CHAPTER TWO
LITERATURE REVIEW
2.0 Introduction
A review of literature is crucial as it shows a picture of the state of knowledge in the area of study. This chapter will review various literatures in the fields of internal audit and impact it has on financial performance of organisations more particularly banks.
2.1 Conceptual Review
2.1.1 Concept of InternalAuditing
Miettinen (2011) defined internal auditing as an independent appraisal of activities within an organization for the view of operations as a source to management it is a management control which functions by measuring and evaluating the effectiveness of other control. This means that an internal auditor should be independent of any manipulations or distractions from the managements activities or others, thereby enabling him to determine whether the management policies are being adhered by the several department in the organization if and whenever there is any deviation policies, the internal auditors check it. Internal auditing is a process that is carried out to provide evidence for reporting to a company's management. Internal auditing, according to Ejoh&Enom (2014), aims to improve organizational efficiency and effectiveness through constructive criticism. The establishment of an internal audit department is momentous since it is seen as a key component in the implementation of an accounting system, which aids in the evaluation of the department's work. Internal audit is regarded as the heart of business accounting because it is the division in charge of keeping track of all businesses in the industry.
Howard (1989) in his own contribution states that “The internal auditors is an employee of the business engaged in the work on behalf of the organization, although the nature of his work require that should be given an element of independence while engaged in it”. This means that the internal auditor is engaged as a staff of the organization but should be given a level of independence. The institute of internal auditors (IIA) defined internal auditing as the independence appraisal of activity within an organization for the review of accounting, financial and other operations as a basis for protective and constructive services to the management. The management of internal auditor here is independent personnel of the organization who appraises the activities of the department and proper, economic efficient and effective use of resources.
Internal audit efficiency aids in the development of the company's work because financial reports reflect the quality of the internal audit department. Furthermore, internal audit is an important part of cooperative governance in an organization because it encompasses the activities of oversight conducted by the board of directors and audit committees to ensure credible financial reporting (Public Oversight Board, 1994). Internal auditing is a constant evaluation of a company's operations and records carried out by specially appointed workers. "The independent appraisal of activities within an organization for the review of accounting, financial, and other business procedures as a protective and constructive arm of management," according to the Internal Audit definition. It's a form of control that works by assessing andcomparing the effectiveness of other controls. As a result, it is apparent that internal auditing encompasses not just accounting but also financial and other problems.
Internal audit's goals include verifying the accuracy of financial accounting and statistical records submitted to management, commenting on the effectiveness of the current internal control and internal check systems, and suggesting ways to enhance them. to aid in the early detection and prevention of frauds, to ensure that the organization's standard accounting practices are strictly followed, to confirm that liabilities have been incurred by the organization in connection with its legitimate activities, to examine the protection provided to assets and the uses to which they are put, to ensure that the organization's standard accounting practices are strictly followed, to ensure that the organization's standard accounting practices are strictly followed, to ensure that the organization's standard accounting practices are strictly followed, to ensure that the organization's standard accounting practices are met, to conduct a particular inquiry for management and identify the authorities in charge of purchasing assets and other items, as well as asset disposal. Internal audit contributes significantly to statutory auditing. When it comes to the accuracy of the accounting, both the internal auditor and the statutory auditor have a mutual interest. Internal auditing, on the other hand, relieves the statutory auditor of detailed scrutiny
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