CHALLENGES OF INTERNAL AUDIT FUNCTION IN THE NIGERIAN PUBLIC SECTOR (A Case Study Of Kaduna State Ministry Of Finance)
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CHALLENGES OF INTERNAL AUDIT FUNCTION
IN THE NIGERIAN PUBLIC SECTOR (A Case Study Of Kaduna State Ministry Of
Finance)
ABSTRACT
This
research work deals with the challenges of internal audit function in the
Nigerian public sector with reference to Kaduna state ministry of finance.
Internal auditing is a process generally adopted towards ensuring and
safeguarding of resources and promoting operational efficiency in organization.
The objective of this study has been to evaluate the internal control system in
the Nigerian public sectors, to ascertain the non- implementation of routine
audit report and the lack of proper segregation and assignment of duties. In
recent times, a combination of forces has led to a quiet revolution in the
profession. Government moving towards democracy must demonstrate accountability
in the use of public money and efficiency in the delivery of service. In many
cases internal control system are weak, staffs are poorly paid making them
unmotivated, coupled with non-implementation of routine audit report by
appropriate authorities. 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 that the internal audit is facing a lot of
challenges which includes inadequate staffing, lack of independence, lack of
facilities to carry out audit function and also poor funding. As a result of
some of these challenges the effectiveness of the internal 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 internal 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.
TABLE OF
CONTENTS
Approval
page
Certification
Dedication
Acknowledgment
Abstract
List of
tables
CHAPTER ONE:
1.0
INTRODUCTION
1.1
Background of the study
1.2
Statement of the study
1.3
Statement of the objectives
1.4 Research
questions
1.5 Research
hypotheses
1.6
Significance of the study
1.7 Scope of
the study
1.8
Limitations of the study
1.9
Definition of terms
CHAPTER TWO:
2.0 REVIEW
OF RELATED LITERATURE
2.1
Introduction
2.2
Organizational structure of ministry of finance
2.3
Definition of auditing
2.4 Types of
auditing
2.5 Meaning
of internal audits
2.6 Meaning
of internal control
2.7 Meaning
of internal check
2.8
Objective and purpose of internal audit
2.9 Qualities
required of an auditor
2.10
Elements of internal audit
2.11 Scope
of internal audit
2.12 Duties
and responsibilities
2.13 Role of
internal audit in the Nigerian public sector
2.14
Challenges of internal audit
2.15 Factors
responsible for the problem of internal
CHAPTER
THREE:
3.0 RESEARCH
METHODLOGY
3.1 Research
design
3.2 Sources
of data
3.3 Area of
the study
3.4
Population of the study
3.5
Determination of population size
3.6
Reliability Test
3.7 Validity
test
3.8 Method
of data collection
3.9
Techniques for data analysis
CHAPTER
FOUR:
4.0
PRESENTATION OF DATA, INTERPRETATION AND ANALYSIS OF DATA
4.1
Presentation of data
4.2 Test of
hypotheses
4.3
Discussion of findings
CHAPTER
FIVE:
5.0 SUMMARY
OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
5.1 Summary
of findings
5.2
Conclusion
5.3
Recommendations
Bibliography
Appendix
CHAPTER ONE
INTRODUCTION
The Kaduna
state ministry of finance started when the country was pre-independent in 1958
during the northern region, the ministry of finance is the custodian of public
fund and stores and is therefore essentially a controlling ministry as opposed
to other executing agencies of the government. The ministry is headed by a
commissioner as the chief executive officer and deputized by the permanent
secretary who is a carrier and servant and is the chief officer of 145 staff
including accounting officers on monthly basis. The ministry consists of three
(3) major departments and seven (7) sub-treasuries.
1.
Administration and finance which further sub-divided into stores and
verification division.
2. Treasury
which is further sub-divided into final accounts and debts management and
ministry of finance Incorporated division and sub-treasury.
3. Internal
audit (state)
1.
ADMINISTRATION AND FINANCE DEPARTMENT.
The
department is headed by the director and is responsible for the general
administration of the ministry which includes maintenance of staff records,
processing of staff promotion, recruitment training discipline and welfare etc.
STORES AND
VERIFICATION DIVISION.
This
division is headed by the chief stores officer who is charged with the
responsibility of purchasing and disturbing of office equipment’s the ministry
of finance is in custody of the public funds and stores, and is therefore a
protective clothing to all government ministries and department and boarding of
unserviceable equipment/ vehicles.
2. TREASURY
DEPARTMENT
This
department is headed by the accountant general and is charged with the
responsibility of keeping receipt of government funds banking and maintenance
of bank accounts, disbursement of all approved fund released, bank
reconciliation, control of treasury documents and control of pooled accounting
staff of the state.
MINISTRY OF
FINANCE INCRPORATED (MOFI) DIVISION
This
division is headed by the deputy director and is responsible for revenue
collection management. Appraisal of investment opportunity for government,
management,
of investment of government companies and ensuring the receipts of dividend and
other funds due to government.
FINAL
ACCOUNT AND DEBT MANAGEMENT DIVISION
The division
is headed by the deputy director and is responsible for the collection and
accounting data from ministry department, analysis of accountant-general’s
reports, maintenance of external internal loan records and supervision of the
state computer center.
3. INTERNAL
AUDIT DEPARTMENT (STATE)
The
department is headed by the director and is charged with the responsibility of
drawing up of internal controls and checks ensuring the adherence to the
administrative and finance controls, investigation of fraud and other
malpractices.
SUB-TREASURY
There are
seven (7) sub-treasuries located at Kaduna, Zaria, Ikara, Saminaka, Kafanchan,
Kachia and Birnin gwari. They are charged with the responsibility of collecting
revenue and payment of pension.
1.1
BACKGROUND OF THE STUDY
Internal
audit had been defined “as an independent appraisal function established within
an organization to examine and evaluate its activities as a service to the
organization”. Internal auditing is a process generally adopted towards
ensuring and safeguarding of resources and promoting operational efficiency in
organizations. The responsibilities for effective internal auditing normally
rest on with the internal auditors who in turn rely a great deal on the
soundness and effectiveness of internal control system.
The business
world is developing so in the complex nature of the organizations. This
complexity of modern organizations and hence the management has led to the much
broader role at the internal audit. The role of internal audit is fast moving
from mere checking of documents and physical duties to analyzing the ability of
organization to react to changing circumstances.
Auditing for
the public sector is aimed at prevention of mistakes, shortcomings and misdeeds
in the public administration. The internal audit has become a good control
measures that can foretell all the incidence of fraud and misappropriation of
fund in government ministries if properly put in place.
1.2
STATEMENT OF THE PROBLEM
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
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 control system leading to improper investigation.
The above
reasons greatly affect the effectiveness of internal audit in the public
sector. This gives the researcher the impetus for undertaking a study on this
study with a view coming up with solution of those challenges.
1.3
OBJECTIVES OF THE STUDY
The
objective of this research is to outline the specific task to be set out
towards achieving the purpose of a research problem. However, appears to be
inhibiting the proper discharge of the role of internal auditing in the
Nigerian public sector due to the necessity for public Accountability. Many
people do not know why internal audit department should exist and it should be
part of internal control in public organization.
The research
project is expected to achieve the following objectives:
To
ascertain the lack of proper segregation and proper assignment of duties as
well as shortages of staffs to carry out audit duties.
To
ascertain reasons for improper implementation of routine audit report by
appropriate authorities.
To
evaluate the internal control system in the Nigerian public sector.
1.4 RESEARCH
QUESTIONS
The
following are the various research questions. They are as follows:
1. Are there
challenges of internal audit function in the Nigerian public sector?
2. Are the
impacts of Nigerian public sectors on the internal audit function?
3. Can
public organization do with an internal audit function?
1.5 RESEARCH
HYPOTHESES
The
following hypotheses were found relevant to the above stated problems and
objectives, and thus tested in this study.
Hypothesis
i:
HO: The
inadequacy of the internal control system in Kaduna state ministry of finances
not the motive for the trials of the internal audit.
HI: The
inadequacy of the internal control system in Kaduna state ministry of finance
is the motive for the trials of the internal audit.
Hypothesis
ii:
HO: The lack
of proper segregation and assignment of duties as well as shortages of staff to
carry out audit duties does not influence the effectiveness of the internal
audit.
HI: The lack
of proper segregation and assignment of duties as well as shortages of staff to
carry out audit duties influences the effectiveness of the internal audit.
Hypothesis
iii:
HO: The lack
no of implementation of routine audit report by appropriate authorities.
HI: There is
lack of implementation of routine audit report by appropriate authorities.
1.6
SIGNIFICANCE OF THE STUDY
The project
intended to bring to light the challenges of internal audits department in the
Nigerian public sector with a view of coming up with possible ways to overcome
such challenges.
The research
work will be of vital importance to the government, bringing to light the
challenges hampering the efficiency of the internal audit and how these
challenges can be tackled.
The research
work will also be of significance to the management or head of department of
various government ministries and public corporations so as to see the
importance of effective internal control system and the discharge of their
responsibilities to the internal auditors as a yardstick to improve
organizational
performance.
It is also necessary for the internal auditors to understand their loopholes so
that necessary adjustments could be made to enhance their efficiency.
1.7 SCOPE OF
THE STUDY
The scope of
this research work in the Nigerian public sectors as a whole specifically the
internal audit and accounting department, with particular interest in the
Kaduna state ministry of finance.
1.8
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.
1.9
DEFINITION OF TERMS
In every
study, there are some terms that are frequently used; also in the course of
this study the following terms relating to the subject matter will frequently
be used.
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.
INTERNAL
CONTROL: Internal control is the whole system of control, financial and
otherwise, established by management in order to carry on with the business to
an enterprise in an orderly manner, ensure adherence to management policies,
safeguard its asset and secure as far as possible the completeness, accuracy
and reliability of books and other records.
INTRENAL
CHECK: Internal check is the aggregate of the check and balance imposed on the
day to day transactions in an organization where by the work of one person are
verified independently by or is complementary to the work of one another.
MINISTRY OF
FINANCE: This is a ministry that is responsible for the administration of
government finance [public fund].
PUBLIC
SECTOR: consist of all organization whose control lies in the hands of the
public and whose objective involves the provision of services where profit is
not the primary motive.
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