INTERNAL AUDIT AS A TOOL FOR MANAGEMENT CONTROL (A CASE STUDY OF PROJECT DEVELOPMENT INSTITUTE) (PRODA) ENUGU.

CHAPTER ONE

1. INTRODUCTION

1. 1. BACKGROUND OF THE STUDY

Annual budgets by the federal state and local government are generally incorporated into government accounting system and financial reports.

These budget estimates are central to the process of making and executing public sectors polices among which is the proper allocation of available resources and reduction in inequality of incomes of individuals. In order to achieve these public sector policies goals mentioned above, there is the need for an internal audit operations within our ministries. The growing recognition by management of the benefits of a good internal control and the complexities in a large organization led to the development of internal auditing as an important component of the internal control system. The emergency of the internal auditor as a specialist in internal control is the result of an evolutionary process that is similar in some ways to the evolution of the independent audit (Howard 1976). The principal factor in its emergency was the extended span of control faced by management as concerns employing thousands of people and conducting operation from widespread locations. Defalcations and improperly maintained. Accounting records were obvious problem under these  circumstances. The growth in the volume of transactions meant a substantial bill for public accounting service for the business that endeavored to solve the problem by containing the traditional form of audit by public accountants.  

               This solution according to Howard (1976) was to provide the needed auditing services on an internal basic particularly as the genitures of the problem made it possible their one or more persons to specializes in such auditing services and devote their full time to the needs of the enterprise. Other advantage that resulted from this internal approach to the problem was that the internal auditor tended to be problems of the company and the auditing activity could be carried on costively, rather than, once year when outside auditing of government ministries departments and extra ministerial department entrusted with public resources and the authority for applying them have a responsibly to render a full accounting of their activities. This accountability is inherent in the management process and which the public resources have been devoted nut also the manner and effort on their application.

          Auditing is an important part of the accounting process since it provides independent judgment of the credibility of public official’s statements about the manner in which they have carried out the responsibilities. The auditing function assures the objectivity of and adds credibility of fair presentation of performance information (Edwards and Black 1976). There has been an unprecedented increase in the importance of internal auditing due to the importance of internal auditing due to the widespread recognition of the invaluable role performed by this branch of auditing profession. Many government enterprises have therefore found reason to maintain an internal audit department as a necessary component of their internal control system. Owing to the priceless valve from internal audit of the institute of character accountants of England and Wales (ICAEXW) defined it as “ a review of operations and records, sometimes continuous undertaken within a business by specially assigned staff. It encompasses such examinations conducted on the affair of the organization as a tool of management control.

Miuichamp (1987) described internal audit as an independent appraisal function within an organization for the review of system of control and the quantity or performance as a service to the organization. It objective examines, evaluates and reports on the adequacy of internal control as a contribution to the proper economic, efficient and effective use of resources a substantial part of the internal audit function performance some people working as employees of the organization.

The common ar4eas of internal auditing act thought its history have been examining, ifying and reporting. Internal auditing has thus been employed as a key factor in controlling every kind of organization with financial and economic records.

According to the American national Association of collage and University Business officers, the development of internal audit as a major element of management control resulted from the need of manager for information relation to all significant aspects of institutional operations. Effective management control cannot be maintained without an efficient system to provide for a prompt reporting of essential information from all parts of the organization. The control idea of management control through the use of accounting is the essential to the efficient conduct and evaluation of the operating activities of the organization.

Accordingly, the inclusion within the accounting made of potential bits of information conditions the management and the decision made (Pawell, 1994).

The conventional internal auditing model and the performance signals that it produces have come to impact upon management efforts to accomplish its objective (Edwards and Black, 1976). The growth in business management has also assisted in the development of internal audit as a useful ad to management of government enterprise.

Internal auditing is an element of managerial control and is responsible for measuring the effectiveness of such controls. The scientific equipment development institute (SEDI) is a research institute under the federal ministry of science and Technology. The institute has cover the years carried out research on industrial materials and process including engineering designs, development and falsification; it has to its credit so many plastics, ceramics, glass wares (Beakers, measuring cylinder, pipette etc.) industrial and engineering products for household and industrial application.

The management of SEDI is aware of the role of an efficient internal audit towards achieving organization goals and have therefore established and internal audit department.

1.2     STATEMENT OF PROBLEM

The problem are summed up as follows:

1. 1. The management of government enterprise do not fully appreciate the operational equipment of internal audits as a sources of management information system.

1. 1.  There has been observable failure by management to serve economic efficiency and effectiveness in the use of resources at their disposal.

1. 1.  How can government enterprise funds and property be managed to ensure their soft

1. 1. The mis-conception of the internal audit function among employees and management diminishes it roles.

1.3     THE PURPOSE OF STUDY 

1. To evaluate the internal audit function ascertains how it can enhance management control.

1. To appraise the role of the internal auditor in the accountability process of the management of government enterprises.

1. To ascertain the produces and methods of internal auditing in government enterprises and evaluate its effectiveness in the realization of management objectives.

1. To find out the problems that hinders effective internal audit and seeks ways of solving such problems.

1.4     RESEARCH QUESTIONS  

1. Are there statement internal audit procedures and guidelines for the audit of government enterprise?

1. Are the audit control measures adequate and reliable to ensure the safety asset, completeness and accuracy of the financial records?

1. How can faithful working relationship be created among the internal audit staff and other workers?

1. How can internal audit reports assists in management control?

1. 1. THE SCOPE THE STUDY

The scope of this study mainly focuses on the system of internal control accounting system and internal audit procedures in government enterprises with corporate polices and produces. An effective internal audit serve can in particular, help reduce overhead, identify ways to improve efficiency and minimize exposure to possible losses from inadequately safe guarded company assets. For the above objective to be accomplished, the internal audit department must perform certain functions, which must be in with the requirements of the organizational internal control system a quality internal audit service will therefore makes a positive contribution to the objectives of any organization.

This study is significant in many respects in the management of private the awareness reprises of the immense benefits of an efficient internal audit department. It is significant in many respects and it is intended to create the awareness in the management of private and public enterprise of the immense benefits of an efficient internal audit department. It is hoped that management will see that internal audit function as that which has much to offer the organization as a whole, in terms of ensuring that the operations of the organization are well controlled and the systems used are efficient, resources are utilized economically and the information provided to management is reliable.

To the internal auditors who are expected to excellent communications, it will be beneficial to know the owners responsibities placed on them as watch dog of their organization. Other who would benefit from this study are future researcher and Fellow students. It will improve to a great extent their theoretical and practical Rowedge about the role of an efficient internal audit department in the management control of government enterprise. It acts as referral to students.