ABSTRACT
The vital instrument for the control of the organizational resources is the internal control which has internal audit as its instrument. This important father makes the researcher to choose “internal auditing as an instrument of effective management.” For this project, the institute of Management and Technology (IMT), Enugu has been used as a case study. The researcher made use of both primary and secondary data, structured questionnaires were the methods used for the collection of primary data, and secondary data were also collected from textbook and various research materials. Chi-square was used as a statistical tool for analyzing the data. From the findings of this research it was discovered that internal auditing is an indispensable instrument for effective management. Management’s interference with the functions of the internal audit duties in the institution and also lack of information contribute to the misappropriation of funds and prosperities of the organization. Every unit of the establishments should acknowledge the importance of internal audit to enable it achieve its organizational goals. The researcher recommends that internal auditors should be persons who are well trained, experienced and of good moral standing for proper recognition. The internal auditor should not be seen as blood grounds but as watch dogs and should be allowed to operate freely according to their schedule. Moreover, an unhindered flow of information is very necessary and the presence of good internal control system and internal audit has led to accountability, reduction in fraud, and safeguarding of assets in the institution. So, internal audit is an important unit in any establishment. Internal auditing is an instrument of effective management.
TABLE OF CONTENTS
Title Page i
Approval Page ii
Dedication iii
Acknowledgement iv
Abstract ix
Table of Contents x
CHAPTER ONE: INTRODUCTION
- Background of the study 1
- Statement of the Problem 6
- Objective of the study 7
- Research Questions 8
- Formulation of Hypotheses 9
- Significance of the Study 10
- Scope/ Delimitation of the Study 11
- Limitation of the study 11
- Definition of Terms 12
CHAPTER TWO: REVIEW OF RELATED LITERATURE
2.1 Definition of Internal Auditing 14
2.2 Internal Audit Process 17
2.3 The Appointment of Internal Audit 26
2.4 Objectives and Scopes of Internal Audit 30
2.5 Objectives of the Internal Auditor 42
2.6 The Components of Internal Controls 47
2.7 Management Control 55
2.8 Detection of Frauds and Errors 62
2.9 Audit Report and Relevance 75
2.10 The Difference Between Internal and External
Auditor 78
2.11 The Roles and Functions of Internal Auditors 81
2.12 Economic Implications of Ineffective Internal
Auditing System 85
References
CHAPTER THREE: METHODOLOGY
3.1 Research Design 92
- Area o the Study 92
- Population of the study 93
- Sample and sampling Procedure 93
- Instrument for Data Collection 94
- Validation of the Instrument 94
- Reliability of the Instrument 94
- Administration of the Instrument 95
- Method of Data Analysis 96
CHAPTER FOUR: DATAPRESENTATION AND RESULT
4.1 Data Presentation and findings 97
4.2 Discussion of Findings 112
4.3 Summary of Findings 115
CHAPTER FIVE: CONCLUSIONS AND RECOMMENDATIONS
- Conclusion 116
- Recommendation 117
- Suggestions for Further Research 119
Bibliography
Appendix
CHAPTER ONE
- INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The function, roles, relevance, importance and the existence of internal audit department in organisation cannot be over emphasized or exhausted considering the enormity of trust and responsibility attached to this department of an organisation.
Internal auditing becomes necessary as a result of the extended span of control faced by the management concerning the employment of men and material in the conduct of organizational affairs. The work of the internal audit are very important in most modern organizations and have trust of responsibility to advice the management and enforce the operations of internal control, and the internal checks in the organisation. The inefficiency in the organisation during day to day activities are controlled.
Internal Audit (IA) serves as an important link in the business and financial reporting process of corporations and not for profit providers. Internal auditors plays a key role in monitoring a company’s risk profile and identifying areas to improve risk management. The aim of internal auditor is to improve organizational; efficiency and effectiveness through constructive criticism.
IA has four main components;
- Verification of written works
- Analysis of policy
- Evaluation of the logic and completeness of procedures internal services and staffing to ensure they are efficient and appropriate for the organizational policies and
- Reporting recommendations for improvements to management.
Internal Audit is an independence appraisal activity in the organisation as a service to the management. The duties are usually defined by the management and some of the duties includes:
- Verification of all accounting methods and principles adopted by the management to prepare auditing report.
- Examination of accounting statement produced for the management.
- Investigation of the administrative system upon which they are based (Inyiama 2010:17).
- Provision of statistical data for management information and decision making.
- Other special assignment such as assets disposal and staff audit.
Inspite of these, there, is a serious, difficult and challenging task in the function of the internal audit department in most government organizations the management to some extent denies internal audit department funs, staffing and training which renders them helpless and ineffective. Internal Audit is part of the management and reports to the chief executive.
It is necessary or very important for internal audit to have the quality to be trusted and believed as internal auditors are persons of integrity. This quality of an internal auditor mentioned above sometimes contributes to the efficiency of the internal audits of an organization generally over the world.
The staff of some organizations treats the internal auditors as a ‘Blood Hound” and not” watch Dogs” which they are meant to be.
This is one of the problems that affects internal audit department as the fraudulent staff would not normally cooperate with the internal audit department as to provide relevant information which should be used for effective check of the works of the organizations.
This project focuses its attention on the Institute of Management and Technology (IMT), Enugu. The school was established as a result of the combination of the former College of technology and Institute of Administration of East Central State in 1972.
The Institute of Management and Technology has two campus Campus 1 and II, Campus I is now taken over by the college of Education Enugu which is located along Abakaliki Express Road, Enugu.
The Institute of Management and Technology runs various Programmes such as full time, part time and poly-air programme.
The Institute has its head of the establishment as the Rector of the Institute, the Registrar, the accounts, and the students affairs etc.
The institute of management and technology (IMT) Enugu has under its various programmes likes;
- School of business and administration;
- School of Engineering
- School of General Studies;
- School of Technical Teachers Education and;
- School of Continuing Education.
1.2 STATEMENT OF PROBLEMS
The research titled internal auditing as an instrument of effective management attempts to determine the methods by which some institution like the institute of management and technology (IMT), Enugu has utilized internal audit as an instrument for effective management some of these problems are:
- Inability to identify the functions of the internal audit department;
- Lack of information for internal audit work;
- Non-independent of internal audit work in the institute and
- Inability to recognize the internal audit as effective and reliable tools to management in performance of its functions.
1.3 OBJECTIVES OF THE STUDIES
The objective of this work is as follows:
- To find out how lack of information in this institute affects the audit work?
- To determine whether internal audit is an instrument for effective management.
- To discover the extent to which the inability to identify the function of the internal audit department affects Institute of Management and Technology (IMT), Enugu.
- To determine the extent to which the independent of the internal audit work is being hampered.
1.4 RESEARCH QUESTIONS
To guide this study, (4) four research questions were formulated as follows:
- To what extent does lack of information in institute of management and technology (IMT), Enugu affect the internal audit works.
- To what extent does internal auditing serve as an instrument for effective management in institute of management and technology (IMT), Enugu.
- To what extent does inability to identify the function of internal audit department affects the activities of the institute of management and technology (IMT), Enugu.
- To what extent does the lack of independence of internal audit hamper its operations?
1.5 FORMULATION OF HYPOTHESIS [Null Hypothesis]
The hypothesis of this work includes:
Ho1: Inability to identify the functions of the internal audit department does not in any way affect the management of institute of management and technology (IMT), Enugu.
H1: Inability to identify the functions of the internal audit department does in any way affect the management of institute of management and technology (IMT), Enugu.
Ho2: Lack of information in the institute of management and technology (IMT), Enugu does not affect the internal audit department or audit work of its management.
Ho2: Lack of information in the institute of management and technology (IMT), Enugu affect the internal audit work of its management;
1.6 SIGNIFICANCE OF THE STUDY
This work will be of great benefit to the management of every institute or firm not only the institute of management and technology (IMT), Enugu.
The benefit of internal audit may not be over emphasized due to detection, control and prevention of waste and fraud in the organisation. This researcher provides moral influence to protect efficiency and assists management in dealing prompting with some issues which would have created problems if left to linger until they come to the attention of the higher management.
Other students of business, research, business executives and the public institute many find this work interesting as the importance and roles of the internal audit in firm’s industries, organization etc can never be over emphasized.
1.7 SCOPE/ DELIMITATION OF THE STUDY
The scope of this study focuses on the internal audit as an instrument of effectiveness management using the Institute of Management and Technology (IMT), Enugu as a case study.
This study is limited to the impart, influence and roles and responsibilities for the internal auditor to be an effective instrument for effective management and the ways by which the internal audit of the institute of Management and Technology has being an effective instruments for the management.
1.8 LIMITATION OF THE STUDY
The limitations of this study is mainly the relevant of staff answering questions related to their organization or institute.
Most staff were unable to complete their questionnaires and hiding some necessary information and thereby delaying the researcher.
Financial constraints was also a factor as documents places and offices where necessary to be there, finance at time stops us.
Also the duration of the researcher is not desirable as we need catch up with lectures and other activities which are important.
Some of this factors, some times hinder the researcher from totally exhausting the study.
1.9 DEFINITION OF TERMS
Integrity: Implies honesty, fair dealing and trustfulness.
Objectivity: The state of the mind. Those considerations related to the task in hand.
Independence: For an auditor to be objective in his judgment.
Watchdog: A person or group of people whose job is to protect the right of people who buys things and to make sure companies do not do anything illegal.
Blood Hound: Are animals used for hunting so some staff of organizations sees auditors as one hunting and not a friend.
Audit programme: This is an internal documents that specifies detailed work that needs to be undertaken as part of the field work.
Organization: The body for which the internal auditor is providing an internal audit services.
Audit Committee: A committee of directors, mainly without executive responsibility which considers amongst others the external and internal audit plans and activities and reviews internal control arrangement.
Management: A comprehensive term including all persons who have responsibility at various level of activity which may be the subject of internal audit.
System: A series of inter-related procedures composed of processes and controls designed to operate together to achieve a planned objectives.
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