INTERNAL AUDIT EFFICIENCY IN BENUE STATE
INTERNAL AUDIT EFFICIENCY IN
BENUE STATE UNIVERSITY, MAKURDI
ABSTRACT
1
Every organization, be it public or private sector can be
seen as a socio economic entity into which resources are
committed for the purpose of attaining some specified
objectives. It may be business unit, producing goods and
services to a market or governmental agency providing a
number of services to people. The business unit or
governmental organizations needs to be managed in an
effective way, and this is ensured by proper
institutionalized internal audit in the respective units.
Therefore, this research work is premised on the
evaluation of internal audit as a tool for ensuring financial
adequacy in the public sector. The historical development
of auditing in the public sector was critically analyzed,
and the fundamentals of accountancy and auditing for
public sector management.
This research work also reviewed the theoretical
framework of auditing standards and guidelines, the
effectiveness of internal auditing more so, a critical
investigation was conducted on the internal control
system and the internal audit department functions of
the Benue State University, Makurdi Nigeria and it was
revealed that, the audit process does not create delays.
2
TABLE OF CONTENTS
TITLE PAGE
APPROVAL PAGE
DEDICATION
ACKNOWLEDGEMENT
DECLARATION
ABSTRACT
TABLE OF CONTENTS
CHAPTER ONE: INTRODUCTION
1.1
1.2
1.3
1.4
1.5
1.6
BACKGROUND TO THE STUDY
STATEMENT OF THE PROBLEM
OBJECTIVES OF THE STUDY
RESEARCH HYPOTHESES
JUSTIFICATION FOR THE STUDY
STRUCTURE OF THE STUDY
CHAPTER TWO: REVIEW OF RELATED LITERATURES
2.1
CONCEPTUAL FRAMEWORK ON INTERNAL AUDITING
2.1.1
THE EFFECTIVENESS OF INTERNAL AUDITING
3
2.2.1EVIDENCE GATHERING BY AUDITORS
2.1.2
2.3
AUDITING STANDARDS AND GUIDELINES
HISTORICAL DEVELOPMENT OF INTERNAL AUDITING IN THE
NIGERIAN
2.3.1
2.3.2
PUBLIC SECTOR
LEGISLATIVE COMPLIANCE IN THE PUBLIC SECTOR
INTERNAL AUDIT AND INTERNAL AUDITORS
2.4.1
FUNCTIONS AND OBJECTIVES OF INTERNAL AUDIT
2.5
INTERNAL AUDIT DEPARTMENT
2.6
INTERNAL AUDIT AND MANAGEMENT STYLE
CHAPTER THREE: RESEARCH METHODOLOGY
3.1
RESEARCH DESIGN AND METHODOLOGY
3.2
RESTATEMENT OF RESEARCH HYPOTHESES AND
QUESTIONS
3.3
POPULATION AND SAMPLING
3.4
RESEARCH INSTRUMENT AND TECHNIQUE
CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS
4
4.1
INTRODUCTION
4.2
ANALYSIS OF QUESTIONNAIRE
4.3
TEST OF HYPOTHESES
CHAPTER FIVE: SUMMARY, CONCLUSION AND
RECOMMENDATIONS
5.1
SUMMARY OF FINDINGS
5.2
CONCLUSION
5.3
RECOMMENDATIONS
5.4
LIMITATIONS OF THE STUDY
5.5
SUGGESTED AREA FOR FURTHER RESEARCH
BIBLIOGRAPHY
APPENDIX
CHAPTER ONE
5
INTRODUCTION
1.1
BACKGROUND TO THE STUDY
Over the years, there have been persistent comments in the
Nigerian press and electronic media about brazen acts of
misappropriation, fraud and embezzlement of public funds in the
public sector organizations.
According to Olowokere (2001), “improper recording of
accounts have accounted for the spate of irregularities and some
acts usually perpetrated by staffs and management”. By way of
solving these occurring problems, in April 2010, the Benue State
Government probed Local Government chairmen on how funds
from the Federation’s excess crude account were expended. Upon
discoveries, about 10 Local Government chairmen were arrested
by the economic and financial crimes commission, EFCC for
allegedly misappropriating over #900 million excess crude oil
fund allocated to the various Local Government councils (Sunday
Trust April 18, 2010).
In any organization which is funded by any of the three tiers
of
government
namely,
Federal,
6
State
and
Local,
such
organizations known as public sector organizations engage in
business activities that are not profit oriented but rather service
oriented. They provide basic amenities like good education,
health care facilities, good roads, electricity, and water etc, for
the benefit and usage of the public.
There is therefore need for a sound internal control system,
internal audit and even a statutory audit to be entrenched in
Public organization for proper, fair and judicious use of the funds
that are allocated to them.
In the light of the above, efforts have been made by the
researcher to look at the various arguments and the statutory
provisions for the manner in which internal audit should be carried
out in the public sector.
Accordingly, the institute of chartered accountants publication
statement on
auditing covering the subject of internal
control defines it as;
“Not only internal
check and audit, but the whole
systems of controls, financial and otherwise,
established by management in order to carry on
7
the business of the enterprise in an
orderly and
efficient manner, ensure
adherence to management
policy,
safeguard its assets and secure as much
as possible the accuracy, reliability, and completeness
of records.”
Furthermore, the Institute of Internal Auditors (IIA) defines
internal audit as “an independent, objective assurance and
consulting activity designed to add value and improve an
organizations’ operations’’. It went further to establish its
objective functions among other things to include, examining,
evaluating, and monitoring the adequacy and effectiveness of
internal control.
Hence, internal auditing as a process can thus be seen as a
review of the accounting and internal control system of the
enterprise in order to highlight weaknesses to management to
enable corrections to be made.
However, it is important to state here that the primary aim of
internal audit is not to detect frauds, errors or mismanagement
8
when examining the records of the organization but rather, if in
the process of examining the records, the auditor detects any
fraud or financial irregularities, it is his duty to report to
management.
Statutory audit as defined by Awe (2002) “is a process
whereby
the
accounts
of
both
public
and
private
sector
organizations, charitable, trustees and professional firms are
subjected to scrutiny in such detail as will enable the auditor form
an opinion as to their accuracy, truthfulness and fairness”.
Historically,
according
to
Stantocki,
(1979:5),
“internal
auditing has its root over 200 years ago in the first division of
interest between those engaged in business undertaking (the
entrepreneurs) and those who supplied the finance without
necessarily engaging in the day to day management of the
business.
1.2
STATEMENT OF THE PROBLEM
9
One of the major challenges that confront evaluating internal
audits efficiency in public organizations ranges from the low level
of internal check, internal control, and internal audit which gives
rise to cases or irregularities.
Furthermore, the absence of internal audit teams in the
private sector have often times given rise to difficult design and
analysis because relevant data and information is not often made
available.
However, there appears to be little or no control internally
especially in the public sector organizations, according to Osakwe
and Godwin (2001), the poor evaluation confronting internal
audits both in the public and private sector is often birthed by non
preparation of financial statements that can be scrutinized by
both internal and external auditors respectively.
The above gave rise to the following questions which this
research aims to answer.
i.
What are the major causes of the challenges experienced in
evaluating audit efficiency?
10
ii.
What are the combined negative effects of quack and
iii.
unskilled auditors and how do they affect the audit report?
Have there been delays in receiving feedback as a result of
audit processes?
1.3
OBJECTIVES OF THE STUDY
The general objective of this research work is to appraise the
efficiency of audit performance in Benue State University,
Makurdi.
The specific objectives of the study are;
a.
To ascertain whether there have been delays in receiving
feedback as a result of audit processes
b. To examine the internal control tools and techniques
which are employed to prepare audit report.
1.4
RESEARCH HYPOTHESES
In this research work, investigations were carried out to test
the validity of the following hypotheses.
11
HYPOTHESIS I
Ho1: The audit process does not create delays in activities
HYPOTHESIS II
Ho2: The staff of the audit unit has not been efficient in rendering
their services
1.5
JUSTIFICATION FOR THE STUDY
The need for the study arises as a result of the fact that, it is
the general belief especially during this political era that the
public sector organizations are organizations where individuals
can enrich themselves with public funds. In this regard, there is
always the flouting of internal control systems, one of which is the
pre-auditing of voucher before payment is made and the
recklessness with which public funds are disbursed without regard
to constitutionally laid down rules and regulations in these public
sectors. Osakwe and Godwin (2001)
Some studies have been carried out on auditing; among
which are Adekunle (1997) who wrote on “internal audit as a
12
management tool”. Habiru (2001) wrote on “internal audit on
profit oriented organizations”, while Keffi (1996) wrote on
“internal audit procedures in the banking industry”. This study
however, will place emphasis on internal audit in the public sector
and its relevance in these public sectors.
Therefore, this study will reveal that internal audit can
i.
ii.
Ensure prudence in effective use of public funds.
Curb financial malpractices through the system of
iii.
effective internal control system.
Generate more good by paying continuous attention to
the in service training of members of the internal audit
department.
1.6
STRUCTURE OF THE STUDY
The research work is organized into five chapters, chapter
one covers the background to the study, chapter two reviewed
relevant and related literatures on the subject under study,
chapter three is the research design and methodology, chapter
13
four covers data presentation, analysis and discussion of result
obtained
and
chapter
five
covers
the
summary,
findings,
conclusions, recommendations, limitations of the study, and
suggestions for further research.
PLEASE, print the following instructions and
information if you will like to order/buy our
complete written material(s).
HOW TO RECEIVE PROJECT MATERIAL(S)
After paying the appropriate amount (#2500) into our bank Account below,
send the following information to 08030765706,07056062983:
(1)Your project topics
(2) Email Address
(3) Payment Name
(4)Teller Number
We will send your material(s) immediately we receive bank alert
BANK ACCOUNTS
MAIN BANK ACCOUNT
Account Name: LAZARUS KUSA.
Account Number: 6170847439
Bank: Fidelity bank.
HOW TO IDENTIFY SCAM/FRAUD
As a result of fraud in Nigeria, people don’t believe there
are good online businesses in Nigeria.
But on this site, we have provided “table of
content and chapter one” of all our project topics
14
and materials in order to convince you that we
have the complete materials.
Secondly, we have provided our Bank Account on this
site. Our Bank Account contains all information about the
owner of this website. For your own security, all payment
should be made in the bank.
No Fraudulent company uses Bank Account as a means of
payment, because Bank Account contains the overall
information of the owner.
CAUTION/WARNING
Please, DO NOT COPY any of our materials on this website WORD-TOWORD. These materials are to assist, direct you during your project. Study
the materials carefully and use the information in them to develop your own
new copy. Copying these materials word-to-word is CHEATING/ ILLEGAL
because it affects Educational standard, and we will not be held
responsible for it. If you must copy word-to-word please do not order/buy.
That you ordered this material shows you have agreed not to copy word-toword.
15
BENUE STATE UNIVERSITY, MAKURDI
ABSTRACT
1
Every organization, be it public or private sector can be
seen as a socio economic entity into which resources are
committed for the purpose of attaining some specified
objectives. It may be business unit, producing goods and
services to a market or governmental agency providing a
number of services to people. The business unit or
governmental organizations needs to be managed in an
effective way, and this is ensured by proper
institutionalized internal audit in the respective units.
Therefore, this research work is premised on the
evaluation of internal audit as a tool for ensuring financial
adequacy in the public sector. The historical development
of auditing in the public sector was critically analyzed,
and the fundamentals of accountancy and auditing for
public sector management.
This research work also reviewed the theoretical
framework of auditing standards and guidelines, the
effectiveness of internal auditing more so, a critical
investigation was conducted on the internal control
system and the internal audit department functions of
the Benue State University, Makurdi Nigeria and it was
revealed that, the audit process does not create delays.
2
TABLE OF CONTENTS
TITLE PAGE
APPROVAL PAGE
DEDICATION
ACKNOWLEDGEMENT
DECLARATION
ABSTRACT
TABLE OF CONTENTS
CHAPTER ONE: INTRODUCTION
1.1
1.2
1.3
1.4
1.5
1.6
BACKGROUND TO THE STUDY
STATEMENT OF THE PROBLEM
OBJECTIVES OF THE STUDY
RESEARCH HYPOTHESES
JUSTIFICATION FOR THE STUDY
STRUCTURE OF THE STUDY
CHAPTER TWO: REVIEW OF RELATED LITERATURES
2.1
CONCEPTUAL FRAMEWORK ON INTERNAL AUDITING
2.1.1
THE EFFECTIVENESS OF INTERNAL AUDITING
3
2.2.1EVIDENCE GATHERING BY AUDITORS
2.1.2
2.3
AUDITING STANDARDS AND GUIDELINES
HISTORICAL DEVELOPMENT OF INTERNAL AUDITING IN THE
NIGERIAN
2.3.1
2.3.2
PUBLIC SECTOR
LEGISLATIVE COMPLIANCE IN THE PUBLIC SECTOR
INTERNAL AUDIT AND INTERNAL AUDITORS
2.4.1
FUNCTIONS AND OBJECTIVES OF INTERNAL AUDIT
2.5
INTERNAL AUDIT DEPARTMENT
2.6
INTERNAL AUDIT AND MANAGEMENT STYLE
CHAPTER THREE: RESEARCH METHODOLOGY
3.1
RESEARCH DESIGN AND METHODOLOGY
3.2
RESTATEMENT OF RESEARCH HYPOTHESES AND
QUESTIONS
3.3
POPULATION AND SAMPLING
3.4
RESEARCH INSTRUMENT AND TECHNIQUE
CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS
4
4.1
INTRODUCTION
4.2
ANALYSIS OF QUESTIONNAIRE
4.3
TEST OF HYPOTHESES
CHAPTER FIVE: SUMMARY, CONCLUSION AND
RECOMMENDATIONS
5.1
SUMMARY OF FINDINGS
5.2
CONCLUSION
5.3
RECOMMENDATIONS
5.4
LIMITATIONS OF THE STUDY
5.5
SUGGESTED AREA FOR FURTHER RESEARCH
BIBLIOGRAPHY
APPENDIX
CHAPTER ONE
5
INTRODUCTION
1.1
BACKGROUND TO THE STUDY
Over the years, there have been persistent comments in the
Nigerian press and electronic media about brazen acts of
misappropriation, fraud and embezzlement of public funds in the
public sector organizations.
According to Olowokere (2001), “improper recording of
accounts have accounted for the spate of irregularities and some
acts usually perpetrated by staffs and management”. By way of
solving these occurring problems, in April 2010, the Benue State
Government probed Local Government chairmen on how funds
from the Federation’s excess crude account were expended. Upon
discoveries, about 10 Local Government chairmen were arrested
by the economic and financial crimes commission, EFCC for
allegedly misappropriating over #900 million excess crude oil
fund allocated to the various Local Government councils (Sunday
Trust April 18, 2010).
In any organization which is funded by any of the three tiers
of
government
namely,
Federal,
6
State
and
Local,
such
organizations known as public sector organizations engage in
business activities that are not profit oriented but rather service
oriented. They provide basic amenities like good education,
health care facilities, good roads, electricity, and water etc, for
the benefit and usage of the public.
There is therefore need for a sound internal control system,
internal audit and even a statutory audit to be entrenched in
Public organization for proper, fair and judicious use of the funds
that are allocated to them.
In the light of the above, efforts have been made by the
researcher to look at the various arguments and the statutory
provisions for the manner in which internal audit should be carried
out in the public sector.
Accordingly, the institute of chartered accountants publication
statement on
auditing covering the subject of internal
control defines it as;
“Not only internal
check and audit, but the whole
systems of controls, financial and otherwise,
established by management in order to carry on
7
the business of the enterprise in an
orderly and
efficient manner, ensure
adherence to management
policy,
safeguard its assets and secure as much
as possible the accuracy, reliability, and completeness
of records.”
Furthermore, the Institute of Internal Auditors (IIA) defines
internal audit as “an independent, objective assurance and
consulting activity designed to add value and improve an
organizations’ operations’’. It went further to establish its
objective functions among other things to include, examining,
evaluating, and monitoring the adequacy and effectiveness of
internal control.
Hence, internal auditing as a process can thus be seen as a
review of the accounting and internal control system of the
enterprise in order to highlight weaknesses to management to
enable corrections to be made.
However, it is important to state here that the primary aim of
internal audit is not to detect frauds, errors or mismanagement
8
when examining the records of the organization but rather, if in
the process of examining the records, the auditor detects any
fraud or financial irregularities, it is his duty to report to
management.
Statutory audit as defined by Awe (2002) “is a process
whereby
the
accounts
of
both
public
and
private
sector
organizations, charitable, trustees and professional firms are
subjected to scrutiny in such detail as will enable the auditor form
an opinion as to their accuracy, truthfulness and fairness”.
Historically,
according
to
Stantocki,
(1979:5),
“internal
auditing has its root over 200 years ago in the first division of
interest between those engaged in business undertaking (the
entrepreneurs) and those who supplied the finance without
necessarily engaging in the day to day management of the
business.
1.2
STATEMENT OF THE PROBLEM
9
One of the major challenges that confront evaluating internal
audits efficiency in public organizations ranges from the low level
of internal check, internal control, and internal audit which gives
rise to cases or irregularities.
Furthermore, the absence of internal audit teams in the
private sector have often times given rise to difficult design and
analysis because relevant data and information is not often made
available.
However, there appears to be little or no control internally
especially in the public sector organizations, according to Osakwe
and Godwin (2001), the poor evaluation confronting internal
audits both in the public and private sector is often birthed by non
preparation of financial statements that can be scrutinized by
both internal and external auditors respectively.
The above gave rise to the following questions which this
research aims to answer.
i.
What are the major causes of the challenges experienced in
evaluating audit efficiency?
10
ii.
What are the combined negative effects of quack and
iii.
unskilled auditors and how do they affect the audit report?
Have there been delays in receiving feedback as a result of
audit processes?
1.3
OBJECTIVES OF THE STUDY
The general objective of this research work is to appraise the
efficiency of audit performance in Benue State University,
Makurdi.
The specific objectives of the study are;
a.
To ascertain whether there have been delays in receiving
feedback as a result of audit processes
b. To examine the internal control tools and techniques
which are employed to prepare audit report.
1.4
RESEARCH HYPOTHESES
In this research work, investigations were carried out to test
the validity of the following hypotheses.
11
HYPOTHESIS I
Ho1: The audit process does not create delays in activities
HYPOTHESIS II
Ho2: The staff of the audit unit has not been efficient in rendering
their services
1.5
JUSTIFICATION FOR THE STUDY
The need for the study arises as a result of the fact that, it is
the general belief especially during this political era that the
public sector organizations are organizations where individuals
can enrich themselves with public funds. In this regard, there is
always the flouting of internal control systems, one of which is the
pre-auditing of voucher before payment is made and the
recklessness with which public funds are disbursed without regard
to constitutionally laid down rules and regulations in these public
sectors. Osakwe and Godwin (2001)
Some studies have been carried out on auditing; among
which are Adekunle (1997) who wrote on “internal audit as a
12
management tool”. Habiru (2001) wrote on “internal audit on
profit oriented organizations”, while Keffi (1996) wrote on
“internal audit procedures in the banking industry”. This study
however, will place emphasis on internal audit in the public sector
and its relevance in these public sectors.
Therefore, this study will reveal that internal audit can
i.
ii.
Ensure prudence in effective use of public funds.
Curb financial malpractices through the system of
iii.
effective internal control system.
Generate more good by paying continuous attention to
the in service training of members of the internal audit
department.
1.6
STRUCTURE OF THE STUDY
The research work is organized into five chapters, chapter
one covers the background to the study, chapter two reviewed
relevant and related literatures on the subject under study,
chapter three is the research design and methodology, chapter
13
four covers data presentation, analysis and discussion of result
obtained
and
chapter
five
covers
the
summary,
findings,
conclusions, recommendations, limitations of the study, and
suggestions for further research.
PLEASE, print the following instructions and
information if you will like to order/buy our
complete written material(s).
HOW TO RECEIVE PROJECT MATERIAL(S)
After paying the appropriate amount (#2500) into our bank Account below,
send the following information to 08030765706,07056062983:
(1)Your project topics
(2) Email Address
(3) Payment Name
(4)Teller Number
We will send your material(s) immediately we receive bank alert
BANK ACCOUNTS
MAIN BANK ACCOUNT
Account Name: LAZARUS KUSA.
Account Number: 6170847439
Bank: Fidelity bank.
HOW TO IDENTIFY SCAM/FRAUD
As a result of fraud in Nigeria, people don’t believe there
are good online businesses in Nigeria.
But on this site, we have provided “table of
content and chapter one” of all our project topics
14
and materials in order to convince you that we
have the complete materials.
Secondly, we have provided our Bank Account on this
site. Our Bank Account contains all information about the
owner of this website. For your own security, all payment
should be made in the bank.
No Fraudulent company uses Bank Account as a means of
payment, because Bank Account contains the overall
information of the owner.
CAUTION/WARNING
Please, DO NOT COPY any of our materials on this website WORD-TOWORD. These materials are to assist, direct you during your project. Study
the materials carefully and use the information in them to develop your own
new copy. Copying these materials word-to-word is CHEATING/ ILLEGAL
because it affects Educational standard, and we will not be held
responsible for it. If you must copy word-to-word please do not order/buy.
That you ordered this material shows you have agreed not to copy word-toword.
15