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
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
2.2 Roles and Duties of Internal Auditor
2.3 Characteristics of the Nigeria Public
2.4 Purposes of Auditing System in a Public
2.5 Management Control in Public Enterprise
2.6 Economic Implications of Ineffective Internal Auditing System
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
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
3.9 Administration of the Data Collection
3.10 Procedure for Data Analysis
DATA PRESENTATION, ANALYSIS AND INTERPRETATION
4.2 Analysis of Respondents Bio-Data
4.3 Analysis of Operational Variables
4.4 Descriptive Statistics
4.5 Reliability Test
4.6 Test of Hypotheses
SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.5 Suggestions for Further Study
OF THE STUDY
term audit is derived from the latin verb "Audire" which means
"to hear". The origin of audit dates from ancient times when the
landowners 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:
,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.
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.
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 1948 Companied Act that he was required to
be professionally qualified. At this juncture, it was more appropriate to
define audit as:
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
WHAT IS INTERNAL AUDIT
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.
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".
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
INTERNAL AUDIT AND THE
PREVENTION OF FRAUD
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:
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
manipulation of , financial statements not involving defalcation. The main
reasons for this are:
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.
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.
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.
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
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
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.
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
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
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
management, employers, employees as well as student benefit from this study.
1.4 RELEVANT RESEARCH QUESTIONS
are some questions that would be answered during the course of this research
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
ensure a mere analytical result oriented research, hypothesis are formulated
and tested on the research objectives.
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:
Internal audit has no significant impact
on the reduction of embezzlement in public enterprises
Internal audit has significant'
impact on the reduction embezzlement in public enterprises
Established control has no
significant effect on managerial performance.
Hi: Established control has significant
effect on managerial performance.
1.6 DELIMITATION OF THE STUDY
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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