Internal Audit and Effectiveness of Internal Control System (a Survey of Selected Firms in Rivers State)
CHAPTER ONE
Objective of the study
The objectives of the study are;
- To know the role of internal audit and a good internal control system in order to reduce the likelihood of accounting fraud
- To know factors contributing to the challenges of internal auditing in selected firm n Rivers state
- To know whether internal auditing and good internal control systems can reduce the likelihood of accounting fraud in some selected firm in Rivers state
CHAPTER TWO
REVIEW OF RELATED LITERATURE
INTRODUCTION
Various authors and scholars defined auditing in different ways; Arens and Leabbecke(1998), define Auditing as a process by which competent independent person accumulates and evaluates quantifiable information related to a specific economic entity for the purpose of determining and reporting on the degree of the correspondences between the quantifiable information and established criteria. The Institute of Chartered Accountant in England and Wales (ICAEW, 2004), defines an audit as, The independent examination and expression of an opinion on the financial statements of an enterprise by an appointed auditor in pursuance of that appointment and in compliance with any relevant and statutory obligation. Attwood and Stein (1986), define audit as checking somebody else`s accounting, while Meigs, et al (1982) put it as an examination or investigation by independent public accountant on a set of financial statements, accounting records and other supporting evidence both within and outside client’s business. In line with the above views, this study agrees with the definitions, but the two definitions have not included expression of opinion by the appointed Auditor and in compliance with statutory obligations after the checking and examinations conducted on the financial statements of an organisation. Millichamp (2002), Dandago (2002), and Adeniji (2004), put the primary objectives of auditing as that of producing a report by the auditor showing his opinion on the truth and fairness of financial statements so that any person reading and using the financial statements can believe in them. They further give the subsidiary objectives of effective audit is detection of errors and frauds; prevention of errors and frauds by the deterrent and moral effort of the audit. This study therefore agrees that, it is necessary for an effective audit to detect irregularities involving the misuse of funds, identify weaknesses in management control, and determine the reliability of the financial data and identify patterns of wastes and inefficiencies in the organization (public or private). Internal auditing is defined by different institutions and scholars in many ways and perspectives. Internal auditing is defined by the institute of internal auditors (2008), as: an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. It helps an organization to accomplish its objectives by bringing a systematic discipline approach to evaluate and improve the effectiveness of management, control and governance processes. Therefore, in any organization where there is effective functioning of internal Audit the organizational internal control system would be improved and it will leads to additional value to the organisation. As cited in Davies (2001), the Auditing Practices Board’s auditing guidelines define internal auditing as an independent appraisal function established by the management of an organisation for the review of the internal control system as a service to the organisation. It objectively examines, evaluates and reports on the adequacy of internal control as a contribution to the efficient and effective economic resources utilization. This study adds that if internal auditors are appointed by the management and made to operate on the management`s policies and report to the management then, it is likely for the auditors to be dependent on the management. John (1996), defines Internal Audit as an independent appraisal functioning within an organization for the purpose of guiding the activities of the institutions as a service to all levels of management within the organization. It is a control which measures, evaluates and reports upon the effectiveness of Internal Control system, financial and otherwise, as a contribution to the efficient use of resources within an organization. The objective of Internal Auditing is to help members of the organization in the effective discharge of their responsibilities.
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 Internal Audit and Effectiveness of internal control system
Sources of data collection
Data were collected from two main sources namely:
Primary source and 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.
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 to ascertain Internal Audit and Effectiveness of internal control system.
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 Internal Audit and Effectiveness of internal control system
Summary
This study was on Internal Audit and Effectiveness of internal control system. Three objectives were raised which included; To know the role of internal audit and a good internal control system in order to reduce the likelihood of accounting fraud, to know factors contributing to the challenges of internal auditing in selected firm n Rivers state and to know whether internal auditing and good internal control systems can reduce the likelihood of accounting fraud in some selected firm in Rivers state. 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 from University of Rivers state was selected randomly. 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 auditors, HODs, senior staff and junior staff was used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies
Conclusion
What can be deducted from this study is the effective coordination of all the working orgasm in the teaching hospital, this has make it possible to produce an almost error proof in accounting system.
The supervision of different subordinate’s staff by their superior officers as also produced a good team work of officials.
Therefore, the situation in the university of Rivers state management has improved greatly unalike in the past when there was no promotion for many years, and staff were being denied of many things to be enjoyed.
Recommendation
The management of tertiary educational institutions in Rivers state should ensure that the components of internal control system are properly put in place especially in the area of authorization, approval, and supervision, segregation of duties and personnel control.
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