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The Challenges of Internal Audit Function in the Nigerian Public Sector

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The Challenges of Internal Audit Function in the Nigerian Public Sector

ABSTRACT

This research work deals with the challenges of the internal audit function in the Nigerian public sector with reference to the Kaduna state ministry of finance.

Internal auditing is a process generally adopted towards ensuring and safeguarding resources and promoting operational efficiency in the organization.

The objective of this study has been to evaluate the internal control system in the Nigerian public sectors, to ascertain the non-implementation of the routine audit reports and the lack of proper segregation and assignment of duties.

In recent times, a combination of forces has led to a quiet revolution in the profession. The government moving towards democracy must demonstrate accountability in the use of public money and efficiency in the delivery of service.

In many cases internal control systems are weak, the staff is poorly paid making them unmotivated, coupled with non-implementation of the routine audit reports by appropriate authorities.

The Responses from staff were analyzed using relevant statistical tools from which three hypotheses were formulated and tested using Z-test statistics, while questionnaires were analyzed in tabular form using simple percentages.

It was discovered that the internal audit is facing a lot of challenges which include inadequate staffing, lack of independence, lack of facilities to carry out audit function, and also poor funding.

As a result of some of these challenges the effectiveness of the internal audit in the Nigerian public sectors, has been hindered as well as the organizational change it can bring to its environment. I recommend that for internal audit to be effective, it must be a completely independent group, adequately funded and equipped with qualified internal auditors as well as sufficient opportunities for internal auditors to become qualified.

TABLE OF CONTENTS

Approval page ii
Certification iii
Dedication iv
Acknowledgment v
Abstract vii
List of tables’ xi

CHAPTER ONE: INTRODUCTION
1.1 Background of study 4
1.2 Statement of study 5
1.3 Statement of the objectives 6
1.4 Research questions 6
1.5 Research hypotheses 7
1.6 Significance of study 8
1.7 Scope of study 9
1.8 Limitations of study 9
1.9 Definition of terms 9

CHAPTER TWO: REVIEW OF RELATED LITERATURE
2.1 Introduction 12
2.2 Organizational structure of the ministry of finance 14
2.3 Definition of auditing 15
2.4 Types of auditing 16
2.5 Meaning of internal audits 17
2.6 Meaning of internal control 18
2.7 Meaning of internal check 20
2.8 Objective and purpose of internal audit 21
2.9 Qualities required of an auditor 23
2.10 Elements of internal audit 25
2.11 Scope of internal audit 27
2.12 Duties and responsibilities 28
2.13 Role of internal audit in the Nigerian public sector 29
2.14 Challenges of internal audit 30
2.15 Factors responsible for the problem of internal 32

CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Research design 34
3.2 Sources of data 35
3.3 Area of study 36
3.4 Population of study 36
3.5 Determination of population size 37
3.6 Reliability Test 39
3.7 Validity test 39
3.8 Method of data collection 39
3.9 Techniques for data analysis 40

CHAPTER FOUR: PRESENTATION OF DATA, INTERPRETATION
AND ANALYSIS OF DATA
4.1 Presentation of data 42
4.2 Test of hypotheses 55
4.3 Discussion of findings 68

CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION AND
RECOMMENDATIONS
5.1 Summary of findings 70
5.2 Conclusion 71
5.3 Recommendations 71
Bibliography 73
Appendix 75

LIST OF TABLES
Table 4.1Shows questionnaire administered
Table 4.1.2 Analysis to know if the internal audit unit exists in the ministry
Table 4.1.3 Analysis to show the degree of independence of the auditor
Table 4.1.4 Analysis to show in the impact of the internal audit function in the ministry
Table 4.1.5 Analysis to know the challenges internal audit unit faces
Table 4.1.6 Analysis to show that sound academic knowledge in accounting is
essential for effective performance
Table 4.1.7 Analysis to know the level of efficient performance on financial
audit in the public sector
Table 4.1.8 Analysis to show the performance on quality assurance
Table 4.1.9 Analysis to show the inadequacy of internal control system
Table 4.1.10 Analysis to know the level of co-operation between internal audit unit and other departments
Table 4.1.11 Analysis to show lack of proper segregation of duties
Table 4.1.12 Analysis to show the non-implementation of routine audit report
Table 4.2.1 Table showing the computed value of Z Hypothesis 1
Table 4.2.2 Table showing the computed value of Z Hypothesis 2
Table 4.2.3 Table showing the computed value of Z Hypothesis 3

INTRODUCTION

The Kaduna state ministry of finance started when the country was pre-independent in 1958 during the northern region, the ministry of finance is the custodian of public funds and stores and is therefore essentially a controlling ministry as opposed to other executing agencies of the government.

The ministry is headed by a commissioner as the chief executive officer and deputized by the permanent secretary who is a carrier and servant and is the chief officer of 145 staff including accounting officers on monthly basis.

The ministry consists of three (3) major departments and seven (7) sub-treasuries. 1. Administration and finance which further sub-divided into stores and verification divisions.

Treasury which is further sub-divided into final accounts and debts management and ministry of finance Incorporated division and sub-treasury. 3. Internal audit (state)

2 1. ADMINISTRATION AND FINANCE DEPARTMENT.

The department is headed by the director and is responsible for the general administration of the ministry which includes maintenance of staff records, processing of staff promotion, recruitment training discipline, and welfare, etc.

STORES AND VERIFICATION DIVISION.

This division is headed by the chief store’s officer who is charged with the responsibility of purchasing and disturbing office equipment’s the ministry of finance is in the custody of the public funds and stores, and is, therefore, protective clothing to all government ministries and departments and boarding of unserviceable equipment/ vehicles.

 TREASURY DEPARTMENT

This department is headed by the accountant general and is charged with the responsibility of keeping receipt of government funds banking and maintenance of bank accounts, disbursement of all approved fund released, bank reconciliation, control of treasury documents, and control of pooled accounting staff of the state.

MINISTRY OF FINANCE INCORPORATED (MOFI) DIVISION

This division is headed by the deputy director and is responsible for revenue collection management. Appraisal of investment opportunity for government, management, of investment of government companies and ensuring the receipts of dividend and other funds due to government.

FINAL ACCOUNT AND DEBT MANAGEMENT DIVISION

The division is headed by the deputy director and is responsible for the collection and accounting data from the ministry department, analysis of accountant-general’s reports, maintenance of external-internal loan records, and supervision of the state computer center.

 INTERNAL AUDIT DEPARTMENT (STATE)

The department is headed by the director and is charged with the responsibility of drawing up internal controls and checks ensuring adherence to the administrative and financial controls, investigating fraud, and other malpractices.

SUB-TREASURY

There are seven (7) sub-treasuries located at Kaduna, Zaria, Ikara, Saminaka, Kafanchan, Kachia, and Birnin aware. They are charged with the responsibility of collecting revenue and payment of pension.

BIBLIOGRAPHY

Ayehg, A. A (2005). Value for Money Audit: A tool for Curtailing Expenditure. The Certified Natural Accountant, January – March 2005, pgs. 28 – 38.

Babatunde, M. A. (2005). Auditing and Investigation (4 th edition). Ibadan: Purl Publishers.

Biggs, W. W. (2006). Spicer and Pegler’s Practical Auditing (15th Edition). Houston: HLF Publishers.

Damagun, Y. M. (2003). The Internal Auditor as a Custodian of Internal Control. Abuja: ANAN Publication II (3) 37-40.

Dependa, F. A. (2002). Auditing Principle and Practice (16th edition). Westerberg: Pitman Book Ltd.

Financial Regulations. (2004). Financial Regulations, Federal Government of Nigeria (Revised Edition). Abuja: Financial Nig. House Ltd.

Grasherghe, C. N. V. (2005). Internal Auditing in the Public Sector: A consultative Forum in Nairobi. Kenya: Culks Publishers.

Kayode, A. O. (2000). Public Sector Accounting, (1 st edition) Chapter Ten. Lagos: Hope Publications.

Milichamp, A. H. (2005). Auditing: An Instrument Manual for Accounting Students (6 th Edition). New York: Dp Publication

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