Internal Auditing As A Tool Of Control In Federal Government Parastatals
Auditing has been used by governments and Private Enterprises for a long period as a tool for efficient and effective management and control of their activities especially as it relates to their financial dealings. This research work primarily discusses how the ABU teaching hospitals utilizes this all embracing technique in the management and control of its financial operations. It also focuses on identifying the inherent problems involved in adopting the technique and utilizing it accordingly and thus depriving the benefits therein. The work is divided into four chapters, chapter one contains the general over review and consider the problems, objectives, scope and limitations of the survey methods. Chapter two handles the literature review, while chapter three and four contain the operations, survey, data collection and analysis, conclusions and suggestions.
1.1 Background of the Study
In Nigeria, successive governments, since independence have set up autonomous organizations with legal independence and powers, having the initiative of private enterprises to carry on developmental activities of commercial or industrial nature. Thus, the emergence of Ahmadu Bello University teaching Hospitals with headquarters in Samaru Zaria is charged with the responsibility of accounting properly all financial activities undertaken by its management.
The need to institute both internal and external audit systems within organizations for efficient and effective financial monitoring, management and control was further necessitated by some prevalent economic pressure like the recession in the privatization and commercialization of most of government owned organizations, keen competition in the Nigerian business environment, the Structural Adjustment Programme (SAP), Industrial unrest and the renewed call by the government through War Against Indiscipline and Corruption (WAI-C) foir financial prudence, action and accountability by government functions.
Internal auditing is of fundamental importance as an effective means of ensuring the reliability of internal records for information and use, through proper internal control systems within an organization without which such records will present chaos and the whole system may fail to succeed for lack of orderliness, accuracy, reliability of information, safety of its assets and the general security of records.
Effective internal control is necessary to be able to determine whether all transactions have been reflected within accounting record. It is therefore, important to recognize that the auditor concerns himself with internal control throughout the clients organization and not merely within the finance and supplies department alone. He ought to understand the organizational operations as a whole, ascertain and evaluate the whole system of control operating within the organizations. An important aspect about controls is the fat that it has to be timely otherwise the whole exercise will be futile.
The internal auditor helps management to achieve organizational objectives effectively through his report. Such reports have to contain express opinion of the auditor on the areas he undertakes to audit. The nature and extent of the internal control system and internal auditing, appropriate to anyone organization is the management’s responsibility and depends on the organizations typology and geographical distribution.
The importance of internal control for internal audit purposes will be appreciated most in an organization like the Ahmadu Bello University Teaching Hospitals, whose activities are spread over various branches at different locations both within and outside Kaduna State.
1.2 Statement of the Problems
A problem represents an unhealthy organizational atmosphere or a puzzle a phenomenon, event or happening. Having defined a problem, an insight is given as to the major problems that could be said to bedevil the internal auditing and control systems in Ahamdu Bello University Teaching Hpsitals. As is the tradition with government parastatals and organizations, the Ahmadu Bello University Teaching Hospitals have some of its problems as follows:
- Lack of a good system if financial monitoring and control.
- Lack of sufficient audit staff and other professional services to aid and effective audit conduct.
- Lack of sufficient transport, financing and suit accommodation.
- Non issuance of internal audit reports prior to statutory audit thus increasing the audit fees and costs.
- Insensitivity of audit inspection reports and queries.
- Loss of funds through misappropriation or abscondment of accounts staff.
1.3 Objectives of the Research
With the above list of problems and many others yet unmentioned bedeviling the internal control system of the Internal Auditor Department in A.B.U. Teaching Hospitals, it will be unfair if no step is taken even as effected by one’s academic pursuance to look at the problems and causes critically and suggest possible solutions that could improve the situation for the organizations continued effective existence.
In a nutshell, the aim of this study is to find a possible shorten and long term solutions to the problems thereby pacing the way for efficient operation in the organization in order to achieve the purposes for its existence.
1.4 Scope and Limitations of the Research
The study is limited to A.B.U. Teaching Hospitals activities, especially its internal audit system and financial dealings as it relates to the management of its financial resources.
The A.B.U. teaching Hospitals are selected as a sample to be studied for the fact that it is likely to offer free access to relevant financial and audit information and documents that will be required for this research. The study centres largely on the Internal Audit Department of the Ahmadu Bello University Teaching Hospitals, Headquarters in Samaru Zaria.
The Departmental functions as per responsibilities assigned to it by management which is mainly to operate within the broad areas of reviewing of accounting system and other related internal control, examinations of financial and operating information for management, review economic efficiency and effectiveness of operations, and implementation of organizational policies, plans and procedures. The external audit concerns itself with making necessary information available with express opinion to outside users to third parties.
As normal researches involving case studies of Government organizations in Nigeria, the issue of confidentiality really hindered the flow of necessary information for this write-up. Moreso, to somebody completely outside the organization like myself, the fear of leaking Governmental secrets due to the government secrecy acts and decrees, further aggravated lack of adequate materials for this work. Therefore, I had to rely on the materials that were made available to me by some personal friends in the organizational under discussion.
Finally, the issue of financial constraints also becomes an important factor that hindered the adequacy of resources (materials) on this write-up.
1.5 Research Methodology
For the purpose of this project, both primary and secondary methods of data collection have been used. The primary was based on my personal interactions with my friends that are working there and the questioning techniques being used during my discussions with them any time I met some of them.
The secondary includes the accounting manuals of the organization and other relevant related audit files, other data used includes texts and journals that relate to the subject matter under discussion, and accounting data, lecture motes and all other relevant financial data necessary for this project write-up.
Summary, Recommendation and Conclusion
From the foregoing, auditing and audit controls have been seen to play a major role in effectively regulating and directing the activities of an organization either public or private.
In government parastatals as we re fully aware, the objectives are not profit making, but mainly some specified services to a group or community within which the organizations are set up by government. Funds for such executions are provided by the government in the form of grants and loans and thus government expects the judicious use of such monies in accordance with some rules and regulations as outlined by it.
Those entrusted with such monies, generally referred to as public servants, are not only supposed to account for such monies but also accounts properly by way of making returns to the government of their financial stewardship in a designated format. This requirement by the government compelled the entrusted servants to ensure economic, efficient and effective use of the public funds and resources so entrusted them.
In A.B.U Teaching Hospitals, auditing has been seen and accepted as a major tool for managing not only the financial but also operational and other activities of the hospitals. Auditing as a tool of control has saved the teaching hospitals from the embarrassment of huge financial losses and has contributed in checking the activities of its members if staff in the ways and manner they conduct the affairs of the hospitals in their areas of responsibility.
Nevertheless, internal audit department ought to be objective. It should also be fair and fearless in carrying out the audit exercise, as such their report should carry what it ought to contain.
For audit and auditing to gain and maintain its prominence and to serve as a tool of control in the financial management of the hospitals as well for the auditors to be seen as performing the role of the public watchdog. The following recommendations may be considered:-
- General education or re-awakening of all staff members of what constitutes accountability and the necessity for enhancing it, and why audit department ought to be given all the necessary support and cooperation.
- Preparation and introduction of auditing and accounting manuals and also a general audit programme.
- Audit and accounting staff should seriously considered for further training and re-training in all relevant audit and accounts courses. Practical attachments to private audit professional firms will also help in improving audit productivity.
- To upgrade, promote or even appoint well qualified officers to fill the various vacant posts whenever available in the audit department.
- Remunerate audit staff according to what is obtained ion the private sector in order to check staff drain.
- There must be a good employer/employee relationship so s to inculcate a sense of belonging which increases devotion to duties and thus output.
- Avoid tempting assignment to staff especially junior staff. For example, no staff should be given an assignment involving cash that may be equivalent to his ten years annual salary without escort, for obvious reasons.
- Where more than one office is used as revenue collection centre, revenue from such centres should be submitted at stated intervals with reports, giving details as to their sources. Audit should closely follow and monitor such returns very actively.
- In the case of salaries, it is always safer that those involved in actual preparation are not the ones to make actual cash/bank payments. Auditing staff should at least once upon a time partake in this type of exercise.
- The number of working tools and especially vehicles in the audit department should be increased in view of the various units audit staff must attend to almost at the same time.
Finally, it is hoped that if appropriate action is taken on the above suggestions, it will go a long way in strengthening the audit department and the internal control system of Ahmadu Bello University Teaching Hospitals considerably as an effective tool of financial control though efficient audit exercise.
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