TABLE OF CONTENTS
Certification i
Dedication ii
Acknowledgement iii
Table of
contents iv
CHAPTER
ONE: GENERAL
INTRODUCTION
1.0 Introduction
1.1 Background history of Bank in Nigeria
1.2 Brief History of Union Bank of Nigeria Plc
1.3 Organization of Union of Nigeria Plc
1.4 Conceptual Definition of Auditing, Management
Efficiency, Organization and their Relationship.
1.5 Conceptual Definition of Internal Audit
1.6 Internal Control and the Scope of Audit
1.7 Research Question
1.8 Purpose of study
1.9 Hypothesis Test
1.10 Relevant of study
1.11 Scope of study
CHAPTER TWO: LITERATURE REVIEW
2.0 The
Nature of Auditing
2.1 Historical
Development of the Internal Auditing
2.2 Purpose
of Internal Auditing
2.3 Factors Determining
the Scope and Objective of
Internal Work
2.4 Methods and Procedures of Carrying Out Internal
Audit Work
2.5 Relationship between
Internal and External
Auditors
2.6 Internal
Control
2.7 Types of Internal Control
2.7.1 Audit Testes
2.8 Fraud,
Irregularities and Errors
2.10 Factors Contributing To Fraud and Common Fraudulent Practices
2.11 The Auditors Responsibilities
for Detecting Fraud
2.12 Reporting Irregularities and
Fraud
2.13 Management Auditing
2.14 Problem
and Prospect of Internal Auditing
CHAPTER THREE: RESEARCH
M ETHODOGY
3.0 Introduction
3.1 Formulation of the Research
Questions
3.2 Hypothesis
3.2 Sampling and Generation of Data
3.3 Questionnaire
3.4 Population Size of the Study
3.5 Method of Data Analysis
CHAPTER FOUR: DATA ANALYSIS
4.0 Introduction
4.1 Response
to the Distributed Questionnaires
4.2 Biographical
Characteristics of Respondents
4.3 Analysis of Data Not Used For
Test of Hypothesis
4.4 Test
of Hypothesis
4.5 Analysis of Section of the
Questionnaire
CHAPTER FIVE: SUMMARY
CONCLUSION, LIMITATION AND RECOMMENDATION
5.0 Introduction
5.1 Summary of Analyzed Date
5.2 Recommendation
5.3 Limitation
of the Study
5.4 Suggestion
for Further Study
Bibliography
Research Questionnaire
CHAPTER
ONE
GENERAL
INTRODUCTION
1.0
INTRODUCTION
The layman is generally under the impression that an
auditor is primarily in search of errors and frauds of all types. This is a
wrong notion. Various accounting society have however made efforts to educate
both general public and the business community in order to dispel this
incorrect impression. This tends to cast a dark veil over the accountancy
profession, especially the auditing aspect. The result there is diminishing
public confidence in Audit reports about financial statements of business. In
its defense, the profession claims to have in place Audit standards,
procedures and ethnic practices which ensure that the quality of audit
conducted in Nigeria needs of financial statement users. But there is equally
widespread though not yet empirically verified counter claims that the auditors
are not living up to expectations as audits conducted in Nigeria have continued
to witness a steady decline in usefulness and reliability.
Given these divergent opinions and their growing
strengths, one wonders which' among them is real or close to reality and which
is based on written information. This study therefore, was embarked upon to
serve as an instrument for whether internal Audit in banks yield any effects on
management effectiveness.
However, in Nigeria today, the word "auditor" is synonymous
with Detective. The officers and servants of companies seem to be ignorant of
the main objective of an auditor. It is not surprising at an impending visit by
auditors. I feel bad about this attitude. Difference scholars have expressed
their view about this situation as to show fairness and reliability of state of
affairs of a company but not to detect fraud as their main duty.
1.1
BACKGROUND HISTORY IN BANK IN NIGERIA
The development of banking in Nigeria dates back to 1892 when the African
Banking Corporation opened its first branch in Lagos. Messrs elder Dumpster
& company, a shipping firm based in Liverpool, was instrumental to its
formation. The initial difficulties experienced y the bank made it transfer its
interest to elder Dumpster & Company in 1893. This led to formation of a
new bank Known as the British Bank of West Africa (BBWA) in 1893. It was
registered in London as a limited liability company in 1894, and the first
Lagos branch was opened the same year. The second Nigerian branch was opened in
Old Calabar in 1900.
Another bank called the Anglo-Africa Bank was established in 1899 in Old
Calabar by the Royal Nigeria Company (now UAC) to compete with BBWA. The bank
later changed its time name to Bank of Nigeria and established branches in
Burutu, Lokoja and Jebba. As a result of fierce competitio_ns and the monopoly
for the importation of silver from the Royal Mint enjoyed by BBWA, they sold
out to BBWA in 1912. The Barclays Bank DCa (dominion, colonial and oversea) now
Union Bank of Nigeria Pic opened its first branch in Lagos in 1917. Soon after,
nine other branches were opened. The Nigerian banking scene was therefore,
dominated by these two British banks BBWA and Barclays bank DCO between 1894
and 1993.
British and French Bank, now known as United Bank for Africa PLC was
established in 1949 making it the third expatriate bank to dominate early
Nigeria commercial banking. These foreign banks monopolized banking services. They largely ignored the development of local
. Africa Entrepreneurship, controlling close to 90% of aggregate bank deposits.
As a result of this, several abortive attempts were made between 1914 to the
1930 to establish locally owned and managed banks to break the foreign
monopoly.
In 1929, the industrial and commercial bank was set up by a handful of
patriotic Nigeria buts folded up in 1930 due to undercapitalization, poor
management and aggressive competition from the expatriate banks. Another
indigenous bank - the Nigerian Mercantile bank was established in 1931. Again,
it went into liquidation in 1936. The same group of pioneers in 1933 launched
the National Bank of Nigeria of Nigeria Limited that became the first surviving
indigenous bank the next private indigenous bank to be established was the
Agbonmagbe Bank founded 1945 by chief Okupa. This bank was later taken over by
the Western state Government in 1969 and its is name change to Wema Bank. The
fifty bank was the Nigeria Penny Bank, set-up early 1940's and collapsed in
1946 under the weight of mismanagement. This was followed by Nigerian farmers,
and the commercial bank in 1947 failed in 1953. Themerchants Bank opened for
business in 1952 and closed in 1960.
Indeed, this was a period of free- for- all banking. Between 1947 and
1952 a total of twenty-two banks registered, but most could not start banking
business. The next successfully established indigenous bank was the African
continental Bank founded by Dr. Nnamdi Azikiwe in 1947.
As a result of constant failure of ,these banks, the colonial Government
set up a commission of inquiry the Patton commission which consequently led to
the banking legislation of 1952.
In spite of the enactment of the banking ordinance of 1952, banks were
still indulging in some mal-practices that the act could effectively control.
Therefore, the necessity of establishing a central Bank to supervise and
control the banks became more apparent and pressing. Thus the central Bank came
into being in 1959.
1.2 BRIEF
HISTORY OF UNION BANK
Union of Nigeria Limited started with the opening of the colonial bank
offices in Lagos, Jos and Port Harcourt in 1917. In 1925, the bank was acquired
by Barclays Bank and its name changed to Barclays bank DCO (Dominion, Colonial
and Oversea). The bank developed and grew rapidly over the years by 1957,
branches had opened in almost all parts of the country. In compliance with the
directive of the government in 1968, that all companies (including banks) must
be incorporated locally in Nigeria, Barclays Bank DCO was. incorporated in
Nigeria in 1969 and its name was consequently changed to Barclays Bank of
Nigeria Ltd, with its registered Head Office at 40 Marina, Lagos.
As a result of indigenization Decree of 1972 and 1977, the federal
Government of Nigeria acquired 52% of the Bank's 'shares leaving 40% for taken
Barclays Bank International Limited while the remaining 8% was taken up by the
Nigerian public.
Barclays Banks plc sold 50% of its shares to Nigerians in 1979, thus
reducing her equity holding to 20%. Following this development, the bank's name
was changed to Union Bank of Nigeria Plc to reflect the new ownership structure
i.e.
Federal
Government of Nigeria 52%
Private
Nigeria Investor 28%
Barclays
Bank Plc 20%
With this new name, this bank is now an indigenous bank and no longer
subsidiary to Barclays Bank Plc, although they still continue to offer
technical and correspondent services as in the past.
1.3
ORGANIZATION OF UNION BANK NIGERIA PLC
The bank has organizational structure that is responsive to the
challenges of our time. It is headed by a managing Director and chief Executive
and Management team of Executive Directors, Deputy General Managers, Assistant
General Managers, Principle Managers, Senior Managers, Senior Managers and
Branch Managers.
For ease of administration, the organization is divided into two
sections, namely: the Service and the operations. Under the services, we have
the head office Department (internal Audit Department, Legal Department,
Insurance Department, Registrar's Department, Business Advisory services
Department, etc. to mention a few. While under the operations, we have the
various branches zoned into areas.
Although the ranch manager is responsible for the proper functioning and
performance in the branch, he cannot do everything himself. Thus all branches
have an organization chart, showing superior and subordinate relationship and
equal rank. This chart varies depending on the size of the branch and sets out
the official responsible for various sections of branch operations.
Union bank is made up of thousands of people, working together for a
common goal, profit through efficient services. The various levels of official
cannot function effectively without the co-operation of one . another. The
principal/senor managers for instance, cannot functions successfully alone
unless their branch manager perform. In the same light to branch manager relies
to a large extent or his Accountant, heads of Department and other junior staff
in order to perform efficiently.
Furthermore, the main thrust organization structure is to ensure that the
bank is responsible to the demands and needs of customer and the challenge of
today's competitive banking industry. .
Union bank has continue to engage in the provision of excellence services
to her customer and discharges its corporate responsibility in full to the
society in which it operates. All these have made it live up to its slogan -
"The big, strong and Reliable Bank.
1.4 CONCEPTUAL
DEFINITION OF AUDITING, MANAGEMENT EFFICIENCY, ORGANIZATION AND THEIR
RELATIONSHIP
Auditing in its widest sense is the examination
of a firm's book of . accounts by a person qualified to do so. Auditing is
derived from the Although the ranch manager is responsible for the proper
functioning and performance in the branch, he cannot do everything himself.
Thus all branches have an organization chart, showing superior andsubordinate
relationship and equal rank. This chart varies. depending on the size of the
branch and sets out the official responsible for various sections of branch
operations.
Union bank is made up of thousands of people, working together for a
common goal, profit through efficient services. The various levels of official
cannot function effectively without the co-operation of one another. The
principal/senor managers for instance, cannot functions successfully alone
unless their branch manager perform. In the same light to branch manager relies
to a large extent or his Accountant, heads of Department and other junior staff
in order to perform efficiently.
Furthermore, the main thrust organization structure is to ensure that.
the bank is responsible to the demands and needs of customer arid . the
challenge of today's competitive banking industry. Union bank has continue to
engage in the provision of excellence services to her customer and discharges
its corporate responsibility in full to the Society in which it operates. All
these have made it live up to its slogan - "The big, strong and Reliable
Bank.
1.4 CONCEPTUAL DEFINITION OF AUDITING, MANAGEMENT
EFFICIENCY, ORGANIZATION AND THEIR RELATIONSHIP
Auditing in its widest sense is the examination
of a firm's book of accounts by a person qualified to do so. Auditing is
derived from the Latin word "AUDIRE" which means to hear. It is
defined, as the independent examinations of an expression of opinion on the
financial statements of an enterprises by an appointed auditor in pursuance of
that appointment and in compliance with any relevant statutory obligation. It
avails the person the opportunity of checking whether such firm has conformed
to the laid down rules of the firm (public companies). It includes not just a
check of arithmetical accuracy but also inspection of vouchers to ensure that
all documentation are adequate and accurate in the book of the firm.
Auditing therefore aims at low cost concept,
suffice to saying that the· ultimate aim of auditing is to make sure that the
prudent concept in any organization is not based. It is then no overstatement
of firms fund given birth to the word "Auditing" in any organization
with the basic aim of cost minimization.
Management efficiency in an auditing atmosphere may have various effects
in any firm. Efficiency of a manger is the measure of how such manager is able
to manipulate the scarce i.e materials, labour, cash. etc. to achieve an
organizational goal at a defined time i.e. output measured by time.
By auditing manager's work, the zeal to achieve an organizational goal
will be his ultimate aim thereby increasing his efficiency on the job.
Conceptual way of tackling problem at a reduced cost to achieve organizational
goal will undoubtedly become part and parcel of the manager.
This is so because auditing him serves as a sort of checking him or
measuring his ability as a manager and as an individual. In this regards they
will want to guide, save and boost their names by being efficiency in their
managerial role. Auditing will therefore, no doubt have a positive have a
effect on management efficiency in any organization.
By organization, one should be talking of a place where managers convert
raw-materials to goods through subordinates. It is a place where production of
goods and services takes place.
An organization is always aiming at a goal, which is production of output,
i.e. producing or a service to the public. The overall objectives of a firm are prosperity, growth and the
continued life of the business. Some firms may have as their main objectives as
the provision of the finest car in the word. Others may consider giving the
public a service which provides the maximum value of money. Again"
satisfaction rather than maximum profit may be the object, and prosperity may
be measured by the annual profit which' gives a satisfactory return on capital
employed. It is therefore, a know fact that are interested in growth and
stability rather than profit making. Growth can be. measured by the actual
turnover or by an increase in the share of the market and this appears to be an
important objective of firms.
The continued life of a is related to growth and stability and this will
suffer if managers are made efficient by way of auditing.
1.5
CONCEPTUAL DEFINITION IOF INTERNAL AUDITING
Large organization (and some small ones) have found internal audit as a
need in auditing to external audit. Internal auditors are employees of the
organization and work exclusively for the organization. Their functions partly
overlap those of the external auditors and in part are quite different. . The
functions of external auditors are either laid down by statues or embodied in a
letter of engagement, the functions (which are rarely precisely laid down) of
internal auditors are determined by management and vary greatly from
organization to organization.
Internal auditing can be defined as an independent appraisal of
activities in an organization for the review of operations as a service to
management. It is a managerial control that functions by measuring and
evaluating the effectiveness of other controls.
Internal of chattered Accountant of English and Wales, defined it as a
review operations and records, sometime continuous undertaken within a business
by special staff. On accounting matters, the main objectives of. an internal
audit is to assure management that the check and the accounting system are
effective in design and in operation.
Where there is an internal Audit department, the external audit will
familiarize himself with the program of the department, in order to decide on
what extent he can rely on the work of the internal auditor to enable him plan
his own work.
Factors
which would be taken into account in arriving at such decision will include.
i.
The degree of independent of the internal auditor from those whose responsibilities
he is reviewing.
ii.
The number of suitably qualified and experienced staff employed in the
internal audit function.
iii. The scope, extent, direction and timings of the
test made by the internal audit functions.
iv. The evidence available of the work done by the
internal auditor.
v.
The extent to management takes. action based upon the reports of the
internal audit functions.
vi. The responsibilities of the internal auditor
vii.
The degree of cooperation experienced in the past
viii.
The adequately of planning and control in the internal audit department.
The auditors objectives in evaluating and testing internal control is to
determine the degree of reliance that may place on the information.
Internal audit is carried out by independent out staff. This is not to
say independent of management who appoints and controls them, but independent
in that they report to the Board of Directors or to a special internal audit
committee. Internal audits may then find themselves in a position of
criticizing the work of their superior which are clearly unsatisfactory.
Their jobs is to appraisal of others, not to perform a specific part of
data processing. For example, a person who spent his time checking employee
expenses claims is not performing an internal audit functions but an employee
who spent some time reviewing: the system for checking expenses claims may well
be performing an internal audit function.
As a service to management, they (management) require' that its policies
are fulfilled, the information it requires to manage effectively is reliable
and complete, This information is not only that provided by the accounting
system but also whether the organizations assets are safeguarded. The internal
auditors activities are met. They can be seen as the eye of management within
the enterprises.
A management control within any organization, other than the very
smallest, there will be a system of internal control. The internal auditor is
concerned with measuring and evaluating the continuous effectiveness of the
internal control system. His role has many facts
including:
i.
Being concerned with the implementation of social, responsibility policies adopted by top management
ii.
Being concerned with the response of the internal control system to
errors and required changes to prevent errors.
iii.
Being concerned with the response of the internal control system to
external stimuli. As a result of changing environment, internal control system
must continually change.
iv.
Acting as a consultant on internal control matters
v.
Acting as a training officer in internal control matters.
vi.
Auditing the information given to management particularly interim
accounts and management accounting reports.
vii.
Taking a share of the external auditors responsibilities in relation to
the figure in the annual accounts.
1.6 INTERNAL CONTROL AND THE SCOPE OF AUDIT
One of the essentials features of the auditors work is to make a critical
review of the internal control in order to decide the extent of examination of
the available evidence which is necessary. Detailed checking must be produced
to the minimum consistence with the
system of internal control and the nature of evident available because of time
and cost limitations.
When the system of internal control is sound in principle and efficient
in practice, then not much extensive detailed checking is needed. However,
where the system is not sound or is not properly practiced, then the nature of
shortcomings in the system must be proffered in order for a decision to be made
as the nature and extent of the detailed checking which should be undertaken.
Internal control must, therefore, be given primary attention in any audit work.
RESEARCH QUESTION
Management is a process of getting things done through people to achieve
organizational goal. To achieve this, Management efficiency should be assured
through internal audit. A genuine concern of management of any organization
such as Union Bank of Nigeria PIc. Will be to maintain good management effort
in efficiency but one still wonders why the problem of loafing on duty and
fraud despite the internal audit machinery set out by the bank.
Hence the research question which this investigation sets to resolve
include the followings
i.
What are
the causes of inefficiency of managers?
ii.
Are
workers dishonesty discovered by another workers?
iii.
Is the
internal audit system adequate?
iv.
Will
adequate internal audit system improve management efficiency?
v.
Will
internal audit affect organizational audit?'
1.8 PURPOSE OF
STUDY
Organization can be assessed base on the overall performance of various
management staff, their efficiency, reliability and integrity. Most of these
qualities have fallen drastically. The purpose of this study therefore, is to
examine the contribution of internal audit management efficiency in Union Bank
of Nigeria PIc. It is of considered opinion that if internal audit is adequate,
the reliability of the bank would be enhanced and owners will benefits greatly
from the ban. In this wise, the study is therefore committed to examine.
i.
Whether
management who are audited internally actually increase
their efficiencies.
ii.
Analysis
the cost implication and merit of the benefits in order to find out whether
there is any justification for providing them.
1.9 HYPOTHESIS
TEST
To confirm whether internal audit improves management efficiency, the
following hypothesis will be tested.
HI. Internal
has no effect on management efficiency.
H2. Internal
audits has effect on organizational profit.
1.10 RELEVANCE OF
STUDY
Banking is service oriented with the aim of making profit. The history of
some branches today cannot be completed without mentioning a single fraud being
committed by staff. Fraud cases are becoming too rampant that management/
owners of the bank become worried. This research therefore is to indicate very
briefly the ways. internal auditors could be trained to prevent the incessant
fraud in the bank.
1.11 SCOPE OF
STUDY
For the purpose of this study, the scope of this research is concerned
with the effect of internal audit on management effectiveness in Union Bank of
Nigeria Plc. This study will be limited to Lagos branches. Available data
indicates that Lagos control the highest number of branches.
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