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IMPEDIMENT TO INTERNAL AUDIT EFFICIENCY IN PUBLIC ENTERPRISES
The concept of auditing derived its origin from the need of some system of checks upon persons, whose business was to record the receipt and payment of money on behalf of others. In the early stage of civilization, the method of accounting were so crude and the number of transactions to be recorded so small, as a consequence, everybody was able to check for himself all his transactions, but as soon as the ancient states empires acquired some coherence organisations a system of checks was applied to their public accounts, as evidenced by extant records. The word audit was gotten from a Latin word “AUDIRE“ meaning to hear, started when ownership was separated from the administration. These was first seen in Ancient Greece , where governmental accounting records for the monarchs, were certified true and fair only after a public hearing in which the accounts were read aloud to the hearing of the people based on the type of response given either affirmation or denial. The monarch either affirmed by saying I hear or reject by being silent in those days the prime qualification of an auditor was reputation men known for their integrity and independence. From the medieval times, there was a great expansion in exploration and international trade involving Europe in dealings, with the east and the America. The entrepreneurs who undertook these venture rarely possessed the necessary financial means that consequently led to them depending on wealthy merchants, bankers and even royalty, as in the case of Christopher Columbus. In England, Queen Elizabeth 1, gave active financial support to those involved in the international trade. This grew i.e expanded into companies that led to; The British companies Act of 1844, which provided for compulsory audit both internally and externally. This also led to a major event in the United States of America, the establishment of the American Institute of certified professional Accountants (AICPA) in 1896. This development led to the issuance of a joint publication by the American Institute and the federal Trade Commission in 1918, “Approved method for preparation of the balance sheet” this document was the first formal declaration of “generally accepted accounting principles” which has been amended till date.
In the nineteenth century, the British also established the Institute of Chartered Accountants in England and Wales (ICAEW) in 1980, during The times, auditing was concerned primarily with the detection of fraud which was generally moved towards the goal of determining, whether the financial statement gives a true and fair view of the financial position operating results and changes in financial positing results. This shift was in emphasis as a response to the needs of the millions of new investors in the corporate society. This latest shift was a result of the dramatic increase in the number of lawsuits charging management fraud that that has gone undetected by independent auditors. Which led to the introduction of the auditors right to examine the books and records to obtain all the information and explanation necessary for giving a report on the truth and correctness of the companies balance sheet. Audit are of different types, there are of four broad types namely: Statutory audits:- These are audits carried out by statutes, because the law requires it to be done like in the S.331 of companies and allied matters act 2004. Private audits:- Is an audit conducted into a firm’s affairs by independent auditors because the owners desire it, not because the law requires it these includes audits of sole traders and partnership. Internal audit:- Is an audit conducted by an employee of a business or an outside contractor into any aspect of its affairs. Other:- They are specific or specialized audit of management environmental matters e.t.c.
1.2 STATEMENT OF THE PROBLEM
It is crystal clear that management view an internal auditor as the watch dog who is out to protect and safeguard the assets and liabilities of the organization. Notwithstanding, the staff sees the internal auditor as an enemy who may want to prevent them from defrauding and carrying out obnoxious acts. They never want any correction from their mistakes or errors. However, the internal auditor needs independence to be able to work more effectively and to form an opinion without interference. To achieve this an auditor needs to be professionally qualified, that is a member of a professional body with knowledge of principle of accounts the body includes: Institute of Chartered Accountants of Nigerian ICAN and Association of national Accountants of Nigeria (ANAN) The auditor has come to stay because of the numerous services, he renders to the organization for instance, the auditor ensures that operations of the company are well controlled and effective ensuring at the same time that internal control systems are effective and efficient. A good internal audit department will provide positive contribution to the fulfillment of organizational goals and objectives. Due to many impediments like lack of independence and management interference, internal audit has not been able to achieve these laudable objectives.
OBJECTIVE OF THE STUDY
The primary objective of an internal audit is to assure the management that the internal checks and control system are effective in design and operation.
The research objectives is aimed at a study on.
Nigerian Television Authority and
Nigeria Petroleum Development Company (NPDC) respectively. Both in Benin City, Edo State
The following research questions are hereby formulated to guide the study.
Does poor staffing of the internal audit affect the efficiency of the depart of the department?
In what ways does, undue influence under the efficiency of internal audit?
Are auditors responsible for the hindrance in of internal audits?
In order to be able to achieve the objectives of this study the following hypothesis is hereby formulated and present for testing.
H0:Non-recognition of the internal audit independence
is not an impediment to its efficiency
H0: The large size of public enterprise is not an
impediment to its efficiency
H0: Poor staffing of the internal audit department is not an impediment to its efficiency.
LIMITATIONS TO THE STUDY
An ideal research work is one which is capable of attaining an overall and thorough coverage of the entire areas of study however, this will not be possible due to some limitations thus:
Time: The major constraint on this study is the time allowed for the completion of the study the short nature of the semester will actually affect the project.
Finance:- Another limitation is finance because not much work has been done in this area. There are few journal and book in the libraries. However the cost of getting this few journals and books is high.
Surfing the internet for materials is quite expensive as well, thus the research was done on a limited budge.
It is a general consensus that is was against management policy to give out internal document to outsider for any reason unless under special circumstance. Therefore the analysis would be made based on the questionnaire results, facts gathered during interview, discussion global criticles on the internet, as well as personal observations made during the work.
DEFINITION OF TERMS
Audit:-it can be defined as the examination of books, accounts, vouchers for business to enable the auditor confirm that the information presented show the true and fair view of the financial statement.
Internal Auditor:- is a type of audit carried out by the employees, which is intended to prevent fraud and ensure compliance with board directives and management policies.
An Auditor:– is a independent person that performs an audit, who is also a professional accountant.
External Auditor:- are chartered accountants who has passed their professional exams and are members of an independent body, contracted to perform audit in organizations.
Internal Control:– This is the whole system of control set-up by organisations to safeguard their assets, liabilities and financial records.
Internal check:- This is the daily or routine work of the organisation to ensure that errors are reduced to the barest minimum.