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Abstract
The study examined internal audit function and accountability in public entities in Rivers State. The survey design was employed. The population of this study is made up of 270 management and staff selected from three tertiary institutions in Rivers State which include Ken Saro-Wiwa Polytechnic, Bori, Captain ElechiAmadi Polytechnic, Rumuola and Rivers State College of Health Sciences all in Rivers State. The Taro Yemens formula was used to determine the sample size of 161. The study applied the simple random sampling techniques to choose the 187 staff from the 270 staff population. The study thereafter employed the Bowley’s proportional allocation formula to determine the number of units to be allocated to the institutions. Primary data that was used for the study were obtained mainly through the questionnaires. The data collected were processed electronically using Statistical Packages for Social Sciences (SPSS Version 22). The statistical test used in the testing of the hypotheses was Pearson Product Moment Correlation Coefficient. The study revealed a positive significant relationship between performance audit and accountability in public entities in Rivers State. The study also revealed a positive significant relationship between Financial Audit and accountability in public entities in Rivers State. Based on the finding of the study, it was recommended that the internal audit unit of each of the tertiary institutions in Rivers State should improve its performance of financial, operational and compliance audits in order to contribute more to corporate governance in such tertiary institutions and management and those charged with governance of tertiary institutions in Rivers State should make effort to inject more qualified, competent and experienced personnel into the internal audit unit.
Table of Contents
Title Page i
Cover Page ii
Declaration iii
Certification iv
Dedication v
Acknowledgements vi
Abstract vii
Table of Contents viii
List of Tables x
List of Figures xi
CHAPTER 1 1
INTRODUCTION 1
1.1 Background of the Study 1
1.2 Statement of the Problem 3
1.3 Objectives of the Study 5
1.4 Research Questions 6
1.5 Research Hypotheses 6
1.6 Significance of the Study 6
1.7 Scope of the Study 8
1.8 Limitation of the Study 8
1.9 Definition Terms 9
CHAPTER 2 11
LITERATURE REVIEW 11
2.1 Conceptual Framework 11
2.1.1 Scope of Internal Audit 11
2.1.2 Dimension of Internal Audit Function 14
2.1.3 Concept of Accountability 16
2.1.4 Measures of Accountability 17
2.1.5 Internal Audit and Accountability 18
2.2 Theoretical Framework 20
2.2.1 Agency Theory 20
2.2.2 Inspired Confidence Theory 21
2.2.3 Lending Credibility Theory 22
2.3 Empirical Review 22
CHAPTER 3 32
RESEARCH METHODOLOGY 32
3.1 Research Design: 32
3.2 Population of the Study: 32
3.3 Sample and Sampling Techniques 33
3.4 Sample Size 34
3.5 Source of Data 35
3.5.1 Primary Source (s) of Data 35
3.6 Research Instrument for Data Collection 35
3.7 Validity and Reliability of Instrument 36
3.8 Techniques for Data Analysis/Test of hypotheses 36
CHAPTER 4: DATA PRESENTATION AND ANALYSIS 39
4.1 Questionnaire Distribution and Retrieval: 39
4.2 Data Analysis and Presentation 40
4.3 Descriptive Statistical Analysis 42
4.4 Hypotheses Testing 44
4.5 Discussion of Findings: 45
CHAPTER 5 48
SUMMARY, CONCLUSION AND RECOMMENDATION 48
5.1 Summary 48
5.2 Conclusion 48
5.3 Recommendation 49
Reference 51
Appendix I 54
Appendix II 55
List of Tables
Table 4.1: Questionnaire Administration and Retrieval 39
Table 4.2: Age of Respondents 40
Table 4.3: Sex of Respondents 40
Table 4.4: Academic Qualification 41
Table 4.5: Performance Audit and Accountability 42
Table 4.6: Financial audit and Accountability 43
List of Figures
Fig. 2.1: A conceptual Framework on Internal Audit Function and Accountability………………………………………………………………..11
CHAPTER 1
INTRODUCTION
1.1 Background of the Study
Internal audit is one of the functions within many organizations (both private and public) that assists management in achieving effectiveness in areas such as risk management, internal control and operations. Internal audit, which is traditionally a feature of public sector and large organizations (Eke, 2015), is now an essential function in many organizations. The origin of internal auditing is not certain, however, the history of modern internal auditing can be traced to the Industrial Revolution period. Internal auditing began as a one-person clerical function that primarily involved performing independent verification of bills before payment (Boynton &Kell, 1996). Over the years, internal auditing has evolved into a highly professional activity that extends to the appraisal of the efficiency and effectiveness of all aspects of an organization’s operations, both financial and non-financial (Meisser, 2000). These changes led to the establishment of internal audit department by many organizations. Internal auditing is traditionally viewed as an independent appraisal function within an organization for the review of accounting, financial and other operations as a basis of service to management (Millichamp, 1999). Thus, internal auditing was originally viewed as a task that focuses on the financial activities of an organization. The Institute of Internal Auditors (IIA) expanded the meaning of internal auditing when it defined internal auditing as an independent, objective assurance and consulting activity designed to add value and improve an organisations operations (IIA, 2002).
Auditing is an independent examination and expression of opinion on the financial statement of an enterprise by an independent person called auditor in pursuance of that appointment and in compliance with any relevant statutory obligation (Adeniji, 2004). From this definition, it could mean that an auditor must be an expert who serves as an examiner to the preparers of financial statements and also examines the internal control system. Auditing standard of England and Wales sees internal control system as the whole system of control, financial or otherwise, established by management in order to carry on the business of an enterprise in an orderly and efficient manner, safeguarding its assets and secure them as safely as possible and also ensuring completeness and accuracy of records. It comprises of both internal checks and internal auditing. Internal audit is an independent appraisal function within an organization for the review of the system of control and the quality of performance as a service to the organization (Millichamp, 1996). From this definition it could be seen that the internal auditor is an employee of an organization whose work is to ensure that the internal control system is working effectively and report back to the management as a means of ensuring accountability. Accountability refers to the demonstration to someone else of success or achievement With respect to preset target(s). It involves revealing, explaining and justifying what one does, or how one discharges his responsibility (Watoseniyi, 1996). Similarly, Rafiu and Oyedokun (2007) opined that accountability is the obligation to demonstrate that work has been conducted in accordance with agreed rules and standards and that officer reports fairly and accurately on performance results vis-à-vis mandated roles and or plan. It means doing things transparently in line with due process and the provision of feedback. Boven (2005) view accountability as hallmark of modern democratic government where those in power must be held accountable for their decisions, polices and their expenditure, it is a compliment of public management. In view of this, it is appropriate for any organization to have an effective control system of accounting by having internal audit for good monitoring and check against the financial statements, ensures compliance with statutory requirements and safeguards the asset of the company. Presently, due to the increasing demand for change, good governance, transparency and accountability in public sector, it is important to investigate the role of internal audit function in promoting accountability.
1.2 Statement of the Problem
There is a low tendency for public officers in Nigeria to report on their performance and conduct fairly to members of the public to whom they are called to serve (Ebimobowe, 2013). Previous studies have established the fact that good accounting and reporting systems enable an entity to allocate its resources in the most efficient manner (kinbuli, 2010).
However, in spite of the existence of internal audit departments in public sector entities in Nigeria, the rate of fraud and financial impropriety is arguably on the increase (Appah, Appiah, &Okereson, 2013). Auditors in public sector entities are expected to ensure that funds are expended in accordance with the terms by which such monies were appropriated and that accounts have been properly prepared (Johnson, 2004).
Though, internal audit has become a crucial function within organizations; insufficient attention has been directed to this area of study when compared to external audit. Arena, Azzone, (2007 & 2009) have suggested the need for studies on internal audit in public sector entities of developing nations. Getie and Wondim (2007) identified the need for effective internal audit function in public sector entities to support effective management of public funds, and links the effectiveness to effective management and internal control of the entity.
Okolo (2001) notes that, the resources of any country belong to its citizens. Any government in power manages these resources on behalf of the citizens through the agencies of Government ministries, boards, corporations, parastatals and other extra-ministerial departments. The government renders account of its stewardship by way of annual accounts, and to assure the citizens that the various accounts are correctly and fairly reported, the Nigerian constitution provides for the audit of these accounts. The audit of the accounts of Government-owned organizations is therefore mandatory under the law, and the audit service is provided by both internal and external auditors. It is as against this backdrop that the section 85 (1) of Nigerian constitution provides for the office of and appointment of an Auditor-General for the Federation for the audit of public accounts. Both the Nigerian Constitution and the audit Act of 1956 provide that the appointed Auditor General shall inquire into and audit the accounts of all accounting officers in all the public sector organizations and of all persons and bodies established by an Act of the National Assembly entrusted with the collection, receipt, custody, issue or payment of federal public money or with the receipt, custody, sale, or other properly of government. These powers of the Auditor General for the federation are by extension cascaded down to the internal auditors of all government statutory corporations, commissions, authorities, agencies, including persons and bodies established by an Act of the National Assembly. It is on this basis that section 1701 (ii) of Financial Regulations provides that the Accounting Officer of a ministry or extra-ministerial office and other arms of government shall ensure that an internal audit unit is established to provide a complete and continuous audit of the accounts and records revenue and expenditure, assets, allocated and unallocated stores, where applicable.
1.3 Objectives of the Study
The main objective of the study is to examinethe association between internal audit function and accountability. The specific objectives are as follows;
1. To examine the extent to which performance audit associate with Budgeting Accountability in public entities in Rivers State.
2. To examine the extent to which financial audit associate with Budgeting Accountability in public entities in Rivers State.
3. To examine the extent to which performance audit associate with Financial Accountability in public entities in Rivers State.
4. To examine the extent to which financial audit associate with Financial Accountability in public entities in Rivers State.
1.4 Research Questions
1. To what extent does performance audit associate with Budgeting Accountability in public entities in Rivers State?
2. To what extent does financial audit associate with Budgeting Accountability in public entities in Rivers State?
3. To what extent does performance audit associate with Financial Accountability in public entities in Rivers State?
4. To what extent does financial audit associate with Financial Accountability in public entities in Rivers State?
1.5 Research Hypotheses
H01 There is no significance relationship between performance audit and Budgeting Accountability in public entities in Rivers State.
H02 There is no significance relationship between financial audit and Budgeting Accountability in public entities in Rivers State.
H03 There is no significance relationship between performance audit and Financial Accountability in public entities in Rivers State.
H04 There is no significance relationship between financial audit and Financial Accountability in public entities in Rivers State.
1.6 Significance of the Study
The research work of this nature will be significant to the government, business organizations, academic as well as the researcher.
Often government personnel’s are accused of dishonest manipulation and deliberate distortion and thereby not being accountable to the public. In this view of this, the significance of the study includes the following:
Government:It is hoped that findings in this research work and subsequent recommendations will go a long way in helping the state and federal governments achieve their aims and objectivesof establishing tertiary institutions for providing good and quality education.
Business Organization:Every establishment should maintain a cordial relationship with the customers and employees of the business organizations.
Academic:The study will add body knowledgeon the subject under investigation.
Researcher:The researcher will gain a lot by giving recommendations that will endeavor to reduce the shortcoming of public institutions governments in the country.
1.7 Scope of the Study
The study is delimited to the internal audit functions and accountability in public sector entities in Rivers State. The study is focused on selected tertiary institutions in Rivers State which include Ken Saro-Wiwa Polytechnic, Bori, Captain Elechi Amadi Polytechnic, Rumuola and Rivers State College of Health Sciences all in Port Harcourt.
1.8 Limitation of the Study
Research of this nature is always beset with series of difficulties, ranging from the problem of data collection, time, low literature and problem of getting the desired attention from the respondents. The major constraints of this study are as follows:
Time: This is one of the major constraints of this study to get the true research it requires. Interview periods are frequently shortened and sometimes rescheduled because of other engagements of the management personnel being interviewed. Also the academic work and other domestic problems of the researcher leave him with limited time for work.
Attitude of the Respondents: Some of the respondents were unwilling to disclose certain information for security purposes as well as distorted or biased report from the worker is another constraint. Therefore, the outcome of the study depends on the data collected from the state councils and local government chairman.
1.9 Definition Terms
Some terms that are used in the research are defined as the apply to this study. They are as follows:
Internal Auditing: It is the process of evaluating a company’s internal controls, including its corporate governance and accounting processes.
Accounting Control: Comprises the methods and procedures that are mainly concerned with the authorization of transactions, the safeguarding of asset, and the accuracy of the financial records. Good accounting controls help maximize efficiency, they help minimize waste, unintentional errors and frauds”.
Public Sector: This is simply defined as, all organization which is not privately owned or as organization which lie in the hands of the public.
Internal Control: This may be defined as the whole system of controls, financial or otherwise, established by the management to assist in carrying out functions in an orderly manner, safeguard its assets, secure as far as possible the accuracy and reliability of its records, promote operational efficiency and encourage adherence to policies.
Accountability: It is setting correct goals, evaluating the effective achievement of the major objective and at what price, presenting and interpreting this information to the public and accepting responsibility of failure.
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