CHAPTER ONE

1.1    INTRODUCTION

The purpose of internal audit is to ensure that the account on which the auditor is reportedly close a true an fair view of the transaction summarized within period under examination. To ensure competence and effectiveness in any organization, public or private, auditing is very important.

The major covered in the exercise or auditing include examination of internal control system of book keeping and accounting to ensure whether they are appropriate for the nature of the business or activities being carried out by the client and whether all the transactions have been properly recorded under the system.

However, the existence of any internal audit function can have a great impact on the effectiveness and efficient of the organization. Internal audit is an element control system set up by management of public sector.

It is an independent appraisal set up basically examine evaluate record and reports of accounting and other controls in operation. Internal audit here is one who is employed by the management of an organization sector who may not attain minimum academic or professional qualification and he is not a member of a recognized professional body e.g. ANAN/ICAN.

Other perceived purpose of internal auditors are:

1. To ensure management that the internal check and accounting system are effective in design and operation.
2. To assist the internal auditor as may be required
3. To ensure that management is supplied with quality
4. To ensure the safeguard of the organizations (physical) asset
5. To ensure that management policies are executed at the right time
6. To receive the internal control system to detect errors and lapse with the aim to improve.
7. To carryout investigation and other task as may be assigned by the management
8. Review of the economic efficiency and effectiveness of the operation.

It is in view of the above that this study would be conducted to find out the effectiveness of internal audit control system in the public sector organization by internal check and examination of the internal control system.

1. Internal check: This is a system whereby the internal auditor order to prevent and detect errors and fraud early. It involves the arrangement of book keeping and other clerical duties in such a way as to ensure.
2. That no single task is executed from it beginning to its conclusion by only one person
3. That the work of each dark engaged upon a task is subject to an independent check in the course of another’s duties
4. The method of recording transaction and the use of independently ascertained total against which a large number o individual item could be proved.
5. The internal control system is examined by the internal auditor in order for him to know if the control system in public sector is effective.

He does this by carrying out compliance test. This is done through questionnaires which are of two types;

1. The internal control evaluation questionnaire and
2. The internal control questionnaire

Internal control questionnaire: This system use by the internal is highlighted in this chapter the importance and role of internal auditor in the public sector organization. Therefore, by embarking on a project of this nature, I am sure that I will arrive at a very satisfactory conclusion, which will be of immense benefit to myself, the student which is the main extreme of the research and the case study organization Hospital Management Board.

1.2    STATEMENT OF THE PROBLEM

Internal audit provide many advantages to the managements, it is a tool for ensuring effective implementation of internal control system and infact, it allows such internal control system to be reviewed within internal audit management policies are seen to be complied with and adequate information is made available for the management for review and decision making. However, the research focuses on the weakness of internal control system in the organization, which makes it impossible for the internal audit to carryout this duties at a specific time.

Also, the practice of politicizing the appointment internal auditor has been encouraged by some executive chairman who would want to manipulate financial control system to promote their fraudulent tendencies. This internal audit is made to understand that he is part of administration most co-operation with the chief executive, those who fail to co-operate often frustrated out of the service, another problem is that since the internal auditors are liable to the management, they found it difficult to disclose information which will affect the management. Another problem is that of lack of audit independences as the internal auditors are given orders by the management.

1.3 OBJECTIVE OF THE STUDY

The importance of internal audit to effective internal control cannot be over emphasized. These, the growing independence in the handling of government resources have often been traced to proof internal control system, the aim of the study is therefore.

(a)     To assess the practice of internal activities in the public sector with particular or reference to kogi state Hospital management Board Management Lokoja.

b) To examine the constraints to the effective realization of internal audit system of the board.

c) To assess the consequences on these flows on the efficient allocation and management of resources in the organization.

d) To recommend ways and means of addressing these problems for optimum performances of the organization.

1.4    SIGNIFICANCE OF THE STUDY

This significance of the study is as follows:

• The organization
• The policy makers
• The researchers and students

The organization: It is paramount importance that an audit, work is planed in advance because;

1. The intended means of achieving the audit objective must be established and formalized in the organization
2. The audit exercise can be directed and controlled in the public sector organization.
3. Attention can be focused on crier call and high risk areas.
4. The work can then be competed economically and to time scale requirement.
5. A true and fair view report can then be submitted to members on time

The policy makers: The government should allow the auditor to operate independently for the realization of performance in which there will be effective and efficient performance on the public sector organization. More so, independence is state of mind, an attitude of impartially and self reliance that pervades and auditors approach to audit to successfully maintain an impartial attitude toward financial information prepared for users.

An auditor must be aware of condition or factors that impair independence and should identify these fundamental dimensions.

• Programming independence
• Investigative independence
• Reporting independence

The researcher and student: During the course of this research work, the method adopted by the research in gathering and arranging the material.

1.5    SCOPE OF THE STUDY

The scope of the study is limited to the area of internal audit and internal control in public sector organization of Hospital Management Board 2000-2007.

1.6    LIMITATIONS OF THE STUDY

Some of the limitation expected to be encountered in the course of undertaking this research are as follows:

1. The research has been limited due to time constraints in the sense that the research work will require a year or more in reviews as many literature and necessary materials as possible and to gather necessary data through questionnaire but the research work has only two month within which to finish the research work.
2. Inadequate information: The internal auditor is reluctant in disclosing information because the staff member are being spied or that they could be quoted by the researcher.
3. Lack of adequate response: The internal auditor responses to questions are not encouraging
4. There was also lack of cooperation from the part of the management board.

Even though the respondents appears very difficult, the research was able to find their way through questionnaire and other means through connections with relations in the organization, this account for the data collected from analysis.

1.7 DEFINITION OF TERMS

Auditing: Auditing is the process of accessing the financial statement of an organization or association to which the person undertaking the task is not a member with the aim of ensuring that these financial statement were truly prepared from the actual records of the financial event and that the statement truly represent the financial position of the organization or association.

Auditing: Is also the examination of certain statement covering the transaction over a period and the financial position for a certain date in order that the auditor may issue a report on them.

Auditor: Is someone who has the sole authority to hear, verify, investigate and read to the hearing of those concerned of the position of the business enterprise for a given period of e.g. government auditors are primarily employed to work into the affairs of the business enterprises and companies in order to advance a true and fair view for a specific period in accordance with the terms of engagement observant of statutory regulation and professional requirement.

Internal audit: This is an independent appraisal unit set up by the management or an organization to evaluate, examine, record and report on the financial statement and other controls in operation. The main objective of an internal audit is to assure management that the internal check and accounting system are effective in design and operation.

External auditor: This is an independent appraisal that is conducted because it is mandatory by law and the term of reference and scope or work is filtrated by law. External audit can also be defined as an audit that comes out because the law requires them. status which require external audit to be done include CAMA 1990.

Internal control system: This refer to the entire system of financial and other forms of control within an organization as clearly spell out by its management, in order to ensure proper, orderly and efficient control of expenditure, safeguard assets and secure as far as possible the completeness and accuracy of the organization record. This is necessary in order to ensure accountability and efficient performance.

CHAPTER TWO

LITERATURE REVIEW

2.1    INTRODUCTION

In the Nigeria account journal of the instate of charted accountant of Nigeria (January/March 1994 Vol.27 No.1 Page 6) Kwamec Yabi (an international guide to auditing) defined a the independent examination and investigation from which a financial statement have been prepared with a view to enabling the independent examiner to report whether in his opinion and according to the best of his explanation and information obtained by him the statement is properly drawn up and give a true and fair view of what he is not suppose to show and not report in what he is not satisfied. From this definition one can understand that auditing is the process of accessing the financial statement of an organization or association to which the person undertaking the task is not a member with the aim of ensuring that these financial statement were truly prepared from the actual records of financial oven and that the statement truly represent the financial position of the organization or association.

In the same journal, the auditing standards defined auditing as the independent examination of an expression of opinion on the financial statement of an enterprise by an appointed auditor in pursuance of that appointment in compliance with any relevant statutory obligation.