The Roles The Internal Audit Department Plays In Aiding Management Of Limited Resources

Project and Seminar Material for Accountancy / Accounting

The Roles The Internal Audit Department Plays In Aiding Management Of Limited Resources


Chapter One


General Introduction

1.1 Background of the Study

The fact that early days most business were run by one man. In a one man operation, there is less of an internal control problem because the proprietor is constantly in contact with all phases of the operation, he makes sales, sign cheque, does the buying and pay all taxes in fact he is his own internal auditor.

, business activities have grown from this stages and with continuously expansion in the business activities, management are faced with more managerial problems. In the past it was possible for the management to maintain control through constant personal contact with the company operation, also contract with the other level of management and ever individual employees. The new problem made it necessary to delegate responsibilities and authority to many levels of supervision with such wide delegation of duties, management had to the control specialist that is the internal Auditor for assistance in maintain surveillance over the managerial control network.

Thus, internal auditing can be define as an independent appraisal activity within an organization for the review of accounting, financial and other operation as a basis for service to management. It is managerial control when functions by measuring and evaluation the effectiveness of other control.

Internal auditing can also be define as a review of operation and records something continuously, undertaken within a business by specially assigned staff with a view to ensure that the system of operation is adhered to, that the internal control is as effective as possible and the economics consistent with efficiency are applied to the business.

The National Industrial Conference Board of Internal auditors give a more detailed definition which also emphasized the management control aspect of internal auditing as follows:

Internal auditing is a series of process and techniques through which an organizations own employees ascertain for the management by means of first hands on – the – job observation whether establishment management controls are adequate and are effectively and promptly and that each division department or other unit is carrying out the plans, policies and procedures for which it responsible.

The widening job between management and action has made it necessary to develop series of control by means of which the organization may be administered efficiency. The internal auditors perfects and complete each of these activities by providing on the science appraised of each form of control. Internal auditing this emerges as a segment of the bound field of accounting utilizing the basic techniques and method of auditing in helping management to attain its objectives. In addition, the internal auditor, being a company man has a more vital interest in all types of company operations and is quite naturally more deeply interested in helping to make these operations as successfully as possible. Thus to a great extent management services come to influence the internal auditors thinking and general approach.

The purpose of any kind of audit to add some degree of validity to the object of the review management policies are carried out more effectively of procedures governed by the policies are subject to constant review. In any presentation of financial information as in the operation of internal control activities. Individuals could be guilty of:

  1. Personal bias
  2. Self Interest
  3. Carelessness
  4. Dishonest

The principal objective of an audit is to eliminate these four causes of an distortion of the fact.


1.2 Statement of the Problem

A brief analysis of some problems faced by some audit staff of the authority are enumerated below:

The major problems of the department is lack of adequate independence. Although this independence is theoretically pronounced but not well practiced. Interference by senior staff of other department, an activity of Junior audit staff affects their ability to perform effectively and this gives room for work control.

Fear of victimization is another major problem faced by most staff of the department where fate of audit staff in such area such as official recognition, training and course a staff determine promotion e.t.c the above mentioned benefits might elude the auditor this might force the auditor to adjust the audit program as well as report and the propose of the audit Jeopardize.

The is also the problem of insufficient equipment such as care to perform effectively. This is on the case where am audit assignment has to be carried out an out station and transport is required and where vehicles are available, requisition for such transport might be deliberate turn down in an attempt to prostrate audit department. Lack of adequate training in the field of auditing is another problems that come to light during the interview. Some audit staff are changed with duties which they don’t know how to perform and such desired result cannot be achieved.

Other problems include in ability of management to act promptly as report submitted, lack of adequate management backing, appreciation of achievement in terms of promotion and official recognition etc. With the above mentioned problem effectively performance of internal auditing might be a very difficult goal to achieve.


1.3 Aims and Objectives of the Study

The main purpose of this project is to give users the basic knowledge of the roles the internal audit department plays in aiding management of limited resources will be required, if the organization objective and policies are to be properly and effectively carried out and implemented, their there is to need for internal audit department in such organization to serve as a watch and the activities and operation of the organization.

The project provide the most important areas where internal auditor of an organization can be of increase help to management in achieving its objectives.

In an organization where the internal auditing department is very effective, most staff of such organization regards the internal auditor as NUISANCE. They often feel the auditors pock noses too much unto their affairs. This might be due to the fact that these staff are ignorance of the roles of internal auditors in the establishment or that the roles, duties and responsibilities of the internal audit department is not well defined or properly communicated by the management top the various sections thereby bringing conflict between internal audit department and other department in the organization.

In this project however, the objectives, roles and duties and significant of the internal audit or development are closely to carry so as to help users appraise the importance of internal audit department in an organization.
The scope of this project is limited to internal auditing in the Niger River Basin Development Authority. The roles of the internal auditing department independence and status of internal auditing etc were enumerated in the write up.
Many internal auditing staff of Niger River Basin Development Authority were interview as regards their duties problem encountered and ways in their problems are been solved. This project also attempt to review the significance of internal auditing and how the department helps management in achieving it goals and objectives.


1.4 Significance of the Study

The importance of this kind of write up is in the fact that many people can benefit for using it. Students can make reference to it in order to have a clear understanding of the concept of internal and auditing and its importance to management. The study can also enlighten readers on the roles played by internal auditors for the overall achievement of organization policy and objectives and the important position occupied by internal auditor with organization.

This project will e of help top management on how to have an effective internal auditing department and the existence of independence required by the internal auditors in order to have effective performance, it will also help internal auditor understanding their roles and duties in the organization.

There is need for cooperation between internal audit department and other department in the organization, this cannot be achieve of the other department are not aware of the roles of the internal auditors as partners toward achieving the overall objectives of the organization.

This project tries to define the role or the internal auditors, the purpose and significance and how it helps management in achieving its goals and objectives.


1.5 Research Methodology

In this write up, the primary source of data such as interview, questionnaire, etc are employed, similarly, secondary sources of data are also used in the collection of data.

As a result of some limitation of the study, the secondary data were mainly used in this research work.


1.6 Scope and Limitation

Scope:

This study is concentrated on the importance of the internal auditing in the government establishment and other organization. More so, the role of internal auditing in an organization and it is also concentrated on the objective, duties and significance of the internal auditor department that helps users appraise the significance of internal audit department in an organization.

Limitation:

However, this write up limits itself to the role of internal auditor and the monitory effective management in Niger River Basin Development Authority including the purpose and the independence of internal auditor department, it also covers the historical background of the Niger River Basin Development Authority that is believed to be the choice of the case study of this project.

Due to the constraint, the researcher was unable to source for more information necessary for this project. Another factor is that financial capability that made it impossible for the researcher to search for more materials that would have this project more materials that would have made this project more vital and effective for future reference and as a guide for organization that make use of internal audit.


1.7 Plan of the Study

This research work is broadly divided into five main chapter

Chapter one continents the general introduction, background of the stud, aims and objective f the problem, research methodology, as well as the definition of terms.

Chapter two of this research work consist of literature review, purpose of internal auditing, managements role in internal auditing relationship with various unit and also organization of the department determining the internal auditing role.

Chapter three contain research methodology, population, data collection as well as method of data analysis.

Chapter four is basically on the analysis of data and presentation, control on receipt and payments, controls on wages and salaries as well as test of hypothesis.

Chapter five which is the last contains the summary conclusion and recommendation. There is no internal auditors, how does internal auditors help an organization to have an effective management of the resources, what extent can this be achieved.

It is also generally believed that it is difficult to entrust human beings with money or money without being properly mentioned. Why do people have the conception am dos the statement true?

Here and other questions are gradually answered ion the course of analyzing the roles of internal auditing and its aids to management in every organization.


1.8 Definitions of Terms

For the purpose of clear and understanding of some terms used in this write up the following terms are defined.

A.I.E:

Authority incurred Experience, this is an extract of management, meeting where certain expenditure are approved.

L.P.O:

Local Purchase Order, this is used for the purpose into the store. The L.P.O is used to centre actor as supplier when suppliers are to be made. This specified the items needed, the quantity as well as the price of which it s approved.

J.O:

Job order, this is used for awarding contractors such as land clearing transportation of items, repairs to re-equipments, printing of stationeries.

C.A.V:

Cash Advanced Vouchers; this is used for receiving supplier into the stores any items taken into the store clerk and will issue on SRC. This items supplied are listed in the store received voucher and necessary ledger.

S.I.V:

Store Issue Vouchers, this is opposite of the stiore received vouchers it is used for receuiving items from the store after necessary store requisitions form has been filled and dully approved by appropriate office.

T.I.V:

Transfer Issue Vouchers: this is used to raise payment for any expenditure to be made in the organization. Relevant document such as L.O.P, J.O, S.R.V, A.J.E, etc are to be attached before such as P.V can be approved.\

CODES:

The Niger River Basin Development Authority has various projects scattered over its area of coverage, these project are allocated codes and money to be spent on each of the project are allocated under the codes.

P.A.V.E:

Pass As You Earn: this is tax deduction at sources on behalf of the government.


Chapter Five


Summary, Conclusion and Recommendations

5.1 Summary

In the previous chapter, attention has been focus on weakness of internal auditing in Niger River Basin Development Authority the major weakness of internal auditing is inadequate independence. The internal auditor being a company own, staff have less degree of independence.

In some cases also, where investigation are carried out and report on finding submitted, if the management fails to act on such report, there is nothing the internal auditor can do, he can not go to court or report to any other person. His only option would be to resign or remain on the job and this will greatly affect his future performance, also where an internal auditor is dismissed from service probably as a result of his instance in reporting the truth, always there is no way he can defined himself impracticable.

Where a fraud is perpetrated of the management level, internal auditor might not be given the chance to investigate such case and losing his job or being victimized in one way or the other might influence his decision and reports.


5.2 Conclusions

In concluding this project, it will be asserted to point out that internal auditors can solve most of the problem facing management today in maintain effective control ion their organization. A close study of the roles of internal auditors reveals this fact that the questions are internal auditor given free hands to perform those functions, some organization use. Internal auditors as camouflage and rubber stamp for fraud perpetration while in some others they are used for fraud prevention.

Whatever the achievement of internal auditor will depend on management release the importance of internal auditors n the organization and given them free hand and support in performing their functions, internal auditors will stand a chance of helping management in achieving one organization goals and objectives.


5.3 Recommendation

In making this recommendation, it is important to bear it in mind that for the internal auditing to e effective and efficient the following are recommend:

The management should ensure that internal auditor are given free hand to perform their function. The department should be independent as much as practicable. Independency will enable internal auditor to exercise their functions of all levels in the organization. Inter auditor should be independent of the person he is auditing.

Another important factors is staffing of the department, the management should ensure that people employed as internal auditor are trusworthy honest, intelligent dedicated and hard working individual, who can perform their duties without fear or favours and should have background knowledge of accounting.

Promoting of internal auditor in the organization should be automatic and should be made at the time such staff is due for it. This will deviate the fear of being victimized as a result of honesty, frankness and objective in reporting finding.

It is also important that the management acts promptly on reports submitted by internal auditors on investigation and findings. This will give encouragement and assurance that their effects are not fruitless.

The management should also ensure that the facilities required for audit assignment are provided at the right-time, this will encourage the internal auditors to be efficient in performing their duties.


The Roles The Internal Audit Department Plays In Aiding Management Of Limited Resources


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The Roles The Internal Audit Department Plays In Aiding Management Of Limited Resources


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