Whistleblowing mechanism and internal audit effectiveness in nigerian public sector
Abstract
The objective of this study is to investigate the Whistleblowing Mechanism and Internal Audit Effectiveness in Nigerian Public Sector. To achieve this objective, the study adopted ex post facto design. Data were collected from both primary sources. A total of 150 copies of questionnaire were administered out of which 145 were retrieved. The returned copies of questionnaire were utilized in the data analysis of the study. Simple regression model was established and the findings of the study indicate that there is a significant relationship between whistle blowing mechanism and accountability in the public sector organization. The study concludes that whistle blowing mechanisms should be encouraged and relevant Acts should be applied judiciously. The study recommends that those who are charged with responsibility in public sector should promote the system, procedures and culture of whistle blowing mechanisms, and strengthen internal reporting mechanism. This would enhance government to achieve her mission and objectives.
CHAPTER ONE
INTRODUCTION
1.1 Background to the study
Public sector is created by government for some reasons which include provision of social goods, public goods, and private goods at affordable prices. These objectives and other visions can only be achieved if large percentage of activities carried out by public sector is performed according to laid down rules and regulations. Government has one period or the others put in place several acts and statutes to mitigate illegal activities among her employees so that her mission would not be mirage. There are several regulatory frameworks in public sector in Nigeria. These include: the constitution of the Federal Republic of Nigeria, 1979 as amended 1989 and others, the Audit ordinance of 1956, the Finance (control and Management) Act of 1958, the Financial Regulation and Revenue Allocation Laws. However, this stream of rules, code of ethics, constitution, and statutes cannot operate themselves except some people are commissioned to carry them out (Adams, 2014). This has been done to some extent but the rate of playing about; playing round, and beating these regulatory frameworks it is at alarming rate. In fact, this has resulted to a sluggard: everybody eats from national cake. Government work is at ease.
On this background, all illegal and illicit activities needed to be fought with all seriousness in order to prevent fraud and corruption. Therefore, this act should be collective responsibility to fight against illegal practices. However, from available literature there are mixed conclusions or conflicting conclusions. For example, Vandekerckhove (2006) examined whistle-blowing and organization social responsibility, asserts that in organizations, law, education, culture and practice advise employees to turn a blind eye to illicit activities or wrongdoing, even should not raise their concerns internally or externally. Lee and Oh (2007) worked on corruption in Asia: pervasiveness and arbitrariness indirectly discourage whistle- blowing mechanism in their statement. They lamented that often times, failure to bribe or comply with illicit activities can make the achievable and viable project remains pending for years. Brown, Mazurski and Olsen (2008) confirm that the reality of whistleblowers would provide little justification for government or senior public sector managers to think ‘proactively’ about how to manage whistle blowing cases.
Against this background, Ponemon (1994) argues that whistle-blowing mechanism plays a vital role as a preventive and detective mechanism, if the firm explicitly incorporates reporting method that discloses incidents of wrongdoing into its internal control structure. Organization for Economic Cooperation and Development wrote about whistle-blowing protection and advocates for whistle-blowing mechanism and its demonstration as well as implementation in both private and public companies (OECD, 2011). Besides, Council of Europe Civil Law Convention on corruption supported the effective establishment of whistle-blowing mechanism in 1999.
Therefore, the study is motivated to examine effective whistle blowing mechanism in the public sector.
1.2 Statement of the problem
Whistle-blowing becomes relevant because of the response of the public for greater financial accountability, financial transparency and financial integrity of financial reporting processes of organizations in recent times. The report of Committee of Sponsoring Organizations of the Tread way Commission in the US and Sarbanes-Oxley Act identified whistle-blowing as an important business ethics that is capable of improving the economic stability and financial reporting process of any country. Therefore, different countries of the world have incorporated whistle-blowing as part of their corporate governance guidelines and financial reporting process.
The findings above contradicts with the findings of Brown, Mazurski and Olsen (2008) whose study confirm that the reality of whistleblowers would provide little justification for government or senior public sector managers to think ‘proactively’ about how to manage whistle blowing cases.
From the Nigerian context, there are several regulatory frameworks in public sector in Nigeria. These include: the constitution of the Federal Republic of Nigeria, 1979 as amended 1989 and others, the Audit ordinance of 1956, the Finance (control and Management) Act of 1958, the Financial Regulation and Revenue Allocation Laws. However, this stream of rules, code of ethics, constitution, and statutes cannot operate themselves except some people are commissioned to carry them out (Adams, 2014).
Moreover, most of the a priori literatures on whistle blowing in the developed nations wereconcentrated on financial institutions. In the developing nations like Nigeria, only fewer studies were done on whistle blowing with emphasis on financial institutions which also were greeted with a lot of controversies. However, there is no known study that had been done on whistle blowing with emphasis to the public sector organizations in Nigeria. This as a result made the study under observation a necessity as whistle blowing on the public sector accountability is a dominating issue that requires empirical support.
1.3 Objective of the study
The main objective of the study is to examine the Whistle-blowing Mechanism and Internal Audit Effectiveness in Nigerian Public Sector. The specific objectives are to:
- To examine the effect of whistle blowing on transparency in the public sector financial reporting quality
- To determine the effect of whistle blowing on reliability in the public sector financial reporting quality
- To ascertain the influence of whistle blowing on independence in the public sector financial reporting quality.
- To examine the effect of whistle blowing on public sector value relevance in the public sector financial reporting quality
1.4 Research Questions
- What is the influence of whistle blowing on transparency in the public sector financial reporting quality?
- To what extent has whistle blowing influenced reliability in the public sector financial reporting quality?
- What is the influence of whistle blowing on public sector independence in the public sector financial reporting quality?
- To what extent has whistle blowing influenced whistle blowing in the public sector financial reporting quality?
1.5 Research Hypothesis
The following hypotheses were formulated in order to direct the flow of this work
H01: Whistle blowing has no significant effect on transparency in the public sector financial reporting quality
H02: Whistle blowing has no significant effect on reliability in financial reporting quality of the public sector
H03: Whistle blowing has no significant effect on financial reporting quality independence in the public sector
H04: Whistle blowing has no significant effect on value relevance in the financial reporting quality of the public sector
1.6 Significance of the study
The objective of this study is to examine effectiveness of whistle-blowing and internal audit efficiency in Nigerian public sector and to show some empirical evidence about the response of whistle-blowing reports by internal auditors. Motivation for this study comes from the vital roles of whistle-blowing in combating corruption practices, illicit exercises as well as fraud and of audit committee effectiveness in whistle-blowing activities. The Committee of Sponsoring Organizations explicitly advocated for whistle-blowing in the context of efforts related to maintaining an effective control environment within organizations.
At the end of this study the usefulness of whistle blowing mechanism will be showcased.
It will serve as a reference material for future studies
1.7 Scope/Limitation of the study
The objective of this study is to examine effectiveness of whistle-blowing and internal audit efficiency in Nigerian public sector and to show some empirical evidence about the response of whistle-blowing reports by internal auditors. It will be carried out in the Enugu state Ministry of Finance.
The study experienced some limitations in the area of gathering deep information from identified stakeholders. The researcher made the use of secondary data such as books, newspapers, magazines, journals, and the internet to enhance the ease in having information that requires efficiency in the whole research process.
1.8 Definition of terms
Whistleblowing: Whistleblowing is the disclosure of information about perceived wrongdoing, corrupt, illegal, fraudulent, or hazardous activities committed, in or by, public, or private, sector organisations and the risk thereof, to individuals, or entities, believed to be able to effect action.
Internal auditor: Internal auditing is an independent, objective assurance and consulting activity designed to add value to and improve an organization’s operations.
Public sector: the public sector consists of governments and all publicly controlled or publicly funded agencies, enterprises, and other entities that deliver public programs, goods, or services. It is not, however, always clear whether any particular organization should be included under that umbrella
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