ANALYSIS OF AUDIT PROCEDURE IN A PUBLIC SECTOR ORGANIZATION (A CASE STUDY OF KADUNA STATE WATER BOARD)
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ANALYSIS OF AUDIT
PROCEDURE IN A PUBLIC SECTOR ORGANIZATION (A CASE STUDY OF KADUNA STATE WATER
BOARD)
ABSTRACT
Auditing is an essential tool for proper governance in the
public sector. It constitutes an indispensable control mechanism for ensuring
proper management of economic resources and for ensuring compliance with
prescribed financial policies and regulations.
Effective audit procedures become important to the public
sector organization in order to curtail the rate of financial mis-management
and abuse which hampers the growth and proper administration of the
organization.
Auditing in the public sector has extended more than the
traditional financial statement audit to the value for money audit. This audit
is concerned with the economy, efficiency and effectiveness of a particular
function or department within the body whose affairs are being audited.
For the purpose of the study, data were collected through the
use of questionnaire, observation and other written documents.
Major findings of the research shows:
- That auditing
cannot exist without the preparation of accounts.
- That auditing
has helped to uncover irregularities, error and other financial mismanagement.
- That auditing is
imperative in public sector as it would help them motivate and maintain
operational autonomy and will alongside help them ensure economic
stability.
TABLE OF CONTENTS
PAGES
Title page
i
Certification
ii
Dedication
iii
Acknowledgement
iv
Table of Content
v
Abstract
vi
CHAPTER ONE: INTRODUCTION
1.1 Background to
the Study
1
1.2 Statement of
Problems
3
1.3 Aims and
Objectives of Study
3
1.4 Scope of the
Study
4
1.5 Significance of
the Study 5
1.6 Limitations of
the Study
6
1.7 Statement of
Hypothesis
7
1.8 Definition of
terms
8
1.9 Historical
Background of Case of Study 9
CHAPTER TWO: LITERATURE REVIEW
2.1 Origin of
Audit 10
2.2 Development and
Growth of Audit in Nigeria Definitions of
Audit purpose of audit
10
2.3 Types of
audit
11
2.4 External
audit
13
2.5 Auditing
guidelines Planning Controlling and Recording Internal
Audit Value for Money Audit 14
2.6 Distinction
between Accounting and Auditing Functions 14
2.7 Auditing
Guidelines and Procedures: Planning, Controlling
And Recording Planning
20
2.8 Audit
Evidence
25
2.9 Internal
Controls 29
2.10 Internal
Audit
35
CHAPTER THREE: RESEARCH METHODOLOGY
3.1
Introduction
48
3.2 Research
Design
49
3.3 Population
Description
50
3.4 Sample
Description and Techniques
50
3.5 Research
Materials/ Instruments
51
3.6 Method of Data
Collection and Organization of Data. 51
3.7 Organization of
Data
53
3.8 Statistical
Treatment of Data
53
CHAPTER FOUR: DATA PRESENTATIONS AND ANALYSIS
4.1
Introduction
55
4.2 Analysis and
Evaluation of Data
55
4.3 Test of
Hypothesis
62
4.4 Findings of the
Study
68
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS.
5.1 Summary
71
5.2 Conclusion
71
5.3 Recommendations
72
Appendix
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO
THE STUDY
As it will be practically impossible to talk of a building
without a foundation, so also it will be professionally imbalance to talk of
Audit procedure in a public sector organization” without actually bringing to
time light what public sector organization portrays.
Public sector organization refers to those organizations set
up by government for the purpose of providing social services with profit
motive if any, at the background.
“organization” in the eyes of the law is an actual being. It
is an intangible person with many of legal rights, powers and obligations of an
individual. It may take contracts, hold and sell property, sue and be sued in
its own name. Organizations therefore, owe their births to creation and they
are owned and managed differently precisely because of their unique artificial
legal make up. Such organizations include Kaduna State Water Board, National
Electric Power Authority, to mention but few.
Every human organization, however, simply require written
records which the management or administration needs to keep decisions
formulation of general rules, the making of policies and the legal validation
of the organization status, procedures and relationships with other
organizations or individuals.
Every civilization, ancient or modern that had a commercial
background or that which had any difficult problems of governmental
organization or administration to solve had to have financial or at least
numerical records of some sort.
Auditing being the exercise aimed at ensuring that the accounts
being reported on show the auditor’s opinion, a true and fair view of the
financial position as at the balance sheet data and of the profit and loss for
the period ended the date, it is suffix to say that as erroneously being
carried about, it is not the objective of an audit to detect fraud, although
fraud or defalcation may surface during audit.
The auditing of an organization financial statements involves
the verification of the balance sheet and the income and expenditure accounts
and the examination of the underlying records to test their reliability and the
basis from which these statements had been prepared. It means going through
financial transaction which had given rise to the records.
In a public sector like Kaduna State Water Board, auditing,
and audit programme has to be drawn up and this will be a guide for the audit
work. The audit programme will seek to verify the efficient working of internal
control system with particular reference to the internal check, division of
duties and managerial supervision.
The proper working of the system of book keeping and
accounting with particular reference to the accuracy, completeness and
reliability of the records being compiled and the extent of the true and fair
view of the financial statement as produced there from.
In analyzing an audit, it involves a set of procedures which
include: general financial control procedure, cash controls and the procedures
involving receipt and payment, salaries and wages control, sales and trade
debtors control procedure contract award procedure and fixed asset and
investment control.
1.2 STATEMENT OF
PROBLEMS
This research work is set out to examine effective analysis
of Audit procedure in a public sector organization so as to have an insight
into how it affect individual, and government as well as how proper analysis of
audit procedure helps in attracting and retaining the financial position in
public sector.
The following are the statement of problems:
i. To what
extent do the auditors exercise procedures in a public sector organization.
ii. What
constraints are there that inhibit auditors procedure on internal control.
iii. What is
the relationship between the company’s auditing process and the level of
accountability.
1.3 AIMS AND
OBJECTIVES OF THE STUDY
Auditing in the public sector organization especially those
in public corporations like Water Board, have been so neglected by government
these days. Most of the relevant books consulted so far in the field of auditing,
little or nothing have been said about auditing of public corporation. Major
concern has been towards the audit of limited liability companies.
This research however, is designed to enable the readers
understand the procedure in the auditing process in the public sector
organizations with reference to Kaduna State Water Board and also, to know the
role of auditors of public sector organization.
1.4 STATEMENT OF
HYPOTHESIS
In order to have a bearing for this study, formulation of
hypotheses is necessary which is an opinion statement on research question and
data to be obtained during the research work will be used to test the
hypothesis.
Nnadozie and Akuzuito (1995 P.32) “The research hypothesis is
a tentative answer to a research problem/question. It is an educated or
intelligent guess of an answer to the problem of the research under
investigation. It is however, an answer which has no evidence supporting it
until a full investigation is carried out. The research hypothesis may
therefore be seen as an opinion statement”.
Considering the problems already stated data gathered during
this study will be used to test the following hypothesis:
Hi: Auditing
process has a positive and significant relationship with the level of
accountability in a public sector organization.
Ho: Auditing
process has no positive and significant relationship with the level of
accountability in a public sector organization.
Hi: Lack of
effective and efficient performance of internal control inhibit auditor’s procedures.
Ho: Lack of
effective and efficient performance of internal control does not affects
auditor’s procedures.
Hi: Lack of
independent mind of most internal auditors does not affect effectiveness of
internal control system.
Ho: Lack of
independent mind of internal auditors affects the effectiveness of internal
control system.
1.5 SIGNIFICANCE OF
THE STUDY
With the rapid growing of economy crises in the country, the
effect of audit procedure can be highly detrimental to the users of a company’s
report if not properly carried out.
Kaduna State Water Board being one of the public sector
organization in Nigeria economy. It is necessary to work into how the audit
procedures is been carried out in such public organization.
The effect of this audit procedures to individual investors,
customers and other governmental agent are of paramount importance. it is with
the believe that the research work will bring about relevant questions that
will require further analytical investigation, thereby increasing the existing
knowledge on the subject matter.
1.6 SCOPE AND
LIMITATIONS OF THE STUDY
The study has been basically limited to areas that is
concerned by Kaduna State Water Board that is, the analysis and the procedure
in a public sector organization. The process of this study covers the control
and procedure of expenditure of the Board as well as that of receipts. it is
also pertinent to mention that the project research is purely an academic
exercise.
Time Constraint: Time is an important factor in a research
work. For a researcher to exhaust all the requirements for a particular study,
a lot of time must be invested. However, the time allowed for this research
work is short coupled with other academic activities.
Financial Constraint: Closely following the above constraint
was finance. Research of this nature requires large fund, indequate fund does
not allow for a large scale research to include the organizations.
Respondent Constraint: Most of the audit and account staffs
confronted for information felt somehow skeptical to release them for fear of
leaking official secret, this actually make it difficult for the researcher to
obtain adequate information needed to the study.
1.7 DEFINITION OF
TERMS
The following are some terms used in this project work.
Audit Programme: Is a schedule of operation to be carried out
in the course of any particular audit exercise.
Audit Planning: Audit planning refers to the plan of work by
a firm of accountants or a government audit department to ensure that during a
year it covers the entire audit job it has at hand.
Audit Evidence: All information obtained by the auditor in
arriving at his conclusion on any matter within the scope of his audit.
V.F.M: Means value for money audit
Audit Working Papers: Working papers consit of file of
evidence obtained during audit work, the details of the methods and procedures
the auditor followed and the conclusion he has reached concerning the object of
the audit.
Testing: Selecting and examining representative items from a
large set of similar items for the purpose of drawing conclusions about the
charactertics of the set.
Audit Procedures: The acts performed by the auditor in the
course of attaining the objectives of the examination.
1.8 HISTORICAL
BACKGROUND OF KADUNA STATE WATER BOARD
The Board was created by Kaduna State (then North Control
State of Nigeria) through Edict No. 2 of 1971. Since then the Board is
operating separate set of books of Accounts and treasury, for payment of vouchers,
time to time new set of procedures and accounting system were introduced
through circulars while sometime through instruction on the job training, to
bring the Board’s Accounting system on modern lines. However, all these
circulars and instructions are in lose form and some are unwritten too. The
introduction of commercial accounting system at Kaduna State Water Board is to
provide suitable, sufficient and authentic management information to help in
decision making and planning of operation.
This data falls under two categories viz:
i.
Financial and management information
ii. Control
and flow of financial data for future planning.
Classification and coding of accounting data is necessary to
process the data speedily. In pursuance to this objectives revenue and
expenditure have been coded and classified.
The general managed/chief executive, is the accounting
officer of the Board. Any officer expending money within the board does so on
behalf of the chief executive. The limits of power of the chief executive in
this regard are stipulated in circulars issued from time to time by the
government and in conformity with the edict.
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