TABLE OF CONTENTS
The title page i
The approval page ii
Certification page iii
Dedication iv
Acknowledgement v
Table of contents vii
List of tables viii
List of figures ix
The abstract x
Chapter One: Introduction
1.1. Background of the study…………………………………………………………….1
1.2. Statement of the problem…………………………………………………………..3
1.3. Research question……………………………………………………………………….4
1.4. Objective of the study…………………………………………………………………4
1.5. Research hypotheses……………………………………………………………………5
1.6. Scope of the study………………………………………………………………………6
1.7. Limitation of the study…………………………………………………………………7
1.8. Significance of the study………………………………………………………………7
1.9. Definition of terms……………………………………………………………………….8
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Chapter Two: Review of related literature
2.1. Difference between internal auditing and internal auditor…………….10
2.1.1. The need or objective of internal auditing in power sector……………..11
2.2. Difference between external auditing and external auditor……………..12
2.2.1. Objectives of external auditing…………………………………………………….13
2.3. Qualities of an auditor………………………………………………………………….14
2.3.1. Auditors right………………………………………………………………………………….16
2.3.2. Duties of an auditor………………………………………………………………………..17
2.4. Value for money audit as a tool of fraud control…………………………..18
2.4.1. Value for money objectives…………………………………………………..……….…19
2.4.2. Improving value for money audit………………………………………..………….…20
2.5. Problems and prospects of value for money audit…………………………20
2.5.1. Causes of fraud in the public sector………………………….…………………..21
2.5.2. Prevention measures of fraud in the public sector……………………..…23
2.6. Other preventive measures………………………………………….……………………24
2.6.1. Internal auditor’s role in fraud control……………………..……………………24
2.6.2. Fraud control methods………………………………………….……………………….26
2.7. Core of value for money audit…………………………………………………………27
2.7.1. Value for money audit concept……………………………………………………….31
2.7.2. Scope and emphasis……………………………………………………………………….33
2.8. Auditing and value for money……………………………..…………………………34
2.8.1. Steps involved in carrying out value for money audit…………………………36
2.8.2. Public sector audit………………………………………………………………………….36
2.9. Procedures for value for money audit…………………………………………….37
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2.9.1. Value for money audit technique………………………………………………….39
2.9.2. Value for money review………………………………………………………………….41
2.10. Problems of value for money audit in the public sector………………….42
Chapter Three: Research methodology
3.0 Introduction………………………………………………………………………………………..44
3.1 Research design………………………………………………………………………………44
3.2 Source of data……………………………………………………………………………………46
3.3 Population of the study…………………………………………………………………..46
3.4 Sampling size and techniques…………………………………………………………47
3.5 Instrument for data collection……………………………………………………..48
3.6 Validity for instrument of data ………..………………………………………….49
3.7 Reliability of the instrument data…………………………………………………..49
3.8 Method of data ……………………………………….…………………………………..49
3.9 Method of data analysis……………………………………………………………….50
Chapter Four: Data presentation, analysis and interpretation
4.1. Data presentation and analysis……………………………………………………..53
4.2. Test of hypothesis…………………………………………………………………………63
Chapter Five: Summery of findings, conclusion and recommendation
5.1. Summary of findings………………………………………………………………………75
5.2. Conclusion…………………………………………………………………………………….77
5.3. Recommendation…………………………………………………………………………78
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BIBLIOGRAPHY………………………………………………………………………….80
APPENDIX / QUESTIONNAIRE……………………………………………..82
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List of tables
4.1.1 Responses on the extent to which value for money audit is relevant
to the effectiveness and control of an organization.
4.1.2 Responses on the significant relationship between internal control
and fraud detection.
4.1.3 Responses on the causes of lack of transparency and wide spread
corruption in power sector.
4.1.4 Responses on the significant impact of value for money audit in fraud
detection and control.
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List of Figures
Fig 2.7 Categorization of fraud detection methods
4.2 Anova table
4.2.1 Anova contingency table for hypothesis 1
4.2.2 Anova contingency table for hypothesis 2
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ABSTRACT
The scope of governmental auditing has been widened over the year by the
demand for independent verification of information to the extent that it can no
longer be limited to the audit of financial operations, but value for money audit
which ensures that the activities and programs are carried out at low cost and
high standard. Lack of commitment in cost efficiency to the overall achievement
of goals by the managers in the public sector brought the need of this research
work titled “Evaluation of value for money audit as tool for fraud control in the
public sector”. The aim was to ascertain whether government auditing achieves
the purposes for which programs are authorizes and funds released economically
and efficiently in accordance with applicable law and regulations. A survey
research design was adopted for the study with sample size of 100 respondents
randomly sample and stratified from Audit and finance department of PHCN
(Abuja). Three hypotheses were tested at 5% level of significance using the
analysis of variance (ANOVA) statistics. it was found that value for money audit
play a vital role in promoting the effectiveness and efficiency of activities in the
public sector the researcher recommend that government should support the
implementation of policies formulated to enhance value for money audit in the
public sector.
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CHAPTER ONE
1.1 BACKGROUND OF THE STUDY
Every sector of the economy both the private and the public sector has its own
objectives and goals to achieve. For the public sector of the economy, their goal is
to satisfy the social needs of the citizens and in the effort to achieve these
purposes, auditing more often, play a vital role.
The size and scope of these sectors have sometimes made it clear for the
executor to exercise personal and first hand supervision of operation. It is in this
light that value for money audit established by management is initiated, for any
organization to carry out its business efficiently and effectively, there must be
some factors that must be put in place for the smooth running of the organization
like materials, machines, human labor and money e. t. c.
Auditing is seen to play an intermediary function in between management
and the resources of the organization. It is also fundamental to any business
either the public or private sector, which will help the business to keep its
adequate financial records. These financial records are kept in response to the
demand by a system control which requires that the business enterprise must be
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carried out in an orderly manner, ensure adherence to management policies, safe
guard the assets and secure possibly the completeness and accuracy of the
records. Irrespective of these facts of system of control established by the
management of the organization, fraud still thrives.
In the early 1970s, the role of the state auditors began to change
dramatically. Changes began in USA, Canada, and in several European countries.
The representative of the people started demanding information on the efficiency
and effectiveness of public expenditure.
In Nigeria no specific legislation has been put in place to empower auditors
to carryout value for money audit. However, the 1999 constitution section 88 (2)
empowered both the two federal house and the state house of assembly to
conduct investigation to expose corruption, inefficiency or waste on the execution
or administration of law within the legislative competence and in the
disbursement or administration of fraud appropriated by it.
Therefore, fraud control has become increasingly important to managers of
various governments in an organization. In general, financial statements fraud has
always weakened investors’ confidence in both private and public sector
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investment. This is because 1 fraud against an organization reduces the net
income by 1 and services to be provided to people in the case of public sector.
However, value for money audit will be wildly concerned with the economy
and efficiency of an organization and the effectiveness of achieving its desired
objective thereby controlling fraud to evaluate the effectiveness of the internal
control system within the organization.
(BRIEF REVIEW OF THE FIRM, POWER HOLDING COMPANY OF NIGERIA, P H C
N)
The history of electricity in Nigeria can be dated back to the end of the 19th
century when the first generating plant was installed in Lagos in 1898. From then
until the 1950, the platform of electricity development was in the form of
individual electricity power undertaking scattered all over the towns, some of the
few undertaking were federal government bodies under the public works
department, some by the native authorities and others by the municipal
authorities.
1.2 STATEMENT OF THE PROBLEM
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Fraud is a complex phenomenon. It is rampant in both private and public
sectors of Nigerian economy. In the public sector, value for money audit reports
are mostly unqualified even in a glaring situation or cases of corrupt practice by
the managers that means that auditors especially those in public establishment
compromise their duties or their duties are influenced and threatened in the
performance of their statutory functions.
Therefore these studies tend to find out why there are:
Improper methods of appointment of auditors
Inadequate internal control
Lack of independence of auditors
Untimely and unreliable financial statements
Lack of transparency and inadequate method of accountability
1.3OBJECTIVES OF THE STUDY
This study tends to find out some of the objectives which will include:
1. To find out the effect of value for money audit in fraud detection and
control in the public sector.
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2. To find out the relationship between internal control and fraud detection.
3. To determine what extent is the value for money audit relevant to the
effectiveness and control of an organization.
4. To find out why there is lack of transparency and inadequate method of
accountability.
5. To find out why there is inadequate internal control system.
1.4 RESEARCH QUESTION
1. Is there any significant effect of value for money audit in fraud detection
and control in the public sector?
2. Is there any alignment relationship between internal control and fraud
detection?
3. To what extent is the value for money audit relevant to the effectiveness
and control of an organization?
4. What are the causes of lack of transparency and inadequate method of
accountability?
1.5 RESEARCH HYPOTHESIS
The hypotheses are stated in null and alternative forms.
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Ho1: There is no significant effect of value for money audit in fraud detection
in the public sector.
HA1: There is a significant effect of value for money audit in fraud detection in
the public sector.
Ho2: There is no alignment between internal control and fraud detection.
HA2: There is an alignment between internal control and fraud detection.
Ho3: The value for money audit does not institute financial discipline in
organization.
HA3: The value for money audit institute financial discipline in an organization.
1.6 SCOPE OF THE STUDY
Basically, the scope of this research work is on the value for money audit
in the controlling of fraud, detection and financial crime prevention in our
present day public sector using “power holding company of Nigeria” as a
study. It focuses on the need for auditing and the importance of auditing in
detecting and preventing fraud in other for organizations to ascertain their
problems.
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The population of study in selected staff in four of the units or department of
the power sector namely the audit unit, finance, account and public relation
department.
1.7LIMITATION OF THE STUDY
Virtually every research work comprises of one limitation or the other.
However during the course of carrying out this research work, a lot of set locks
were encountered which include:
1. Time constant: there was limited time so the topic could not be broadened.
2. Non-challant attitude of some respondent: the response gotten from
some of the staff of the power holding company poses another problem.
Most of them due to lack of knowledge fear to provide information and
also to protect their job due to corruption, they could only give information
which concerns them most.
1.8 SIGNIFICANCE OF THE STUDY
1.There is need to inform the management in the business organization on the
value for money audit as regard to fraud control , detection and prevention in
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order that the auditor would be giving a maximum co-operation in the
performance of his study.
2. It will also encourage the interest groups in the organization e. g potential
investors, creditors’ e. t. c.
3. It will enlighten the public on the topic and provide further literature in the
field of auditing and investigation.
Also the research work will be handy and serve as reference for further
researches concerning auditors and fraud control, and it will add to our
knowledge generally.
1.9 DEFINITION OF TERMS
Auditing: An independent examination of an expression of opinion on the
fundamental statement of an entity by an appointed auditor (Ihe and Umeaka
2006)
Economy: An organized scientific study of the problem by which scarce
resources which have alternative uses are allocated among competing wants
with the objective of maximizing welfare (Nnamocha 2002)
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Efficiency: Is the maximization of the ratio of output to input or the
relationship between resources consumed in the process of generating
effective output and output so produced (Norbert 1999)
Effectiveness: Refers to the degree to which the resulting output satisfied
predetermined organization objectives (Norbert 1999)
Internal control system: The whole system of control financial and otherwise
established by management in other to carry out the business of an enterprise
in an orderly and efficient manner (Chukwu 2005: 17)
Management: An applied discipline concerned with the achievement of
organizational objectives (Norbert 1999)
Public sector: The portion of an economy in which the activities are under the
control and direction of the state (Ihe and Umeaka 2006:1)
Private sector: that portion of the economy in which the activities are under
the control and direction of a non- governmental economic unit (Ihe and
Umeaka 2006:2)
Fraud: Refers to intentional act by one or more individual among
management, those charged with governance, employees, or third parties
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involving the use of deception to obtain an unjust or illegal advantage (Anesike
2009)
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