Abstract
Internal
auditing department has evolved to meet the need of business, government and
nonprofitable organization. The demand for internal auditing arose when
managers of early large corporations recognizes that annual audit of financial
statement by Certified Public Accountant (CPA) were not sufficient. The objective
of this study, is to find out if the internal audit department in the unit
command of the Federal Road Safety Commission, in which Auchi unit command was
the case study of the research has/or is playing the role of a panacea to the command.
Simple random and stratified sampling methods were used in the process of
administering the questionnaire. The sample size was limited to 30 staff, in
which both junior and senior staff of the Federal Road Safety Commission were
sampled. At the end of the study, it was discovered that the internal audit
department which is normally referred to as an extension of management serve as
panacea to the commission. The researcher therefore recommends based on the
findings that; the federal government who are responsible for the recruitment
of staff into the internal auditing department, should ensure that qualified
and experience staff are recruited into the department; the internal auditors
should be motivated and lastly, management should ensure that the report of internal
audit department are read and that adequate steps should be taken to improve
the organizational performance.
TABLE OF CONTENTS
Title
Page i
Certification
ii
Dedication
iii
Acknowledgements
iv
Abstract
vii
Table
of content
Chapter One:
Introduction 1
1.1
Background to the Study 1
1.2
Statement of Problems 5
1.3
Research Questions 5
1.4
Objectives of the Study 5
1.5
Statement of Hypothesis 6
1.6
Significance of the Study 6
1.7
Scope of the Study 7
1.8
Limitation of the Study 8
1.9
Definition of Terms 9
Chapter
Two: Review of Related
Literature 11
2.1 Introduction 11
2.2 Purpose of Internal Audit. 12
2.3 The History of the Federal Road Safety Commission. 13
2.4 Organization of the Internal Audit 20
2.5 Objectives of the Internal Audit 23
2.6 Function of the Internal Audit Department 24
2.7
Factors Militating against the
Effectiveness of the Internal Audit. 27
2.8
Managing the Internal Audit Department 28
2.9
Essential Qualities of Internal Auditor 32
2.10
Internal Audit Department 33
2.11 Acceptance of Evidence 35
2.12 Internal Audit Investigation Techniques 39
Chapter
Three: Research Method and Design 43
3.1
Introduction 43
3.2
Research Design 43
3.3
Description of Population of the Study 43
3.4
Sample Size 44
3.5
Sampling Techniques 44
3.6
Sources of Data Collection 44
3.7
Method of Data Presentation 45
3.8
Method of Data Analysis 45
Chapter
Four: Data Presentation, Analysis and
Interpretation 47
4.1 Introduction 47
4.2 Data Presentation 47
4.3 Data Analysis 48
4.4 Hypothesis Testing 55
Chapter
Five: Summary of Findings, Conclusion and
Recommendations 58
5.1
Introduction 58
5.2 Summary of Findings 58
5.3
Conclusion 59
5.4
Recommendations 60
References 61
Appendices 64
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
Internal auditing has evolved to meet
the need of business and government and non profitable organization.
Originally, a demand for inter auditing arouse when managers of early large
corporations recognizes that annual audits of financial statement by Certified
Public Accountants (CPA) were not sufficient. As organization become larger and
complex, they encountered additional operational problems that could be
addressed operationally.
Several relatively recent events have
been important to the evolution of the internal auditing profession. The first
was the enactment of the foreign corrupts practice Act of 1977. the accounting
provisions of the Act require public companies to establish and maintain
effective internal control. To ensure compliance with these provision, many
companies established or augmented their internal auditing departments.
Another event that affected that
internal auditing profession was the issuance in 1989 of the “Report of the
National Commission on fraudulent financial reporting”.
This report contains the commissions
finding and recommendations about preventing fraudulent reporting by public
companies. Among its recommendation was a suggestion that the public companies
establish an internal audit function, with appropriate qualified personnel and
fully supported by top management. It also recommends the following:
1.
Internal Audit objectivity within the
organization.
2.
Maintain a director of the internal
audit function with appropriate stature, establishing effective reporting
relationships between the director of internal auditing and the audit committee
of the board of directors.
Consistently in 1998 the Blue Ribbon
Committee Report on audit committee effectiveness conclude that appropriate
responsibilities for the oversight of financial integrity and accountability of
public companies may be viewed as a three legged stool consisting of:
·
Management and internal audit
·
The board of director and its audit
committee and
·
The external auditors
Internal auditing has various
definitions in different books, one of such definitions ways by Adeniyi (2012,
p. 242) as an independent, objective, assurance and consulting activity
designed to add value and improve an organization’s operating.
Howard (1974, p. 201) defined internal
auditing as an internal check in an establishment to put the management in
their appropriate footing on statutory.
The internal audit serves as a
protection for management against irregularities that could be committed by
officials of the organization such as fraud, misuse of funds or theft of
assets, dereliction of duty which could result in financial loss or damage to
the organization.
Internal audit also offer a constructive
service to management by making objective assessment of operational procedures
in an organization and putting forward to management well thought out
suggestions for improvement.
It must be noted that the establishment
of the internal audit function is not required by only law and is usually
crested by the management of offer the aforementioned protection and
constructive service to it.
The internal auditor is in fact an
extension of management and does the things which the chief executive officer
of any organization would have been doing himself with his time and necessary
expertise in executing any of the functions of management. Therefore, the chief
executive can always seek the assistance of internal auditor. This is why
internal auditing is referred to as a panacea to effective management, as no
management will attain optimal effectiveness without the help of the internal
auditor.
1.2 Statement of the Problem
This topic looks into the problems faced
by management prior to the establishment of the internal audit department and
finally the role played by management in ensuring the effective of management
i.e. how has the internal audit department served has a panacea to management.
1.3 Research Question
1.
Does the internal audit department in
the unit command serve any significant purpose to the management of the
command?
2.
What are the relevance of the internal
audit department to the command?
1.4 Objective of the Study
The evolvement of large activities by
business organization and the concept of expansion by many organization has
really increase the need for the establishment of the internal audit
department.
This study is directed to find out if
internal auditing will help the unit command to put all her record in order of
operational accounting procedure in governmental settings.
The study will also serve to enlighten
us on the organograme of the Federal Road Safety Commission as a case study is
concerned.
To ascertain if there is any reason for
the federal road safety commission to operate an effective and sound, reliable
internal audit system even down to the units commands.
1.5 Statement of Hypothesis
Ho: Internal auditing
department do not serve as a panacea to effective management in the command.
HI: Internal auditing
department serve as a panacea to effective management in the command.
1.6 Significance of the Study
Internal auditing is a service to
management. It acts as a panacea to management in the following ways:
·
It reduces staff fraudulence in the
Federal Rod Safety Commission unit command.
·
It also ascertains the level of control
in an organizational system like paramilitary.
·
Internal auditing effectively put the
management in the true picture of what is happening internally in any system,
to enable them take concrete decisions over their pressing issue of
improvement.
1.7 Scope of the Study
This work is primarily concerned with
how internal auditing serves as a panacea to management with particular
reference to the Federal Road Safety Commission, Auchi Unit Command. For the
purpose of this study, attention was centered on selected activities of the
unit where internal auditing service is of paramount importance. The areas
considered are;
i.
Account of allocation received monthly
ii.
Salaries and impress account in
department
iii.
Booking accounts (Revenue)
1.8 Limitation of the Study
·
The compilation of information used for
the preparation of these work has not been easy. One of such problem is the
refusal of some officers, especially those at the unit command to have direct
interview with them.
One of the commander contacted at the
time of collecting data said “it’s outside my power to give any information or
allow anybody to collect information from the unit command without the
permission or a written document from the headquarters”.
·
The project work is restricted to
Federal Road Safety Commission, Auchi unit command which result obtained from
this may not represent the result of other organization. If the result is
generalized, it may be misleading.
Despite the problem above, all the
relevant information needed was obtained and project complete as schedule.
1.9 Definition of Terms
Auditing: The
review and checking of records and operation of any business entity.
Internal auditing:
Is the independent appraisal of activity within an organization for the review
of the accounting, financial and other operations as a basis for protective and
constructive service to management.
Defalcation:
Misappropriation of money and materials entrusted to someone.
Internal Control:
It is “not” only internal check and internal audit but the whole system of
controls financial and otherwise, established by the management in order to
carry on the business of the enterprise in an orderly manner, and safeguards
its assets and secure as far as possible the accuracy and reliability of its
records.
Internal Check:
Is the allocation of authority and work in such a manner as to afford checks on
the routing transactions of day to day work by means of the work by one person
being complementary to that of another.
Loans:
Is the money granted as credit by the unit commander to its state after
satisfying certain conditions and which will be due for payment at an agreed
date.
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