Internal Auditing as an Aid to Management

Internal Auditing as an Aid to Management, download the full project materials from chapter one to five with reference and abstract.



1.1                Background of the Study

In developing economics, like Nigeria, public sector represents one of the most dominant economic forces; perhaps due to the fact that government constitutes the largest single business entity and her pattern of expenditure through its various ministers, agencies and departments stimulate a lot economic activities.

Public sector, therefore, sets the economic agenda for the nation.  This implies that a robust system of internal checks needs to be put in place to provide assurances that government funds are used for purposes they were meant.  One major way of achieving this is the institution of internal audit.  In the absence of effective internal audit, individuals with questionable character may exploit inherent loopholes to their advantage.  It is argued that the historically centralized and hierarchical structure of the public sector with its complex bureaucratic procedures tend to provide some level of comfort to those entrusted with the disbursement of public funds.  Consequent upon some layers of control embedded in the public sector, those responsible do not often see the need for another institutional layer (internal audit) to strengthen public assurance of accountability.

At the beginning of the century, most businesses are small and sole-operated. The owners/managers are overly involved with most of the decision making. As business grows in size and complexity, professional managers take position of the owners and the operators.

Consequently, they rely heavily upon streams of accounting and statistical report which summarizes current happenings and conditions in the enterprise. The information carried by these streams of report enables management to control and direct the enterprise in order to assure management that the information received are both reliable and accurate. A system of internal audit is developed to monitor the activities of the company.  The need for maintaining the adequate efficient and effective internal audit, therefore cannot be overemphasized especially in days when Nigeria’s economy still is witnessing depression and every company is making effort in ensuring that wastage, pilferage, misappropriation are checked or avoided, and to ensure that assets are being secured.

Vani (2010) argues that modern internal audit really evolved after the land mark 1987 report of the Committee of Sponsoring Organizations (COSO) on fraudulent financial reporting.  He further states that the implementation of the 2002 Sarbanes – Oxley act has further increased the breadth and depth of the professional work carried out by the Internal Audit (1A) community. He opines that the main objective of the modern Internal Audit function is to assist management in making decisions “by bringing a systematic, disciplined approach to evaluate and improve the effect of risk management, control, and governance process”.

Some problems were noticed during the cause of this research; problems within the company, these problems necessitate this work. The researcher noticed that there was ineffective co-operation between the internal audit and management, audit reports were sometimes ignored by the management. The relationship between the internal auditor and external auditor was strained making work harder for the external auditor. The lack of internal audit to prevent pilferage and fraud within the company thereby preventing an error free working condition.

1.2            Statement of the Problem

In spite of various pronouncements on internal audit in the Nigerian Public Sector, the general opinion according to literature is that most of the public enterprises have failed to deliver on the purposes for which they were established.  Many people accuse managers of public enterprises in Nigeria of ineffectiveness and inefficiency in terms of resource control.  They argue that poor application of internal audit principles and procedures leads to blatant diversion of scarce resources with its attendant consequences on the traditional accountability of government to the public.  In fact, Lee, Johnson and Joyce (2004) observe that internal control is desired to provide some assurance to stakeholders that scarce resources are not diverted away from basic considerations inherent in financial management system design.

Often, management and internal audit department function were seen as contradictory rather than complementary. Internal audit department is setup to ensure adherence to management policy but this objective cannot be achieved because of interference and undue influence by the top management.

More so, monthly or quarterly internal audit report as the case may be in an organization is expected to provide information required by management to determine how effective their policies and implementation are. It is on this realization that this study will attempt to determine how effective are those information to aid management in solving day to day problems. It signifies defects or problems; the research will examine number of them namely: There exists no relationship between the internal audit and management, Co-operation does not exist between the internal auditor and external auditor, Internal audit does not assist in detection and prevention of fraud.

1.3              Research Questions.

This research work on internal auditing as an aid to management will guided by the following research questions.

  1. i) Is there any relationship between the internal audit and management?
  2. ii) Does co-operation exist between the internal auditor and external auditor?

iii) Does internal audit assist in the detection and prevention of pilferage and fraud?

Other headings in chapter one include the followings.
1.4            Objectives of the Study

1.5 Hypotheses of the Study

1.6 Significance of the Study

1.7 Scope of the Study

1.8 Limitations of the Study

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