The notion of the auditor being
bound or a watchdog is gradually changing for the better as internal auditing
has undergone tremendous changes in recent past.
The actual functions of the auditor is
often surrounded in secrecy or held in some kind of awe.
Major notes of internal auditing have
not been clear to the majority of people in the society. In view of numerous
corrupt practice, frauds and embezzlement often uncovered by probe tool has
often been questioned.
It is the realization of this that I have
set out to look critically into internal audit department of Afribank with a
view to finding whether effective internal auditing practices ensure effective
control. The mode of appointment, independence and duties of the internal
Auditor was looked into an determining whether the internal audit department is
being operated as a management or efficiency audit.
The finding shows
that internal auditor is not completely independent and mode of operation has a
combination of characteristics of various types of auditing especially the
operation type of audit.
high degree of internal control exists in the bank. In consideration of
improvement in some area, recommendations are proposed.
TABLE OF CONTENTS PAGES
Title page……………………………………………. I
Approval page……………………………………… ii
Table of content……………………………………. Vi
Statement of problem
Purpose of study
Significant of study
Scope of the study
Limitation of the
Definition of terms
Review of related
Definition of internal
Function of internal
The basic of internal
Use of internal
Effective area of
Limitation of internal
The nature of
accounting policy and computation
Role of audit
in-banking nig plc.
Research design and
Selection of study
Forms of collecting
Data presentation and
Data presentation and
Test of hypothesis
Summery of findings,
conclusion and Recommendation
system of controls adopted in any economy greatly determines the development
and growth of that economy. To ensure optimization in money, materials machine,
time, resource and management of men, controls are essentials.
controls are installed by many organizations including banks to check how
effective and efficient they maximize their resource. One of such controls
commonly used to minimize wastage and guide plans 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 out of the complexities of
modern business climate and transaction involved. In that other management of
various large business organizations and government concern recognized internal
auditing as a valuable machinery in achieving and objective deemed accurate at
a given point in time.
term “Audit” is from a Latin word “Audire” which means hr hears. This is
because the account of an estate domain were checked by having them called out
of those who complied them to those in authority. With the growth of trade and
commerce the need for more accurate method of recording business activities
arose. This, auditing is more a question of he hears but a whole process where
by the books of account and vouchers of business entities (including charities,
trusts) are subjected to critical examinations by professionally qualified and
independent account (Auditors) on such a detail as will enable them from an
option as to their truth and fairness. The Auditing is the bridge across the
creditability gap created by the separation of management from ownership.
complexity of the art of management extents to increasing aware 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 a 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 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 the fairness and truly of financial statements. However
since the internal auditors are employee of the firm or the establishment
concern, independence is not always achieved.
comprehensive coverage 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
auditor will have a greatly enhanced share in recommending a new and conducting
investigations where appropriate. The terms of references should be defined as
lack of this may lead the department and those in another.
avert this ugly incident and ensure greater coverage during investigations,
management issues guidelines to heads of division 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 financial and
operating information for management.
Review the economy
efficiency and effectiveness of operation.
implementation of corporate policy plans and procedures.
implementation of new accounting system.
Providing a training
ground for both financial and general management personnel.
Internal Audit functions can
help to spot out deficiencies in the systems so as to evolve corrective measure
at the earliest opportunity. Internal auditor appraise, analyses and report
upon the policies and methods employed in the bank.
of internal Auditor to the general performance of the whole organizations can
not qualified which makes it very importance for all organization to maintain a
good internal control system maintained by qualified chartered accountants.
control system may be insufficient based on some predicaments. These may
include lack of segregation and assignment of duties to accounting staff. Also
the scope 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.
of Accounting officer can easily be maneuvered by management which can affect
the internal audit system of an organization clearly defined as a result of two
or more dishonest staff can collide to override the efficiency of the internal
control system. The criticisms of the internal control system have been
extended to the banking industry hence this study of internal audit as a tool
for effective management.
aims at assessing the internal audit as a subsystem of internal control being
operated in the bank.
i. The purposes are
ii. To aid good
iii. To eliminate wastage and losses
iv. To survey the internal audit unit of Afribank Plc, Head
at Victoria Island so as to review the
predominant audit practice
in the bank.
v. To point out deficiencies in the internal control
system used by
vi. To appoint out
the implications of the system and suggest
that will bring improvement.
vii. To evaluate the expenditure procedure of the bank.
To ensure adherence management policies procedures, secure
completeness and accuracy of record and safe guard all assets.
of the public as to efficient contribution of internal audit department to
efficient management makes this study essential. It is the believe of some
people that internal audit is not necessary as it delays jobs, while some think
it is only to detect frauds and misappropriate on, so this project will makes
clear the merits of having a source of internal audit.
inability of workers to efficiently and effectively utilize resources and lack
of proper control mechanisms has led to wastage of human resources, time
financial and materials resources. This study will help management in bringing
about greater efficiency and effective use of resources and this same
management cost. E.H Woo if (1988) (FCA) maintained that a great deal of the
work of an internal auditor is curled with the evaluation of systems of
internal cheek, conservations with officials (the result of when was later
conformed by examination of records) and general seripling of records.
Though many researchers have been
conducted system, one can say that this study will contribute in no small way
to the available interactive.
This study makes more, insight into
the deficiencies in current internal audit practices in the banking section and
suggests useful innovation for making necessary changes in both the
organization and implementation into internal audit function as it obtains in
Afri- bank Nigeria plc.
study will at most expose the benefit of this great department to companies who
do not have such, so that they can establish this control department without
section the hypotheses selected in chapter one is tested. Relevant question
from the question form the questionnaire aroused to test the hypothesis
Ho: - Internal Audit
is not a source of help to efficient management operations
Hi: Internal Audit is
a source of help to efficient management operation.
Ho: The recognition accorded to the internal Auditor in the
organization hierarchy has not enhanced the system of the organization.
Hi: the recognition accorded to the internal Auditor in the
organizational hierarchy has enhanced the system of the organization.
SCOPE OF The
measures of internal control systems are considered in Afri-bank, but more
concentration world be made on internal audit aspect for the purpose of this
systems and related internal control measure, the position, the independence of
the auditor as well as the slope of his works is the areas to be studied.
out this study, it is important to have a set of assumption to base the study
that internal auditing
helps in making efficient management of the company’s resources by evaluating
the other control departments.
That fraud is reduced
to the barest minimum that when it occurs most often then not it is easily
That the responses to
the questionnaires are true and accurate.
That the internal
audit unit in the bank has adequate knowledge of practice of the organization.
That the resporident
co-operated by giving the information demanded from them without reservation.
problems and limitations are expected to face study like this, such problems
are lack of resources or time to study or go ground another divisions of the
staff may not like to reveal information, which they regard as classified,
deputes the fact that the manager of the bank has given the manager of the bank
study approach will be adopted which will be extensively and intensively
carried out by personal calls on the bank. The main method of data and
information collection will include both primary and secondary sources. The
primary sources will be through personal interview with the intense Audit
department’s staffs. Questionnaire will also be designed and distributed.
secondary sources are textbooks and journals.
necessary that clear definition of some technical terms and words are given to
avoid any possible confusion that may arise because of their usage.
AUDITING: It is sometimes referred to as external auditing or simply as
auditing the American Accounting Association committee on basic Accounting
concepts (1972) has defined it as “A systematic process of objectively
obtaining and evaluating evidence regarding assertions about economic action
and events to ascertain the degree of correspondence between those assertion
and established criteria and communicating the result to interest users.
consultative council of Accountant defines Audit as “The independent
examination and expression of opinion on the financial statement of an enterprise
by an appointed auditor in pursuance of that appointment and in compliance with
an relevant statutory obligation.
INTERNAL AUDITING: A.H. milligram defines it as “An independent appraisal
activity within an organization for the review of accounting financial 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
It is a
vital part of internal control and forms the eves and ears of the board in the
enterprises. It is also a series of process and techniques through which an
organization own employee ascertain for the management, by means of first hand
on the job observations, whether established management controls are adequate
the effectively maintained, records and reports financial, accounting and other
wise reflect actual operation and results accurately an promptly and each
division in carrying out the plans, policies and procedure for which it is
INTERNAL CONTROL: the institute of chartered accountants of England and
Wales define it as “A whole system of control, financial or other wise
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 the records”.
definitions given by a special committee report of the American institute of
corporate Accountant (A.I.C.A) is more impressive. It said that “internal
control comprises the plan of organizations and all of the co-ordinate methods
and measures adopted within a business to safeguarded its asset, check the
accuracy and reliability of its accounting data promote operational efficiency
and encourage adherence to prescribed managerial policies.
paragraph, we will consider the definition in detail.
The whole system
internal controls can be seen as single procedures (Example clerk A checks the
calculations performed by clerk B).
Financial and other
wise: the distinction is not impotent perhaps financial include the use of
control accounts and other wise may include physical access restrictions to
Established by the
management: internal control system are established by the management, either
directly or by means of external consultants, internal audit, or accounting
“Carry on efficient
manner dearly the converse is unacceptable in any business.
Ensure adherence to
management policies: Not all management have expressed policies, but as an
example a budget is an expression of management policy and adherence to the
budget can be achieved by procedure such as variance analysis.
Another example might be the selling prices of the
enterprises products being kid down by the management and controls existing to
ensure that these prices are adhered to
Safeguard the assets:
Obviously allowing assets to be broken, lost or stolen is unacceptable and
procedures are always devised to safeguard them. Examples are locks and keys,
the keeping of a plant register regular reviews of debtor balances etc. An
aspect of this which is often over looked is the payment where no benefit have
been received as payment for piece of work not done or the setting up of
liabilities where no benefit has been received as in fraudulent purchase and
subsequent embezzlement of goods by employees are both examples of failure to
safe guard assets.
And accuracy of the
records: Again, the converse is unacceptable. Examples of procedures to achieve
this include checking of the work of one clerk by another or, the use of
control accounts, independent comparison of two sets- of records e.g. stock
records and stock, or piece-work payments and good work put into store.
TYPES OF INTERNAL CONTROL
of internal control are categorized in the appendix to the operational auditing
guideline on internal controls and this categorization is followed here, giving
organization, an enterprise should;
Have a plan of
organization which should
Define and allocate
responsibilities: Every function would be in the charge of a specified person
who might be called the responsible official.
(a) Thus the keeping of petty cash should be entrusted to a
particular person who is then responsible and hence answerable for that
Identify line of
reporting: In all case, the delegation of authority and responsibility should
be clearly specified.
should always know the precise power delegated to him, the extent of his
authority and to whom should report. Two examples:
i Responsibility for approving by the board of
Directors for items over tax and within the competence of the works manager for
a budgeted amount agree by the board.
for the correct operation of internal controls may be delegated by the board of
specific management personnel and the internal audit department.
Segregation of duties
No one person should
be responsible for the recording and processing of a complete transaction.
INTERNAL 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 the work of one person being proved independently by another,
or of the work of one person being a complementary to that of another.
AUIT REPORT: A report prepared by a qualified account and to express
the opinion that the accounts snow a true and fair view and comply with
FRAUD: The use of deception for unlawful gain or unjust
BACKGROUND OF AFRI-BANK NIGERIA PLC
– bank Nigeria plc formerly known as international bank of west Africa (IBWA)
was granted a license to carry out banking business on 26th October,
1059 and began operation on 4th January, 1960 with the opening of a
branch in Kano and shortly afterwards another branch was opened in Apapa.
head office was subsequently established in 1961 at 94 Broad Street, Lagos.
Originally owned by Bangue Del’ Afrique occidentale (BAD). It was renamed
Bangue international pour I’ Afrigue occidental (BIAO/” IBWA”) to reflect it 49th
acquisition in 1964 by first National City Bank Inc and consequent
bank was later incorporated under Nigerian companies Act, 1968 as a private
limited liability company on 30th may, 1969. In 1976, the federal
government of Nigeria acquired 60’h ownership of the bank. The staff Trustee
ownership scheme off loaded later 10% while BIAO retained 4’h share holding as
is one of the most diversified banks in the country over the last few years.
The bank has worked it self up to become one of the top four leading banks in
Nigeria and it has a net work of 123 branches covering the entire country, an
asset base in excess of
and a wide spectrum of corporate, institutional and individual customers that
enjoy the professional services of the bank.
meeting the full range of its customer’s requirements, the bank has diversified
its operations into the following wholly owned subsidiaries to compliment its
comprehensive financial services delivery
Afribank international limited (merchant bankers)
finance company limited, Dublin, Republic of Ireland.
Afribank insurance broker.
Estate Company Limited (for in- house services)
trustees and securities company limited
mission is to achieve the position of a leading international growth providing
comprehensive and qualitative banking and financial services which meet the
changing needs of its customers through the employment within the group of high
caliber personnel and utilization of up – to – date technology while ensuring
optimum returns to its shareholders”
approved by the federal ministry government based upon the recommendation of
the technical committee on privatization and commercialization (TCPC), the ministry
of financial incorporated (MOF) in 1993 relinquished all of its equity holdings
in Afribank for sale to the public.
shares of Afribank Nigeria Plc were admitted and listed on the fistler market
of the Nigeria stock exchange on 29th October 1993.