Showing posts with label Internal Audit. Show all posts
Showing posts with label Internal Audit. Show all posts

Friday 31 December 2021

PROBLEM AND PROSPECT OF AUDITING IN GOVERNMENT ORGANIZATIONS

PROBLEM AND PROSPECT OF AUDITING IN GOVERNMENT ORGANIZATIONS

CHAPTER ONE

INTRODUCTION

1.1   Background of the Study

Government organizations have played a greater part in the economic growth of any economy, especially in the Nigerian economy. The contributions they have made so far cannot be overemphasized because their utmost aims of establishment is to provide some vital or essential services to improve the social and economic well being of the people.

These government organizations are mainly being funded either by the federal or state government through their budgetary allocations made to them yearly and they can also obtain loans or overdraft from commercial bank as well as subvention from government. These funds are expected to be utilized effectively and efficiently. But in most practices they are being misappropriated or embezzled by some government officials.

As a result of this mis-appropriation which has characterized most of the government organizations. Honestly and prudently managed. The audit is expect to show whether proper principles of accounts and audit ethics have been adhered to and that financial statements prepared give a true and fair view.

1.2   Statement of the Problem

In any business Organization in which allocation and application of funds serves as a backbone for financial activities to be carried out the following are problems in which are bund to be encountered.

1. Embezzlement of fund by some government Officials

2. Failure to exercise due professional care and the appropriate level of professional skepticism.

3. Over reliance on inquiry as a form of audit evidence

4. Deficiency in confirming accounts receivable

5. Failure to recognize related party transactions and assuming internal control exist when they may not.

These and other factors contribute to problems of auditing in government organization.

1.3   Purpose of the Study

The purpose of studying this topic is to examine the importance, problems and prospects of auditing in government institution.

  • To ascertain the problems encountered while auditing in government establishment.
  • To know if auditors exhibit enough professional competence in conduct of their work.
  • To know how effective auditing is in government establishment

1.4   Research Questions

This research work seeks to ask the following questions among others, deduced from the purpose of the study.

  1. Are auditors being threatened or intimidated during their audit work.
  2. Are auditors being faced with some problems during their audit work.
  3. Are vital documents needed for the audit of the organization being held from the auditors

1.5   Research Hypothesis

Based on the purpose, and research questions the following hypothesis are put forward.

Ho: Financial reports submitted are not in consonance with the transactions carried out by the government establishment

HI: Financial report submitted are in consonance with the transactions carried out by the government establishment.

Ho: Treats and intimidation do not positively affect the quality of auditors work in government establishment.

HI: Treat and intimidation positively affect the quality of auditors work in government establishment.

Ho: Poor professional conducts by auditors do not affect the quality of work done by auditor in government establishment.

HI Poor Professional conduct by auditors affects the quality of work done by auditors in government establishments.

1.6   Significance of the study

Where audit principles and procedures are carried out in government organizations the following benefits are derived of which these work will be beneficial to the following people and establishments:

  1. Government good audit work will prevent, expose fraud, errors and irregularities in government establishment.
  2. Auditors: will benefit by knowing the challenges facing them in their audit work and thereafter the prospects.
  3. Banks; will also benefit because it will give them insight on how to handle audit work successfully.
  4. Students and researchers will benefit by gaining knowledge on the audit challenges to banks and the prospects.

1.7   Scope and limitation of the study

This project would cover arrears such as audit principle(s) and procedures giving as in depth analysis on how audit work is carried out in government organizations.

Attempts have been made by the researcher to discuss in depth the various short comings behind this operational framework of auditing in government organization and also self investigation carried out.

Part of the constraint encountered by the researcher and limitations are as follows.

  1. Cost of carrying out the research
  2. Short duration of time limit dedicated on the project
  3. Distance and financial constraint.
  4. Restriction placed upon by some organization to have access to some vital documents.
  5. Secrecy maintained by some government officials by not revealing certain information which they term as “Keep government secrets secret”.

1.8   Definition of terms

Fraud: Is a mis-presentation of data with the intention to theft which is dishonest act involving the theft of assets and the falsification of accounting records and financial statements (Akpankpan, 2000.126)

Embezzlement: The fraudulent appropriation of property lawfully in one’s custody, (Kohther, 1970:173)

Auditing or Audit: Is concerned with an independent examination of financial statements and accounting records by an independent certified or chartered accountant and expression of an opinion by the public accountant on the financial statements of an organization stating whether the finance; al statements present fairly by the financial position of the firm concerning the period covered by the financial statement.

Auditor: An auditor is the qualified accountant who is professionally licensed to audit or examine financial statements or report of business or non-business organizations.

THE CHALLENGES OF INTERNAL AUDIT FUNCTION IN THE NIGERIAN PUBLIC SECTOR

THE CHALLENGES OF INTERNAL AUDIT FUNCTION IN THE NIGERIAN PUBLIC SECTOR

(A STUDY OF KADUNA STATE MINISTRY OF FINANCE)

ABSTRACT

This research work deals with the challenges of internal audit function in the Nigerian public sector with reference to Kaduna state ministry of finance. The objective of this study has been to evaluate the internal control system in the Nigerian public sectors, to ascertain the non- implementation of routine audit report and the lack of proper segregation and assignment of duties. In recent times, a combination of forces has led to a quiet revolution in the profession. Government moving towards democracy must demonstrate accountability in the use of public money and efficiency in the delivery of service. In many cases internal control system are weak, staffs are poorly paid making them unmotivated, coupled with non-implementation of routine audit report by appropriate authorities. The Responses from staffs were analyzed using relevant statistical tools from which three hypothesis were formulated and tested using Z-test statistics, while questionnaire were analyzed in tabular form using simple percentage. It was discovered that the internal audit is facing a lot of challenges which includes inadequate staffing, lack of independence, lack of facilities to carry out audit function and also poor funding. As a result of some of these challenges the effectiveness of the internal audit in the Nigerian public sectors, has been hindered as well as the organizational change it can bring to its environment. I recommend that for internal audit to be effective, it must be a completely independent group, adequately funded and equipped with qualified internal auditors as well as sufficient opportunities for internal auditors to become qualified.

CHAPTER ONE

INTRODUCTION

1.1     BACKGROUND OF THE STUDY

Internal audit had been defined “as an independent appraisal function established within an organization to examine and evaluate its activities as a service to the organization”. Internal auditing is a process generally adopted towards ensuring and safeguarding of resources and promoting operational efficiency in organizations. The responsibilities for effective internal auditing normally rest on with the internal auditors who in turn rely a great deal on the soundness and effectiveness of internal control system.

The business world is developing so in the complex nature of the organizations. This complexity of modern organizations and hence the management has led to the much broader role at the internal audit. The role of internal audit is fast moving from mere checking of documents and physical duties to analyzing the ability of organization to react to changing circumstances.

Auditing for the public sector is aimed at prevention of mistakes, shortcomings and misdeeds in the public administration. The internal audit has become a good control measures that can foretell all the incidence of fraud and misappropriation of fund in government ministries if properly put in place.

1.2     STATEMENT OF THE PROBLEM

Many business organizations are rapidly assuming complexity resulting to remarkable reliance to internal audit and management as a wider range area of control.  In spite of the existence of internal audit departments in organizations, it is often argued that the rate of fraud and misdeeds is still on the increase, particularly in the public sector. Some people argues that the internal auditors are creating more problems than they are solving, others see it as tools for witch-hunting and therefore sees them as unnecessary evil.

The internal control system in Nigeria public sector may be insufficient based on some predicaments.

  • Lack of proper segregation and proper assignment of duties as well as shortage of qualified staff to carry out internal audit and accounting duties.
  • Lack of implementation of routing audit report by appropriate authorities.
  • Inadequacy of internal control system leading to improper investigation.

The above reasons greatly affect the effectiveness of internal audit in the public sector. This gives the researcher the impetus for undertaking a study on this study with a view coming up with solution of those challenges.

1.3     OBJECTIVES OF THE STUDY

The objective of this research is to examine the challenges of internal audit function in Nigeria public sector organization.

The research project is expected to achieve the following objectives:

  • To ascertain the lack of proper segregation and proper assignment of duties as well as shortages of staffs to carry out audit duties.
  • To ascertain reasons for improper implementation of routine audit report by appropriate authorities.
  • To evaluate the internal control system in the Nigerian public sector.

1.4     RESEARCH QUESTIONS

The following are the various research questions. They are as follows:

1. Are there challenges of internal audit function in the Nigerian public sector?

2. Are the impacts of Nigerian public sectors on the internal audit function?

3. Can public organization do with an internal audit function?

1.5     RESEARCH HYPOTHESES

The following hypotheses were found relevant to the above stated problems and objectives, and thus tested in this study.

Hypothesis i:

HO: The inadequacy of the internal control system in Kaduna state ministry of finances not the motive for the trials of the internal audit.

HI: The inadequacy of the internal control system in Kaduna state ministry of finance is the motive for the trials of the internal audit.

Hypothesis ii:

HO: The lack of proper segregation and assignment of duties as well as shortages of staff to carry out audit duties does not influence the effectiveness of the internal audit.

HI: The lack of proper segregation and assignment of duties as well as shortages of staff to carry out audit duties influences the effectiveness of the internal audit.

Hypothesis iii:

HO: The lack no of implementation of routine audit report by appropriate authorities.

HI: There is lack of implementation of routine audit report by appropriate authorities.

1.6     SIGNIFICANCE OF THE STUDY

The project intended to bring to light the challenges of internal audits department in the Nigerian public sector with a view of coming up with possible ways to overcome such challenges.

The research work will be of vital importance to the government, bringing to light the challenges hampering the efficiency of the internal audit and how these challenges can be tackled.

The research work will also be of significance to the management or head of department of various government ministries and public corporations so as to see the importance of effective internal control system and the discharge of their responsibilities to the internal auditors as a yardstick to improve organizational performance. It is also necessary for the internal auditors to understand their loopholes so that necessary adjustments could be made to enhance their efficiency.

1.7     SCOPE OF THE STUDY

The scope of this research work in the Nigerian public sectors as a whole specifically the internal audit and accounting department, with particular interest in the Kaduna state ministry of finance.

1.8     LIMITATION OF THE STUDY

The limitation to this research work is the lack of adequate information from the senior staff of the ministry considering such information as “Top Secret”. In ability to have access to vital documents in the ministry considering such document as confidential.

1.9     DEFINITION OF TERMS

In every study, there are some terms that are frequently used; also in the course of this study the following terms relating to the subject matter will frequently be used.

FRAUD: This is defined as criminal deception in an act of acquiring other people money kept in one’s possession deceitfully.

INTERNAL AUDIT: A.H. Millichamp defined internal audit as “an independent appraisal function within an organization for the review system of control and quality of performance as a service to the organization”. The objective is to examine, evaluate and report on the adequacy of internal control as a contribution to the proper economic efficient and effective use of resources.

INTERNAL CONTROL: Internal control is the whole system of control, financial and otherwise, established by management in order to carry on with the business to an enterprise in an orderly manner, ensure adherence to management policies, safeguard its asset and secure as far as possible the completeness, accuracy and reliability of books and other records.

INTERNAL CHECK: Internal check is the aggregate of the check and balance imposed on the day to day transactions in an organization where by the work of one person are verified independently by or is complementary to the work of one another.

MINISTRY OF FINANCE: This is a ministry that is responsible for the administration of government finance [public fund].

PUBLIC SECTOR: consist of all organization whose control lies in the hands of the public and whose objective involves the provision of services where profit is not the primary motive.

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