms.
1.6 Scope of the Study
The study is limited to Dangote Cement PLC’s Audit Committee and internal auditing practices from 2021 to 2025, focusing on corporate governance aspects such as risk management, compliance, and ESG integration. It draws on company reports, scholarly literature, and regulatory frameworks in Nigeria, excluding comparative analyses with other firms or sectors.
1.7 Limitations of the Study
Potential limitations include reliance on publicly available data, which may not capture all internal dynamics, and the evolving nature of governance regulations post-2025. Access to proprietary audit details could be restricted, and the study’s findings may not generalize beyond large-scale Nigerian manufacturers.
1.8 Definition of Terms
- Internal Auditing: An independent, objective assurance and consulting activity designed to add value and improve an organization’s operations (Institute of Internal Auditors, 2025).
- Corporate Governance: The system by which companies are directed and controlled, involving boards, management, and stakeholders.
- Audit Committee: A board subcommittee responsible for overseeing financial reporting, internal controls, and audit processes.
- ESG: Environmental, Social, and Governance factors influencing sustainable business practices.
References
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Adegbie, F. F., Ajayi-Nifise, A. O., & Akintoye, I. R. (2025). Corporate governance and money laundering in Nigerian listed companies: The moderating role of internal audit effectiveness. Journal of High Technology Management Research, 36(1), 100030. https://doi.org/10.1016/j.hitech.2025.100030
Baharom, Z. (2025). The role of internal audit in ESG governance: A conceptual framework. International Journal of Research and Innovation in Social Science, 9(8), 123-145. https://rsisinternational.org/journals/ijriss/articles/the-role-of-internal-audit-in-esg-governance-a-conceptual-framework/
Dangote Cement Plc. (2025a). Dangote Cement FY 2024 annual report: Corporate governance. https://dangotecement.com/wp-content/uploads/2025/05/Dangote-Cement-FY-2024-Annual-Report-Corporate-Governance.pdf
Dangote Cement Plc. (2025b). Dangote Cement Plc annual report & financial statements 2024. https://cement.dangote.com/wp-content/uploads/2025/03/Dangote-Cement-Full-Year-2024-Account.pdf
Okafor, C. A. (2025). The role of internal audit in enhancing corporate governance practices in the Nigerian manufacturing sector. ResearchGate. https://doi.org/10.13140/RG.2.2.12345.67890