ABSTRACT

The research sought to ascertain the impact the internal auditing and effective management of finance in a public sector (government establishment). The set-up of an Internal auditing in an organization is not compulsory decree but also necessity for the efficient operation effective of management finance. The study intends to examine the internal auditing system in government parastatals and to ascertain if properly installed and implemented, to effectively management the finance of the organization.  Also to identified the functions of internal Audit department and the extent to which these functions have been used to perform its duty as the watch-dog in the system. The researcher employed primary data through questionnaire using a random sampling techniques from Power holding company of Nigeria (PHCN), Uyo district. The data was analysed and tested using simple regression. The result showed that 82% of the total increase in revenue generation was explained by the present of internal audit in system, which amount to effective financial management. The study recommended that every government organization should be design, installed and implement internal audit department for effective financial management.

CHAPTER ONE

INTRODUCTION

1.1       Background to the study

Every organization, profit and non-profit making organization has objectives and goals to achieve. The goal of the profit making organization are to maximize profit while that of the non-profit making organization is to ensure effective service delivery for public satisfaction, for this purpose supervision has a dominant role (Nwibere, Emecheta & Sylva 2011). The government provides the social needs of the society; these needs are channel through ministries, agencies and parastatals.  Thus, the needs may include provision of such goods and services such as electricity, water supplies, health care education, securities etc.

The agencies and parastatals that handle the services needs supervision, the suppression serves as a steering wheel that helps to maintain the tract.  However, sometimes made it impossible for the execution of the exercise for the attainment of the expected objective.  It is in this light that internal auditing which co-ordinate methods and measures adopted within the business to safeguards assets, check accuracy and reliability of financial accounting data, promote operational efficiency and courage adherence to prescribed management policies initiated. (Okezie,1999), he also asserted that auditing guidelines defined internal controls as “the whole system of controls, finance and otherwise, established by the management in order to carry on the business of the 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”.

In Nigeria, the authority for finance management in government parastatals is derived from the constitution, the financial Act 1958, the Audit Act 1956, civil service reforms of 1988 and other activities having relevance to financial matter. The financial regulation management over expenditure to avoid fraud, misappropriation, embezzlement and waste. These rules and regulations apply in all localities to government parastatals. In view of this Detosu, (1993) defined Internal Auditing as an independent appraisal function within an organization for the review of activities as a service to all levels of management; it is a control which measures, evaluates and reports upon the effectiveness of internal controls, financial and others sub-systems, as a contribution to the efficient use of resources within an organization.

Usually, the internal auditors are staff or personnel in the organization, It is important to note that the activities and duties of the internal auditors is equally expected to report to the management. Considering the definition and the steps stated above, it becomes obvious that internal auditing is very important in any establishment whether government or private owned industry. This is due to the facts that scope of internal auditing touches all activities of any establishment such as the method by which the top management delegates authority and assigns responsibility to various levels of management.

1.2       Statement of the Problem

In public sector accounting set-up, auditing is the most neglected sub-system and often misunderstood. Though recently, the government has developed interest with a slogan which goes thus “probity and accountability should be your watch words”. But in the real sense probity and accountability are not encouraged because most of the government financial transactions are not audited or reviewed for some years, even if they do it only to showcase to the public rather than what ought to be the actual intention of the exercise.

Fraud, embezzlement and misappropriation of fund is a common feature in the public sector organization. The alarming rate of this practice constitute a major threat to the corporate growth and existence of the economy since the main aim of public corporation is to use public funds to provide services /facilities which will benefit all citizens.

It is on the basis of the above problems that the researcher intends to examine the essence of internal audit as an instrument for control and effective financial management in the public sector.

In an effort to investigate the effectiveness of internal auditing in the operation of the enterprise, one needs to understand the nature of the organizational set-up to find out where the problems come from.

1.3       Objective of the Study

Internal audit is a sub-system of the internal control system set up by management and the system is an important for the survival of any business enterprise, government establishments inclusive.

For this purpose, the main objective shall examine if there exist internal auditing system in government parastatals and to ascertain whether it is properly designed, installed and implemented to function as an instrument for control and effective management of finance. Other objectives shall include:

1.                  To examine, evaluate and reports on the adequacy of internal control as a contribution to the proper economic and efficient use of resources at a reasonable cost.

2.                  Ascertaining the extent of compliance of internal audit report with Management established policies, plans of such public enterprise. (PHCN)

It is important to point out that internal audit is an integral e organizations internal control system and as such it is entirely al- management affair.

1.4       Research Questions

Based on the above objectives the researcher put across the following research questions which the answers shall puffer ways of realizations of the objectives.

1.         To what extent is the existence of the internal auditing system in government parastatals, properly designed, installed and implemented to function as an instrument for control and effective management of finance?

2.         To what extent is the adequacy of reports from Internal control unit of public enterprise contributes to the proper economic, and efficient use of resources?

3.         To what extent do public enterprises’ internal audit reports comply with Management established policies, (rules) expenditures on plans of establishing such public enterprise (PHCN as a case)?

1.5       Research Hypotheses

The following hypotheses are formulated in a null form to answer questions stated in the research questions.

1.         Ho1: there is on existence of the internal auditing system in government parastatals and are not properly designed, installed and implemented to function as an instrument for control and effective management of finance as stipulated by law.

2.         Ho2: there is no adequacy in the reports from Internal control unit of public enterprise and does contributes to the proper economic, and efficient use of resources at a reasonable cost

3.         Ho3: there is no expenditures compliance with internal audit report of public enterprises to Management established policies, (rules) plans of establishing such public enterprise (PHCN as a case).

1.6       Significance of the Study

This research proposal is primarily designed to highlight the problems red, if internal auditing has been the instrument for control and effective financial management and the result shall suggest and puffer solutions to the problems. It shall also highlight Inherent laxity, limitation and non-compliance with the internal audit system in government enterprises.

It shall be of great help to Professional Accountant and Graduates of accountancy, Academies, Policy –makers in government and the general public to articulate the idea and ascertain the roll and function of internal audit system, not only in private setting but also in government enterprises. Finally, if successfully gone through, it shall add synergy to the existing literature.

1.7       Scope of the Study

The scope of this study is to examine how internal audit operates in the area of assisting in financial management in the public sectors using Power Holding Company of Nigeria, (PHCN), Uyo District, as a case.

-      The study shall x-ray the adequacy in the Internal audit reports- with respect to: Income receipt, salaries/wages paid, and other disbursement of cash for effective financial management using the internal audit department of PHCN Uyo district.

-      The study shall also examine the intervals of internal audit of reporting to help compliance of public enterprises to Management established policies, (rules) plans of establishing such public enterprise. (PHCN as a case)

-      The data for the study shall be generated through primary data by administering questionnaire. A statistical tool called simple regression shall be used to analyze the data, in order to determine the effectiveness of internal audit system in the public enterprise using PHCH as a case.

1.8       Limitation of Study

The researcher intends to limit the study to PHCN Uyo district, by which the result could generalize. This would enable the researcher to concentrate because it is closer since there are scarce resources. The literature shall be drawn from text books, journals and online materials.   The questionnaire shall be ministered to staff of PHCN, Uyo district.

1.9       Definition of Terms

Auditor: This is an accountant who has undergone a recognized professional course and is a member of one of the recognized Accountant bodies’ resident in Nigeria and who is carrying out a professional Accountancy practice.

Competence: It means that an auditor should undertake work which h

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