THE IMPORTANCE OF THE INTERNAL AUDITING IN THE GOVERNMENT ESTABLISHMENT AND OTHER ORGANIZATION
TABLE OF CONTENT
Table of content
CHAPTER ONE: GENERAL INTRODUCTION
1.1 Background of the study
1.2 Statement of the problem
1.3 Aims and objective of the study
1.4 Research methodology
1.5 Scope and limitation
1.6 Plan of the study
1.7 Definition of terms
CHAPTER TWO: LITERATURE REVIEW
2.1 The Role of Internal Auditing and Monitoring Policy
2.2 Purpose of Internal Auditing
2.3 Independence and status of internal Audit Department.
2.4 Management role in Internal Auditing
2.5 Relationship with various units in internal Auditor
2.6 Organization of the Department Determining the Internal Auditing Role
CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Brief History of Niger River Basin Development Authority
3.3 Data Collection Instrument
3.4 Method of Data Analysis
CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS
4.1 The Audit Department in Niger River Basin Development Authority. (N.R.B.D.A)
4.2 Control on Receipt and Payment
4.3 Control of Wages and Salaries
4.4 Stores and other record
4.5 Interview with Audit Staff of Nigeria River Basin Development Authority
4.6 Tests of Hypothesis
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATION
CHAPTER ONE: GENERAL INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The fact that early days most business were run by one man. In a one man operation, there is less of an internal control problem because the proprietor is constantly in contact with all phases of the operation, he makes sales, sign cheque, does the buying and pay all taxes in fact he is his own internal auditor.
However, business activities have grown from this stages and with continuously expansion in the business activities, management are faced with more managerial problems. In the past it was possible for the management to maintain control through constant personal contact with the company operation, also contract with the other level of management and ever individual employees. The new problem made it necessary to delegate responsibilities and authority to many levels of supervision with such wide delegation of duties, management had to the control specialist that is the internal Auditor for assistance in maintain surveillance over the managerial control network.
Thus, internal auditing can be define as an independent appraisal activity within an organization for the review of accounting, financial and other operation as a basis for service to management. It is managerial control when functions by measuring and evaluation the effectiveness of other control.
Internal auditing can also be define as a review of operation and records something continuously, undertaken within a business by specially assigned staff with a view to ensure that the system of operation is adhered to, that the internal control is as effective as possible and the economics consistent with efficiency are applied to the business.
The National Industrial Conference Board of Internal auditors give a more detailed definition which also emphasized the management control aspect of internal auditing as follows:
Internal auditing is a series of process and techniques through which an organizations own employees ascertain for the management by means of first hands on – the – job observation whether establishment management controls are adequate and are effectively and promptly and that each division department or other unit is carrying out the plans, policies and procedures for which it responsible.
The widening job between management and action has made it necessary to develop series of control by means of which the organization may be administered efficiency. The internal auditors perfects and complete each of these activities by providing on the science appraised of each form of control. Internal auditing this emerges as a segment of the bound field of accounting utilizing the basic techniques and method of auditing in helping management to attain its objectives. In addition, the internal auditor, being a company man has a more vital interest in all types of company operations and is quite naturally more deeply interested in helping to make these operations as successfully as possible. Thus to a great extent management services come to influence the internal auditors thinking and general approach.
The purpose of any kind of audit to add some degree of validity to the object of the review management policies are carried out more effectively of procedures governed by the policies are subject to constant review. In any presentation of financial information as in the operation of internal control activities. Individuals could be guilty of:
1. Personal bias
2. Self Interest
The principal objective of an audit is to eliminate these four causes of an distortion of the fact.
1.2 STATEMENT OF THE PROBLEM
A brief analysis of some problems faced by some audit staff of the authority are enumerated below:
The major problems of the department is lack of adequate independence. Although this independence is theoretically pronounced but not well practiced. Interference by senior staff of other department, an activity of Junior audit staff affects their ability to perform effectively and this gives room for work control.
Fear of victimization is another major problem faced by most staff of the department where fate of audit staff in such area such as official recognition, training and course a staff determine promotion e.t.c the above mentioned benefits might elude the auditor this might force the auditor to adjust the audit program as well as report and the propose of the audit Jeopardize.
The is also the problem of insufficient equipment such as care to perform effectively. This is on the case where am audit assignment has to be carried out an out station and transport is required and where vehicles are available, requisition for such transport might be deliberate turn down in an attempt to prostrate audit department. Lack of adequate training in the field of auditing is another problems that come to light during the interview. Some audit staff are changed with duties which they don’t know how to perform and such desired result cannot be achieved. Other problems include in ability of management to act promptly as report submitted, lack of adequate management backing, appreciation of achievement in terms of promotion and official recognition etc. With the above mentioned problem effectively performance of internal auditing might be a very difficult goal to achieve.
1.3 AIMS AND OBJECTIVES OF THE STUDY
The main purpose of this project is to give users the basic knowledge of the roles the internal audit department plays in aiding management of limited resources will be required, if the organization objective and policies are to be properly and effectively carried out and implemented, their there is to need for internal audit department in such organization to serve as a watch and the activities and operation of the organization.
The project provide the most important areas where internal auditor of an organization can be of increase help to management in achieving its objectives.
In an organization where the internal auditing department is very effective, most staff of such organization regards the internal auditor as NUISANCE. They often feel the auditors pock noses too much unto their affairs. This might be due to the fact that these staff are ignorance of the roles of internal auditors in the establishment or that the roles, duties and responsibilities of the internal audit department is not well defined or properly communicated by the management top the various sections thereby bringing conflict between internal audit department and other department in the organization.
In this project however, the objectives, roles and duties and significant of the internal audit or development are closely to carry so as to help users appraise the importance of internal audit department in an organization.
The scope of this project is limited to internal auditing in the Niger River Basin Development Authority. The roles of the internal auditing department independence and status of internal auditing etc were enumerated in the write up.
Many internal auditing staff of Niger River Basin Development Authority were interview as regards their duties problem encountered and ways in their problems are been solved. This project also attempt to review the significance of internal auditing and how the department helps management in achieving it goals and objectives.
1.4 SIGNIFICANCE OF THE STUDY
The importance of this kind of write up is in the fact that many people can benefit for using it. Students can make reference to it in order to have a clear understanding of the concept of internal and auditing and its importance to management. The study can also enlighten readers on the roles played by internal auditors for the overall achievement of organization policy and objectives and the important position occupied by internal auditor with organization.
This project will e of help top management on how to have an effective internal auditing department and the existence of independence required by the internal auditors in order to have effective performance, it will also help internal auditor understanding their roles and duties in the organization.
There is need for cooperation between internal audit department and other department in the organization, this cannot be achieve of the other department are not aware of the roles of the internal auditors as partners toward achieving the overall objectives of the organization.
This project tries to define the role or the internal auditors, the purpose and significance and how it helps management in achieving its goals and objectives.
1.5 RESEARCH METHODOLOGY
In this write up, the primary source of data such as interview, questionnaire, etc are employed, similarly, secondary sources of data are also used in the collection of data.
As a result of some limitation of the study, the secondary data were mainly used in this research work.
1.6 SCOPE AND LIMITATION
SCOPE: This study is concentrated on the importance of the internal auditing in the government establishment and other organization. More so, the role of internal auditing in an organization and it is also concentrated on the objective, duties and significance of the internal auditor department that helps users appraise the significance of internal audit department in an organization.
LIMITATION: However, this write up limits itself to the role of internal auditor and the monitory effective management in Niger River Basin Development Authority including the purpose and the independence of internal auditor department, it also covers the historical background of the Niger River Basin Development Authority that is believed to be the choice of the case study of this project.
Due to the constraint, the researcher was unable to source for more information necessary for this project. Another factor is that financial capability that made it impossible for the researcher to search for more materials that would have this project more materials that would have made this project more vital and effective for future reference and as a guide for organization that make use of internal audit.
1.7 PLAN OF THE STUDY
This research work is broadly divided into five main chapter
Chapter one continents the general introduction, background of the stud, aims and objective f the problem, research methodology, as well as the definition of terms.
Chapter two of this research work consist of literature review, purpose of internal auditing, managements role in internal auditing relationship with various unit and also organization of the department determining the internal auditing role.
Chapter three contain research methodology, population, data collection as well as method of data analysis.
Chapter four is basically on the analysis of data and presentation, control on receipt and payments, controls on wages and salaries as well as test of hypothesis.
Chapter five which is the last contains the summary conclusion and recommendation. There is no internal auditors, how does internal auditors help an organization to have an effective management of the resources, what extent can this be achieved.
4. It is also generally believed that it is difficult to entrust human beings with money or money without being properly mentioned. Why do people have the conception am dos the statement true?
Here and other questions are gradually answered ion the course of analyzing the roles of internal auditing and its aids to management in every organization.
1.8 DEFINITIONS OF TERMS
For the purpose of clear and understanding of some terms used in this write up the following terms are defined.
A.I.E: Authority incurred Experience, this is an extract of management, meeting where certain expenditure are approved.
L.P.O: Local Purchase Order, this is used for the purpose into the store. The L.P.O is used to centre actor as supplier when suppliers are to be made. This specified the items needed, the quantity as well as the price of which it s approved.
J.O: Job order, this is used for awarding contractors such as land clearing transportation of items, repairs to re-equipments, printing of stationeries.
C.A.V: Cash Advanced Vouchers; this is used for receiving supplier into the stores any items taken into the store clerk and will issue on SRC. This items supplied are listed in the store received voucher and necessary ledger.
S.I.V: Store Issue Vouchers, this is opposite of the stiore received vouchers it is used for receuiving items from the store after necessary store requisitions form has been filled and dully approved by appropriate office.
T.I.V: Transfer Issue Vouchers: this is used to raise payment for any expenditure to be made in the organization. Relevant document such as L.O.P, J.O, S.R.V, A.J.E, etc are to be attached before such as P.V can be approved.\
CODES: The Niger River Basin Development Authority has various projects scattered over its area of coverage, these project are allocated codes and money to be spent on each of the project are allocated under the codes.
P.A.V.E: Pass As You Earn: this is tax deduction at sources on behalf of the government.
2.1 THE ROLE OF INTERNAL AUDITING
The institute of internal auditor, the professional society of internal auditors have officially set forth the parameter of internal auditing in its statement of responsibilities of the internal auditor.
Definition of internal auditing can be derived from” An independent appraisal activity within an organization for the review of accounting, financial and other operations as a basis of services to management. It is managerial control which function by measuring and evaluating the effectiveness of other control.”
The national industrial conference board of internal auditing business policy study number 111 of 1953, give a more detailed definition which also emphasizes the managerial control aspect of internal auditing as a series of process and techniques through which an organization own employee ascertain for the management by means of first hands on the job observation, whether established management controls are adequate and are effectively maintained recorded and report financial accounting and otherwise reflect actual operations and result accurately and prompt and each division, department or other unit is carrying out the plans, policies and procedures for which it is responsible. According to walter W.B (1993) stated that “ An audit may therefore be said to be such as examination of books and accounts and vouchers of a business as will enable the auditor to report whether he is satisfied that the balance sheet is properly drawn up..