Evaluation Of The Role Of Internal Auditors In An Organization

The system of controls adopted in any economy greatly determines the development and growth of that economy. To ensure optimization in money, materials, machine, time, resources and management of men, controls are essential. This study was carried out to evaluate the role of internal auditors in an organization (a case study of coca-cola, ibadan). Specifically, the study examined the need for assisting the financial statement . At the end of this research work an attempt would have been made to look critically into the problems mentioned and their impact in an organization. The contribution of internal audit in solving the problem. And this project work will also cover the role of internal audit as an instrument of internal check to management it will also touch internal control. The study employed the survey descriptive research design. A total of 80 responses were validated from the survey. From the responses obtained and analyzed, the findings revealed that there is a relationship between the internal audit and management control. Also,co-operation exist between the internal auditor and internal check to management. Furthermore, internal audit assist in the detection and prevention of fraud in the management. The study hereby recommend that the internal audit unit of the organization should keep ethical standard by keeping up to date internal audit manual and train its internal auditors in forensic accounting. Also, Internal audit units should always draw annual audit plan which is the focus of the company as it will help them to have efficient operation. Lastly, The internal audit unit of the organization should always submit their audit plan to the management who will have to be pro-active and take action according to findings of the plan.

Introduction

1.1 Background of the Study

The system of controls adopted in any economy greatly determines the development and growth of that economy. To ensure optimization in money, materials, machine, time, resources and management of men, controls are essential.

These controls are installed by many organisations including banks to check how effective and efficient they maximize their resources. One of such controls commonly used to minimize wastage and guide plan to their eventual accomplishment is "INTERNAL AUDITING".

Auditing has been in existence for many years, it was in ancient Egypt and the great mercantile establishment of the middle ages. This shows that internal auditing can neither be neglected nor under rated in our modern economy for it was borne of the complexities of modern business dominate and transactions involved. In that, other management of various large businesses, organisations and government concern recognised internal auditing as valuable machinery and achieving and objective deemed accurate at a point in time.

The term "Audit" is from a Latin word "Audire" which means "Hears". This is because the accounts of an estate domain were checked by having them called out of these who completed them to those in authority. With the growth of trade and commerce the need for more accurate methods of recording business activities arose. Auditing is a process whereby the books of account and vouchers of business entities (including charity users/trusts) are subjected to critical examinations by professionally qualified and independent account (Auditors) on such a detail will enable them from an option as to their truth and fairness. The auditing is the bridge across the credibility gap created by the separation of management from ownership.

The complexities of the art of management extends to increasing ware of business fraud, embezzlement and the cash squeeze which often cripple many companies. The management has to look inward in order to uphold the space of activities and keep abreast with the changes in their immediate and external environment, and this can only be achieved as good and effective internal control system of which internal auditing is a major section. A writer maintained that the existence of an efficient and effective system of internal control both in design and operation which is the responsibility of management with the best to prevent fraud or at worst help to detect such fraud at the earliest opportunity.

It is a function carried out by an independent staff in audit department with the sole aim of reporting on fairness and truly of financial statement. However since the internal auditors are employee of the firm or the establishment concern, independence is not always achieved.

The comprehensive courage of an internal audit upon several factors, a general rule is that department should of course have as much freedom as possible without interference from the management. In such circumstances; the internal auditors will have a greatly enhanced share in recommending new and concluding investigations where appropriate. The terms of reference should be defined as lack of this may lead the department and those in another.
To avert this ugly incident and ensure greater coverage during investigations, management issues guidelines to heads of divisions to always make necessary documents/records/files available to audit staff as may be demanded by them while performing their duties. A proper audit work should be able to:

Review the accounting systems as related to internal control.

Examine the economy or review the economy efficiency and effectiveness of operation.

Examine financial and operating information for management

Review the implementation of cooperate policy plans and procedures.

Assist in implementation of new accounting system

Providing a training ground for both financial general management personnel.

Internal audit functions can help to spot out differences in systems, so as to evolve corrective measures at the earliest opportunities. Internal auditors appraise, analyse and report upon the policies and methods employed in the bank.

The duties of internal auditors to the general performance of the whole organisation cannot qualify; maintain a good internal control system maintained by qualified chartered accountants.

1.2 Statement of the Problem

Internal control system may be insufficient based on some predicament. These may include lack of segregation and assignments of duties of accounting staff. Also the scopes of duties of internal audit unit are so wide and their scales of operations so low as well as the shortage of qualified staff to carry out internal auditing and accounting duties.
Independence of accounting officer can easily be influenced by management which can affect the internal audit system of an organisation clearly defines as a result of two or more dishonest staff can collide to override the efficiency of the internal control system. The criticism of internal control system has been extended to the banking industry hence the study of internal audit as a tool for effective management.

1.3 Objective of the Study

Internal audit is a tool, procedure, way to helping organisations achieve their set goals or objectives. The main objective of the study is to examine the effectiveness of internal audit in an organisation.

Other objectives of this study are as follows:

To show how internal audit assist in management operations.

To show how organisational hierarchy has influenced internal audit department.

To ascertain how internal audit department is a base to achieving value for money audit.

1.4 Research Questions

Does internal audit actually assist in management operations?

Does organisational hierarchy enhance internal audit performance?

Can internal audit be a base to achieving value for money?

1.5 Significance of the Study

Due to the ignorance of the public as to the contribution of internal audit department to efficient management makes this study essential. This is the form at which the public believe that internal audit is not necessary as it delays job, while some sees it as the only way to detect frauds and misappropriation of funds in a firm/organisation.
So this project will make clear, the merits of having a source of internal audit, which benefits and how such benefits comes.

Secondly, the inability of workers to effectively and efficiently utilize resources and lack of proper control mechanisms has led to wastage of human resources, time, and finance and material resources. This study will help management in bringing about greater efficiency and effective use of resources and the same management cost. E. Woo [1988] (FCA) if maintained that great deal of the work of an internal auditor is curled with the evaluation of systems internal checks, conservations with officials (the results of when, was later confirmed by examinations of records) and general stripling of records. This study makes more insights into the differences in current internal audit practices in the banking system and suggests useful innovation for making necessary changes in both the organisation and implementation into internal audit functions as it contains and obtains in Coca cola plc.
Lastly, this will at most expose the benefits of this great department to companies who do not have such, so that they can establish this control department without delay.

In further research, the shareholders in any organisation/firm are the beneficiary when it comes to the role of internal auditing in the view at which frauds detected are made known to them, not only the shareholders, but the also the general public as a whole, so as to give assurance of less risk in creating business opportunities with such firms/organisation and knowing the financial stability of such firm/organisation. Also detecting fraud helps in firms/organisations the board of trustees protect the rights of such firm/organisation at which either misappropriation of frauds in an organisation is going bankrupt. This is of the view at which internal auditors helps organisations/firms/companies get back to achieving their goals/objectives.

1.6 Scope of the Study

Various measures of internal control system are considered in Coca cola plc, but more concentrations would be made on internal audit aspect for the purpose of this study. Accounting systems and related internal control measure the position, the independence of the auditors as well as the scope of his workers is here to be studied.

1.7 Limitation of the Study

Certain problems and limitations are expected to face the study, such problems are lack of resources or time to study or go around other divisions of the bank.

Also, some staff may not like to reveal information which they regard as classified, deputes the facts that manager of the bank has given the manager of the bank approved.

1.8 Definition of Terms

It is necessary that clear definitions of some technical terms and words are given to avoid any possible confusion that may arise because of their usage.

1) Financial Auditing:

It is sometimes referred to as auditing (external) or simply as auditing. The American accounting committee on basic concepts (1972) has defined it as "a systematic process of obtaining and evaluating evidence regarding asserting about economic actions and events to ascertain the degree of correspondence between those ascertained and established the degree criteria and communicating the results to interested users.

2) Internal Auditing:

H. Millichamp (1979) defines it as "independent appraised activity within an organisation foe the review of accounting financially and other operations as a basic of services to management. It is a managerial control, which functions by measuring and evaluating the effectiveness of other control.

3) Internal Control:

The institute of chartered accountants for England and Wales defined it as "a whole system of control, financial and otherwise established by the management in order to carry out the business of an enterprise in an orderly and efficient manner, ensure adherence to management policies, safeguard the assets and secure as far as possible the completeness and accuracy of records".

4) Audit Report:

This is a report prepared by a qualified accountant and to express the opinion that the accounts show a true and fair view and comply with statutory requirements.

5) Fraud:

The use of deception for unlawful gain or unjust advantage.

6) Internal Check:

It is defined as the allocation of authority and work, in such a manner as to afford checks on the routine transactions of day to day work by means of works of the person being proved independent of another, or the work of one person being complementary to that of another.

1.9 Organization of the Study

This research work is organized in five chapters, for easy understanding, as follows.

Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study.

Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature.

Chapter three deals on the research design and methodology adopted in the study.

Chapter four concentrate on the data collection and analysis and presentation of finding.

Chapter five gives summary, conclusion, and recommendations made of the study.

Summary of Findings, Conclusions and Recommendations.

In this last chapter of the study, the researcher tends to give a clear summary of the findings of the research process, the finding made on the analysis of the data and the conclusion drawn from the analysis. The broad aim of this study is to ascertain how efficient the internal audit as an aspect of internal control system has contributed to the effective management of Coca cola plc.

5.1 Summary of Findings

From the outcome of the analysis and interpretation as they relate to the questions in the questionnaire for this study, the following findings were made and summarized as follows:

The responses received for research questions established the fact that, management operations can effectively work out if there are no lack of morale, and illegal obligation required for management operation.

Internal audit is not only a source of help to prudent management, but also helps in the control of operations in such organisations from which the respondents responds clarified.

Management operations are not only carried out by the internal audit department for which there are many other units, departments, sectors in such organisation that also helps in carrying out management operations.

The researcher discovered that internal audit department concepts changes from time to time as the objectives and scopes of duties are expanded as well as the standard of practice in terms of organisational operations in which the responds to the question was just based on average by the respondents.

The researcher also observed that internal audit department do assess the degree of compliance to rules and regulations in management operations of which responds turned out to be negative for the respondents.

We also discover that value for money audit does not give the shareholders a review of such organisation at which the organisation needs to put all efforts and resources from all units, sectors e.t.c in the organisation so as to give a review of the organisation to the shareholder. And at such internal audit department is not the whole aspect of the department.

It was also observed that the recognition accorded to the internal audit department in the organisation hierarchy do enhance the operations in the organisation, at which it aids in providing value for money audit of such organisation.

We discovered that management operations are clerically or mostly determined by the internal audit department of such organisation.

The findings agrees with C. Watts (2000), E. Woo (1988) who asserted over the principles of internal auditing, and contributed to the objectives of internal audit as a tool in achieving organisational operations. The American Accounting committee on basic concepts (2002) findings also agree that internal audit is a tool use in achieving organisational objectives e.t.c.

5.2 Conclusion

Based on the findings of our research work, the study reveals that internal audit is a tool in achieving organisational objectives which is also seen by E. Woo (1988) is essential in any organisation. Hence internal audit is the mainstream in every organisation which also has the influence in improving the growth of such organisation. Internal audit has given the shareholders of such organisation the review for value for money audit and how it can be achieved.

5.3 Recommendations

The following recommendations are hereby made with the view of seeing internal audit as a major tool in achieving organisational objectives.

On the basis of the findings and decisions in this study, i hereby make the following recommendations:

The need to orientation course: employees apart from those in audit department need to be told why there is need for internal control. They should know that instituting good control procedures are not an insult to the integrity of present employees of job relation and forced vocations.

More than one employee becomes familiar with certain duties and procedures so that replacement of employees in case of emergency is less difficult.

It broadens the training of personnel in general.

Rotation frequency serves as a general check on the efficiency of the employee on vocation.

Irregulations which may have been committed by an employee may be discovered while the employee is on vacation and his duties are assumed by someone else.

Budgetary and reporting controls are effective without the active participation of a senior management in the review process. There should be need to improve the system of internal audit, so that it is a real asset to management by finding management or efficiency audit.

Internal audit department must realize that they have been designed to help management run the organization effectively.

The issues of visiting auditors to area officers. It was gathered that auditors are permanently at the head office and are only in area office when need arise which is risky as the visiting auditor may not be familiar with all the operating aspects of the area offices. This may not have free and independent mind to give good and unbiased judgements. The auditor should make an unscheduled visit to the area office.

Review of the accounting system and relative internal control.

Duties should be allocated in such a way that one person"s job is independently proved or checked by others. Different jobs should be allocated to different people so as to call for checks and balances.

Development of education and professional qualification.

Internal audit staff should be encouraged having sound, personal, educational and professional qualifications. The personal qualities to be cultivated, the idealism, leadership, mental capacity and alertness. They should also be constructive and analytical ability as mastery of model procedure and practices, excellent knowledge of accounting theory and a good knowledge of language communication.

• Evaluation Of Internally Generated Revenue And Economic Growth
• Evaluation Of Effectiveness In Internal Control System In Banking Industry
• Evaluation Of Internal Control System In Public Sector
• Evaluation Of Internal Audit As A Veritable Control Machinery For Efficient Management In Public Enterprises
• Evaluation Of Tax Incentives And Internal Revenue Generation
• Evaluation Of The Problem And Prospect Of Tax Collection In Internal Revenue Service In Bauchi State
• Evaluation Of The Internal Control System In Hotel Industry

• Accounting Project Topics and Materials