CHAPTER
ONE
1.0 INTRODUCTION
1.1.
Background of the Study
Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization's
operations. It helps an organization accomplish its objectives by bringing a
systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes (Chamber (2008)).
Internal
auditing is a catalyst for improving an organization's governance, risk
management and management controls by providing insight and recommendations
based on analyses and assessments of data and business processes. With commitment to integrity and accountability ( Nwude (2001)). Internal auditing provides value to
governing bodies and senior management as an objective source of independent advice (Okezie (2006)).
The scope of internal auditing within an organization is
broad and may involve topics such as an organization's governance, risk
management and management controls over: efficiency/effectiveness of operations
(including safeguarding of assets), the reliability of financial and management
reporting, and compliance with laws and regulations (Nwude (2001)).
Internal auditing may also involve conducting proactive fraud audits to
identify potentially fraudulent acts; participating in fraud investigations
under the direction of fraud investigation professionals, and conducting post
investigation fraud audits to identify control breakdowns and establish
financial loss.
Internal auditors are not responsible for the execution of
company activities; they advise management and the Board of Directors (or similar oversight body) regarding executing their responsibilities. As a result of their broad scope of
involvement, internal auditors may have a variety of higher educational and
professional backgrounds.
For most
of its history internal audit has served as a simple administrative procedure comprised
mainly of checking documents, counting assets, and reporting to Board of Directors,
Management or External Auditors. In recent times, however, a combination of different
forces has led to a quiet revolution of the profession. Organizations have to demonstrate
accountability in the use of shareholders money and efficiency in the delivery of
services. Organizations now demand great competency and professionalism from internal
audit, and scarce resources must be deployed more efficiently to minimize and manage
risks. Technological advancement makes it possible to track and analyse data
with continually increasing speed thus making it essential for organizations to
be well advised by the internal audit department. Internal audit varies from
one organization to another, and making change to modern internal audit can be
a substantial undertaking. The transition from merely ensuring compliance with
rules and regulations to truly delivering added value requires more than just
organizational changes. In many bank institutions staff is poorly paid and
unmotivated, ethical standards are weak, and governance practices are ineffective
leading to asset mismanagement (Ramamoorti, 2003).
The
papers seek to empirical and statistically ascertain the impact of the internal
audit in the Performance an organization, while the private sector of the
economy is studied at large; the case study MB ANAMCO Ltd, Emene, Enugu is
particularized.
1.2.
Statement of the Problem
The
private sector according to Anyanwu (2006) is that part of the economy not under direct government
control. It entails production and distribution that is in private hands. It
serves as a complement to the public sector since increased public sector
efficiency results from improvements and places government in a better position
to focus on the objectives, conduct and performance of those enterprises that
remain in the public sector (Hamming and Mansoor 1987).
Despite
this enormous role, the sector has been beclouded with problems such as:
(i)
Financial impropriety
(ii) Lack of auditing control
(iii)
Lack of independence of the internal control
(iv)
Incomplete recording of business transactions
(v)
Over blow expenses to reckless spending
(vi)
Non compliance and adherence to accounting standard and guide lines.
(vii)
Mismanagement of scarce funds
1.3 Objectives of the Study
The
objective of this study is to establish the impact of internal audit on
organizational performance
Specific objectives include:
1. To
ascertain if the duties of the internal auditor assist management in taking
informed decision.
2. To
ascertain if there exist co-operation between the internal auditor and external
auditor.
3. To
find out if internal audit assists in the detection and prevention of fraud.
4. To
determine if internal audit ascertain the correctness of financial records.
5. To
determine the extent to which internal audit helps in enforcing compliance to
rules and regulations regulating private sector accounting and auditing.
6. To
find out if internal audit inspect and verifies organizational assets and
liabilities.
7. To
know the factors hammering pa ring audit procedures in the private sector
1.4 Research Questions
i)
Is there any relationship between the internal audit and management?
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?
1.5 Statement
of Hypothesis
To
justify the research topic, the impact of internal audit on organizational
performance and to enable the researcher
to draw a logical conclusion, there is need to make guesses as solutions to the topic which are
subject to acceptance and rejection are based on the result of the test.
HYPOTHESIS ONE
ü H0:
There is no relationship between the internal audit and management.
ü H1:
There is a relationship between the internal audit and management.
HYPOTHESIS TWO
ü H0:
There is no co-operation between internal auditor and external auditor.
ü H1:
There is co-operation between internal auditor and external auditor.
HYPOTHESIS THREE
ü H0:
Internal audit does not assist in the defection and prevention of pilferage and
fraud.
ü H1:
Internal audit assist in the detection and prevention of pilferage and fraud.
1.6 Significance of the Study
(I) The study will be of immense benefit to the
shareholders who have contributed the progress of the business and needs a
reward in form of dividends.
ii) This can be achieved if ineffectiveness and
corrupt practices such as fraud, loss of revenue, sharp practices, and lack of
transparency etc .associated with the private sector are minimized or even
eradicated.
iii)
Since a virile private sector is noted for the economy will be of great benefit
from the findings of the study
iv)
Equally, future researches on auditing will find the study interesting in their
research.
1.7 Scope of the Study
As
the study is centered on the impact of the internal audit in organizational
performance of M.B ANAMCO LTD, Emene
Enugu State, the research covers all department under the firm in other
to ascertain whether auditing has an effect in the private firm and if not what
is the cause.
1.8 Limitation of the Study
The
researcher in the course of carrying out the research was faced with the
following problems and constraints.
(a) Time factor: Time shortage posed serious
challenges, since it was indeed very short considering the enormity of the
research work.
(b) Lack of information and data due to
unavailability of materials and other vital information. Libraries are either
out of stock or scanty in their content of relevant materials.
(c)
Financial problem was also a deterrent in carrying out
the research since the available fund was not enough to sustain the vast
research proposals, it was also a
challenge in that regard.
1.9 Definition of Term:
(A) Audit:
Audit can be define as the independent
examination of a financial statement and expression of opinion on the financial
statement of enterprise by an appointed auditor in pursuance of that appointed
and in compliance with any relevant statutory obligation.
(B) Auditor:
Auditor is a qualified accountant who also
passed a professional examination. Such a person must be of good conduct and
have a vast knowledge and able to understand a practical business, endeavor
always to grasp the technicalities and business, methods of any concern whose
account he undertakes to audit.
(C) Internal Auditing
According to Bright (1964) "Internal
auditing has to do with the independent examination of the books of account so
as to ascertain whether the books of accounts are in agreement with the
organization transaction.
(D) Private sector:
Private sector includes the part of the
economy that is fully controlled and managed and financed by private
individuals.
(E) Organization
Organization can be defined as an organized group of people
with a particular purpose, such as a business or government department.
According to Wikipedia; An organization or organisation (is an entity comprising multiple people, such as aninstitution or an association, that has a collective goal and is linked to an external
environment.
DOWNLOAD NOW!
No comments:
Post a Comment