The Importance Of Internal Audit Of Public Sector Management (A Case Study Of Ministry Of Finance, Imo State)
This study was carried out to examine the importance of internal audit of public sector management using ministry of finance, Imo State as a case study. The study was carried out to determine whether internal audit ensures financial controls in Ministry Of Finance, Imo State, determine whether internal audit ensures management control in Ministry Of Finance, Imo State, find out whether internal audit contributes to the efficiency of Ministry Of Finance, Imo State, and determine the effectiveness of the internal audit unit in Ministry Of Finance, Imo State. The survey design was adopted and the simple random sampling techniques were employed in this study. The population size comprise of auditors of ministry of finance, Imo State. In determining the sample size, the researcher conveniently selected 65 respondents and 50 were validated. Self-constructed and validated questionnaire was used for data collection. The collected and validated questionnaires were analyzed using frequency tables. While the hypotheses were tested using Chi-square statistical tool. The result of the findings reveals that internal audit ensures financial controls in Ministry Of Finance, Imo State. Furthermore, the study also revealed that internal audit contributes to the efficiency of Ministry Of Finance, Imo State. Therefore, it is recommended that since internal audit can assist management in meeting its desired goals, there is need for proper empowerment of internal auditors to acquire the requisite skills and technique in order to be able to face the changing complex operation in public sector organizations. To mention but a few.
Table of Content
- Title Page
- Table of Content
- List of Tables
- 1.1 Background of the Study
- 1.2 Statement of the Problem
- 1.3 Objective of the Study
- 1.4 Research Questions
- 1.5 Research Hypothesis
- 1.6 Significance of the Study
- 1.7 Scope of the Study
- 1.8 Limitation of the Study
- 1.9 Definition of Terms
- 1.10 Organisations of the Study
Review of Literature
- 2.1 Conceptual Framework
- 2.2 Theoretical Framework
- 2.3 Empirical Review
- 3.1 Research Design
- 3.2 Population of the Study
- 3.3 Sample Size Determination
- 3.4 Sample Size Selection Technique and Procedure
- 3.5 Research Instrument and Administration
- 3.6 Method of Data Collection
- 3.7 Method of Data Analysis
- 3.8 Validity of the Study
- 3.9 Reliability of the Study
- 3.10 Ethical Consideration
Data Presentation and Analysis
- 4.1 Data Presentation
- 4.2 Analysis of Data
- 4.3 Answering Research Questions
- 4.4 Test of Hypotheses
Summary, Conclusion and Recommendation
- 5.1 Summary
- 5.2 Conclusion
- 5.3 Recommendation
1.1 Background to the Study
There is a general awareness all over the world of the need to pay greater attention to the improvement of public sector management. The reason is obvious government in most if not all nations, constitutes the largest single business entity and in many places the care of the economy. It’s pattern of expenditure through various parastatals, agencies and commissions or manners of resources allocation determines the extent to which accountability for economy, efficiency and effectiveness can be achieved. Hence, initiative is being taken all over the world towards improvement of the standards of accounting and auditing in government. The United Nations department for technical co-operation for development and international consortium on government (1987) has also joined in a worldwide crusade for more effective management functions in public sector of which the key ingredients is “AUDITING”. The development of modern accounting and auditing should be credited to great organization in commerce and industry which has taken place since the industrial resolution. At the time when there were small business transactions and properties took active part in the management of their business, it was perhaps felt that there was little or no need for auditing. But as business transaction increased and investment in public sector came along, the need for accountability for find and properties of the business became necessary. On this note, government made provision for the account of public sector to be examined and reported on by persons other than the people managing the business. Thus, auditing and internal audit continue to grow with the increasing complexity in the modern business and accounting systems. In the public sector management, internal audit serves as a good instrument, internal audit cannot be discussed without discussing internal control and it’s nature. Internal control is defined according to the auditing guidelines as the “whole system of control financial and otherwise established by the management in order to carry on the business of the enterprise in an orderly and efficient manner, ensures adherence to management policies, safeguard the assets and secure as far as possible the completeness and accuracy of records”. Internal control extends beyond accounting and financial functions. It includes method adopted by management to delegate authority and assign responsibilities for various functions. Apart from internal audit, it comprises also of internal checks, accounting controls and other forms of control.
According to Okezie (1995:46) internal audit is therefore defined as an independent appraisal function within an organization for the review of systems of control and quality of performance, as a service to the organization. It objectively examine, evaluate and reports on the adequacy of internal control as a contribution to the proper economic, efficient and effective sue of resources. Internal audit department is responsible to the accounting officer.
The public sector accounts and records are audited by the internal auditor and a report to that effect is submitted to the accounting officer. According to Ogbonna (1938:20) public sector accounting deals with the account of government institutions or organization and as an information tool that provides management with primary data which can be sued with other data generated elsewhere in the system to develop analytical device for purposes of preparing economic development plans. Public sector auditing on the other hand means an independent examination of an expression of opinion on the financial statement of government establishment and in compliance with the enabling decree. The public sector auditor has to satisfy himself that the account have been prepared in accordance to statutory and constitutional requirements and regulations and that proper accounting practices have been observes in their complication. The duties of an external auditor in relation to internal audit in government establishments are similar to those applied other business organizations. The external auditor should consider to which extent he should rely on the work of the internal auditor. Since modern internal auditing began to flourish as organizations rapidly expanded, the problems of widespread operations posed serious challenges to management control and hence the need to delegate responsibility and authority to many levels, supervision to become necessary. In view of the delegation, management had to turn to internal auditors for assistance in maintaining surveillance over management control network. Hence, internal audit has direct bearing on public sector management.
The ministry of finance is one of the twelve ministries of the Imo state government. It came to being on creation of Imo state in 1976. The ministry has the ultimate goal of working towards the attainment of health economic growth. It’s basic objective is to formulate and execute ideas designed to facilitate the effective management of the financial resources of the state. The chief executive of the ministry is an honourable commissioner in the person of chief Ekwegh. A permanent secretary in the person of Mr. C. Okoye and the accountant general Dr. Emeka Adinmadu are assisting him. There are six functional departments in the ministry, these departments are:
- Department of administration and finance
- Department of accounts
- Departments of planning research and statistics
- Investment and loan department
- Department of planning operations
- Department of accounts operations
This is the historical evolution of the topic which is seen and explained briefly above with the permanent secretary and the accountant general who is also assisting him in the Imo state ministry of finance.
1.2 Statement of the Problem
Currently there is so much outcry from the public stakeholders and development partners on the role of audit based on reports by The Auditor General on various entities on misuse of public funds. Questions are emerging on how effective are internal audits in light of recent mass of loss of revenue through by Subcounties and departments as demonstrated by the reports.The increase and rampant resurgence of fraud within the public sector has also shot up hence the essence to consider research on the same.
Considerably based on the above service delivery may also be related to the above concerns which may affect common wananchi since the core mandate of most public sector is to offer services to its citizens and not profit making as such. Most government services are based on specific procedures and processes, one activity leading to the other hence the service. This has created some loopholes for corrupt public servants to take advantage of the bureaucratic procedures to swindle desperate citizens.
1.3 Objectives of the Study
The purpose of the study is to examine the importance of internal audit of public sector management (a case study of ministry of finance, Imo State). Specifically, the objectives of the study are as follows:
- Determine whether internal audit ensures financial controls in Ministry Of Finance, Imo State.
- Determine whether internal audit ensures management control in Ministry Of Finance, Imo State.
- Find out whether internal audit contributes to the efficiency of Ministry Of Finance, Imo State.
- Determine the effectiveness of the internal audit unit in Ministry Of Finance, Imo State.
1.4 Research Questions
The following questions were formulated to guide the study based on the research objectives;
- Does internal audit ensures financial controls in Ministry Of Finance, Imo State?
- Does internal audit ensures management control in Ministry Of Finance, Imo State?
- Does internal audit contributes to the efficiency of Ministry Of Finance, Imo State?
- What is the effectiveness of the internal audit unit in Ministry Of Finance, Imo State?
1.5 Research Hypothesis
- Ho: Internal audit has no significant impact on public sector management.
- Ha: Internal audit has a significant impact on public sector management.
1.6 Significance of the Study
The need for effective internal audit in public sector management cannot be over emphasized. The public sector concerns everybody in the society and the welfare of the populace depends on the effective management of the public sector resources. Internal audit department maintains good records and protects cash and other assets, hence the importance of this study is obvious and include:
- It will help to ensure that management policies and government policies are adhered to by all the departments and members of the organization.
- The society at large will benefit if the internal audit department in the public sector are able to monitor the use of resources in the pursuit of the defined government objectives.
- The external auditor’s job will become much easier and the assets of the organization sage guarded.
- The appraisal of the soundness, adequacy and operating control will ensure efficiency in all units of the sector at reasonable cost.
- It will help to achieve effective management by being fed with quality analysis, appraisal, findings and recommendations on every activity reviewed.
- The internal audit department maintains good records by examining, evaluating and reporting on the adequacy of internal control as a contribution to the proper, economic, efficient and effective sue of resources.
1.7 Scope of the Study
This study focuses to examine the importance of internal audit of public sector management (a case study of ministry of finance, Imo State). however staff of ministry of finance, Imo State will form our respondents.
1.8 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.
1.9 Definition of Terms
These are those checks on day to ay transactions which operate on continuous basis. It covers the detection of fraud or errors and of inferior quality of work. It involves a lot of matters such as the delegation of authority and division of work, the method of recording transactions and the independently ascertain totals against which a large number of individual transaction can be proved.
Accounting control are those portions of internal control system which affect the reported accounting figures.
These are set of rules of procedures issued by the government to guide the conduct of financial transactions in all department of government; they are issued under the authority of the financial (control and management) act of 1958 as amended and therefore have force of law.
1.10 Organization of the Studies
The study is categorized into five chapters. The first chapter presents the background of the study, statement of the problem, objective of the study, research questions and hypothesis, the significance of the study, scope/limitations of the study, and definition of terms. The chapter two covers the review of literature with emphasis on conceptual framework, theoretical framework, and empirical review. Likewise, the chapter three which is the research methodology, specifically covers the research design, population of the study, sample size determination, sample size, and selection technique and procedure, research instrument and administration, method of data collection, method of data analysis, validity and reliability of the study, and ethical consideration. The second to last chapter being the chapter four presents the data presentation and analysis, while the last chapter(chapter five) contains the summary, conclusion and recommendation.
Summary, Conclusions and Recommendations:
This chapter summarizes the findings on the importance of internal audit of public sector management using ministry of finance, Imo Stateas 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 to examine the importance of internal audit of public sector management using ministry of finance, Imo State as a case study. The study was specifically focus to determine whether internal audit ensures financial controls in Ministry Of Finance, Imo State, determine whether internal audit ensures management control in Ministry Of Finance, Imo State, find out whether internal audit contributes to the efficiency of Ministry Of Finance, Imo State, and determine the effectiveness of the internal audit unit in Ministry Of Finance, Imo State.
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 auditors of ministry of finance, Imo State.
In the light of the analysis carried out, the following conclusions were drawn.
- Internal audit ensures financial controls in Ministry Of Finance, Imo State.
- Internal audit ensures management control in Ministry Of Finance, Imo State.
- Internal audit contributes to the efficiency of Ministry Of Finance, Imo State?
- The internal audit unit in Ministry Of Finance, Imo State is somewhat effective.
Based on the findings the researcher recommends that;
- Since internal audit can assist management in meeting its desired goals, there is need for proper empowerment of internal auditors to acquire the requisite skills and technique in order to be able to face the changing complex operation in public sector organizations.
- The internal auditors at all level should be adequately independent of members of various departments within the organization so that they can carry out their duties effectively.
- There should be regular evaluation of internal control system in order to determine their effectiveness in operation and identify and report to the appropriate authority the weakness, so that corrective action can be taken. Prompt implementation of internal auditors report will encourage them to improve in their functions.
- The internal control system should be documented and properly communication to all staff of the organization.
- Management should establish and implement periodic review of internal audit unit to ensure that its role and value to the hospital is maximized.
- Continuous professional training and development of internal auditors is necessary. This is because the quality ofinternal control system is only as effective as the quality of the personnel who performs and implements the controls.
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