PROPOSAL
INTRODUCTION
An effective
internal audit department is a prerequisites to the growth and survival of any
business organization or non making organization, since all organization small
or big, profit oriented or not operate within the condition or resource
constraints and also run high risk of fraud and errors.
This study
attempt to examine the internal audit as practised by government parastatals
which is described as those parastatal whose means of operation is less than
average comparing with company(s) for the government of the federation through
an assement of Lagos state judiciary for the purpose of these write-up a review
of internal audit would be carried out determined the effectiveness and
problems of internal audit department in a government parastatal most
information needed by the management morder to keep informed about finance and
the progress to operation comes from the accounting records.
Internal audit
is necessary to ensure that government policies and directives are properly
adhered to management internal audit is a key factor in the effectiveness and
efficient management of a government parastatals, internal audit can be said to
be a form of auditing.
Internal audit
management control which function by measuring and evaluating of effectiveness
of other control.
A quality
internal audit service will make a positive contribution to the objectives of
any organization, the key areas where an internal audit department can be
effective are:-
(a)
GOVERNMENT
POLICIES: Management at distance can
also aided by utilization of internal audit more traditional policy role.
(b)
VALUE OF
MONEY: A value of money audit it is an independent appraisal of the
performance of management in seeking to secure economy efficiency.
(c)
MANAGEMENT
INFORMATION: One of the key to successful decision making in any
establishment is the quality of the management information available, its
accuracy and its reliability. Here the internal audit department has a big role
to play in assessing the adequacy and suitability of information.
(d)
FINANCIAL
CONTROL: Where as the external will take a view of the financial controls
operated within the establishment during the annual audit.
OBJECTIVES OF THE STUDY
This write-up is
intended to study the need for assisting the financial statement to government
parastatal i.e the important of work an attempt would have been made to look critically
into the problems mentioned and their impact in an organization. The
contribution of internal audit in solving problems.
SIGNIFICANCE OF THE STUDY
This research
work will be carried out with the aim of checking for the problem of fraud external
of reliance on internal audit by external audit in a establishment by some set
of people through their department mainly account department in the course of
this study attempt will be on finding out it internal audit department has any
effect to the management and shall compared with external audit.
LIMITATION OF THE STUDY
Auditing as a
whole is a wide spread course and much have already been written about it.
However, for the
purpose of this study the researcher will limited to the impact of internal
audit to management of Lagos
State judiciary.
WORKING HYPOTHESIS
The study is to
be carried out with certain underlying assumption upon which personnel
interview, suggestions and comments, questionnaire are based. Those assumption
would proved correct of false in the course and the following are hypothesis
(a)
The higher the creditability of financial
statement prepared by management of Lagos
state judiciary the higher their changes of obtaining finance.
(b)
If the internal control system of Lagos state judiciary are
strong the work of auditing their financial statement by auditor will be
reduced.
RESEARCH METHODOLOGY
For the purpose
of this write-up, the findings will be achieved through under each interviews
of accountant internal auditing as well as use of questionnaire to be
distributed randomly to member and staff of Lagos State
judiciary.
The survey will
follow the following sources:-
i)
PRIMARY
SOURCE: Which will be gathered through experosnal interviewed and use of
questionnaires.
ii)
SECONDARY
SOURCE: This will be gathered form textbooks, periodical magazine, journal
etc. The source of data collection which comprise both the primary and
secondary data will be used concurrently and for accuracy, adequacy analysis
will be necessary which will be based on descriptive model.
STATEMENT OF PROBLEM
In designing, installing, maintaining and operating only internal audits,
the management would have to examine
a)
Audit comparable with over all objectives of the
parastatals.
b)
Analyse the nature of risk in existence.
c)
Non-compliance with the rule and regulations set
up by government for both personal and management thereby oversiding control
set up by it.
Causes, nature and type of frauds
detection and preventing of fraud in relation to adequate internal audit
department.
TABLE OF CONTENT
Title Page
Certification
Dedication
Acknowledgement
Abstract
Table of Content
CHAPTER ONE
1.1 Introduction 1
1.2 Statement
of Problem 10
1.3 Objective
of the Study 11
1.4 Significance
of the Study 11
1.5 Limitation
of the Study 12
1.6 Brief
History of Lagos State Judiciary 12
1.7 Working
Hypothesis 14
1.8 Methodology 15
CHAPTER TWO
Literature Review
2.1
Definition of Auditing 16
2.2
Types of Auditing 17
2.3
Objectives of Auditing 21
2.4
Internal Auditing is defined by Biggs and Duties
in their Book ‘Internal Auditing”
23
2.5
Element of Internal Auditing 24
2.6
Approach to an Audit Work 25
2.7
Reliance on Internal Audit 27
2.8
Who is an Auditor 30
2.9
Role of Auditors 32
2.10
Auditor as a Watchdog 34
2.11
Auditor Fraud and Errors 37
2.12
Internal and External Audit Compared 41
2.13
Scope and Function of Internal Audit 43
2.14
Responsibilities, Authority and Independence of Internal
Audit 45
2.15 Internal control and Internal Audit 46
CHAPTER THREE
3.0 Research
Methodology 48
3.1 Research
Design 48
3.2 Data
Collection Method 49
3.3 Research
Strategy and Selection of Sample Size 50
3.4 Conducts
of the Field work 50
CHAPTER FOUR
Data Analysis 52
4.1 Table
of Question 1 Sex
53
4.2 Table
of Age 54
4.3 Table
of Marital Status 54
4.4 Table
of Experience of Employees 55
4.5 Table
of Position of Employees with Percentages 56
4.6 Table
of Educational/Professional Qualification 57
4.7 Table
of Bar chart 58
4.8 Table
of Element of Internal 59
4.9 Table
of response as to Independence of Internal
Audit 60
4.10
Table of Response as to whether the Quality of
Personal
Commensurate
with the Personnel Responsibilities 61
4.11
Table of Responses as to whether the Management
Undertakes Regular and Frequent Redeployment
of staff 62
CHAPTER FIVE
5.1 Summary
64
5.2 Recommendation 65
Conclusion 66
Reference 69
Questionnaire
CHAPTER ONE
1.1 INTRODUCTION
An effective
internal audit department is a prerequisites to the growth and survival of any
business organization since all organization either small or big, profit
oriented, operate within the conditions or resources constraints and also run
high risks of fraud and errors, in view or this, there is a need to introduce
or establish operating rules and procedure by establishing on internal audit
department in other to ensure that the use of their resource are maximized and
that the potential risk of internal risk and unintentional irregularities are
reduced to the minimum.
This study
attempts to examine the internal audit as practiced by government parastatals
which is described as those parastatal whose means of operation is less than
average comparing with company(s) for the government of the federation through
an assessment of Lagos State judiciary, for the purpose of these write up a
review of internal audit would be carried out to determine the effectiveness
and problems of internal audit department in a government parastatals. In the
light of this study, a brief discussion of information protection and control
as vital aids to management would be explained. Most information needed by
management in order to keep informed about finance and the progress of
operations comes from the accounting records. The information to be maximum
value must be variable complete and timely. Therefore inaccurate information is
no little better than no information at all.
The
classification of account, all aspect of the accounting system must be designed
to assist management gather information as to answer the question “DOWE HAVE
ENOUGH STAFF TO MEET THE ANTICIPATED VITAL ASPECT OF INTERNAL CONTROL”
protection of the resources of government is important against a multitude of
possible losses ranging from embezzlement to such cases as careless use of
government properties.
Internal audit
is necessary to ensure that government policies and directives are properly
adhered to management internal audit is a key factor in the effectiveness and
efficient management of a government parastatals. Internal auditing can be said
to be a form of auditing.
Auditing can be
said to be such an examination of the books, voucher and accounts of a business
and shall enable the auditors to satisfy himself whether or not the balance
sheet and profit and loss account are properly complied so as to exist it a
true and fair view of the affair to the business, whereas internal audit is
independent appraisal or review activities with the organization for the review
of the operation as a service to management, it is a management control which
function by measuring and evaluating the effectiveness of other control.
Internal audit
as defined by millichamp as an independent appraisal function established by
the management of an organization for the review of the internal check and
internal control system as a service to the organization, it objectively
examines, evaluate and report on the accuracy of internal controls as a
contribution to the proper economics efficient and effective use of resources.
From the above
definition it is clear that:-
a)
Internal audit is an internal function which
means that it is conducted by the employees of an organization specially
assigned for that purpose.
b)
Internal audit is a service to management i.e is
a managerial control, consequently the scope and objectives depend upon the
management assessment of what is needed and its willingness to assign the task
to the internal audit departments.
c)
Part of the internal audit function is to review
and to appraise the organizations operation and records.
The functions of
internal audit or auditor is to be independent i.e to be a special and separate
entity. (It means separate department from the account department and it
reports to the top managements).
The definition
of internal audit is broader than the meaning sometimes attributed to the term,
it recognizes that internal audit extends beyond those matters which relates
directly to the function of the accounting department. This broad definition
may be summarized by stating that internal audit is the means by which
management obtains the information and protection of errors and fraud that are
vital to the successful operation of government parastatals.
A good internal
audit department has a direct bearing on the reliability of a concern
accounting records permitting the independent auditor (extend) to place a great
confidence and relevance.
In the
accounting and audited records and thereby justifying reduction in the scope of
the auditors examination and redirection of loss efforts.
Many management
of government parastatals large organization and small one had found a need for
an internal audit in addition to external audit. Internal auditors are employee
of the parastatlas and work exclusively for the management. Their functions partly
overlap those of the external auditors and infact are quite different.
The precise
function rarely laid-down of internal audit are determined by the management
and varies greatly from organization to organization.
There is a laid
down rule issued in June 1990 to guide the internal audit department.
Internal
auditing is thus carried out by independent personal called internal auditor
who are employees of the establishment and this independence is not always easy
to consive. However it can be assisted by:
(a)
Reporting to the top management of his funding
without being bias.
(b)
Having no conflicts of interests or any
restrictions placed upon their work by management.
(c)
Having no non-audit work.
(d)
Having the scope of arranging its own priorities
and activities.
(e)
Having unrestricted access to records assets and
personnel.
The management
of a government parastatal need a complete and accurate accounting and other
departmental records because:
(i)
The parastatals cannot be otherwise controlled.
(ii)
The financial statement which are required for
numerous purpose can only be prepared it adequate primary records exists.
(iii)
Statutes often have a specific requirement on
record keeping for specific form of government parastatals.
The basic need
for an audit is to restore the problem which exist between the managers and the
owners interms of report which they believe may contain errors, not disclosed
fraud, deliberately misleading, inadvertently misleading, fail to disclose
relevant information. The solution to this problem of credibility in reports
and account lies in appointing an independent person called an auditor to
investigate the report and their report on there finding.
Auditing an
instructional manuals for Accounting students by H.A. MILLICHAMP expressed the
auditing guideline issued in June 1990 give a very good summary of the stages
in a system of audit as:-
a)
Identifying the system parameter.
b)
Determine the control objectives
c)
Identifying the expected control to meet control
objectives.
d)
Review the system against expected control.
e)
Test the operation of control in practice.
f)
Give an opinion based an audit objective as to whether the system provides
an adequate basic for effective control and whether it is properly operated in
practice.
In carrying out
an internal audit of an organization or government parastatals there is need to
follow the underlisted stages of planning an internal audit thus:
a)
Identifying the objectives of the organization.
b)
Define internal audit objectives
c)
Take account of relevant changes in legislation.
d)
Obtain a comprehensive understanding of the
organisation’s system structure and operation.
e)
Identify, evaluate and rank risk to which the
organization is exposed to.
f)
Take account of change instructure or major
system in the organization.
g)
Take account of known strength weakness to the
internal control system.
h)
Take account of management concerns and
expectations.
i)
Identify audit areas by services, functions and
major systems.
j)
Determine the type of audit e.g system,
verification or values of money (e.g stock control, cash balances)
k)
Take account of the plan of internal audit and
other review agencies.
l)
Assess staff resources required and match with
resources available.
Internal audit
as an instrument of management involves a periodic review of the accounting and
internal control system as well as the result of operations in order.
i)
To report on the efficiency and effectiveness of
the internal control and accounting system and to suggest improvement where
necessary such as continuous update of existing controls to block loopholes.
ii)
To report on result of operations, variations
from plans and the reason thereof.
iii)
Safeguard the asset of the parastatal
effectively.
iv)
Study the environment and recommended
improvement on review of existing controls.
The success of
internal audit will depends on the degree of support it receives form the
management which must be seen in a positive light rather there as a big stick
to weild against line management and must also be seen to be independent.
A quality
internal audit services will make a positive contribution of the objectives of
any organization. The key areas where an internal audit department can be
effective are:
a) GOVERNMENT POLICIES: Management at a
distance can be aided by utilization of internal audit more traditional policy
role, while also accounting compliance with corporate policies and procedure.
b) VALUE BY MONEY: A value of money audit
is an independent appraisal of the performance of management in seeking to
secure economy efficiency and effectiveness in the use of resources at its
disposal. This value for money approach can be adopted when undertaking of a
product service department.
(c) MANAGEMENT INFORMATION: One of the key
to successful is the quality of the management information available, its
accuracy and its reliability. Here the internal audit department has a big role
to play in assessing the adequacy and suitability.
(d) FINANCIAL CONTROL: Where as the
external will take a view of the financial controls operated within the
establishment during their annual audit, this may not cover establishment
during their annual audit, this may not cover items or areas where there are
value which would be considered immaterial such as pretty cash or expense. But
the accuracy of controls over these activities can often give a good indicator
as to the control exercised over financial activities as a whole. The internal
auditor is again ideally situated to ensure that these and other basis
financial control are in place at each of the parastatals operation.
1.2 STATEMENT OF PROBLEM
In designing,
installing, maintaining and operating any internal audits, the management would
have to examine.
(a) Audit compatible with overall objectives
of the parastatals.
(b) Analyse the nature of risk in-existence.
(c) Non-compliance
with the rule and regulation set up by government for both personal and
management thereby over siding control.
(d) Causes,
nature and types of frauds detection and preventing of fraud in relation to
adequate internal audit department.
1.3 OBJECTIVE OF THE STUDY
This write-up is
intended to study the need for assisting the financial statement of government
parastatal i.e the importance of auditing to management of a government
parastatals. At the end of this research work an attempt would have been made
to look critically into the problems mentioned and their impact in an
organization. The contribution of internal audit in solving the problem. And
this project work will also cover the role of internal audit as an instrument
of internal check to management it will also touch internal control.
1.4 SIGNIFICANCE
OF THE STUDY
This research
work will be carried out with the aim of checking for the problem of fraud,
extence of relevance on internal audit by external audit in an establishment by
some set of people through their department mainly account department in the
course of this study attempt will be on finding out if internal audit
department has any effect to the management and shall be compared with external
audit.
1.5
LIMITATION
OF THE STUDY
Auditing as a
whole is a wide spreed course and much have this already been written about it.
However, for the purpose of this study the researcher will be limited to the
impact of internal audit to management of Lagos State
judiciary.
1.6
BRIEF
HISTORY OF LAGOS
STATE JUDICIARY
Judiciary is a
function of government parastatals which is responsible to the administrator of
Lagos State, it serve as a revenue from which Lagos State Government generate
much find though government pump in money to this area of parastatals to carry
out is operations/plans they expect them “judiciary” to return part of the
money they realize at the end of the year to government coffers.
This arm of
government parastatals generate much fund to government coffers which is refer
to as returns to government. Lagos state judiciary generate much funds from
different aspect of their function among which are probate registry of high
court i.e collection of estates fees from the estate of the decreased, this
aspect of “probate” is where judiciary generate most of its fund because for
every estate fees collected they charge a commission of about 10% which is been
paid directly to government coffers. They also generate money from litigation
i.e filling fees, motions, summons, writes of summons, and through deposit of
wills.
Most of the
money they generate and those pump in by government inform of budget are been
spent on maintenance of office equipment and furnitures, they use part to
repair and purchase machinery or assets e.g cars, office equipment and pay
staff salary.
Lagos state judiciary are situated at
different are of the state. i.e most local government have their judiciary
including the newly created ones and practice is referred to as the
“GEOGRAPHICAL SPREAD of JUDICIARY”.
Judiciary as
been headed by the chief judge whose office is situated at Ikeja. Men are
always appointed as Chief judge in the federation not until 1995 when Chief
Mrs. Omotosho was appointed chief judge in the whole federation which makes a
history to Lagos
state judiciary.
The main aim of
judiciary is ‘CASE” i.e punishing offenders and implementing government rule
and regulation and also settle dispute between company and individuals they encourage
the citizen of the country and also improve the economy of the country by
assisting individuals of their rights.
ORGANOGRAM OF LAGOS-STATE JUDICIARY
CHIEF
JUDGE
CHIEF
REGISTER
PRINCIPAL
ACCOUNTANT
SENIOR ACCOUNTANT
INTERNAL
AUDITORS
REVENUE
COLLECTORS
|
|
ASSISTANT
DIRECTOR
OF
LIBRARY
STATISTIC
AND
RESEARCH
|
|
Source from the
registry Lagos
– State Judiciary, Apapa.
1.7 WORKING
HYPOTHESIS
A study is to be
carried out with certain underlying assumption upon which personal interview
suggestions and comments, questionnaire are based. Those assumption would be
proved correct or false in the course or research and the following are
hypothesis:
(a) The
higher the credibility of financial statement prepared by management of Lagos – Stat judiciary
the higher their changes of obtaining finance.
(b) If the
internal control system of Lagos
State judiciary are
strong the work of auditing their financial statement by auditors will be
reduce.
1.8 METHODOLOGY
For the purpose
of this write up, the finding will be achieve through direct interviews of
accountant internal auditors as well as use of questionnaire to be distributed
randomly to members and staff of Lagos – State judiciary, the survey will
follow the following sources:-
Primary source: Which will be gathered
through personal interview and use of questionnaires.
Secondary Source: This will be gathered
from textbooks, periodical magazine, Journal etc.
The source of
data collection which comprise both the primary and secondary data will be used
concurrently and for accuracy adequacy analysis will be necessary which will be
based on descriptive model statistical method and bar chart/histogram.
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