THE ROLE OF AUDITORS AND THE METHOD OF INTERNAL CONTROL IN LOCAL GOVERNMENTS
| PAGES = 65 | CHAPTER = 1 – 5 |
ABSTRACT
This research delves into “The Role of Internal Auditors and Methods of Internal Control in Local Government, with a focus on Enugu State.” The aim of the study is to assess whether the internal audit functions adhere to established standards and policies and to evaluate their effectiveness in achieving the objectives of local government. Data was gathered through interviews, direct observation, and review of secondary sources. The analysis employed percentage calculations and formulated hypotheses to interpret the findings. The key findings of this study are: Udi Local Government Area has an established internal audit department; internal auditing provides insight into the effective implementation of management policies; the responsibilities of internal control may be carried out by either the accounts division or an externally appointed auditor; and all internal auditors report to the Auditor General through the Executive Chairman of the local government area. The researcher recommends the continued use of internal auditing within local governments, as it significantly enhances management control.
TABLE OF CONTENTS
CHAPTER ONE: INTRODUCTION
Background of the study
Statement of problem
Objective of the study
Research questions
Research hypothesis
Significance of the study
Scope of the study
Limitation of the study
Definition of terms
CHAPTER TWO
Introduction
Theoretical framework
Current Literature review
Summary of Literature review
CHAPTER THREE: RESEARCH DESIGN AND METHODS
Research design
Area of the study
Population of the study
Sampling method
Research Instruments
Validity and Reliability of research Instruments
Sources of data
Method of investigation.
CHAPTER FOUR: ANALYSIS OF DATA PRESENTATION
Data presentation and Interpretation
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATION
Summary of findings
Conclusion
Recommendation
References
Appendix A
Appendix B
Questionnaire
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The recent reforms in civil services aim to make the system more effective, professional, productive, and better suited to address the socio-economic needs of the country. Additionally, the federal government has recently overhauled and reorganized the local government system to improve its capacity for promoting, coordinating, and implementing community services, enhancing citizen participation, and optimizing the use of local resources. A significant flow of funds is directed to local governments from the federation account, state-generated revenues, and local government revenues.
In 1979, the Nigerian federal government mandated the establishment of internal audit units in each local government through a financial directive. However, the operational practices and attitudes within many local governments led to the failure to either establish these units or ensure their functionality. In response, the federal government introduced significant reforms in 1988, providing a detailed framework for internal auditing within local governments. This framework was designed to address the difficulties faced by local government management and to tackle the key issues contributing to their underperformance.
1.2 STATEMENT OF THE PROBLEM
Local governments derive revenue from three main sources: allocations from the federation account, state government-generated revenue, and internally generated funds. Internal revenue sources for local governments include rents from market stalls, royalties from local businesses, fees for contractor registrations, and sales of vehicle emblems, among others.
Given the numerous potential revenue streams available to local governments, the key issues are:
a) How can effective management controls be implemented?
b) What role does internal auditing play in maintaining these controls?
c) How can internal auditing be optimized as a tool for effective management control?
Certainly! Here’s a rephrased version:
1.3 Objective of the Study:
a) The aim of this research is to explore the role of auditors and the methods of internal control within local government.
b) To assess whether the internal audit department’s functions adhere to established standards and policies, and to evaluate how effectively these functions contribute to the objectives of the local government.
c) Ultimately, the research will identify the potential benefits of a robust audit control system.
1.4 Research Questions:
a) Does the Udi Local Government Area have an internal audit department?
b) Does internal auditing provide insights into the execution of management policies?
c) Can the responsibilities of the internal auditor be handled by the accounts division or an external statutory auditor?
d) Do all internal auditors within the local government area report to the Auditor General via the Executive Chairman of their respective local government area?
1.5 Research Hypotheses:
The following hypotheses have been formulated, tested, and analyzed to address the research problem:
Ho: The internal audit department supports the accounting system of the local government.
Hi: The internal audit department does not support the accounting system of the local government.
Ho: The internal audit department does not contribute to preventing fraud or enhancing the revenue position.
Hi: The internal audit department helps prevent fraud and improve the revenue position.
Ho: Reporting to the Auditor General through the Executive Chairman of the local government ensures that the internal auditor fulfills their fiduciary duties diligently.
Hi: Reporting to the Auditor General through the Executive Chairman of the local government impedes the internal auditor from performing their fiduciary duties diligently.
1.6 Significance of the Study:
This research aims to examine the positive impact that internal auditing can have on the local government system in Nigeria, with a specific focus on the Udi Local Government Area in Enugu State.
The local government faces numerous challenges, notably the absence of an effective audit system. One key issue is the management’s tendency to overlook the disorganized execution of local government operations. The researcher selected this topic based on the belief that implementing an efficient management system in Udi Local Government is essential for enhancing productivity and overall effectiveness. This is because an effective control system allows management to oversee the performance of executives and take appropriate corrective measures to ensure high performance across all levels.
1.7 Scope of the Study:
This study is confined to the Udi Local Government Area in Enugu State due to constraints related to the researcher’s limited timeframe and financial resources. Additionally, the literature review indicated sufficient grounds for generalizing the findings within this scope.
1.8 Limitations of the Study
This study faced several challenges, with one of the most significant being the respondents’ reluctance to answer research questions and their tendency to misinterpret the intent of interviews.
Additionally, a crucial document required for the investigation, the audited accounts for the 2007 and 2008 financial years, could not be provided. The most recent audited account available was from 1988.
The researcher also had to put in considerable effort to reassure some respondents that the study was not aimed at evaluating the quality of their work.
Capital Constraints: This research involved financial costs for the researcher, including transportation expenses, purchasing materials, and browsing the internet to gather additional information.
Lack of Awareness: Many respondents were hesitant to provide the information requested by the researcher due to a lack of understanding of the research’s purpose, fearing that the information might be used negatively.
Privacy Concerns: Some questions in this study were perceived as intrusive by the respondents, which resulted in a lack of full cooperation and made it challenging for the researcher to conduct a thorough investigation.
1.9 Definition of Terms
Local Government: A local government is a type of public administration that typically operates as the lowest level of governance within a given state (Wikipedia).
Embezzlement: Embezzlement refers to the act of dishonestly withholding assets with the intention of converting (stealing) them. This is usually done by one or more individuals entrusted with the assets, either to hold them or to use them for specific purposes.
Appraisal: An appraisal is the valuation of property (such as real estate, a business, or an antique) conducted by a qualified individual. For the appraisal to be valid, the individual must hold a designation from a regulatory body that governs the jurisdiction in which the appraiser operates.