Resource Accounting in Public Sector: Issues and Challenges of Auditing in Public Sector
Chapter One
OBJECTIVES OF THE STUDY
The objective of this research is to outline the specific task to be set out towards achieving the purpose of the research problem.
The research project is expected to achieve the following objectives:
- To investigate issues and challenges encounter in auditing public sector accounts.
- To examine the role of public sector auditing in controlling frauds, embezzlements, financial malpractice and corruption that is found in the public sector.
- To ascertain the lack of proper segregation and proper assignment of duties and shortages of staffs to carry out audit duties in public sector.
- To ascertain reasons for improper implementation of routine audit report by appropriate authorities.
- To provide solution to the issues and challenges of auditing in public sector
CHAPTER TWO
REVIEW OF LITERATURE
INTRODUCTION
Our focus in this chapter is to critically examine relevant literature that would assist in explaining the research problem and furthermore recognize the efforts of scholars who had previously contributed immensely to similar research. The chapter intends to deepen the understanding of the study and close the perceived gaps.
Precisely, the chapter will be considered in three sub-headings:
- Conceptual Framework
- Theoretical Framework
CONCEPTUAL FRAMEWORK
Audit And Auditing
Modern auditing began in 16th century in Europe during the reign of Queen Elizabeth 1 (Okolo, 1989). The basic aim was increased activities in international exploration and trade. As commerce developed, it became common for the number of participants in enterprise to increase.
In the opinion of Oladipopo (2005) he describe audit in modern sense as process where accounts of business entities are subjected to scrutiny. By business entities are limited companies, charitable organization, trust, NGOs and professional firms.
However, on the issue of social and environmental context of auditing, Porter (1992) identifies auditors as the watchdogs of the society. This function is not only applicable to Nigeria and developing nations of the world but also to developed societies.
According to Izedonmi (2000), Auditing involves an independent examination of the financial statements of an enterprise prepared by the management of that enterprise by an appointed person called auditor in order to express a professional opinion whether or not those financial statements show a true and fair view position of the enterprise as at the end of the financial period in accordance with the auditor terms of engagement as well as other relevant statutory and professional regulations.
Originally, audit was confirmed to ascertaining whether the accounting party had properly, account for all receipts and payments on behalf of his principal. This kind of audit although it includes the examination of cash transaction, has its ultimate aim of verifying the financial position disclosed by the balance outfit.
Another author sees audit as “the process by which a competent independent person accumulates and evaluates evidence about quantifiable information and established criteria” Cooper V.R.M. (2005)
Cooper has this to say, “An audit is such an examination of the records whether in his option the statement gives a true and fair view of what it purpose to show.
According to Okolo (2001), auditing is defined, “as an objective and consecutive examination of a statement of account, records and all other available evidence relating to the statement of account as to whether it present a true and fair view to whatever it purports to represent and to report accordingly”.
Auditing is an independent examination of, and the expression of an opinion on the financial statements of an enterprise by an appointed auditor, in accordance with his terms of engagement and the observance of statutory regulations and professional requirements (Dandago, 1999) and (Mainoma, 2007). This definition clearly stated that there must be someone (auditor) responsible for expressing an opinion on the entire financial statement of an organisation. The auditor here may mean an individual or firm carrying out the audit of an enterprise. The auditor should be approved and must have personal and operational independence in order to perform his duty effectively.
The Concept Of Public Sector Audit
Public sector audit has experienced considerable expansion throughout the world. The reason for this is closely related to changes in the structure of government and concern for more accountable and transparent governance, which has resulted in a large increase in the number of accounts and sophistication of financial reporting. The expansion has brought with it an added demand for accountability (Dowdall, 2003). Public sector accounting is quite distinct from commercial accounting in terms of objectives, sources of revenue and bases of recording accounts, responsibility and accountability among others.
It is useful however, to distinguish between audit and other forms of regulation and inspection. Public audit applies to almost every public sector body and is relatively wide-ranging, from certifying the accounts to examinations of economy, efficiency and effectiveness. The audit function and the form in which audit results are reported tend to reinforce the traditional line of public sector accountability to elected representatives rather than establish new forms of accountability.
With increasing democratization and concern about corruption people are demanding to be informed about what their government intends to achieve and what it has actually accomplished. In other words, the public is demanding audit reports in order to access the performance of those entrusted with public sector resources (Anonymous, 2001). Thus proper audit has a distinct role in promoting accountability and ensuring the best use of public money by providing credibility to the information reported by or obtained from management through objectively acquiring and evaluating supporting evidence.
In Nigeria the appointment, the authority and the duties of the Auditor General are described in sections 85 and 86 of the 1999 Constitution of the Federal Republic of Nigeria (henceforth Nigeria). Briefly, the Auditor General or any person authorized by him or her the is to audit, without directions or control of any other authority, the accounts of the Federation of all Offices, the courts and all Federation authorities, including all persons and bodies established by law and entrusted with the collection and administration of public monies and assets. The Auditor-General or any delegated person authorized by him is permitted to have access to the books, records and other documents relating the accounts. The Auditor-General is required to submit the audit report to each house of the National Assembly for consideration by a committee responsible for public accounts.
The 1999, Constitution of Nigeria also requires each State to have an Auditor General, with functions and powers at the State level similar to the functions and powers of the Federal counterpart. Although the State Auditor General is not authorized to audit the accounts of statutory corporations, commissions or authorities, the State Auditor General has the power to conduct periodic checks of the accounts of these statutory bodies. In addition, the State Auditor is authorized to provide a list of external auditors from which these authorities must appoint their external auditors, together with guidelines on the level of fees to be paid these external auditors.
CHAPTER THREE
RESEARCH METHODOLOGY
INTRODUCTION
This chapter outlines the methods and procedures used in getting the needed data that was used in solving the research problems. It will take a critical look at the following;
- Research Design
- Area of the Study
- Sources/ method of data collection
- Population of the Study
- Sample Size determination
- Research instrument
- Validity and reliability of the instrument
- Statistical tools for data analysis
RESEARCH DESIGN
In this study, the researcher used the survey and descriptive method. This is because field survey was carried out and the data collected was analyzed using Chi-square. The aim of the descriptive analysis is to create understanding about the topic under study.
AREA OF THE STUDY
The study is designed to examine resource accounting in public sector; issues and challenges of auditing in public sector with particular focus on some selected ministries in Edo state. This implies that the data to be collected will be restricted to Edo State. Ten ministries were selected for the study, using convenience random sampling techniques. The study was carried out in six (6) ministries in Edo state; Ministry of finance, Ministry of Commerce and Industry, Ministry of Oil and Gas, Ministry of Budget Planning and Economic Development, Ministry of Energy and Water Resources and Ministry of Agriculture.
POPULATION OF THE STUDY
The population is made up of 1,150 comprising of all the staff (management, senior and junior staff) in the six (6) selected ministries in Edo State.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
INTRODUCTION
This chapter presents the analysis of data derived through the questionnaire and key informant interview administered on the respondents in the study area. The analysis and interpretation were derived from the findings of the study. The data analysis depicts the simple frequency and percentage of the respondents as well as interpretation of the information gathered. A total of four hundred (400) questionnaires were administered to respondents of which all were returned and validated. For this study a total of 400 was validated for the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS:
Introduction
This chapter summarizes the findings on resource accounting in public sector: issues and challenges of auditing in public sector using some selected ministries in Edo state s a case study. The chapter consists of summary of the study, conclusions, and recommendations.
Summary of the Study
In this study, our focus was on resource accounting in public sector: issues and challenges of auditing in public sector using some selected ministries in Edo state s a case study. The study is was specifically set to investigate issues and challenges encounter in auditing public sector accounts, examine the role of public sector auditing in controlling frauds, embezzlements, financial malpractice and corruption that is found in the public sector, ascertain the lack of proper segregation and proper assignment of duties and shortages of staffs to carry out audit duties in public sector, ascertain reasons for improper implementation of routine audit report by appropriate authorities, and provide solution to the issues and challenges of auditing in public sector
The study adopted the survey research design and randomly enrolled participants in the study. A total of 400 responses were validated from the enrolled participants where all respondent were staff of six (6) selected ministries in Edo State.
Conclusions
In the light of the analysis carried out, the following conclusions were drawn.
- There are issues and challenges of audit function in the Nigerian public sector.
- The roles of public sector auditing in controlling frauds, embezzlements, financial malpractice and corruption that are found in the public sector include; to detect and report of fraud, detect all in appropriate/illegal record, unveil errors in accounting practices, assess internal controls so as to prevent or detect the theft of assets, assess management’s style, so as to determine if it leads to fraudulent financial reporting, and ensure the management conveys the findings of the audit to the board of directors or audit committee.
- There is a lack of proper segregation and proper assignment of duties and shortages of staffs to carry out audit duties in public sector.
- There are reasons for improper implementation of routine audit report by appropriate authorities?
- The possible solutions to the issues and challenges of auditing in public sector are; ensuring the independence of the auditors, ensuring accuracy and reliability of records, adequate cooperation of other staff, ensuring the adequacy of internal control, and entrenching honesty, responsibility, and integrity in managerial activities & administration.
Recommendation
Based on the findings the researcher recommends;
- Ensuring compliance with professional accounting practices;
- Proper and detailed documentation of financial transaction at all time
- Effective monitoring of allocated funds to ensure that it serve its intended purpose;
- Independence of the accountants managing the public sector accounting;
- Ensuring timely financial report;
- To grant autonomy to the office of both the Accountant General and that of the Auditor General of the federation, across the nation to strengthen their professional independence by removing them from the administrative and financial governance of the federal civil service commission;
- Ensure constant and up to date vendor knowledge and capacity building for professional Accountants to enforce full implementation of IPSAS as to improve the financial management efficiency at all levels;8.Introduce constant redeployment of professional Accountants and key Financial Administrators in order to reduce the tendency for fraud and over familiarity towards systems loopholes.
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