Project Topics

THE ROLE OF INTERNAL AUDITING IN THE EFFECTING MANAGEMENT CONTROL OF LOCAL GOVERNMENTS

THE ROLE OF INTERNAL AUDITING IN THE EFFECTING MANAGEMENT
CONTROL OF LOCAL GOVERNMENTS

 

ABSTRACT

The subject of this research investigation is the role and
functions of internal auditing within the local government councils in EnuguState,
specifically, this study has empirically investigated the present situation
functions and problems of the internal audit department within the local
government councils in Enugu.
The major problem of the researcher was to find out their relevance to the to
the effective and efficient performances of the local government areas.

The research methodology in this investigation is descriptive
approach, based an the answers to certain research questions. Data for the
descriptive analysis were generated through an empirical investigation of the
activities of the internal audit department in Ezeagu local government area.
The methods of data collection were interviews, direct observations and study
of secondary materials.

The major findings of this study are:-

a.    
That Ezeagu local government area
has an internal audit department.

b.    
That internal auditing helps to
know how well the policies of management were executed.

c.     
That the duties of the internal
auditor could be performed by either the accounts division or the external
auditor who must be statutorily appointed.

d.    
That all the internal auditors of
the local government report to the auditor general, through the executive
chairman of their local government areas.

The
conclusions of this study are:

a.    
Management needs to know whether
the report it relieves are accurate and adequate and whether its policies are
being effectively translated into action in all sections of the local
governments.

b.    
It also needs to know whether
staffs are being properly trained and that they understand the rules and
procedures they are expected to follow.

PROPOSAL

 

The purpose of this project is to bring out the role and
function of internal auditing in the effective management control of local
government councils in EnuguState.

The research work will fall in the area of internal auditing
in Ezeagu local government area in EnuguState. The internal
auditing, which is an audit function is in use by the local governments as a
part of their overall system of internal control. The project will state the
present situation, functions and problems of the internal audit department with
the local government councils in EnuguState.

The research method which is going to be use will be the
desciptive approach. The descriptive approach will give answers to certain
research questions. This method will enable the researcher to describe in a
systematic manner the role of internal auditing in the local government area
studied.

The method of data collection is going to be interviews,
study of secondary material and direct observations. The scope of the research
work will be only limited to Ezeagu local government area in EnuguState.
This is due to the short period of time available for the research
work/project.

TABLE CONTENTS

 

Title
page

Approval
page

Abstract

Acknowledgement

Dedication

Table
Contents

CHAPTER ONE

1.1  Introduction

1.2  Area
of research investigation

1.3  Problems
background

1.4  Statement
of problem

1.5  Method
of study

1.6  Objective
of study

1.7  The
importance of study

1.8  The
scope of the study

1.9  The
limitations of the study

1.10      
Definition of terms

CHAPTER TWO

2.1
Literature review

2.2
Historical background

2.3
Principles

2.4
Operational definition of internal auditing

2.5
Functions of an internal auditor

2.6
Benefits from an internal audit function

2.7
The internal auditor’s role in the area of management audit

CHAPTER THREE

3.1
Methodology and procedures

3.2
The empirical investigation

3.3
Reliability of data collection

CHAPTER FOUR

4.1
Data presentation and analysis

4.2
Location of Ezeagu local government area

4.3
The objectives behind the creation of local governments

4.4
Functions of local governments

4.5
Structural organisation of Ezeagu local government

4.6
Sources of revenue

4.7
The functions of internal audit in the effective management control of local
governments

4.8
Results of emperical investigations

4.9
Problems identified

4.10
Procedure of improvement

4.11
Major findings

CHAPTER FIVE

5.1
Summary

5.2
Conclusions

5.3
Recommendations for improvement

5.4
Appendix

5.5
Interview guide sheet

5.6
Bibliography

 

 

 

 

 

CHAPTER ONE

 

INTRODUCTION

1.1 AREA OF RESEARCH AND
INVESTIGATION

This research investigation falls within the area of internal
auditing in Ezeagu local area.

Internal Auditing is an audit function which is being used by
local governments as a part of its overall system of internal control. Such
auditing is carried out by local government employees who are responsible to
local government management. The activities of internal auditors were
originally intended to verify secrecy and dependability of the accounting
systems, data and information, but currently they are operating in
non-accounting functions, verifying local government operation and efficiency.

From the foregoing, internal auditing is therefore, a day to
day verification process, which operates continuously throughout the local
government financial year. According to Akanyanwu (1990) internal auditing is
“The independent appraisal within a local government of the accounting,
financial and all other operations as a basis for protective and advisory
services to management”.

1.2    PROBLEM BACKGROUND

The new civil service move with designed to made the service
more functional, professional, productive and responsive to the socio-economic
needs of the nation. The federal government has also recently revamped and
restructure the local government system to enable it perform its role of
promoting, co-ordinating and implementing community services, enhancing
citizens participation and maximizing the use of local resources. Enormous
amount of money if flowing to the local government from the federation accounts
(20%), the 10% if the state internally generated revenue and the revenue of the
local government.

The federal government of Nigeria came up with a financial
instruction in 1979 instructing all local government to set up internal audit
unit in each local government. But the behavior and attitude of operation of
local government system resulted in many local governments not setting up
internal audit units or if set up, they were not functional. The federal
government in 1988 set in motion a real wave of change. A real frame work of
internal auditing in the local government was spelt out in order to make it
less difficult for management of the local government to have perfect control
of the activities of staff of the local government as the greatest contributing
factor to the poor performances of the local governments.

1.3
STRUCTURE OF LOCAL GOVERNMENT

Local government forms the third tie of government in Nigeria; in Nigeria so to
say we have the federal government at the apex, the state government at the
middle and local government at the bottom. Local government was created to help
in catering for the rural populace. Its operations include the provision of
same social amenities, such as cottage hospitals, rural roads, and bridges,
management of primary schools that is before now. At the head of affairs in
each local government is the chief executive of the local government who is
referred to as the local government chairman. We also have the legislators of
the local government who were elected in various wards.

The local government administration has the chairman at top
of affairs, followed by his deputy, and then come the secretary, the personnel
executive officer (PEO), the treasurer and the internal auditor. The internal
auditor reports to the auditor general of the state through the executive
chairman of the local government.

1.4 STATEMENT OF THE PROBLEM

The local government has three broad sources of revenue. They
include 20%direct from the federation accounts, 10% of internally generated
revenue of the state government and revenue internally generated by the local
government herself. The internal source available to the local government area
include, rents from market stores, royalty paid by some residents companies in
a local government, contractors registration, sales of car/bus emblems, etc.

Since the local government has a whole lot of possible source
of revenue the problem therefore include:

a.    
How can efficient management
controls be achieved?

b.    
What is the role of internal
auditing in ensuring this control?

c.     
How can the internal auditing be
made a useful tool for management control?

 

1.5 METHOD OF STUDY

The
major method of this research investigation will be descriptive, based on the
answers to certain research questions. Detailed discussion an methodology will
be presented in chapter three.

1.6 OBJECTIVE OF THE STUDY

a.     
The researcher intends to find out;
the role of internal auditing in management control.

b.    
Whether the function of the internal
audit department are performed in compliance with the established standards and
policies and how much it has succeeded in achieving the objective of the local
government.

c.     
In the end the researcher shall
establish some acceptable benefit that may be derived from effective audit
control system.

1.7 THE IMPORTANCE OF THE STUDY

This research is an attempt to survey the constructive parts,
which internal auditing can play in the local government system in Nigeria with
particular reference to Ezeagu local government area – EnuguState.

A lot of problems are facing the local government areas as
not having  an effective audit control
system. One of these problem is the management seems to gloss over the
operation of the local government, which are carried out in disorganized
manner. The researcher was motivated to choose this topic because of her belief
that if management of Ezeagu local government have complete control of the
activities of the members and staff of the local government, an efficient
management which is pre-requisite for high productivity will be assured.

This is so because an efficient control system will enable
the management to monitor the performance of the executives and take necessary
and adequate corrective actions to ensure high performance of the executives
and take necessary and adequate corrective actions to ensure high performance
at the levels.

1.8    SCOPE AND LIMITATIONS OF THE STUDY

The scope of the study is limited to Ezeagu local government
area of EnuguState. This is because of the limited
time available for the researcher for the submission of the report and the
financial involvement of the scope is further widened. Furthermore, from the
related literature reviewed, it was observed that there was enough bases for
generalizing the result of the study.

1.9   LIMITATIONS OF THE STUDY

This study has been limited by a number of factors. Notable
among the limitations was our people’s poor reaction to researches question and
reading meaning into any attempt at any form of interview.

One of the vital documents needed for this investigation
could not be supplied because it was audited account for 1998 and 1999
financial year. The last audited account was in 1983.

It took the researcher much time and effort to convince some
respondent that she is not in any way trying to find out how well or otherwise
they are carrying out their work.

1.10       DEFINITIONS OF TERMS

The
following terms, which due to their technical nature carry special meanings,
need some definition to aid proper understanding of this paper. The writer
therefore, wishes to define them briefly here but those of them that need
further explanations were explained in later chapters.

Internal Audit:

This
is a continuos review of operations and records understanding within an
organization by specially assigned staff.

          Internal Control:

This is the whole system of control established by the
management to enable it carry out its management function efficiently.
Institute of Chartered Accounts of England and Wales (ICAEW) defines internal
control as “the whole system of control, financial and otherwise, established
by management in order to carry on the business of the company in an orderly
manner, safeguard its assets and secure as far as possible the accuracy and
reliability of the records.

From the above definition, it is clear that the main purpose
of internal control is to safeguard assets and keep proper records.

The important features of internal control are:

i.                  
The plan to the organization with
particular reference to the allocation of staff duties (segregation of duties)

ii.                
Authorization, recording and
custody procedure including internal checks.

iii.             
Managerial supervision and reviews
(including internal checks). This is the point where the internal auditor comes
into focus.

WATCH DOG:

This
refers to one who is always around at the center of activities of the business.
He carefully watches every person on the activities, only running back to the
master to report errors committed.