Effect of Internal Audit Quality (Experience and Qualification) and Profitability of Pharmaceutical Firms in Nigeria
Chapter One
OBJECTIVE OF THE STUDY
The objectives of the study are;
- To ascertain the relationship between internal audit quality and financial performance of pharmaceutical firm in Nigeria
- To assess the effect of internal audit quality on profitability of pharmaceutical firm
- To suggest some measures that will enhance the effectiveness of the use of financial control mechanisms for better profitability performance of the pharmaceutical firms in Nigeria
CHAPTER TWO
REVIEW OF RELATED LITERATURE
Internal Audit Competency and Organizational Performance
Internal audit competency apparently consist the development of specialized expertise that improve the (IAQ). It comprises IA experience, skills, knowledge and professional proficiency (Mahzan and Hassan, 2015). Internal audit competency represents one of the most essential elements in determining internal audit quality which improve the auditors’ role towards organizational performance. The IIA, as prominent standards setters of IA highlights the importance of having essential knowledge, skills, experience and professional qualification by internal auditors to operate more effectively (ISPPIA). Hutchinson and Zain, (2009) in their study on internal audit experience and qualification; and firm performance from Malaysia indicated significant relationship between qualification of IA and firm performance after employing multiple regression analysis to test the data obtained from 60 listed firms in Malaysia. Prawitt et al, (2009) conducted studies to examine the association on earning management. The finding of the study after using ordinary least squire (OLS) regression to test the data obtained from 218 companies shows a significant association between the two constructs. In an empirical examination of determinant of internal audit effectiveness – internal audit qualification, experience and professional proficiency, Cohen and Sayag, (2010) conducted their studies in Israel organizations to examine data collected from 108 Israel organizations. The result of the study using correlation and regression analysis indicated significant relationship of IA competency with organizational performance. Although, the model used in their analysis combined both private and public organization, the regression analysis shows that the positive relationship is more on private organization because of their sensitivity in implementing internal auditing standards. Studies in internal audit competency and organizational performance are limited and generally concentrate on private firms (Al-Matari et al, 2014). In similar studies (Chi, et al, 2010; Gaballa and Ning, 2011) indicated that IA competency has strong relationship with firm performance. To this effect, IA competency will be employ to examine its relationship with organizational performance in public institutions with particular reference to Nigerian federal universities. Ali et al, (2007), examined the relationships and suggested a need to focus on internal audit competency because lack of it creates obstacles towards organizational performance especially in developing countries. This is supported from the result of the findings of Brierley et al, (2001 & 2003) who conducted studies in the southern Sudanese public institutions and that of Mihret & Yesmaw, (2007) and Muluqeta && Gebrehiwot (2008) where they indicated that lack of qualified, experience and professional audit staff as one of the factors hindering IA effectiveness. They suggested that internal audit should have sufficient educational qualification and adequate continuous professional development programme to enable them upgrade their skills and knowledge to meet organizational expectations. Alzeban and Gwilliams, (2014) conducted a survey study in Saudi Arabian public sector. I the study, competency of internal audit with four variables of educational qualification, professional certificates, work experience in the field of internal IA job and continuous training and other staff developmental programmes were considered. The result of their finding indicated competency and IA effectiveness have positive relationship, which in turn leads to organizational performance. Mihret et al, (2010); and Alzeban &Sawan, (2013) have found that competency of IA have a significant and positive relationship with IAQ which in turn have significant impact on organizational performance. That means, the need to ensure internal auditor possessed required qualification, skills and adequate knowledge to execute their responsibilities more effectively is quite imperative.
CHAPTER THREE
RESEARCH METHODOLOGY
Research design
The researcher used descriptive research survey design in building up this project work the choice of this research design was considered appropriate because of its advantages of identifying attributes of a large population from a group of individuals. The design was suitable for the study as the study sought to effect of internal audit quality (experience and qualification) and profitability of pharmaceutical firms in Nigeria.
Sources of data collection
Data were collected from two main sources namely:
(i)Primary source and
(ii)Secondary source
Primary source:
These are materials of statistical investigation which were collected by the research for a particular purpose. They can be obtained through a survey, observation questionnaire or as experiment; the researcher has adopted the questionnaire method for this study.
Secondary source:
These are data from textbook Journal handset etc. they arise as byproducts of the same other purposes. Example administration, various other unpublished works and write ups were also used.
Population of the study
Population of a study is a group of persons or aggregate items, things the researcher is interested in getting information on effect of internal audit quality (experience and qualification) and profitability of pharmaceutical firms in Nigeria. 200 staff selected pharmaceutical firms in Lagos were selected randomly by the researcher as the population of the study.
CHAPTER FOUR
PRESENTATION ANALYSIS INTERPRETATION OF DATA
Introduction
Efforts will be made at this stage to present, analyze and interpret the data collected during the field survey. This presentation will be based on the responses from the completed questionnaires. The result of this exercise will be summarized in tabular forms for easy references and analysis. It will also show answers to questions relating to the research questions for this research study. The researcher employed simple percentage in the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was on Effect of internal audit quality (experience and qualification) and profitability of pharmaceutical firms in Nigeria. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of internal audit quality (experience and qualification) and profitability of pharmaceutical firms in Nigeria.
Summary
This study was on Effect of internal audit quality (experience and qualification) and profitability of pharmaceutical firms in Nigeria. Three objectives were raised which included: To ascertain the relationship between internal audit quality and financial performance of pharmaceutical firm in Nigeria, to assess the effect of internal audit quality on profitability of pharmaceutical firm, to suggest some measures that will enhance the effectiveness of the use of financial control mechanisms for better profitability performance of the pharmaceutical firms in Nigeria. In line with these objectives, two research hypotheses were formulated and two null hypotheses were posited. The total population for the study is 200 staff of selected pharmaceutical firms in Lagos. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made up medical representatives, administrative staffs, senior staffs and junior staffs was used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies
Conclusion
The internal audit department is very important inside a university as it is regarded as the key element in the application of accounting systems and this in turn, helps in evaluating the work of the department as well as the university as a whole. The internal audit remains fundamental in organizational accounting as it is the department that ensures financial regularity in pharmaceutical firm. The efficiency of internal audit helps develop the work of the university because the quality of financial transactions reflects quality of the internal audit department in Nigerian universities. Internal audit department is a significant part of the structure in the in the pharmaceutical firm as it covers the activities of oversight by the managements and audit committees to ensure credible financial reporting process (Public Oversight Board, 1994).
Recommendation
The study recommended that pharmaceutical firms in Nigeria should ensure functionality of internal audit quality factors being fundamental ingredients in attaining organizational profitability
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