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THE CHALLENGES OF INTERNAL AUDIT FUNCTION-IN-THE-NIGERIAN-PUBLIC-SECTOR

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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.

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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