ROLE OF INTERNAL AUDIT IN EDUCATIONAL INSTITUTION

PROJECT TOPIC- ROLE OF INTERNAL AUDIT IN EDUCATIONAL INSTITUTION

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

An audit is described as the independent examination of and expression of opinion on the financial statement of an enterprise by an appointed auditor in pursuance of the appointment and in compliance with any relevant statutory obligation. Internal audit is an independent appraisal function within an organization for the reviews of systems of control and quality of preference as services to the organization.

It objectively examines, evaluates and report on the adequacy of internal control as a contribution to the proper economic, efficient, and effective use of resources. Under the Companies and Allied Matters Decree 1990, an auditor is to report whether in his opinion the balance sheet and profit and loss accounts have been kept by a company and whether also proper returns for audit purposes have been received from branches not visited and whether a company’s balance sheet and profit and loss accounts are in agreement with the book.

The practice of auditing can be traced back to the ancient times, but auditing as it exist today, was established in the later part of the nineteenth century and since then the ever increasing complexity of commercial and industrial set up has made it equally compulsory for every joint stock company to have an annual audit. However, no legal compulsion is placed on the proprietor of partnerships or on sole traders to engage the services of professional auditors, but some of these enterprises still consider it necessary to have a periodic audit because of the benefits accruing from such a periodic audit.

Internal auditing is thus carried on by independent personnel known as internal auditor. Internal auditors are employees of the firm, and institutions like Akanu Ibiam Federal Polytechnic, Unwana. The function of internal audit are performed in a department or unit known as internal audit department which is always attached to the rectory and whoever is the head is responsible to the rector who is the chief executive.

It is practically difficult for an internal auditor to posses any responsible degree of independence in mind and attitude because of the management’s influences on the terms of reference and scope of work. The role of internal audit is to assure management that the internal check and the accounting system are effective in design and in operation. Auditing deals primarily with accounting and financial matters.

PROJECT TOPIC- ROLE OF INTERNAL AUDIT IN EDUCATIONAL INSTITUTION

1.2 STATEMENT OF THE PROBLEM

It is important to state here that, independence is basic as regards the effectiveness of auditing, for the auditor is expected to be free in carrying out his duties in order to give an unbiased opinion in respect of the accounts prepared and presented by management. In view of the above fact the internal auditor in the course of his legitimate duties has the unrestricted access to all books of accounts and records in order to carry out useful work at any time.

The researcher at this juncture will like to state that the internal audit department with special reference to Akanu Ibiam Federal Polytechnic is not allowed the right of information and access to all the accounting necessary for the performance of its audit duties. Again the influence of management does not give the auditor a chance to give unbiased opinion. These special problems, which the internal audits department is experiencing makes it very difficult for the department to prepare reliable audit report.

Again, post- audit is very rampant in the Polytechnic as the internal audit department processes payment vouchers, touring/purchases, advances forms when the payments had already been made. Some members of the staff who are issued I owe you (IOU) feel reluctant to attach the necessary receipts for the proper procession of their papers. Even the payroll unit submits salary vouchers some months in arrears thereby making it impossible for the auditors to form their opinion on the account.

 Even when external auditors are invited they are faced with the problems of not getting all the returns necessary for their audits. Many staff fail to make returns in respect of the advances issued to them they threatened that their salaries will be withheld. Further still, the internal control system of the Polytechnics are not working as they supposed to work, for instance some of the member of the staff do buy some working materials without allowing the idea of the purchase to originate from the appropriate quarters.

At the end, they would apply for the refund of out of pocket expenses, which in most cases are not genuine. Some member of staff may receive money to purchase some items, which at the end they will not buy the items. Some do not even take their bulk purchase to the store to enable them make the necessary entries and then issues it to the users department. At time some will even buy inferior items when money was actually given to the superior type. You can agree with researcher that these ugly situations pose a great problem to the internal auditor in their attempt to check fraud in the institution. It is even worse than some management staff is involve.

1.3 OBJECTIVE OF THE STUDY

The main objective is to analyze the role of internal audit in educational institution.

       The specific objectives of the study are as follows:

  1. To find out how the qualification of internal auditor determine the extent of accuracy, adequacy and efficiency of internal audit in Akanu Ibiam Federal Polytechnic, Unwana.
  2. To determine how the presence of internal audit department improve the practice of internal control system in Akanu Ibiam Federal Polytechnic, Unwana.
  3. To find out how lack of qualified audit staff or workers are responsible for weak internal control system.
  4. To determine how the misappropriation of both financial and non-financial assets can be attributed to the overlapping of duties in Akanu Ibiam Federal Polytechnic, Unwana (AIFPU).

1.4 RESEARCH QUESTIONS

The research work is basically enhanced to the following research questions. Beside, the question to be used in the questionnaire, these questions will cut across the entire research work or the purpose of the study. The following questions were asked:

  1. How does the qualification of internal auditor determine the extent of accuracy, adequacy and efficiency of internal audit in Polytechnic, Akanu Ibiam Federal Polytechnic, Unwana?
  2. How does the presence of internal audit department improve the practice of internal control system of in Akanu Ibiam Federal Polytechnic Unwana?
  3. How does lack of qualified audit staff or workers responsible for weak internal control system?
  4. How does the misappropriation of both financial and non-financial assets, be attributed to the overlapping of duties in AIFPU?

1.5 FORMULATION OF HYPOTHESIS

Hypothesis is a statement, which guide an investigation by providing a tentative solution to the research problem. This is formulated by null hypothesis (HO) and alternative hypothesis (HI) as follows:

(1) HO: The qualification of internal auditor does not determine the extent of accuracy adequacy and efficiency of internal control, including internal audit in AIFPU.

H1: The qualification of internal auditor determines the extent of accuracy, adequacy, adequacy and efficiency of internal control, including internal audit in AIFPU.

(2) HO: The presence of internal audit department does not improve the practice of internal control system in AIFPU.

H1: The presence of internal audit department improves the practice of internal control system in AIFPU.

(3) HO: Lack of qualified auditor staff is not responsible for weak internal control system.

   H1: Lack of qualified auditor staff is responsible for weak internal control.

(4) HO: The misappropriation of both financial and non- financial assets should not be attributed to overlapping of duties in AIFPU.

H1: The misappropriation of both financial and non- financial assets should be attributed to overlapping of duties in AIFPU.

1.6 SIGNIFICANCE OF THE STUDY

       The study is to assist the researcher in informing the general public and the Polytechnic community in particular the importance of auditing in tertiary institutions.

       The Companies and Allied Matters Act 1990 states the functions of the auditor as to examine and report on the account presented by the management.

However, the auditors are not responsible for the preparation of the accounts as well as keeping of records, but the auditor’s operational standard required the auditors to adequately plans control and record their work in order to ensure that the audit is carried out effectively and efficiently.

The important of adequate planning and control by the internal auditor includes establishing the intended means of achieving the objectives of internal auditing, assisting in this direction by ensuring that attention is devoted manly critical aspect of the audit and ensuring that audit work is concluded in time.

       At this junction the researcher would therefore like her readers to understand that auditing has a stand and guard lines specifically laid down for its conduct.

       Again, an important auditing objective is the provision of constructive assistance to the management in the form of system recommendation and advice on financial management. It may also interest the readers on this, work to known that the institute of chartered accountants of Nigeria has issued a statement on the relationship between the auditor and his client in criminal matters.

       In the light of the above, the internal auditor should carry out his work or duties without fear or favor for which they were appointed.

1.7  SCOPES AND LIMITATIONS OF STUDY

       This section discusses the coverage of the study, that is what the study will incorporate, what it will not in incorporate and why.

DELIMITATION:

       This research work is being carried out within Akanu Ibiam Federal Polytechnic, Unwana. In order to obtain the necessary information, some staff of the audit unit were very helpful to the researcher.

LIMITATIONS

Here, the researcher is trying to relate the constraints and difficulties encountered in the course of the research. As a result of all these constraints, some relevant areas were not left out.

  1. THE TIME FACTOR: The time given to the researcher to carried out the research work is limited. Because of this insufficiency of time, not all the need information was collected and as such the researcher limited her writing to volume that is expected of her within the short period.
  2. UN-CO-OPERATIVE ATTITUDE OF SOME STAFF: Some staff of the audit felt reluctant to supply the needed information and as a result enough data was not collected.

1.8 DEFINITION OF TERMS

       The definitions of importance operation terms are as follows:

  • AUDIT: An audit is the examination of accounts and their underlying records in order to be able to express on opinion on their honesty and veracity.
  • ERROR: An error is an unintentional mistake. It may occur at the stage of negotiation, documentation, Primary recording, final entry, summarization or preparing the financial statement. There can be error of commission, omission or the error of principle or interpretation of facts.
  • FRAUD: The term fraud is used sparingly in (practical) auditing. The preferred term is irregularity. However, fraud is defined as the international distortion of the financial statement to secure particular advantage such as the misappropriation of assets
  • INTERNAL CONTROL: Internal control is defined as the whole system of control, financial and otherwise, established by the management in order to carry on the business of the enterprises in an orderly and efficient manner, ensure adherence to management policies, safeguard the assets, and secure as far as the possible the completeness and accuracy of the records.
  • INTERNAL AUDIT: Internal audit is described as a review of operations and records, sometimes continuous undertaken within a business by assigned staff. This review is to ensure that internal control system operates effectively and it is carried out by the employee of the organization.

PROJECT TOPIC- ROLE OF INTERNAL AUDIT IN EDUCATIONAL INSTITUTION

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