Effectiveness Of Internal Audit As An Instrument Of Improving Public Sector Management ( A Case Study Of Imo State Ministry Of Finance)

Description

ABSTRACT

This study is devoted to assessing the effectiveness of internal audit an instrument for improving the public sector management. The methodology employed include personal interview, written question and library research, various recommendation were made in a bid to improve the public sector management via  internal audit. The economy today is known to be characterized by incessant frauds, forgeries and mismanagement of public properties. This though a global phenomena, has recorded an outstanding growth in the Nigeria public sector management. It outs across all sector of the economy, call for prompt appraised of internal control system is however weighted down by a lot of factors. The inability to reconcile the accounting systems control  system regularly is more  or has a heaven for fraudulent and unscrupulous staff. A problem which is the consequences of competent manpower shortage. The train of irregularities and management has got an extent that insufficient are not made, the economic future will become a menace rather than fortune to the populace. The point therefore is that the internal audit department should be hastily equipped with competent and qualified staff and modern facilities so that internal audit can still play its role  in improving the public sector management.

TABLE OF CONTENT

Title Page

Certification Page ……………………………………………………………..I

Dedication………………………………………………………………………Ii

Acknowledgement………………………………………………………………Iii

Abstract………………………………………………………………………….v

Table of content………………………………………………………………vi-viii

Chapter One

1.0 Introduction…………………………………………………………………..1

• Background Of The Study…………………………………………………1-3
• statement Of The Problems………………..………………………………..3
• Objectives Of The Study……………….…………………………………..4
• Research Question……………………………………………………….4-5
• Research Hypothesis……………………………………………………6
• Significance Of The Study…………………………………………..6-7
• Scope/Delimitation Of The Study………………………………….7-8
• Limitation Of The Study……………………………………………8-9

1.9 Definitions Of Terms…………………………………………………10-13

          Chapter Two

• Literature Review………………………………………………………14-16
  • Definition Of The Internal Audit………………………………………16-17
  • Definition Of Public Sector Auditing………………………………….18-20
  • Economic Implementation Of Ineffective Internal Audit In The Public Sector Management…………………………………………………………21-22
  • Basic Check Peculiar To Public Sector Audit………………………….22-23
  • Summary Of Literature Review…………………………………………24

Chapter Three

• Research Methodology……………………………………………………25
  • Design Of The Study……………………………………………………25
  • Population Of The Study……………………………………………..25-26
  • Sample/Sampling Techniques………………………………………….26-27
  • Research Instrument …………………………………………………27-28
  • Method Of Data Collection …………………….…………………….28-29

3.6 Method Of Data Analysis ……………………………………………29-30

Chapter Four

4.0 Data Presentation And Analysis………………………………………31-49

4.2 Discussion Of Finding …………………………………………………50-51

Chapter Five

5.0 Summary, Recommendation And Conclusions…………………………52

5.1 Summary Of Findings…………………………………………………..52-53

5.2 Conclusion  ……………………………………………………………….53-54

5.3 Recommendation ………………………………………………………54-55

Reference

Appendix

Questionnaire

CHAPTER ONE

• INTRODUCTION

The significance of public sector management can be assessed in terms of its impact on the nation’s economy. The public sector is represented by the tiers of government, federal, State, local government and the parastatal. The objective of the public sector is the provisions of goods and services at reasonable cost, in contrast with the privet sector. The extent of Management economy, effectiveness and efficiency in the sector determines how well a government can cater for the welfare of the populace. There is therefore an every rising need all over the world for improvement in the public sector.

In fine turning the public sector management, internal audit serves as a good instrument.

• BACKGROUND OF THE STUDY

Imo state ministry of finance owerri is as old as the state itself. The ministry came into being in 1976, following the state creation carried out by the then head of state, Late General Murtalar Mohammed. What is today known as ministry of finance Owerri Imo. It started operation at No. 145 Douglas Road Owerri when it became necessary that civil public servant of Imo Sate origin to leave Enugu for their own state.

Accordingly, the first military government of Imo state, Navy Commander Ndubisi Kanu, through the ministry of works awarded a contract of two secretariats complex Orlu Road and Okigwe Road following the completion of the secretariat spanning to Orji Town. Until 23^rd may 2005 when the two secretariat complex were relocated to their permanent/new site at port Harcourt road. The permanent  site has ten structural blocks, however ministry of finance is in block four (4).

Department, ministry of finance owerri has six departments namely:

• Department of planning research and statistics.
• Department of accounts.
• Department of administration and finance.
• Department of accounts production.
• Department of treasury operation.
• Department of investment and loans.

Each of the department is headed by a director on grade level sixteen. The commissioner is a political head while the permanent secretary is the accounting officer. The department of treasury operation is headed by the accountant general of the state.

The ministry of finance has another quiz bodies like board of internal revenue, the finance brokers etc.

• STATEMENT OF THE PROBLEMS

These problems have been identified to account for inadequate internal auditing in the public sector.

1. Internal audit department have become a dumping ground for incompetent and unqualified staff. Those staff through and higher qualify job always expected from the internal audit department.
2. The event of computer has affected performance of the staff because the lack of knowledge of electrical data processing (EOP).
3. The staffs of internal audit department are poorly enumerated and this makes them to lose interest in their job and works are done ineffectively.
4. Hostility of other staff affects the objectivity desire from the internal auditors and they end up with poor reports. The high fraudulent tendencies make its sight of internal auditors repulse other staff.

• OBJECTIVES OF THE STUDY

The objectives of the study are as follows:

• The review the implementation of corporate policies, plan and procedures in all areas of the public sector management with a view to solving the problem of under staff and under resources and prevent arrears of work in the public sector management through the internal audit.
• To review the accounting systems and related internal controls in the public sector management to solve the problem of inadequate knowledge of electronic data processing this causes ineffectiveness in auditing computerized systems.
• Examination of financial and operating information for management implement, including detailed testing of transactions, payment balance so that the staff of the internal audit will renumerated.
• Special investigation of ways of improving the public sector management through the education of the staff of the internal audit.
• To advice management and ensure that the internal audit staff are adequately remunerated and motivated.
• RESEARCH QUESTION

The study is carried out to provide answer to the following questions.

• Does the application of effectiveness of internal audit improve public sector management?
• How can the use of effectiveness of internal audit improve public sector management?
• To what extent does effectiveness of internal audit improve public sector management?
• Does effectiveness of internal audit aid management in the achievement goal?
• Does effectiveness of internal audit eliminate fraudulent activities in the public sector management?
• Has the management resolved the problem of incompetent and unqualified staff in the internal audit department of the public sector management?
• Does internal audit require the use of computer in the public sector management?
• What are the causes of poor remunerations of internal auditors in the public sector management?
• RESEARCH HYPOTHESIS

The research hypothesis is based on the Imo State Ministry of Finanace Owerri as government parastatals, it is possible that accounting records are audited at relevant intervals. The assumptions therefore are as follows:

HO: There is no significant effect of internal audit on the efficient accounting system and strong internal control in the public sector management.

HI: There is significant effect of internal audit on the efficient accounting system and strong internal control in the public sector management

 

• SIGNIFICANCE OF THE STUDY

The need for effective internal audit in the public sector 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 audits departments maintain goods, records and protect cash and other assets; hence the importance of this study is obvious and includes:

• It will help to achieve effective management by management being tied with quality analysis, appraisal, findings and recommendations in every activity reviewed.
• The appraisal of the soundness adequacy and application of accounting financial and other operating control will ensure efficiency in all units of the sector at reasonable cost.
• It will help to ensure that management policies and government policies are adhered to by all the departments and members of organizations.
• 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 auditors job will become much easier and assistance of the organization safe guard.

 

• SCOPE/DELIMITATION OF THE STUDY

The organizations of the internal audit vary quite vividly and are dependent upon the responsibilities assigned to it by the management.

The study does not intend involving many government parastatals, but selected ones and the selected will depend on the degree of relevance to the study. Furthermore, the study call not extend to physical examination of cash, stock or other asset and liabilities as auditor do but to accept any written evidence as may be provided by the auditors and management officers. The questionnaire itself will not go beyond the relevant arrears that will help in improving the public sector through the internal audit.

• There will be an increase need for specialist staff who have work with department management in determining whether or not they and their staff have been successful in producing the level and quality of services required by those who formulate policy.
• The scope of the internal auditor should be to support management by assisting in pointing out deficiency and advising on possible courses of action.
• The internal auditor is not concerned with policy but with its effect whether such affects correspond with the intentions of the policy.
• LIMITATION OF THE STUDY

A research work cannot be concluded without limitation. The researcher encountered numerous problems which affected the smooth running of work.

These problems include difficulty in procuring materials for the projects, financial constraint and time factor.

• MATERIAL PROCUREMENT

There were a lot of constraints as to getting information and materials for the job. The researcher made series of consultations. And visit to most renowned institutions to acquire the needed information. Most materials used were very difficult to come by, as there is no good library within the town.

• FINANCIAL CONSTRAINTS

The researcher would have obtained more information than what is obtainable here but due to lack of money to visit some of the firm and government agencies located a bit farther from the researcher’s place of residents.

• TIME CONSTRAINTS

Combining academic work with job is no doubt a thought provoking issue as it has to do with time. Actually, a lot of time was used as the researcher visited the organization and individuals together with Government agencies to obtain valuable information for the project.

 1.9 DEFINITIONS OF TERMS

The following terms have been used for this purpose of this study:

1. AUDITING: Auditing is an independent examination of recording and draft accounts provided by client. An audit is an independent examination of an expression of opinion on the financial statements of an enterprise by an appointed auditor in pursuance of that appointment and in compliance with any relevant statutory obligation.
2. AUDITOR: An auditor as statement of accounts which implies that the auditor must be independent, in dependent is fund amentia to the entire complex of auditing.

The auditor must not be under the control or direction of the management of the organization whose accounts is supposed to audit or that of any other person. The must have technical knowledge that will enable him to carry out a conscientious examination of statement of accounting.

1. AUDITING PROFESSION: In auditing the auditor must be independent of the public sector management who are responsible for the account. In case of public companies he must not be connected with either the director (who are responsible for the preparation of the accounts. The must also be independent government agencies or other groups are connected with the business.
2. INTERNAL AUDITS: it is defined as an independent appraisal activity established within an organization for the review of operation as a service to management.

It is management controls which function by measuring and evaluating the effectiveness of other control.

Internal auditors are employees of the company and are responsible to its management.

1. c) THE AUDIT PLAN: the auditors must plan his audit in some detail and the plan will involve preparation of memorandum showing.
2. a) An outline of the audit work to be done on each area of the clients systems and finance statement.
3. b) The staff who will do the work.
4. c) The location of the audit.
5. d) The timing of the work to be done.
6. e) The budget of time and cast.
7. f) AUDIT STAFF: This consist of anybody who is directly connected with the creation and expression of opinion on account as auditor.
8. g) EXISTENCE OF THE AUDITORS LIABILITY IN PUBLIC SECTOR: liability can be defined to mean, a charge against a person of entity for damages done by that person or entity to a third person to who be had a relationship. The need for auditing came into practices as a result of the introduction of joint stock companies which separation ownership of organization from control and management section.
9. h) PUBLIC SECTOR AUDITING: Public sector auditing mean an independent examination, an expression of opinion on the financial by an appointed auditor in pursuance of the appointment and in compliance with the enabling decree Okezie B.N (2003.20).

The government financial account classified into funds, for the federal state and local government includes:

• Purpose of auditing system in the public sector. Auditing in the public sector provides three types of reports.

1. Internal reporting which managers use for planning and control of operation.

 

1. Internal reporting to the chief executive and directors for institutional policy formulations.

• External reporting for ensuring credibility before external bodies, foreign creditors and for legislature.

1. CONSOLIDATED REVENUE FUND: This is the main fund where all tax receipts are paid out to this, out of this fund are paid contribution to development and statutory appropriation.
2. J) DEVELOPMENT FUND: This fund is established for the purpose of capital

CHAPTER TWO

• LITERATURE REVIEW

Internal auditing is a management function in every organization and the internal auditing as an employee operates within the frame work of the rules and regulations guiding operations of the employee. In the public sector therefore, Auditors work must be carried out within the strict confines of the law.

The internal auditors reports to the chief executives and is charged with the duty to ensure that all the operational procedures and internal controls put in place by the management are strictly…