ABSTRACT
This research
examined the Effect of
Internal Audit on Managerial Performance in Public Enterprise. Survey design was employed with the use of
a well structured questionnaire. Respondents were selected based on simple
random sampling technique. Seventy (70) staff were selected from NNPC. Two
hypotheses were formulated and data collected were tested with the use of
Chi-Square analysis. Findings from the result shows that Internal audit
has significant impact on the reduction of embezzlement in public enterprises
and established control has significant effect on managerial performance. The
study recommends that internal auditor should continue to efficiently review
various departmental functions with a view to enhancing effective accounting
system and control.
TABLE OF CONTENTS
CHAPTER ONE: INTRODUCTION 1.1 Introduction
1.2 Purpose of the Study
1.3 Significance of the Study
1.4 Relevant Research Questions
1.5 Statement of the Hypothesis
1.6 Delimitation of the Study
References
CHAPTER TWO: LITERATURE REVIEW
2.1 Introduction
2.2 Roles and Duties of Internal Auditor
2.3 Characteristics of the Nigeria Public
Enterprise
2.4 Purposes of Auditing System in a Public
Enterprise Management
2.5 Management Control in Public Enterprise
2.6 Economic Implications of Ineffective
Internal Auditing System
in the Public Enterprise Management
2.7 Management of Performance Evaluation in
NNPC
2.8 Internal Auditing in NNPC
2.9 Qualification of Internal Auditor
2.10 Accountability in NNPC
References
CHAPTER THREE: RESEARCH METHODOLOGY
3.0 Introduction
3.1 Research
Design
3.2 Population
of Study
3.3 Sample
and Sampling Procedure
3.4 Sample
and Sampling Technique
3.5 Restatement
of Research Questions
3.6 Statement
of the Hypothesis
3.7 Data
Collection Instrument
3.8 Test of
Validity and Reliability of the Study
3.9 Administration
of the Data Collection Instrument
3.10 Procedure
for Data Analysis
CHAPTER FOUR: DATA
PRESENTATION, ANALYSIS AND INTERPRETATION
4.1
Introduction
4.2 Analysis
of Respondents Bio-Data Department
4.3 Analysis
of Operational Variables
4.4 Descriptive
Statistics
4.5 Reliability
Test
4.6 Test of
Hypotheses
CHAPTER FIVE: SUMMARY,
CONCLUSION AND RECOMMENDATIONS
5.1 Introduction
5.2 Summary
5.3 Conclusion
5.4 Recommendations
5.5 Suggestions
for Further Study
Bibliography
Questionnaire
CHAPTER
ONE
BACKGROUND
OF THE STUDY
1.0 INTRODUCTION
The term audit is derived from the latin
verb "Audire" which means "to hear". The origin of audit
dates from ancient times when the land owners allowed tenant farmers to work on
their land whilst landowners themselves did not become involved in the business
of farming. The landlords relied upon an overseer who listened to the accounts
of stewardship given by the tenants this period the word audit is described as:
The ,independent examination of, and
expression of opinion on the financial statements of an enterprise by an
appointed auditor in pursuance of that appointment and in compliance with any
relevant statutory obligation.
Furthermore, the introduction of the joint
stock company increased the supply of capital for industry and commerce. The
small privately owned business, which was financed by a sole trader or a
partnership gave way to the form of organization now familiar as the limited
company. The body of shareholders delegated some of their members to act as a
board of directors, and periodically the board submitted accounts to the
shareholders so that they could be aware of the state of affair of the
enterprise in which they had an interest. It was therefore necessary for the
shareholders to satisfied the accounts presented of the directors did provide
an objective view of the state of affairs of the company.
The joint stock company Act of 1844 .was
the fist legislation in Britain fore quire all incorporated businesses to hand
their annual financial statements examined by an auditor. Early auditors were,
in many cases non accountants who were required state whether the accounts
showed a `true and correct' view of state of affairs of the, it was the
company's Act 1900 that required auditor to be independent and it was not until
the 1948Companied Act that he was required to be professionally qualified. At
this juncture, it was more appropriate to define audit as:
An exercise whose objective is to enable
auditors to express an opinion whether the financial statement give a true and
fair view (or equivalent) of the entity's affairs at the period end and of its
profit and loss (or income and expenditure) for the period then ended and have
been properly prepared in accordance with the applicable reporting framework
(for example relevant legislation and applicable accounting standards) or where
statutory or other specific requirement prescribed the term, whether the
financial statements "present fairly".
WHAT
IS INTERNAL AUDIT
Internal audit are those audit that are
being carried out by employees within an enterprise. Internal audit is an
independent appraisal functions established by the management of an
organization for the review of the internal control system as a service', to
the organization. It objectively examines, evaluates and reports on the
adequacy of internal control as a contribution to the proper economic
efficiency and effective use of resource.
The institute of internal Auditors (IIA),
the professional body of internal auditors, define the function in the
following way. "Internal auditing is an impendent appraisal activity
within the organization, for the review of operations as a service to
management. It is a management control which functions by measuring and
evaluating the effectiveness of the controls".
The scope of the internal audit within an
organization is broad and may involve topic such as the efficacy of operations,
there liability of financial reporting and investigating fraud, safeguarding
assets compliance with laws and regulations.
INTERNAL
AUDIT AND THE PREVENTION OF FRAUD
By definition, internal control is an
independent appraisal function within an organization, carried out by employees
of the organization, for the review of operations (financial and otherwise): as
a service to management. It is a management controls which functions, by
measuring and evaluating the effectiveness of other controls. Fraud or
irregularities, which arise in the conduct of the affairs of a company, may be
classified broadly into:
Defalcations involving the misappropriate
of money or goods, such acts may be performed by an individual or group of
individuals without the knowledge of the board of directors, or sometimes, by the
board with the intention of defrauding the member.
Fraudulent manipulation of , financial
statements not involving defalcation. The main reasons for this are:
To attempt to improve the apparent position
or the company e.g to justify a dividend that would not otherwise have been
payable or to assist in raising new finance: or To attempt to defraud the tax
authorities by reducing taxable
profits.
The internal auditors should continuously
review the existing controls to ensure that they are followed and update them
when need be. This shall ensure that the occurrence of fraud is prevented and
that when any such 'frauds occur, they are easily and timely identified and
reported to management. It is his duty to search for fraud, to examine the
books, accounts and control/processes/system with the objective of discovering
whether there have been defalcations or other irregularities by directors or
employees of the company. However, if the directors of the company decide to
defraud the members, there is not much the internal auditor can do. Being a
staff of the organization, he probable reports to the directors and depends on
the board for his remunerations, promotion and other employment incentives.
Similarly, where the management .of
business wish to manipulate the a misleading impression without actually
diverting any of the business assets, the internal auditors cannot do much as
management misstate the assets or liabilities. While the more common target for
manipulations is stock, other areas are also susceptible.
financial statements to give It is painful
to observe that in practice, members in the employment of companies as
accountants, finance controller, internal auditors etc are used to, enhance and
perpetuate these management/ directors aided fraud. Members must always beings
to bear on all activities they are carrying out for clients and employees the
institute's codes of professional conduct and ethics.
Misappropriation of cash may result from
the making of fictitious payments or the diversion of cash receivable. The
number of ways in which these may be done depend on the systems of control in
existence and the ingenuity of the person or persons involved. In many cases,
it is the attempt to cover of rather than the original theft that is detected.
So prevention of fraud is continuous review of controls and operations. The
opportunities for fraud will depend on the system of controls. Particularly,
important are those leading to segregation of duties. Although frauds involving
collusion are not uncommon, it is generally agreed that the chance of detection
rises with the number of people involved.
1.1
STATEMENT OF PROBLEM
Despite the fact that there are installed
control and check of resources, embezzlement and fraud of resources
misappropriate of funds, errors, irregularities and mistake stills find their
ways into the public enterprises.
Internal audit department was established
to reduce those excesses however, in Nigeria public enterprises this is not so,
as there are series of problem which has been hindered in the internal audit
efficiency.
1.2 PURPOSE OF THE STUDY
The broad objective of this is to examine
the effect of internal audit on managerial performances in public enterprise
(NNPC). However, some of the specific objectives are as follows:
- To identify the
factors that hinder audit efficiency in NNPC as a public enterprise.
- Reduce excesses
of the internal auditing department of NNPC Identifying problems and
accountability in NNPC.
- Examine the
factors that hinder internal audit efficiency and how these factors are
impinged. It is also shapes up performance of management
1.3 SIGNIFICANCE OF THE STUDY
The role of internal audit department is
called upon to play especially in public enterprise and the ignorance of the
employees makes this study important With sound internal audit, management that
is characterized by fraud, errors, irregularities, and mistakes in the public
enterprises which has resulted by the notion that government business are not
supposed to make profit is bound to be eliminated.
The management, employers, employees as well
as student benefit from this study.
1.4
RELEVANT RESEARCH QUESTIONS
Below are some questions that would be
answered during the course of this research works.
- What is the impact
of internal audit on the performance in public sector
- Does establish
control failed to enhance management performance in Nigeria public
enterprise (NNPC)
- Is there any
factors that determine the performance of the management in NNPC
- Does effective
internal audit enhance reduction of fraud?
- Is there any
factor that prevent; internal audit from being effective and efficient in
NNPC.
1.5 STATEMENT OF THE HYPOTHESIS
To ensure a mere analytical result oriented
research, hypothesis are formulated and tested on the research objectives.
The decision criteria are to accept the
null hypothesis (HO) and reject the alternative hypothesis (Hi)
or otherwise based on the result of the test performed. The research hypotheses
are stated below:
Hypothesis
1
HO: Internal
audit has no significant impact on the reduction of embezzlement in public
enterprises
Hi: Internal
audit has significant' impact on the reduction embezzlement in public
enterprises
Hypothesis
2
HO: Established control has no significant effect on managerial
performance.
Hi: Established control has significant effect on managerial
performance.
1.6 DELIMITATION OF THE STUDY
The scope of limited to various measurement
of internal audit which are used in public enterprises. The constraints to this
study are time, in adequate information, lack of enough literature on this
subject arid information which are considered confidential were not revealed by
some of the staff.
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