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The system of controls adopted in any economy greatly
determines the development and growth of that economy. To ensure
optimization in money, materials, machine, time, resources and
management of men, controls are essential.
These controls are installed by many organisations including banks
to check how effective and efficient they maximize their resources. One
of such controls commonly used to minimize wastage and guide plan to
their eventual accomplishment is “INTERNAL AUDITING”.
Auditing has been in existence for many years, it was in ancient
Egypt and the great mercantile establishment of the middle ages. This
shows that internal auditing can neither be neglected nor under rated in
our modern economy for it was borne of the complexities of modern
business dominate and transactions involved. In that, other
management of various large businesses, organisations and government
concern recognised internal auditing as valuable machinery and
achieving and objective deemed accurate at a point in time.
The term “Audit” is from a Latin word “Audire” which means
“Hears”. This is because the accounts of an estate domain were checked
by having them called out of these who completed them to those in
authority. With the growth of trade and commerce the need for more
accurate methods of recording business activities arose. Auditing is a
process whereby the books of account and vouchers of business entities
(including charity users/trusts) are subjected to critical examinations by
professionally qualified and independent account (Auditors) on such a
detail will enable them from an option as to their truth and fairness. The
auditing is the bridge across the credibility gap created by the separation
of management from ownership.
The complexities of the art of management extends to increasing
ware of business fraud, embezzlement and the cash squeeze which
often cripple many companies. The management has to look inward in
order to uphold the space of activities and keep abreast with the
changes in their immediate and external environment, and this can only
be achieved as good and effective internal control system of which
internal auditing is a major section. A writer maintained that the
existence of an efficient and effective system of internal control both in
design and operation which is the responsibility of management with
the best to prevent fraud or at worst help to detect such fraud at the
earliest opportunity.
It is a function carried out by an independent staff in audit
department with the sole aim of reporting on fairness and truly of
financial statement. However since the internal auditors are employee of
the firm or the establishment concern, independence is not always
The comprehensive courage of an internal audit upon several
factors, a general rule is that department should of course have as much
freedom as possible without interference from the management. In such
circumstances; the internal auditors will have a greatly enhanced share
in recommending new and concluding investigations where appropriate.
The terms of reference should be defined as lack of this may lead the
department and those in another.
To avert this ugly incident and ensure greater coverage during
investigations, management issues guidelines to heads of divisions to
always make necessary documents/records/files available to audit staff
as may be demanded by them while performing their duties. A proper
audit work should be able to:
Review the accounting systems as related to internal control.
Examine the economy or review the economy efficiency and
effectiveness of operation.
Examine financial and operating information for management
Review the implementation of cooperate policy plans and
Assist in implementation of new accounting system
Providing a training ground for both financial general management
Internal audit functions can help to spot out differences in systems, so
as to evolve corrective measures at the earliest opportunities. Internal
auditors appraise, analyse and report upon the policies and methods
employed in the bank.
The duties of internal auditors to the general performance of the
whole organisation cannot qualify; maintain a good internal control
system maintained by qualified chartered accountants.
Internal control system may be insufficient based on some
predicament. These may include lack of segregation and assignments of
duties of accounting staff. Also the scopes of duties of internal audit unit
are so wide and their scales of operations so low as well as the shortage
of qualified staff to carry out internal auditing and accounting duties.
Independence of accounting officer can easily be influenced by
management which can affect the internal audit system of an
organisation clearly defines as a result of two or more dishonest staff
can collide to override the efficiency of the internal control system. The
criticism of internal control system has been extended to the banking
industry hence the study of internal audit as a tool for effective
Internal audit is a tool, procedure, way to helping organisations
achieve their set goals or objectives. The main objective of the study is
to examine the effectiveness of internal audit in an organisation.
Other objectives of this study are as follows:
To show how internal audit assist in management operations.
To show how organisational hierarchy has influenced internal audit
To ascertain how internal audit department is a base to achieving
value for money audit.
1. Does internal audit actually assist in management operations?
2. Does organisational hierarchy enhance internal audit performance?
3. Can internal audit be a base to achieving value for money?
In this section the hypothesis selected in chapter one is tested
relevant question from the question for, and the questionnaire aroused
to the test of the hypothesis.
Ho; internal audit is not a source of help to prudent management
H1; internal audit is a source of help to prudent management
Ho; the recognition accorded to the internal audit department in the
organisation hierarchy do not enhanced the system of the organisational
H1; the recognition accorded to the internal audit department in the
organisation hierarchy do enhanced the system of the organisational
Ho; internal audit department is not a base for achieving value for
money audit
H1; internal audit department is a base for achieving value for money
Due to the ignorance of the public as to the contribution of
internal audit department to efficient management makes this study
essential. This is the form at which the public believe that internal audit
is not necessary as it delays job, while some sees it as the only way to
detect frauds and misappropriation of funds in a firm/organisation.
So this project will make clear, the merits of having a source of
internal audit, which benefits and how such benefits comes.
Secondly, the inability of workers to effectively and efficiently
utilize resources and lack of proper control mechanisms has led to
wastage of human resources, time, and finance and material resources.
This study will help management in bringing about greater efficiency
and effective use of resources and the same management cost. E. Woo
[1988] (FCA) if maintained that great deal of the work of an internal
auditor is curled with the evaluation of systems internal checks,
conservations with officials (the results of when, was later confirmed by
examinations of records) and general stripling of records. This study
makes more insights into the differences in current internal audit
practices in the banking system and suggests useful innovation for
making necessary changes in both the organisation and implementation
into internal audit functions as it contains and obtains in Afri-bank plc.
Lastly, this will at most expose the benefits of this great department to
companies who do not have such, so that they can establish this control
department without delay.
In further research, the shareholders in any organisation/firm are
the beneficiary when it comes to the role of internal auditing in the view
at which frauds detected are made known to them, not only the
shareholders, but the also the general public as a whole, so as to give
assurance of less risk in creating business opportunities with such
firms/organisation and knowing the financial stability of such
firm/organisation. Also detecting fraud helps in firms/organisations the
board of trustees protect the rights of such firm/organisation at which
either misappropriation of frauds in an organisation is going bankrupt.
This is of the view at which internal auditors helps
organisations/firms/companies get back to achieving their
Various measures of internal control system are considered in
Mainstreet bank, but more concentrations would be made on internal
audit aspect for the purpose of this study. Accounting systems and
related internal control measure the position, the independence of the
auditors as well as the scope of his workers is here to be studied.
Certain problems and limitations are expected to face the study,
such problems are lack of resources or time to study or go around other
divisions of the bank.
Also, some staff may not like to reveal information which they
regard as classified, deputes the facts that manager of the bank has
given the manager of the bank approved.
It is necessary that clear definitions of some technical terms and
words are given to avoid any possible confusion that may arise because
of their usage.
1) FINANCIAL AUDITING; it is sometimes referred to as auditing
(external) or simply as auditing. The American accounting
committee on basic concepts (1972) has defined it as “a
systematic process of obtaining and evaluating evidence regarding
asserting about economic actions and events to ascertain the
degree of correspondence between those ascertained and
established the degree criteria and communicating the results to
interested users.
2) INTERNAL AUDITING; H. Millichamp (1979) defines it as
“independent appraised activity within an organisation foe the
review of accounting financially and other operations as a basic of
services to management. It is a managerial control, which
functions by measuring and evaluating the effectiveness of other
3) INTERNAL CONTROL; The institute of chartered accountants for
England and Wales defined it as “a whole system of control,
financial and otherwise established by the management in order to
carry out the business of an enterprise in an orderly and efficient
manner, ensure adherence to management policies, safeguard the
assets and secure as far as possible the completeness and
accuracy of records”.
4) AUDIT REPORT; – This is a report prepared by a qualified
accountant and to express the opinion that the accounts show a
true and fair view and comply with statutory requirements.
5) FRAUD; The use of deception for unlawful gain or unjust
6) INERNAL CHECK;- it is defined as the allocation of authority and
work, in such a manner as to afford checks on the routine
transactions of day to day work by means of works of the person
being proved independent of another, or the work of one person
being complementary to that of another.


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