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ANALYSIS OF AUDIT PROCEDURE IN A PUBLIC SECTOR ORGANIZATION (A CASE STUDY OF KADUNA STATE WATER BOARD)

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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.

REFERENCES

Milichamp, A.H (2000) Auditing Continuum London and New York. The Edition

Ekwere A. B. (1991) Contemporary Auditing, Fab Education Book, Jers, Nigeria.AAT Study Pack Paper 14, Public Sector Accounting and Auditing/2 Published September.

Akuezuilo E. O. And Nnadozie B. M. (1995) Research Methods and Statistics in Education, Social and Management Sciences, Nuel Centi (Nig) Publishers Akwa.

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