THE ROLE OF INTERNAL AUDITORS IN A DEPRESSED ECONOMY (A CASE STUDY OF SELECTED BANKS IN NIGERIA)

THE ROLE OF INTERNAL AUDITORS IN A DEPRESSED ECONOMY (A CASE STUDY OF SELECTED BANKS IN NIGERIA)

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ABSTRACT
This research was undertaking to ascertain the role of Internal
Auditors in a depressed Economy with particular reference to Banks
in Nigeria, the main purpose of the study is to look at the Internal
Auditing Department in banking industry and to review to an extent
to which it is used in the protection of the Bank’s assets,
misappropriation and embezzlements of funds. The objectives of this
study are: to examine the roles of Internal Auditors in Financial
Institutions, to access the impact of government financial policies and
guidelines on the execution of Internal Audit functions in financial
institution, to evaluate the usefullness of Internal Audit functions in
financial institution (Banks), to find out the importance of Internal
Auditors in protection of company’s assets, misappropriation of funds
and embezzlement of funds and to make appropriate
recommendations that will proffer sound solutions in the weakness of
Internal Auditing functions in bank’s. In pursuance of the objective of
the study, three hypotheses were formulated ad tested. In order to
get information for the study, both description and historical method
of research have been used in the course of study. Also primary and
secondary data was used.
Primary data was gotten through the application of questionnaire,
personal interviews and observation. Secondary data was gathered
through the review of related literature and the results of the
questionnaires were analyzed and assembled in tables.
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The end result revealed that internal auditing is a powerful tool in
protection of banks assets, misappropriation and embezzlement of
funds.
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TABLE OF CONTENTS
Title page - - - - - - - - -- i
Certification page - - - - - - - ii
Dedication - - - - - - - - - iii
Acknowledgement - - - - - - - iv
Abstract - - - - - -- - - - v
Table of contents - - - - - - - - vi
List of table - - - - - - - - vii
CHAPTER ONE
I.I Introduction - - - - - - - 1
1.2 Statement of problem - - - - - - 2
1.3 Objective of the study - - - - - - 3
1.4 Significance of the stud- - - - - - 4
1.5 Research question- - - - - - - 5
1.6 Hypothesis - - - - - - - - 6
1.7 Research method - - - - - - - 7
1.8 Scope and limitation of the study - - - - 7
1.9 Definition of terms - - - - - 8
References - - - - - - - 10
CHAPTER TWO
LITERATURE REVIEW - -- - - - - 11
2.1 Historical background - - - - - - 11
2.2 Definition and types of Auditing - - - - 15
2.3 Overview of internal audit - - - - - 16
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2.4 Qualities of an auditor - - - - - - 19
2.5 Professional standard for internal auditing - - 24
2.6 Functions of internal auditing - - - - 28
2.7 The role of auditors - - - - - - 30
2.8 What is a depressed economy - - - - 32
2.9 The state of Nigeria Economy - - - - 35
2.10 Banks in the recession period - - - - 44
2.11 Major problems of Nigerian economy - - - 47
References - - - - - - - 53
CHAPTER THREE
RESEARCH DESIGN AND METHODOLOGY
3.1 Scope of study - - - - - - - 55
3.2 Sources of data collection - - - - - 55
3.3 Population of study - - - - - - 57
3.4 Determination of sample size - - - - - 58
3.5 Analytical technique - - - - - - 59
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
4.1 Presentation and analysis of data - - - - 61
4.2 Hypothesis verification - - - - - - 76
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
5.1 Summary - - - - - - - - 82
5.2 Conclusion - - - - - - - - 84
5.3 Recommendation - - - - - - - 85
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References - - - - - - - - 88
Appendixes - - - - - - - - 91
LIST OF TABLES
Table 4.1.0 Questionnaire forms distributed and returned
4.1.1 Department
4.1.2 Qualification
4.1.3 How long have you been in the bank
4.1.4 Need for internal audit department
4.1.5 Availability of internal audit department
4.1.6 Objective of the internal audit department
4.1.7 Internal audit Department role in the protection of bank’s
assets and embezzlement of funds
4.1.8 Overall performance of the internal audit department.
4.1.9 Achievement of goals and objective of the bank by
internal auditing department
4.1.10 Response on when the last audit was conducted
4.1.11 How the past audit has improve the company’s
performance
4.1.12 The effect of proper audit on fraud control
4.1.13 Effect of carrying out audit text control
4.1.14 The caliber of staff in achieving the banks objectives is
essential
4.1.15 Does government policies, rules and regulations on
financial matters affect the execution of internal audit
functions
4.1.16 Responses on how often the internal audit carry out its
appraisal and report
4.1.17 Adherences of auditor to the statutory rules and
regulations
4.1.18 Does the administration hierarchy of the company allow
the internal auditor to be independent in the execution of
his duties
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4.2.1 Hypothesis 1 Analysis of the responses
4.2.2 Hypothesis 2 Analysis of the responses
4.2.3 Hypothesis 3 Analysis of the responses
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CHAPTER ONE
1.1 INTRODUCTION
The practice of auditing has been existence even in the ancient
time. The need for auditor arises when the truthfulness and fairness
of financial statement is required. An Auditor is a person appointed
by law to examine and investigate the accounting records prepared
and maintained by organization are of true and fair view.
Before the medieval times, auditing was referred to as the
process of public hearing in which financial statement of financial
records were read aloud, Ekwere (1991). In essence, auditing was
made to determine where persons in position of fiscal responsibilities
in government or organizations were acting and reporting in good
faith or in honest manner. But today, auditing has taken a new
dimension in our society and it will continue to be improved upon as
a result of expansion and growth of business in our contemporary
society. According to the publication of American Accounting
Association (AAA 1991),”Auditing is a systematic process of
objectively obtaining and evaluating evidence regarding assertions
about economic actions and events to ascertain the degree of
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correspondence between those assertions and establish criteria and
communicate the result to interested users”. Adeniyi A.A. (2004.2)
extracts his opinion that it is “an exercise whose objective is to
enable auditors to express an opinion whether the financial
statements give a true and fair view of the entity’s affairs at he
period and of its profit and loss (income and expenditure) for the
period ended and have been properly prepared in accordance with
applicable frame work”.
However, the practice of auditing which has been in existence
for years has no positive impact on the economy, there had been
several corporate failures, which had been led to reduction in growth
(ie depressed economy) in view of the above problem this research
focused on the roles of auditors in a depressed economy.
1.2 STATEMENT OF PROBLEM
The establishment of internal audit in organization and financial
constitutions was to reduce or remove completely the problems of
fraud, to protect the company’s assets, and to check
misappropriation and embezzlement of funds. But there have been
13
and there is still problem of fraud, misappropriation and
embezzlement of fraud in financial institutions.
1.3 OBJECTIVE OF THE STUDY
(1) To examine the role of internal auditors in financial
institutions
(2) To evaluate the usefulness of Internal Auditors to banks
by providing reliable accounting information.
(3) To access the impact of government financial policies and
guidelines on the execution of Internal Audit function in
financial institution (Banks).
(4) To find out the importance of Internal Auditors in
protection of company’s assets, misappropriation of funds
and embezzlement of funds.
(5) To make appropriate recommendations that will proffer
sound solutions in the weakness of internal auditing
functions in banks.
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1.4 SIGNIFICANCE OF THE STUDY
The significance of this study can be viewed in many ways; it is
intended to create awareness in the management of private and
public companies, it is hope that firms will see internal auditors as
those which has much to offer to the organization. Also this research
recognizes the fact that depression in an economy will lead to macro
economic instability and that probably auditors too have a role to
play. It is hoped that this research will identify the various factors
causing depression that had hitherto been in effectively controlled so
that more attention can be paid to them.
The banking management would benefit because their
problems will be addressed to a reasonable extent. It will be
beneficial to investors, who might not be opportune to critically view
some documents either because of lack of time, it will help them to
know whether to invest in a particular bank or not. To policy makers
and regulators in the banking industry, it will present a scheme,
through its analysis can assist them in enunciation policies that will
not only positively impact on banks but also to remain relevant in the
economy by performing good function in Nigeria economy.
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This study, when completed will serve as a reference point and
source of secondary data for future researches in the field, it will give
them an insight into the role of auditors in depressed economy like
ours.
1.5 RESEARCH QUESTIONS
In order to facilitate this study the researcher will base this
study on the following questions:
(a) What is the role of an auditor?
(b) How an auditor does perform this function his function to
ensure efficiency in banking industry?
(c) What are the things to be done to enhance good
economy in banks and banking industry in general?
(d) Does an auditor duly follow the laid down rules and
regulation in auditing a firm?
(e) Are the roles of auditor followed under normal
circumstance?
(f) Does an auditor play any vital role in Nigeria Economy?
(g) How far is the economic situation, similar or contrasting
in the banks.
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1.6 HYPOTHESIS OF THE STUDY
A hypothesis is a tentative statement, which is subject to future
proof. Based on this, the researcher has generated the following
hypothesis that will be tested in the study.
Ho:1 Internal Audit Department in banking industry has not been
able to play its role in the protection of the company’s assets,
misappropriation and embezzlement of funds.
H1: Internal Audit Department has been able to play its role in the
protection of the company’s assets, misappropriation and
embezzlement of funds.
Ho2: Internal Auditors do not adhere to statutory rules and
regulations laid down for them in the course of doing their
work.
H1: Internal Auditors do adhere to statutory rules and regulations
laid down for them in the course of doing their job.
Ho3: Government policies, rules and regulations on financial matters
does not affect the execution functions of internal audit
department.
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Hi: Government policies, rules and regulation on financial matters
affect the executive functions of internal audit department.
1.7 RESEARCH METHODS
This research work involves both qualitative and comparative
analysis of data, other information where obtained from both primary
and secondary sources in form of past data and face to face
interview.
The primary sources of data include information from
questionnaires administered to staff of United Bank for Africa Plc,
Intercontinental Bank Plc and Zenith Bank Plc. Secondary sources of
data was gotten form various text books, magazine, journals,
newspapers and periodical seminar papers.
The researcher decided to use random sampling method in the
selection of sample size, to ensure that all members of the population
has equal and unrestricted chance of being represented.
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1.8 SCOPE AND LIMITAION OF THE STUDY
This study covers the cause of depression in an economy and
the extent to which these causes are being addressed. The period
under view is restricted to 11 years that is (1993-2004). This period
is considered to be very important in the history of our country
Nigeria because of a lot of crisis going on in Nigeria which has caused
a lot of instability both socially, politically, and economically. During
the period of writing this work. The researcher encountered
limitations of time. Financial constraints also limits the scope of
research work that can be embarked upon by the researcher.
Also the problem of resistance of some bankers who prefer not
to comment, regards to some information as being vital and
confidential therefore the researcher was deprived these information,
because of this, the researcher could not carryout as much as
detailed analysis as she wished.
1.9 DEFINITION OF TERMS
In carrying out this study, there are certain words, which
required the expression of their meaning.
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AUDIT: It consists of a searching investigation of the accounting
records and other evidence supporting these financial statement.
AUDITING: It is the independence examination of the financial
statements of an organization with a view to express an opinion as to
whether these statement give a true and fair view and comply with
the relevant statues Aguolu (1998).
AUDITOR: A person whose duty is to conscientiously and
objectively examine and inquire into any statement of account and
other documents where possible.
DEPRESSION: Is a sever down-turn in economic activity that last
for several years. Or feel of sadness that makes you to think there is
no hope for the future.
FRAUD: It involves theft, misappropriation or embezzlement of
organization fund usually in form of cash or other assets.
STATUTARY AUDITORS: These are audits carried out because
the law requires them. Status, which requires audit includes CAC, the
building society Act (1962, CAMA 1990) et.
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REFERENCES
ADENIYI, A.A. (2004), Auditing and Investigation, Values Analysis
Consult Publishers, Ibadan.
AGUOLU, OSITA (1998), Fundamentals of Auditing Meridian
Associates Uwani, Enugu State.
COMPANIES and Allied Matters Act (1990).
IYIOGWE, SAM .O. (2002), Research Methodology, Willy Rose and
Apple Seed Publishing Abakaliki.
PUBLICATION American Accounting Association (AAA), (1991).
ROBERSON, JACK C. (1979), Auditing, Dallas Texas Business
Publishers, Texas.




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