Auditing As An Aid To Accountability In The Public Sectors (A Case Study Of Federal Ministry Of Finance And Economic Development)

Project and Seminar Material for Accountancy / Accounting

Auditing As An Aid To Accountability In The Public Sectors (A Case Study Of Federal Ministry Of Finance And Economic Development)


Abstract


This study was carried out on auditing as an aid to accountability in the public sectors using federal ministry of finance and economic development, Abuja as a case study. The survey design was adopted and the simple random sampling techniques were employed in this study. The population size comprised of staff of selected departments of Federal Ministry Of Finance and Economic Development, Abuja. In determining the sample size, the researcher purposefully selected 59 respondents and 50 validated. Self-constructed and validated questionnaire was used for data collection. The collected and validated questionnaires were analyzed using frequency tables. The result of the findings reveals that auditing is an effective tool for accountability in the public sector. The study also revealed that auditing is very effective in presenting true and fair reports in public sector. In the light of the findings, this study recommends that there should be legal mandate in the public to carry out regular performance audit of their activities and programs to ensure proper accountability of resources given to them; appropriate policy measures should be designed by government commission to mandate compulsory implementation of audit and control system at all government agencies. Internal control system should be addressed with strong compliance of ethical conduct, therefore, any breach of this ethical conduct should be appropriately penalized. To mention but a few.


Chapter One


Introduction

1.1 Background of the Study

This is now a national issue. The increasing incidence of fraud and misappropriation of funds and property by Accounting officers and chief executive in the public sector of the Nigeria economy pose pertinent question as to whether auditing plays any significant role towards ensuring proper accountability and judicious use of fund set aside for various purposes and corporate objectives (Ejerel, 2012).

Some programmers and activities organized by these individuals are assumed to be done on behalf of the people therefore deserted to be assured the resources which they put at the disposal of these accounting officers are efficiently, effectively and economically managed, since it is known, that not all of us are judicious in the in the management of our private affairs and much less, the public affairs entrusted to us (Halachmi, 2002) A case in point is about distressed banks like continental marchant bank and Nigeria marchant bank. Poor management was the problem with these banks, if these banks hard carried out proper audit and made use of the recommendation, the directors would have reduced proper accounts of their deeds (Mulgan, 2000).

Accountability has clearly manifested itself as a principle to be pursued if the status quo is not to be perpetrated. Several past leader have pledged to introduce a more responsible system of government with accountability but their subsequent conduct or governance have show that they have little or no understanding of the definition and application of accountability, hence the question of what then is accountability arises(Obazee, 2006).

Accountability as it is contained in long man dictionary of contemporary English is the condition or quality of being able (that is having) to give an explanation for ones actions. Accountability is also defined as the management of funds and other assets of which individuals or institutions had been custodians (Chai, 2009).

Auditing is regarded as one of the more recently established professions born out of the complexity of modern business world. It became relevant so as to discourage men from erring and to expose those who erred when they give account of how they managed the funds and property entrusted to them. This account or report is usually done by means of financial statement in order to verify the true and fairness of this report, an independent person- an auditor will audits the account (Okafor, 2011).

An audit is an investigation by an auditor into the evidence form which the final revenue accounts and balance sheet or other statements of an organization have been prepared in order to ascertain that they present true and fair view of the summarized transactions for the organization at the end date, so enabling the auditor to report thereon.

There are more involved definitions such as; that issued by the consultancy council of accountancy of accountancy bodies (CCAB), which defined an audit as the independent examination of and expression of opinion. On the financial statements of an enterprise by an appointed author in pursuance of that appointment and incompliance with any relevant statutory obligations(Okaro, 2011).The law also makes provisions for the establishment of audit department as seen from the above definition, SEC 357 of companies and allied matters act auditors that will audit the financial statement of the company at the annual general meeting.

The question now is that in spite of all these provisions and safeguards one still experience the alarming rate of fraud and misappropriation of public funds and property by those entrusted with their safe guards. It is not surprising that great emphasis is being laid on proper auditing as means to enhance accountability in the public sector of the nations.


1.2 Statement of the Problem

There has been an out-cry of poor accountability in the public sector of Nigeria. The effectiveness of an independent audit is not however limited to the added statement of creditability derived from the audit itself (Halachmi, 2000). There is the statutory effect of the prospective audit on employer who may be tempted to defraud their employers and or management that may find it expedient to endeavour to deceive third party users by preparation of misleading financial statements (Obazee, 2006).

The problem is that the funds and property of the organizations are entrusted to certain individual workers in the organization and in most cases; these individual employees are not brought under through surveillance (Obazee, 2006). The result is that most of the funds and for property are distorted to personal use. Another Problem is the identification of the reasons for this ugly situation and why despite the fact that the accounts of these public organizations are said to be audited, there’s still an increase in fraud and misappropriation of fund and property.


1.3 Objectives of the Study

The overall aim of this study is to critically examine auditing as an aid to accountability in the public sectors. Hence, the study will be channeled to the following specific objectives;

  1. Find out whether auditing is an effective tool for accountability in the public sector.
  2. Determine the effectiveness of auditing in presenting true and fair reports in public sector.
  3. Determine whether auditing practices in public sectors are inline with the standards of auditing.
  4. Ascertain whether auditing has helped minimize misappropriation, embezzlement, and defalcation of fund in public sector.
  5. Ascertain whether statutory effect of top officials influences the effectiveness and independence of auditors in public sector.

1.4 Research Questions

The study will be guided by the following questions;

  1. Is auditing an effective tool for accountability in the public sector?
  2. To what extent is auditing effective in presenting true and fair reports in public sector?
  3. Are auditing practices in public sector in compliance with the standards of auditing in Nigeria?
  4. Has auditing helped to minimize misappropriation, embezzlement, and defalcation of fund in public sector?
  5. Does the statutory effect of top officials influence the effectiveness and independence of auditors in public sector?

1.5 Significance of the Study

The growing nature of Nigerian society and the complexity of government operations have today give birth to frequent loss of public fund. This losses compelled government to set up a good number of tribunals and special investigation panels (SIP) to carryout findings on the causes of such loss of public fund. The important of this research will be of a great aid to find permanent solutions to the problem in audit practices and programmes.

The solutions will increase the effectiveness and efficiency of audit in the public sector. This research work will in addition highlight the functions and roles of auditing in our society and particularly to the auditor’s in the ministry.
More so, the concept of compliance and efficiency were properly examined to guide the auditors during audit investigations and practices.

The research study will in-addition appraise the usefulness of establishing internal audit department in various ministries and parastatals. It will also enable the directing boards and various heads of establishments make provision for adequate and regular payments of staff salaries and remunerations. The management of both public and private sectors were equipped with the usefulness need to establishing adequate internal checks that will certify the efficiency and effectiveness of their internal control system so as to ensure auditing as an aid to accountability.


1.6 Scope of the Study

This study is structured to generally examine auditing as an aid to accountability in the public sectors. However, the study will further find out whether auditing is an effective tool for accountability in the public sector, determine the effectiveness of auditing in presenting true and fair reports in public sector, determine whether auditing practices in public sectors are inline with the standards of auditing, ascertain whether auditing has helped minimize misappropriation, embezzlement, and defalcation of fund in public sector, and ascertain whether statutory effect of top officials influences the effectiveness and independence of auditors in public sector.

The respondents for this study will be obtained from the Office of the Accountant General (OAG), Internal Audit (IA), and Financial Intelligence Agency (FIA) in Federal Ministry Of Finance and Economic Development, Abuja.


1.7 Limitation of the Study

Like in every human endeavour, the researcher encountered slight constraints while carrying out the study. Insufficient funds tend to impede the efficiency of the researcher in sourcing for the relevant materials, literature, or information and in the process of data collection, which is why the researcher resorted to a limited choice of sample size. More so, the researcher simultaneously engaged in this study with other academic work. As a result, the amount of time spent on research will be reduced.

Moreover, the case study method utilized in the study posed some challenges to the investigator including the possibility of biases and poor judgment of issues. However, the investigator relied on respect for the general principles of procedures, justice, fairness, objectivity in observation and recording, and weighing of evidence to overcome the challenges.


1.8 Definition of Terms

Accounting:

Accounting is the process of recording financial transactions pertaining to a business. The accounting process includes summarizing, analyzing and reporting these transactions to oversight agencies, regulators and tax collection entities. The financial statements used in accounting are a concise summary of financial transactions over an accounting period, summarizing a company’s operations, financial position and cash flows.

Auditing:

Auditing typically refers to financial statement audits or an objective examination and evaluation of a company’s financial statements – usually performed by an external third party

Accountability:

Accountability is essential for an organization and for a society. Without it, it is difficult to get people to assume ownership of their own actions because they believe they will not face any consequences

Public Sector:

Public sector includes government ownership or control rather than mere function and thereby includes, for example, the exercise of public authority or the implementation of public policy.


Chapter Five


Summary, Conclusions and Recommendations

5.1 Introduction

This chapter summarizes the findings on auditing as an aid to accountability in the public sectors using federal ministry of finance and economic development, Abuja as a case study. The chapter consists of summary of the study, conclusions, and recommendations.


5.2 Summary of the Study

In this study, our focus was on auditing as an aid to accountability in the public sectors using federal ministry of finance and economic development, Abuja as a case study. The study is was specifically set to find out whether auditing is an effective tool for accountability in the public sector, determine the effectiveness of auditing in presenting true and fair reports in public sector, determine whether auditing practices in public sectors are inline with the standards of auditing, ascertain whether auditing has helped minimize misappropriation, embezzlement, and defalcation of fund in public sector, and ascertain whether statutory effect of top officials influences the effectiveness and independence of auditors in public sector.

The study adopted the survey research design and randomly enrolled participants in the study. A total of 50 responses were validated from the enrolled participants where all respondent are staff of selected departments of Federal Ministry Of Finance and Economic Development, Abuja.


5.3 Conclusions

In the light of the analysis carried out, the following conclusions were drawn.

  1. Auditing is an effective tool for accountability in the public sector.
  2. Auditing is very effective in presenting true and fair reports in public sector.
  3. Auditing practices in public sectors are in compliance with the standards of auditing.
  4. Auditing has helped to minimize misappropriation, embezzlement, and defalcation of fund in public sector.
  5. Statutory effect of top officials influences the effectiveness and independence of auditors in public sector.

5.3 Recommendation

With respect to the findings and the aim of this study, the researchers therefore recommend that;

  1. There should be legal mandate in the public to carry out regular performance audit of their activities and programs to ensure proper accountability of resources given to them.
  2. Government authority should increase their effort to ensure proper and highly effective internal auditing and control system are in place within the parastatals of government to enhance financial accountability.
  3. Appropriate policy measures should be designed by government commission to mandate compulsory implementation of audit and control system at all government agencies. Internal control system should be addressed with strong compliance of ethical conduct, therefore, any breach of this ethical conduct should be appropriately penalized.
  4. For the audit findings to be useful, the government should follow-up on the audit disclosures. For this to occur the policy makers need to ensure that the public sector has established bureaucratic structures which are managed in such a way that they ‘enable’ the accountee to hold the accountor to account.
  5. The accountor-accountee relationship also be extended beyond the reporting stage to be effective. A lack of firmly established political bureaucratic structures have weakened the Auditor-General’s ability to perform his role as an overseer of public funds and will probably continue to do so unless actions are taken by the government.

Auditing As An Aid To Accountability In The Public Sectors (A Case Study Of Federal Ministry Of Finance And Economic Development)


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