ABSTRACT
This study examined “Corporate Governance in the Nigerian University system; managements’ perception of the role of Internal Audit”. Data were gathered through the administration of structured questionnaire to a sample of 222 Management Staff (Principal Officers), Accountants and Internal Auditors of selected universities in the South East geo-political zone of Nigeria due to proximity and cultural affinity derived from work force. The data were analyzed using ANOVA, Multiple and Simple regressions. The result shows that management of Nigerian universities perceives internal audit function and efficiency either positively or adversely. The extent of their positive perception enhances management control activities while an adverse management perception has a negative effect on management control activities in Nigerian universities. The role of Internal Audit in Nigerian University governance is very vital; hence the centrality of Internal Audit in University governance particularly in the financial governance and performance of Nigerian Universities. The rating of management support to internal audit functions is moderate in Nigerian universities. Management support to internal audit functions has a remarkable effect on the performance of internal audit in the university system. Furthermore, some internal audit efficiency factors like, independence, integrity, objectivity of audit staff, value added audit activities, interpersonal relationship among management, auditor and other stakeholders, professional status and quality of audit staff, influence the level of management support of internal audit in Nigerian universities. The research recommends that the Federal Government through Auditor General of the Federation and the National Universities Commission should constantly create awareness to management of Universities on the function and need for internal audit in the system of control in Nigerian Universities. In addition, internal auditors should be allowed to have access to assets, books, records and other relevant documents or information which they deemed necessary for the purpose of their audit assignment. Management should also improve on their level of support to Internal Audit functions and also give due attention to their reports and recommendations.
TABLE OF CONTENTS
Title page i
Declaration ii
Certification iii
Dedication iv
Acknowledgements v
List of Tables
vi
Abstract vii
CHAPTER 1: INTRODUCTION
1.1 Background
to the Study 1
1.2 Statement
of the Problem 5
1.3 Objectives
of the Study 6
1.4 Research
Questions 7
1.5 Research
Hypotheses 7
1.6 Significance
of the Study 8
1.7 Scope
of the Study 9
1.8 Limitations
of the Study 10
1.9 Definition
of Terms 10
CHAPTER 2: REVIEW OF RELATED LITERATURE
2.1 Conceptual
Frame Work 13
2.1.1 Brief
historical development of auditing 13
2.1.2 Definition
of auditing 14
2.1.3 Definition
of internal audit 14
2.1.4 Who
is an internal auditor? 18
2.1.5 Functions
of internal audit 19
2.1.6 Internal
audit charter 20
2.1.7 Internal
audit as part of internal control 20
2.1.8 Internal
audit 22
2.1.9 Essential
elements of internal audit 22
2.1.10 Duties
of internal auditor 28
2.1.11 Rights
and powers of the internal auditor 29
2.1.12 External and internal auditors
compared 29
2.1.13 A
brief development of university education in Nigeria 32
2.1.14 Corporate governance in the Nigerian
university system 34
2.1.14 An
overview of management and Internal audit in Nigerian university 38
2.1.15 Objectives and scope of internal
audit in the Nigerian universities 41
2.1.16 Internal audit as a management
control tool in Nigerian universities 43
2.1.17 Factors that impede internal
auditor’s performance as an effective
management control tool in
Nigerian universities 47
2.1.18 Management support as a determinant
of internal audit efficiency 49
2.1.19 Managements’ perception of the role
of internal audit. 52
2.2 Theoretical
Frame work 57
2.2.1 Theories
of auditing 57
2.2.2 The
policeman theory 57
2.2.3 The
lending credibility theory 58
2.2.4 The
theory of inspired confidence (theory of rational expectation)
Limperg (1932) addressed both the demand
and the supply
for audit service 58
2.2.5 Agency
theory 59
2.2.6 Institutional
theory 61
2.2.7 Complexity
theory 62
2.3 Empirical
Review 62
2.4 Gap
in Empirical Review 67
CHAPTER 3: RESEARCH METHODOLOGY
3.1 Research
Design 68
3.2 Area
of Study 68
3.3 Population 69
3.4 Sample
Size and Sampling Techniques 71
3.5 Sources
of Data 76
3.6 Instrument
for Data Collection
76
3.7 Validity
of the Instrument 77
3.8 Reliability
of the Instrument 78
3.9 Model
Specification 79
3.10 Method
of Data Analysis 81
CHAPTER 4: DATA PRESENTATION AND ANALYSES
4.1 Descriptive
Statistics 83
4.1.1 Level
of management supports for internal audit among
Federal, State and Private Universities in
Nigeria 83
4.1.2 Management’s
support of internal audit and internal audit
Performance in Nigerian universities 85
4.1.3.1 Internal audit efficiency factors
and level of management
support of
internal audit functions 87
4.1.4 Effectiveness
of internal audit in enhancing management
control activities in Nigerian universities
89
4.2 Test
of Hypotheses 90
4.2.1 Hypothesis
I 90
4.2.2 Hypothesis
II 92
4.2.3 Hypothesis
III 94
4.2.4 Hypothesis
IV 96
4.2.5 Hypothesis
V 97
CHAPTER 5: SUMMARY,
CONCLUSION AND RECOMMENDATION
5.1 Summary
of Findings 100
5.2 Conclusion 101
5.3 Recommendations 101
5.4 Contribution
of the Study to Existing Knowledge 102
References
Appendixes
LIST OF TABLES
3.1: Population
Distribution 70
3.2: Sample
size for ±5% and ±10% precision levels where confidence
Level is 95% and P = 0.5 73
3.3: Sample
size for ±5% and ±10% precision levels where confidence
Level is 95% and P = 0.5 74
3.4: Distribution
of sample size among selected universities 75
4.1: Level
of Management Support 83
4.2: Descriptive
Statistic of how Management Supports Internal Audit 85
4.3: Descriptive
statistics of Internal Audit efficiency factors and
Performance 87
4.4: Variations
in perceptions of Internal Audit effectiveness in
Nigerian Universities 89
4.5: Difference
in level of management supports for Internal Audit 90
4.6: Regression
of management support components on the performance
Of Internal Audit Directorate in Nigeria
Universities 92
4.7: Effect
of Internal Audit efficiency factors on Management support 95
4.8: Perceptions
as regards effectiveness of Internal Audit functions 96
4.9: Effect
of adverse management perception and management
Control activities in Nigeria Universities 98
CHAPTER
1
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The role of Internal Audit in corporate governance in
Nigerian University system is very vital; hence the centrality of Internal
Audit in corporate governance particularly in the financial governance and
performance of Nigeria Universities cannot be over emphasized. It is an
indispensible factor in corporate governance for insuring a sound financial
reporting and deterring misappropriation of resources in any organization.
Virtually all guidelines on sound corporate governance
practice include recommendations for risk management through internal control and
internal audit as a critical part of the governance structure. This
relationship can be seen as an intricate part of the stewardship model of corporate
governance .Internal controls and audit has been a central concept in the
debate on regulating corporate governance and financial reporting since the
Cohen Report on the auditor’s responsibilities and especially the tread way
report on fraudulent reporting. Omolaye and Jacob (2017).
Internal Audit provides objective assurance by
assessing and reporting on the effectiveness of governance, risk management and
control processes designed to help the organization achieve strategic,
operational, and financial and compliance objectives (IIA, 2018).
Internal Audit can best provide assurance when its
resource level, competence and structure are aligned with organizational
strategies and when it is free from undue influence, by maintaining its
independence. Internal Audit can perform its assessment objectively, providing
management with an informed and unbiased critique of governance processes, risk
management and internal control. Based on its findings, Internal Audit
recommends changes to improve processes and follows up on their implementation.
Internal Audit insight on governance, risk and control provoke positive change and
innovations within the organization or any University system.
A strong management perception and support of Internal
Audit function, proper positioning and resourcing of Internal Audit to provide
high-quality professional assurance and advisory services to management is vital.
A vibrant and agile Internal Audit function can be a veritable resource support
in sound corporate governance structure in Nigerian University system.
The history of University Education in Nigeria started
with Elliot Commission of 1943, which led to the establishment of the
university college of metropolitan university of London in Ibadan in 1948. This
university college was saddled with a number of problems at inception, ranging
from rigid constitutional provisions, poor staffing and low enrolment, to high
dropout rate. Ibukun (/1997). The University College became independent of
London University and later a full-fledged University of Ibadan (U.I) in 1962.
In
April 1959, the Federal Government Commissioned an inquiry (The Ashby
commission) to advise it on the higher education needs of the country for its
first two decades. Before the submission of the report, the Eastern Region
Government established its own University at Nsukka, created by its statutes in
1955 but formerly opened in 1960.
The
implementation of the Ashby report led to the establishment of the University
of Ife (now Obafemi Awolowo University Ile-Ife) in 1962 by the Western Region;
Ahmadu Bello University, Zaria in 1962 by the Northern Region; and University
of Lagos, in 1962 by the Federal Government. Ajayi and Ekundayo,( 2008).
This
meant that the university of Ibadan and University of Lagos became the first
two federal universities in Nigeria; the other three remained Regional Universities.
In 1970, the mid-west state (formerly mid-west region, now Edo State) which was
carved out of the Western Region established the mid-west Institute of
Technology (M.I.T). The institute was later converted to a University status,
the University of Benin in 1972 and was handed over to the Federal Government
in 1975. The six Universities established during the period 1960-1972 are today
referred to as first generation Universities. Babalolo et al., (2007) remarked that during this period, Universities in
Nigeria were under the close surveillance of the government. Appointments of
lay members of the Council, and that of the Vice-Chancellors, were politically
motivated. The third National Development plan (1975 – 1980) made provision for
the establishment of seven more Universities to be located in states where
there were none at that time. This gave birth to the “Seven Sisters” or second
generation between 1975 – 1979.
The third generation universities
were established between 1979 and early 1990s.
The 1979 constitution of the Federal
Republic of Nigeria placed university education on the concurrent legislative
list, that meant that apart from the Federal Government, State Governments who
wished, could establish their own Universities as was the practice before 1975
when university education was put on the exclusive legislative list by the then
Military Government. Between 1979 and 1990 the first eight State Universities
were established;
In 1988, the Federal Government announced the
establishment of the University of Abuja.
According to Ajayi and Ekundayo (2008), the fourth generation universities were
established between 1991 till date. They include Federal, State, Nigeria Open
Universities and Private Universities. In addition, in the recent past, the
Federal Government of Nigeria, granted licenses to Individuals, Corporate
bodies and Religious bodies to establish more private Universities.
Sequel
to the above, as at February 2019 as released by National Universities
Commission, there were a total of forty (43) Federal Universities, forty-eight
(48) State Universities, and seventy-nine (79) Private Universities, in
Nigeria, NUC Monday Bulletin (2019).
Furthermore,
these Federal, State and Private Universities are subject to the same
oversight, regulation and accreditation, which means one will be getting the
same quality education regardless of whether you opt for a Federal Funded
University, State Funded University or a Private Funded University.
The
National Universities Commission (NUC) which was established in 1962 as an
advisory Agency in Cabinet Office later became a statutory body in 1974 for the
supervision of all Universities in Nigeria. They function as dynamic regulatory
agency acting as a catalyst for positive change and innovation for the delivery
of quality university education in Nigeria.
This
body had Prof. Jibril Aminu as the First Executive Secretary, while currently
Prof. Abubakar Adamu Rasheed is the Executive Secretary of National Universities
Commission. The Commission’s Governing Council is currently headed by Prof.
Shehu Galadanchi.
In
view of the above backdrop of the history of establishments of Universities in
Nigeria, these universities have continued to grow with increasing dynamism and
complexities in their administrative and management structures and these
developments require modern management techniques and control mechanisms to
achieve their set objectives. Consequently, Internal Audit policies are often
relegated to the dictates of individual Vice-Chancellors without regards to the
directions and guides of the Internal Auditor.
This
development is quite contrary to the indispensable roles, the Internal Audit
Directorates play in the maintenance of the whole system of controls, financial
or otherwise. Hence, IIA (2017) defined Internal Audit as Independent,
Objective assurance and consulting activity designed to add value and improve
an organization’s operation. It has also been defined as “an independent
appraisal function activity within an organization for the review of activities
as a service to all levels of management. It evaluates and reports on the
effectiveness of internal controls, financial or otherwise as a contribution to
the organization. Johnson (1996).
Management
as a specific organ of any Tertiary Institution is charged primarily with the
responsibility of achieving the set objectives of their institutions. In
pursuance of this, the management in her day-to-day operation or administration
is saddled with the problems of using the meager resources available in
optimizing the University’s primary objectives and to maintain absolute control
over the activities of these dynamic and complex Institutions.
To
achieve these set objectives, management established procedures, rules and
regulations known as “Management Control” or “Internal control”.
The
establishments of these controls are not more vital to the management, than
their implementation, management, therefore, has onerous responsibility of
installing a sound and water-tight implementation mechanism to augment their
efforts in the whole system of control adherence, which Internal Audit is said
to be a Panacea.
In
view of this, the way in which management perceives and support their Internal
Audit can make or mar their Internal Audit effectiveness and productivity in
service delivery.
In
addition, the interaction and relationship between the management, Internal
Auditors and the Internal Audit function are both complex and important as
regards to the performance of the University system. This study therefore,
seeks to examine “Corporate Governance in the Nigerian University System; Managements’
Perception of the role of Internal Audit”
.
1.2 STATEMENT OF THE PROBLEM
In
Nigeria, over the decades, both Public and Private Universities, whether
conventional, specialized or modern have become complex both in size, structure,
scope and mode of operation. Consequently, management of these institutions can
no longer maintain adequate surveillance in the whole control net work of
activities. This has been characterized by lack of operational efficiency or
performance, incessant breakdown of rules and regulations, prolonged strikes,
wanton destruction of lives and properties, mismanagement and misappropriation
of available scarce resources, fraud, embezzlement, specialized pilferages and
loss of Assets among others in our various institution especially in Public Universities.
In
the face of the above avalanche of problems and challenges, it becomes
worrisome whether management of these institutions make adequate use of Internal
Audit as a veritable and indispensible
management control tool to enhance performance.
In
most Nigerian Public Universities, managements’ perception of Internal Audit
directly affects the operational efficiency and effectiveness of Internal
Audit. Some appear to have positive perceptions while others have negative
perceptions.
According
to Woodard (2002) Perception is the process of attaining awareness or
understanding of sensory information or it is the mental image or intuitive
recognition of experience when aware of the elements of the environment.
Straker
(2008) viewed perception as a reality that has to be managed. Perception is the
reality which individual life is based, how we create meaning and hence
perceive the world around us. This implies that the perception of management of
any universality can make or mar the functions of their whole system of control
which they installed. For instance, quite often, there has been allegations of
disagreement between the Internal Auditor and the operators of University
(management) scarce resources, regarding the Auditor’s proper position or right
of access to assets and inquiries into various aspects of the university’s
system of control and procedures with such matters always left to the “wisdom”
and “discretion” of the individual Vice-Chancellors to resolve. These circumstances
tend to frustrate proper enforcement of Internal control in the university
system and would have negative effects on operational efficiency.
Internal
Auditors, due to sheer disposition of office cannot avoid having a close relationship
with their university’s management in their day-to-day activities or functions.
They ordinarily would need good support and perception from their management to
be more effective and to achieve their audit and organizational objectives but
in most cases this is “far- fetched” or a “Mirage” in the university system.
Sequel to the above, this study examined Corporate Governance in the Nigerian
University System; Managerial Perception of the role of Internal Audit”.
1.3 OBJECTIVES OF THE STUDY
The
main objective of this research is to evaluate Corporate Governance in the
Nigerian University System; Managements’ Perception of the role of Internal
Audit.
The
specific objectives are, to;
i.
Assess the difference in
the level of management support of internal Audit among Federal, State and
Private Universities in Nigeria.
ii.
Dictate the effect of management support on
the performance of Internal Audit Directorate in Nigerian Universities.
iii.
Find out the internal audit efficiency factors
that influence the level of management support of Internal Audit functions in
Nigerian Universities.
iv.
Determine the extent to which managements’
perception of the effectiveness of Internal Audit functions affect management
control activities in Nigerian Universities.
v.
Assess the extent to which adverse management’s
Perception of internal audit function affects management control activities in
Nigerian Universities.
1.4 RESEARCH QUESTIONS
i.
How does the difference
in the level of management support of the Internal Audit among Federal, State
and Private Universities in Nigerian vary?
ii.
To what extent does
management support of the Internal Audit affects the performance of Internal
Audit Function in Nigerian Universities.
iii.
What are the Internal
Audit Efficiency factors that influence the level of management’s support of
Internal Audit functions?
iv.
How does the opinion of
Management, Accountants and Internal Auditors differ on how management
perceptions of Internal Audit functions influences management control
activities in Nigerian Universities?
v.
To what extent does adverse
managements’ perception of Internal Audit function affect management control
activities in Nigerian Universities?
1.5 RESEARCH HYPOTHESES
The
following hypotheses were formulated and would be tested to determine their
validity or otherwise.
Ho1: There is no significant difference in the
level of management support of Internal Audit among Federal, State and Private
Universities in Nigeria.
Ho2: Management support to internal audit has no
significant effect on the performance of Internal Audit Directorate in Nigerian
Universities.
Ho3: Internal Audit efficiency factors do not
have any significant effect on the level of management support of Internal
Audit functions in Nigerian Universities.
Ho4: There is no significant difference in the
perception of management, Accountants and Auditors as regards to the
effectiveness of Internal Audit functions in enhancing management control
activities in Nigerian Universities.
Ho5: Adverse management perception does not have
any significant effect on the management control activities in Nigerian
Universities.
1.6 SIGNIFICANCE OF THE STUDY
The
significance of this study cannot be over emphasized. It will add value to the
existing body of knowledge as regards to the research topic. It will also be of a great importance
to the following;
i.
Management of Tertiary Institutions:
Especially Public and Private Universities to re-examine and re-evaluate their
perception of their Directorate of Internal Audit in the right direction. This
is vital in that, the perception of management as regards to Internal Audit is
very crucial to the performance or efficiency of their Internal Audit, hence
the need to acknowledge them as partners in progress and not a “rubber stamp”
or enemies in the whole system of control.
ii.
Auditors and Accountants:
It will enable them to understand their management’s perception and support to
them. It helps them to improve their inter-personal relationship with their
management. A positive management perception and support on Internal Audit will
enhance the Auditor’s efficiency, effectiveness, productivity and service
delivery in the whole system of control in Nigerian Universities.
iii.
Researchers and Academia:
This is a reference point; hence, it will serve as a pedestal for a good
conceptual frame work and empirical evidence in creating further value to the
existing knowledge in this research topic proper or related study.
iv.
Public and other Resource
Control Managers: These are not left out, they will also benefit immensely from
this study, it will enable them to have an in-depth understanding of the
function of Internal Audit and have proper perception of them and also
appreciate the need for their existence in any given organization as regards to
effective internal control.
1.7 SCOPE OF THE STUDY
The
scope of this study is limited to Corporate Governance in the Nigerian
University system; managements’ perception of the role of Internal Audit.
It
covered only six randomly selected Universities from three chosen States out of
five States in the South-East Geo-.political Zone of the Federation due to
proximity, cost, university and cultural affinity derived from work force.
The
states are Abia, Ebonyi and Imo respectively, while the universities used in
the study are; the Federal, State and Private Universities in the zone - viz.
1. Federal
University of Technology Owerri, Imo State.
2. Alex-Ekwueme
Federal University Ndufu- Alike, Ebonyi State.
3. Michael
Okpara University of Agriculture, Umudike. Abia State.
4. Abia
State University Uturu Abia State.
5. Imo
State University Owerri.Imo State.
6. Evangel
University, Akaeze Ebonyi State.
1.8 LIMITATIONS OF THE STUDY
This
study would have covered all the universities in Nigeria, but due to some
inherent problems the researcher encountered, he restricted his study to only the
South-East Geopolitical Zone of Nigeria. Six notable Universities in three
states, out of the five states of the South-East Geopolitical Zone of the federation
were covered by the researcher.
These constraints that posed this
restriction to the researcher included the following;
The
uncooperative attitude of the respondents; some of these respondents were
absolutely reluctant to express their views on the research topic proper, with
the excuse that it is a classified information
Management
and Staff of Private Universities were also not willing to disclose any
information in this regard.
Furthermore,
some of the materials were secured and required reasonable resources to be
expended before having access to them. In addition, even after payment of huge
sum of money, some of the files or information may be corrupt.
1.9 DEFINITION OF TERMS
Auditing:
This is an independent examination of an expression of opinion on the financial
statement of an enterprise by an appointed Auditor in pursuance of that
appointment and in compliance with any statutory obligation.
Corporate
Governance is the system of rules, practices and processes by which a firm is
directed and controlled. Corporate governance essentially involves balancing
the interest of an organization’s many stakeholders, such as shareholders,
senior management executives, employee’s, customers, suppliers, financiers, the
government and the community. External
Audit: A type of Audit imposed by statute which is carried out by a Public
Accountant.
Governance: This refers specifically to the set of rules controls polices and resolutions
put in place to direct corporate behavior.
Internal
Audit: An independence appraisal function activity within an organization for
the review of activities as a service to all levels of management. It is a
managerial control, which measures, evaluates and report upon the effectiveness
of internal control, financial and otherwise as a contribution to the efficient
use of resources within the organization.
Internal
Auditor: An employee of an Organization/Institution who is appointed to control
and direct the day-to-day affairs of the Internal Audit Directorate. He is a
private Accountant and the overall controller of the Internal Audit
Directorate.
Internal
Check: The aspect of internal control which is exclusively concerned with the
prevention and early detection of errors and fraud.
Internal
control: The whole system of control financially or otherwise established by
the management in order to carry out the business of the enterprise in an
orderly and efficient manner, ensure as far as possible the completeness and
accuracy of the records.
Management control: The establishment of rules,
regulations, policies, procedures to optimize the organizational primary
objectives and to maintain absolute control over organization activities in a
dynamic and complex environment.
National
Universities Commission (NUC): The Apex body that oversees all the Universities
in Nigeria.
Nigerian
Universities: These are Universities in Nigeria; currently there are one
hundred and seventy (170) Universities in Nigeria made up of Federal, State and
Private Universities.
Perception:
This is the mental image or intuitive recognition of experience when aware of
the elements of the environments.
Research
Design: This is a framework or plan that is used as a guide in collecting and
analyzing the data for a study.
University
Council: A statutory Apex governing body in any Nigerian University.
University
Management: An administrative body or
organ that is vested with the day-to-day running of operation of a university
by planning, organizing, directing and controlling the activities of the
university e.g. the Vice-Chancellor, Deputy-Vice Chancellors, Registrar, Bursar
and the Librarian.
University:
An institution at the highest level of education where one can study for a
degree or do research.
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