Challenges Of Internal Audit In Public Sector

Project and Seminar Material for Accountancy / Accounting

Challenges Of Internal Audit In Public Sector


Abstract


The research work was conducted on the challenges of internal audit in public sector with particular reference to ministry of finance, Kaduna as a case study. The project also reviews the literature relating to the project topic, it discussed the objectives, characteristics, and the area of cooperation between the external and internal auditor. Also existing documents were also used together with a designed questionnaire to perform a thorough examination and investigation of the challenges. It also discussed about the presentation and data analysis, which cover areas of importance and problem of internal auditor of Kadunea state Ministry of Finance. The research reveals the procedure employed in gathering of data for designing this project, that is, the method of data collection, sample and sample size solution, data analysis techniques. The study also discusses the presentation of the data, which covers areas of significance and problems of the internal audit of the government. The results of the research work show that internal audit if properly utilized can dictate the reasons for poor performance and provide guidance on future preventive and corrective action.


Chapter One


1.0 Introduction

1.1 Brief Overview of the Subject Of Study

It is generally agreed that finance is the main stay of any economy, be it public or private sector. It is equally true that no meaningful development could be achieved without finance and proper management, as a result of this, many organizations establishes difference systems of control or ensure smooth running of their business of which internal auditing is an integral part.

Basically, internal auditing ensures that all activities of the organization are carried out by employees according to laid down procedures.

The introduction of new technologies e.g. the invention of computerized audit system which posed challenges to the internal audit staff and their work, the update of their knowledge to meet with these challenges in the face of manipulation of these to perpetrate fraud is desirable. Moreso, the requirement of new auditing standards will make the staff of internal audit to update their knowledge and adjust to the current practice.

Auditing as a key factor in controlling every kind of organization with financial and economic aspect serves as a sort of checks and balances in the financial and administrative procedure of any organizational setup. Apart from explaining the concept of auditing and it’s operations, emphasized is laid on the problem areas in the account of governance, accounts maintained by the government and procedures involved in auditing government accounts.

The need for maintaining and adequate, effective and efficient internal audit system, therefore cannot be over emphasized especially in days like these when Nigeria economy is with effort in ensuring that wastage, pilferage, misappropriation and checked or avoided and to ensure that asset are being secured.


1.2 Statement of the Problem

Often management of public sector and internal audit department function are seen as contradictory rather then complementary.

Internal audit department which is set up to ensure adherence to management policy may not achieve their main objective because of interference and undue influence by top management.

That the internal audit adequately equipped with.

That better and well-trained professional should be employed for efficiency and effectiveness.


1.3 Objective of the Study

  1. To identify the problems in internal audit department of public sectors.
  2. Finding ways of improving on the internal audit of public sector.
  3. To explain the meaning and significance of internal audit as an aid to public sector.
  4. Assist other researcher to obtain useful information that will serve as input for further research work.

1.4 Research of Hypothesis

Considering the problem definition of this study and it’s objectives. The following hypothesis are developed to be tested in this project.

  • Hi: Internal audit is of importance to aid management of public sector performances.
  • Ho: Internal audit is not importance to aid management of public sector performances.

1.5 Research Questions

The following research questions are used as a guide to collect information.

  1. How is the account of state ministry being audited?
  2. What are the procedures involved in caring out audit of the state ministry?
  3. What are the problems being encountered by the auditors in auditory state ministry?
  4. Is there any laws binding the auditing of account of the state ministry?

1.6 Significance of the Study

The significance of this study is to enable the researcher to know:

  1. If internal audit within an organization is effective for internal control system.
  2. Whether internal audit in public sector organization complies with sector management policies, law and regulation.
  3. If internal audit in public sector organization will help to defect minimization fraud in an organization (State Ministry).
  4. Some procedures, techniques add principles involve in auditor government parastatals.

1.7 Definition of Terms

In the course of writing this project, there are some technical terms used that needs to be understood very well before a project can have a good meaning to the reader, these terms include the followings:

Audit:

Is the independent examination of the financial statement of an enterprise and the expression of an opinion of such financial statement by an appointed auditors as to whether it shows true and fair view of the state of affairs of the enterprises in accordance with the terms of his agreement, the observation of statutory regulation and professional requirement.

Audit Report:

Generally refers to any written report by an auditor in accordance with the term of his appointment. It is an medium through which are auditor expresses his opinion.

Internal Control System:

A system within an organization designed to provide reasonable checks regarding the achievement of the organizational objective.

Irregularity:

Is the intentional distortion of financial records and report for what ever purpose.

Fraud:

The use of deception to obtain an unjust or illegal financial advantage.

Error:

Unintentional misstatement in or omissions of amounts or disclosures from an entity’s accounting records or financial statements.

Illegal Acts:

Refers to any act that is contrary to law.

Public Sector:

Is all organization, which are established, being operated and controlled by the government on behalf of the public.


Chapter Five


Summary, Conclusion and Recommendations

5.1 Summary

The research work was conducted on the challenges of internal audit in public sector with particular reference to ministry of finance, Kaduna as a case study.

However, the system of internal auditory in the Kaduna Ministry of finance, treasury department can be said to be a developing one considering the state itself, there is a lot of technological advancement that need to be absorbed in order to make internal audit suitable for the present day.

The project also reviews the literature relating to the project topic, it discussed the objectives, characteristics, and the area of cooperation between the external and internal auditor. It examines the research methodology, that is the method of data collection, sample and sample size solution, data analysis techniques.

It also discussed about the presentation and data analysis, which cover areas of importance and problem of internal audit of Kaduna state ministry of finance, Kaduna.


5.2 Conclusion

It should be understood that the extent to which the internal auditor can perform his duty effectively is where there is sound internal control system; the finding in chapter four of this research work reveals failure to strongly establishes these systems will render to a large extent duty of the internal auditor worthless.

The public sector auditor (statutory audit), is formulated from the principle of accountability and transparency demand from the people who have been entrusted with public fund in other to improve public accountability and service deliverance, through finance and performance audit.

Although, the primary objective of internal audit is not to detect fraud and errors; the internal auditors or inspections as the case may be should understand that he will not be free from blame, due to his carelessness, if fraud and error are perpetrated, and he was not able to detect them in time. He should therefore, exercise diligent skill and care in order to see that he has done what is expected of him, without allowing a room for blame on negligence.

Finally, internal audit if properly utilized can dictate the reasons for poor performance and provide guidance on future preventive and corrective action.


5.3 Scope and Limitations of the Study

The scope of this project work covers the public sector alone that is, the discussion of the scope, and challenges of internal audit in public sector.

Limitation of the Study

Firstly every information in the public service is a “top secret” of which the Kaduna state ministry of finance is one of the practicals and no good civil servant is expected to give out such secret. This is one of the major areas where the researcher had a lot of problem.

Secondly, finance which is the most useful feature in the research work also obstructed the plan work because the cost involved in going to where the case study is located was not small.

Finally, the lack of co-operation on the part of the ministry studied to release some documents needs for the research project inhibit the study even though the little gotten was reliable and was used effectively.


5.4 Recommendations

Based on the research work carried out so far, the following are the recommendations made.

  1. Government should base the appointment of the internal auditor under merit, so as to ensure reliability in the skills of the staff. Also the audit unit should be adequately staffed.
  2. Internal control system should be implemented on the part of the management.
  3. Need for government to consider accountability and prudence, as such supply all the internal audit unit with sufficient funds to carryout these obligations.
  4. Sending the staff on the internal audit department on course that will enhance their operational efficiency.
  5. The internal auditor should be free from interference of execution in order to attain objective and should also be given the freedom to review the financial statement from his own point of view, any aspect of the organization activities under any circumstances. This is to enable him serve as a check on the activities of the staff in the department.

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