The Role of Internal and External Auditors in Nigerian Public Organization
Chapter One
Abstract
This study investigated the role of internal and external auditors in Nigerians public organization. The following research objectivesa were used to guide the study: to ascertain the relationship between internal and external audioters, to find out the role of internal as well as the role of external auditors in Nigerians public otrganization. The Responses from staffs were analyzed using relevant statistical tools from which three hypothesis were formulated and tested using Z-test statistics, while questionnaire were analyzed in tabular form using simple percentage. It was discovered there is relationship between internal and external auditors in public organizations. As a result of some of these challenges the effectiveness of the audit in the Nigerian public sectors, has been hindered as well as the organizational change it can bring to its environment. I recommend that for audit to be effective, it must be a completely independent group, adequately funded and equipped with qualified internal auditors as well as sufficient opportunities for internal auditors to become qualified.
Chapter one
Introduction
Background of the study
The Nigerian Standard on Auditing (NSA), issued by the Institute of Chartered Accountants of Nigeria (ICAN) is titled Considering the Work of Internal Audit, which is consistent with International Standard on Auditing (ISA). Using the Work of Internal Auditors, issued by International Auditing and Assurance Standards Board (IAASB). These standards are expected to increase the quality of external audit of financial statements by providing more audit evidence. Therefore, the standard (NSA 26) requires that the external auditors should determine the extent to which they will rely on the work of internal auditors. This is key to audit planning decision (Munro & Stewart, 2011). However, the extent of reliability of the external auditor on internal audit work may largely be determined by the level of satisfaction with the competence and objectivity, of the internal auditors.
This study details the importance of public sector audit activity to effective governance and seeks to define the key elements needed to maximize the value the public sector audit provides to all levels of the public sector. As such, it will determine the roles being played by internal and external audit in public organization.There has been a significant outcry in the public sector over governance related issues with the Institute of Internal Auditors (IIA, 2:2012) strongly contending that audit roles in public orgnaization have diminished and are now of insignificant effect. The institute further outlines the need for guidelines to ensure an effective role of both internal and external audit in public orgnaization. However, other researchers such as Ridley and Silva (2007) do not share different perspectives and henceforth outlined that audit in private organization has been surrounded by bad practices. In addition, Albrecht et al (1992) contends that both internal and external audit are best practiced in public sector governance. This was followed by a wave of unqualified audit reports that also rocked UK when Northern Rock received an unqualified report on 22 February 2007 and was eventually nationalized in 2008
Studies by Financial Reporting Council (2004) and HM Treasury (2002) have shown that effective internal and external audit roles in public sorganization are of paramount importance and have a huge bearing on major economic activities and hence have to be encouraged and promoted. One of the entity that has been said to benefit from such roles is Ibadan state government. This is after revised forecast which showed that the oil sector provides more than 90% of government revenue and 80% foreign exchange earnings (index mundi, 2014). Adorno (1979) pointed out that government stands to benefit a lot especially from energy sources but needs good public sector governance and has to ensure effective internal and external audit in public sector governance. With most analyst contending the need and encouragement of as a priority (Gary, G., 2004 and IIA, 2004). This study therefore seeks to determine the role of internal and external auditors in Nigerian public organization
Statement of the study
Often times, management of public organizations via ministry of finance in Ibadan have problems with internal control and external maintenance of discipline. This brought about by low level of management education and willingness to adhere to the theories and practices of management .most organization are not well structured . There is overlapping of junctions and definitions of functions. Many business organizations are rapidly assuming complexity resulting to remarkable reliance to internal audit and management as a wider range area of control.
In spite of the existence of internal audit departments in organizations, it is often argued that the rate of fraud and misdeeds is still on the increase, particularly in the public sector. Some people argues that the internal auditors are creating more problems than they are solving, others see it as tools for witch-hunting and therefore sees them as unnecessary evil.
The internal and external control system in Nigeria public sector may be insufficient based on some predicaments. Lack of proper segregation and proper assignment of duties as well as shortage of qualified staff to carry out internal audit and accounting duties.
Lack of implementation of routing audit report by appropriate authorities. Inadequacy of internal and external control system leading to improper investigation.
Objective of the study
The main objective of the study is to investigate the role of internal and external auditors in Nigerian public organization. The specific objectives are;
- To ascertain the relationship between internal and external auditors in public organization
- To ascertain the role of internal auditors in public organization
- To ascertain the role of external auditors in public organization
Research Questions
The following research questins are formulated to guide the study;
- Is there any relationship between internal and external auditors in public organization?
- What is the role of internal auditors in public organization?
- What is the role of external auditors in public organization?
Research Hypotheses
The following research null hypotheses are formulated to guide the study;
H1: There is no relationship between internal and external auditors in public organization
H2: There is no role of internal auditors in public organization?
H3: There is no role of external auditors in public organization?
Significance of the study
The study will be very significant to students, lecturers and public organizatuions. The study study will give a clear insight on the role internal and external auditors play in public organizations and also ascetain the relationship internal and external auditors in public organization. The study will also serve as a reference to other researchers that will embark on the related topic
Scope of the study
The scope of the study covers the role of internal and external auditors in Nigerian public organization. The study will be limited to ministry of finance in Oyo state.
Limitation of the study
The limitation to this research work is the lack of adequate information from the senior staff of the ministry considering such information as “Top Secret”. In ability to have access to vital documents in the ministry considering such document as confidential.
Defintion of terms
FRAUD: This is defined as criminal deception in an act of acquiring other people money kept in one’s possession deceitfully.
INTERNAL AUDIT: A.H. Millichamp defined internal audit as “an independent appraisal function within an organization for the review system of control and quality of performance as a service to the organization”. The objective is to examine, evaluate and report on the adequacy of internal control as a contribution to the proper economic efficient and effective use of resources.
External audit: An external auditor performs an audit, in accordance with specific laws or rules, of the financial statements of a company, government entity, other legal entity, or organization, and is independent of the entity being audited.
Do you need help? Talk to us right now: (+234) 08060082010, 08107932631 (Call/WhatsApp). Email: [email protected].IF YOU CAN'T FIND YOUR TOPIC, CLICK HERE TO HIRE A WRITER»
