Olajide Project

ABSTRACT

The aim of writing this project is to produce a realistic picture of Internal Audit

Department in curbing wastes and losses using The Federal Polytechnic Ado

Ekiti as a case study, hence, this project entitled ‘A Review of the Effectiveness

of Internal Audit Department in Curbing Wastes and Losses’ a case study of the

Federal Polytechnic Ado Ekiti, talks about how the Internal Audit Department of

the Polytechnic is effective in curbing wastes and losses, various literatures are

reviewed to analyze the Development of Internal Auditing, Definitions of

Auditing, Wastes, Losses, Internal Auditing, Functions of the Internal Audit

Department of The Federal Polytechnic Ado-Ekiti, Roles of the Internal Audit

Department, Types of Audit Performed, the Internal Audit Process,

Authorization and Responsibilities, Professional Standards, Authority and

Independence of the Internal Audit Department, to achieve this aim, the

researcher gathers relevant data from both primary and secondary sources, These

data are classified and analyze into a more comprehensive work with the use of

simple percentages and chi-square method, the result of the findings revealed

that larger percentage of the respondents are of the opinion that internal audit

department if properly structured and possessed the needed skills by the staff and

independent in its dealings is effective in curbing wastes and losses, it is however

recommended that internal audit department should be enhanced in order to help

curb wastes and losses.

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CHAPTER ONE

1.0 INTRODUCTION

Auditing has certain outstanding characteristics and features which makes it a

specialized subject of study. This research work has therefore been taken to give

the readers an insight into Internal Audit Department in curbing wastes and

losses using The Federal Polytechnic Ado Ekiti as a case study. The Internal

Audit Department was established for the purpose of providing management and

the Audit Committee of the Board of Trustees with reasonable assurance that the

management control systems throughout the Polytechnic are adequate and

operating effectively. Internal Audit provides an independent and objective

appraisal of activity for management and furnishes them with analyses,

recommendations, counsel, and information concerning the activities reviewed.

This includes promoting effective controls at reasonable cost.

To accomplish its threefold mission of teaching, research and public service, the

Polytechnic must maintain the confidence of its schools, departments, staff,

students, alumni, the public and elected officials, and various other

constituencies. Confidence in the institution is paramount if the Polytechnic is

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going to achieve its stated objectives. The Internal Audit Department provides

valuable support in maintaining the public’s confidence by performing

independent and objectives reviews and reporting to the Audit committee and

responsible administrative and academic officers on their findings so that

corrective actions or enhancements can be initiated.

The Internal Audit Department assists operating management in achieving

Polytechnic financial and operating goals by evaluating controls to ensure

systems function adequately, by identifying weaknesses, and by providing

recommendations. Through complete and unrestricted access to records, property

and personnel, Internal Audit provides the Polytechnic with an additional

resource in meeting these goals. With the support of Polytechnic management

and the Audit Committee, the Internal Audit Department provides the highest

quality of auditing services, thus enhancing fiscal control at the Polytechnic.

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1.1 REPORTING STRUCTURE OF THE INTERNAL AUDIT DEPARTMENT OF THE FEDERAL POLYTECHNIC ADO

The Internal Audit Department reports to the office of the Rector and the Audit

committee of the Board of trustees. This reporting structure allows the Internal

Audit Department to remain independent and report all items of significance to

the Rector and the Audit Committee. The Director of Internal Audit attends all

Audit Committee meetings and brings appropriate matters to the Committee’s

attention.

Table 1.0

RECTOR

CHIEF INTERNAL AUDITOR (C.I.A)

ASST. C.I.A ASST. CHIEF OFFICER PRINCIPAL OFFICER SENIOR OFFICER HIGHER EXECUTIVE OFFICER

Secretary Clerk

Structure of the internal audit department of the Federal Polytechnic Ado-Ekiti

SOURCE: INTERNAL AUDIT DEPARTMENT GAZETTE

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Operation of internal Audit Department of the Federal Polytechnic Ado is

discussed below:

1. Examination of financial and operating information; this may

include review of the means used to identify, measure, classify and

report information and specific enquiry into individuals items including

detailed testing of transactions, balances and procedures.

2. Review of the accounting and internal controls system; Management

is responsible for the establishment of adequate accounting and internal

control system. Often, internal audit is assigned specific responsibility

for reviewing the design of the system, monitoring their operation and

recommending improvement.

3. Review of economy efficiency and effectiveness; this review may

include the non-financial controls of an organization.

4. Review of compliance; this review may cover compliance with laws,

regulations and other external requirement and with internal policies

and directives and other requirements including appropriate

authorization of transaction.

5. Special investigation; one example is suspected fraud.5

1.2 STATEMENT OF THE PROBLEM

The following are some of the problems identified with the internal audit

department in the performance of its duties in curbing wastes and losses;

The small size and structure of internal audit department was a

limiting factor in their ability to curb wastes and losses.

The management responds to recommendations and comments

made by the internal audit department were delayed which made it

difficult to curb wastes and losses.

Internal audit department were unable to curb wastes and losses

because their staff were inadequately trained.

The management determines the scope and functions of internal

audit department and the department act in line with the directives

of the management in order not to lose their jobs. As a result, they

might not display enough professional skill in all cases which made

them ineffective in curbing wastes and losses.

However, this project work wants to proffer solutions to the aforementioned

problems.

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1.3 AIM AND OBJECTIVE OF THE STUDY

This study which is a review of the effectiveness of internal audit department in

curbing wastes and losses, a case study of The Federal Polytechnic Ado Ekiti has

the following objectives;

To examine that a structural framework exists for the efficient use of

resources in the institution.

To examine that the policies decide on and adopted by management are

consistently followed by those responsible for implementing them.

To examine that important documentations which provide the information

on which significant strategic and tactical decision are based provide a

complete and timely records of relevant events.

1.4 SIGNIFICANCE OF THE STUDY

The following are the significance of this study:

TO THE RESEARCHERS: it will serve as a stock of knowledge for

further researchers on internal audit.

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TO THE PUBLIC: It will broaden the knowledge of the public about

internal audit both in private and public organizations or higher

institutions.

TO THE GOVERNMENT: this research work will assist government in

enhancing its internal audit department in order to curb wastes and losses

in their various ministries.

TO ANALYSTS: this work will be a reference material for them.

1.5 HYPOTHESIS

The formulation of hypothesis is therefore an inevitable task in quest of

searching for an acceptable fact. In this research work, the notable hypotheses to

be tested for are;

The Department size and structure is adequate to meet its established

objectives.

Audit Planning include written audit plans and programs.

Management responds in an appropriate and timely fashion to significant

recommendations and comment made by the internal auditor.

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Internal Audit procedures encompass operational as well as financial

areas.

The Internal Audit team keeps itself informed about and involved in

professional activities.

1.6 RESEARCH QUESTIONS

The following research questions serve as guidelines to this research.

Is the department size and structure adequate to meet its established

objectives?

Does audit planning include written audit plans and programs?

Does management respond in an appropriate and timely fashion to

significant recommendations and comment made by the internal auditor?

Do internal audit procedures encompass operational as well as financial

areas?

Does the internal audit team keep itself informed about and involved in

professional activities?

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1.7 SCOPE OF THE STUDY

The scope of this study will cover internal audit department effectiveness in

curbing wastes and losses using the Federal Polytechnic Ado Ekiti as a case

study. The essential information to be used for the study will be sourced through

administration of questionnaire and interview of staff at the internal audit

department of the Federal Polytechnic Ado Ekiti and also from the secondary

sources, like internet sites and books.

1.8 LIMITATION OF THE STUDY

This project work faced the following obstacles which caused setbacks for the

researcher for earliest completion of the study. They are financial constraints,

time constraints, communication barrier and poor library facilities i.e. internet

services.

1.9 OPERATIONAL DEFINITION OF TERMS

AUDITING: Ayantoye (2010) defines Auditing as an accounting

procedure which checks thoroughly the authenticity of a company’s

accounts. According to Consultative Council of Accountancy (CCAB),

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Auditing can be defined as the independent examination of, and expression

of opinion on, the financial statements of an enterprise by an appointed

auditor in pursuance of the appointment and in compliance with any

relevant statutory obligation. Howard (2008) defines Auditing as the

examination of certain statement covering the transaction over a period

and the financial position of an organization on a certain data in order that

the auditor may issue a report on them.

WASTES AND LOSSES: Unabridged Dictionary.com defines waste

as to spend or consume uselessly or carelessly or to fail to use. Also

defines loss as the act of losing, disadvantage from losing, amount lost.

Hornby (1996) defines wastes as using more than what is needed i.e.

spending extravagantly in an organization or higher institution while John

(2001) defines wastes as the excess of expenditure over receipts, which

normally reduces an organization capital and John (2001) defines losses as

forfeiture of money or negative profit. According to Ayantoye (2010)

waste is any material which is no longer of use to the system that produced

it and which has to be disposed of. And define loss (finance), is when the

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expenses of an entity exceed sales or revenues of the entity, i.e. items are

sold for less than they cost the firm.

INTERNAL AUDIT: According to Olatunji B.O, Dada O.D and

Bankole K.D (2008) internal audit is an audit exercise which is carried out

mainly to review activities and the records of an entity on continuous

basis. The Institute of Internal Auditors (IIA), the U.S. professional

organization of internal auditors, has defined internal auditing as: “An

independent, objective assurance and consulting activity designed to add

value and improve an organization’s operations. It helps an organization

accomplish its objectives by bringing a systematic, disciplined approach to

evaluate and improve the effectiveness of risk management, control and

governance processes.”

INTERNAL AUDITOR: According to Olatunji B.O et al, internal auditor

is an employee of the organization, a servant responsible solely to the

management. He is not independent as the statutory auditor and does not

required any letter of engagement before he can perform his duty as

management must given him full employment and job procedure.

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1.10 ORGANISATION OF THE STUDY

The research work is limited to five (5) chapters and it contains the following

details;

CHAPTER ONE: This chapter is an introductory aspect of the research project

and it will shed more light on the following; Introduction, Reporting Structure of

the Internal Audit Department of The Federal Polytechnic Ado Ekiti, Statement

of the problem, Aim and Objectives of the study, Significance of the study,

Hypothesis, Research Questions, Scope of the Study, Limitation of the study,

Operational Definition of terms and Organization of the study.

CHAPTER TWO: this chapter includes literature review, types of audit

performed, the internal audit process, role of internal audit department, role in

internal control, role in risk management, authorization and responsibilities.

CHAPTER THREE: This chapter includes the following research methodology,

population, sample population, sources of data, method of data analysis, problem

encountered on the field

CHAPTER FOUR includes presentation and analysis of data

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CHAPTER FIVE: contains summary, conclusion and recommendation

Reference page is included as well.

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CHAPTER TWO

2.0 LITERATURE REVIEW

The researcher will deal with the view of many authors concerning this study.

What some scholars say about this study.

2.1 THE DEVELOPMENT OF INTERNAL AUDITING

The concept of auditing is nothing new and records show that even the earliest of

civilizations (e.g., Mesopotamian, Egyptian, Chinese, and Persian) had some

form of auditing as far back as 5,000 years ago. Even these early civilizations

realized the importance of being able verify what they had, particularly when it

came to verifying the amount of grain they had on hand, because it was primarily

through the control of food supplies that they remained in power. As the saying

goes “a hungry population is a restless population.” It was at about this time that

the concept of internal control took hold. For example “the Egyptians required

the actual witnessing of grain being brought to the granaries and demanded that

receipts of grain be certified.” ‘Sawyer’s Internal Auditing, 5th edition’

But, it really wasn’t until during the Industrial Revolution period that auditing

began as we know it today. During this period, accountants were used to check

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and verify financial information. To do this, they had to scrutinize written

records and compare the book entries with documentary evidence. This is what

we generally think of as auditing.

For the most part, it was only in the 1920’s that companies started to publish

their audited financial statements. This was primarily done for the benefit of the

bankers who wanted some assurance about the validity of the balance sheets. The

concept of internal audit was started by the railroads because railroad executives

needed to have some assurance that their stationmasters across the country were

properly handling receipts. They felt that the work done by the external auditors

did not adequately address this issue. Hence, internal auditing became the

function that did this for the railroads. ‘Brian Hock and Carl Burch (2011)’

2.2 DEFINITION OF AUDITING

According to Ayantoye (2010), Auditing is an accounting procedure which

checks thoroughly the authenticity of a company’s accounts. According to

Consultative Council of Accountancy Bodies (CCAB), Auditing can be defined

as the independent examination of, and expression of opinion on, the financial

statements of an enterprise by an appointed auditor in pursuance of the

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appointment and in compliance with any relevant statutory obligation. Howard

(1998) defines Auditing as the examination of certain statement covering the

transaction over a period and the financial position of an organization on a

certain data in order that the auditor may issue a report on them. Adeniyi (2010),

defines Auditing as a systematic process of objectively obtaining and evaluating

evidence regarding assertions about economic actions and events to ascertain the

degree of correspondence between the assertions and established criteria and

communicating the results to interested users.

According to John and Gary (1976), auditing may be defined as the systematic

investigation and appraisal of transactions, procedures, operations, and resulting

financial statements. They further explained that auditing purpose is to determine

the degree of adherence to prescribed criteria and to express an opinion thereon,

if the person performing the audit is an employee of the entity whose procedures

and records are being reviewed, he or she is called an internal auditor. Within an

organization internal auditors should be independent of those whose work is

reviewed. They occupy a staff position and should report to someone high in the

administrative ranks of the organization. Internal auditors fulfill an important

function within business corporations, governmental units, or other forms of

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organization. By reviewing the internal information system, an internal auditor

determines whether or not the system is effectively designed to communicate

management’s directives, to collect necessary data, and to report results of

operating activities to management. An auditor’s review results in an in an

evaluation of the system design, observations about the functioning of the

system, and recommendations for its improvement. An internal auditor also

investigates activities such as quality control, market penetration, personnel

policies, and many other matters only remotely related to financial accounting.

The internal auditor must be constantly alert to detect and report matters

anywhere within the organization that need to be brought to management’s

attention.

Internal auditing has undergone major changes in the past few decades and has

come to include areas of specific expertise, and is used outside of financial and

accounting matters. This growth of the role and expectations of internal auditors

led to the development of internal auditing as a profession. The Institute of

Internal Auditors (IIA), the U.S. professional organization of internal auditors,

has defined internal auditing as:

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“An independent, objective assurance and consulting activity designed to add

value and improve an organization’s operations. It helps an organization

accomplish its objectives by bringing a systematic, disciplined approach to

evaluate and improve the effectiveness of risk management, control and

governance processes.”

http//www.theiia.org

Hayes and Schilder (2005), said internal auditors are employed by individual

companies to investigate and appraise the effectiveness of company operations

for management. Much of their attention is often given to the appraisal of

internal controls. A large part of their work consists of operational audits; in

addition, they may conduct compliance audits. In many countries internal

auditors are heavily involved in financial audits. In these circumstances the

external auditor should review the work performed by the internal auditor. The

internal audit department reports directly to the president or board of directors.

An internal auditor must be independent of the department heads and other

executives whose work he reviews. Internal auditors, however, can never be

independent in the same sense as the independent auditors because they are

employees of the company they are examining.19

According to Olatunji B.O, Dada O.D and Bankole K.D (2008), internal audit is

an audit exercise which is carried out mainly to review activities and the records

of an entity on continuous basis.

According to Olatunji B.O et al, internal auditor is an employee of the

organization, a servant responsible solely to the management. He is not

independent as the statutory auditor and does not required any letter of

engagement before he can perform his duty as management must given him full

employment and job procedure.

According to Ayeye (1994), internal audit is the review of operations and records

sometimes continuously undertaken within an organization by specially assigned

staff. The internal auditor is an employee of the organization and he is a servant

of the organization and is responsible to the management of the organization.

Adedoyin and Adelabu (2006) defined internal audit as the independent appraisal

activity within an organization, for the review of operations as a service to

management. It is a management control which functions by measuring and

evaluating the effectiveness of other control.

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Unabridged Dictionary.com defines waste as to spend or consume uselessly or

carelessly or to fail to use. Also defines loss as the act of losing, disadvantage

from losing, amount lost. Hornby (1996) defines wastes as using more than what

is needed i.e. spending extravagantly in an organization or higher institution

while John Clark (2001) defines wastes as the excess of expenditure over

receipts, which normally reduces an organization capital and John Clark (2001)

defines losses as forfeiture of money or negative profit. According to Ayantoye

(2010) waste is any material which is no longer of use to the system that

produced it and which has to be disposed of. And define loss (finance), is when

the expenses of an entity exceed sales or revenues of the entity, i.e. items are sold

for less than they cost the firm.

2.3 ROLE OF INTERNAL AUDIT DEPARTMENT

The internal auditing department is established by the board of directors, and its

responsibilities are defined by the audit committee of the board of directors as

part of their oversight function.

ROLE IN INTERNAL CONTROL; internal auditing activity is primarily

directed at improving internal control. Under the COSO framework, internal

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control is broadly defined as a process effected by an entity’s board of directors,

management and other personnel designed to provide reasonable assurance.

Effectiveness and efficiency of operations

Reliability of financial reporting

Compliance with laws and regulations

ROLE IN RISK MANAGEMENT; internal auditing professional standards

require the function to monitor and evaluate the effectiveness of the

organization’s risk management processes. Risk management relates to how an

organization sets objectives, then identifies, analysis and responds to those risks

that could potentially impact its ability to realize its objectives. Some of the key

risk assessment activities, strategic in organization include: marketing planning,

strategic planning incentive payout determination, credit authorization and

capital planning each of which can be audited in one or more projects.

In larger, more complex organizations, major strategic initiatives are

implemented to achieve objectives and drive changes. As a member of senior

management, the chief audit executives (CAE) may participate in status updates

on these major initiatives. This places the CAE in the position to report on many

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of the major risks the organization faces to the audit committee, or ensure

management’s reporting is effective for that purpose.

2.4 TYPES OF AUDIT PERFORMED

The Internal Audit Department performs a wide range of audit services including

financial audits, compliance audits, operational audits, information technology

audits and consulting services.

FINANCIAL AUDITS: Address questions regarding accounting and the

propriety of financial transactions.

COMPLIANCE AUDITS: Determine the degree of adherence to laws,

regulations, policies and procedures.

OPERATIONAL AUDITS: Review operating information and

procedures to determine if any modifications of the operations could result

in greater efficiency and effectiveness.

INFORMATION TECHONOLOGY AUDITS: Evaluate system

processing controls, data security, physical security, systems development

procedures, contingency planning and systems requirements.

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CONSULTING SERVICES: Encompass a wide range of services which

allow the Polytechnic community to utilize the Department’s financial and

information technology expertise to address a known problem or need.

(htts://www.be.pitt.edu/intaudit/).

2.5 THE INTERNAL AUDIT PROCESS

When an audit is scheduled, an announcement letter is sent to the responsible

parties. An entrance meeting is scheduled to discuss the objectives and scope of

the audit. At the entrance meeting, any concerns or questions about the audit

process are discussed.

A typical audit is comprised of five stages: Planning, fieldwork, reporting and

follow-up. The audit team will collect data and document the procedures,

controls and / or activities being reviewed. Based on our risk assessment, the

audit team will perform various types of tests and conclude on the adequacy of

the control system.

During the audit and at the conclusion of the fieldwork, the audit team will

discuss with the appreciate staff of an area being audited any findings and

recommendations noted during the audit process. A formal exit conference is 24

held to discuss the audit findings and recommendations with the Dean, Director,

supervisor etc. of the area being audited. Next, the audit team will issue a draft

report summarizing the findings and recommendations. The draft report has

limited distribution, and the management of the audited department are provided

approximately two weeks to draft written management responses as to how they

plan to address the recommendations. The management responses are

incorporated into the draft report along with any agreed upon changes, thus

becoming a final report. The final report is distributed to the appropriate

Polytechnic management. All audit information is treated as confidential and is

reported only to those within the Polytechnic who need to know.

(http://www.be.pitt.edu/intaudit/).

2.6 AUTHORIZATION AND RESPONSIBILITES

Authorization is granted for full and complete access to any of the organization’s

records (either manual or electronic), physical properties, and personnel relevant

to an audit engagement. Documents and information given to internal auditors

during a periodic review will be handled in a confidential and prudent manner as

required by the international institute of internal auditors’ code of ethics.

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http://www.be.pitt.edu/intaudit/

Internal auditors have no direct responsibility or any authority over any of the

activities or operations that they review. They should not develop and install

procedures, prepare records, or engage in activities, which would normally be

reviewed by reviewed by internal auditors.

Recommendations on standards of control to apply to a specific activity may be

included in the written report of audit findings and opinions, which is given to

the operating management for review and implementation copies of final reports

will be distributed to polytechnic management and the Rector.

(http://www.be.pitt.edu/intaudit/).

2.7 PROFESSIONAL STANDARDS

According to Millichamp (2004), Internal Auditing Staff shall govern themselves

by adherence to The Institute of Internal Auditors ‘Code of Ethics’. The

Institute’s ‘International Standards for the Professional Practice of Internal

Auditing’ (Standards) shall constitute the operating procedures for the

department. These two documents constitute an addendum to their charter. The

Institute of Internal Auditors “Practice Advisories” will be adhered to as

applicable. In addition, Internal Auditing will adhere to the institution policies 26


and procedures and Internal Auditing’s Standard Operating procedures manual.

The Standard Operating Procedures Manual shall include attribute, performance,

and implementation standards to guide the Department.

2.8 AUTHORITY

According to Sawyer (2001), authority is granted for full, free and unrestricted

access to any and all of the institution records, physical properties and personnel

relevant to any function under review. All employees are requested to assist

internal auditing in fulfilling their staff function. Internal auditing shall also have

free and unrestricted access to the chairman of the Board of Directors, and the

audit committee of the Board of directors. Documents and information given to

internal auditing during a periodic review will be handled in the same prudent

and confidential manner as by those employees normally accountable for them.

2.9 INDEPENDENCE

All internal audit activities shall remain free of influence by any element in the

organization, including matters of audit selection, scope, procedures, frequency,

timing or report content to permit maintenance of an independent and objective

mental attitude necessary in rendering reports.27

Internal auditors shall have no direct operational responsibility or authority over

any of the activities they review. Accordingly, they shall not develop nor install

systems or procedures, prepare records, or engage in any other activity, which

would normally be audited.http//www.theiia.org

According to Millichamp (2002), internal auditing is thus carried on by

independent personnel. Internal auditors are employees of the firm and thus

independence is not always easy to achieve. However it can be assisted by:

Having the scope to arrange its own priorities and activities

Having unrestricted access to records, assets and personnel

Freedom to report to higher management and where it exists to an audit

committee

Internal audit personnel with an objective frame of mind

Internal audit personnel who have no conflicts of interest or any

restrictions placed upon their work by management

Internal audit personnel having no responsibility for line work or for new

systems. A person cannot be objective about something he/she has taken

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responsibility for. On the other hand the internal auditing should be

consulted on new or revised systems.

Internal auditing personnel who have no non-audit work.

Since internal auditors are employees it is difficult to ensure that they are truly

independent in mind and attitude.

2.10 INTERNAL CONTROL SYSTEM

The Institute of Chartered Accountants of England and Wales defined internal

control system in their guideline as: ‘the whole system of control, financial or

otherwise, established by the management in order to carry on the business of the

enterprise in an orderly and efficient manner, ensure adherence to management’s

policies, safeguard the asset and secure as far as possible the completeness and

accuracy of the records’. The individual components of an internal control

system are known as ‘controls’ or ‘internal controls’. Adeniyi (2010) and the

Auditing Practices Committee in its guideline also define Internal Control

System as earlier defined by ICAEW. According to the International Standards

on Auditing (ISA 400), the term ‘Internal Control System’ means all the policies

and procedures (internal controls) adopted by the management of an entity to

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assist in achieving management’s objective of ensuring, as far as practicable, the

orderly and efficient conduct of its business, including adherence to management

policies, the safeguarding of assets, the prevention and detection of fraud and

error, the accuracy and completeness of the accounting records, and the timely

preparation of reliable financial information.

2.11 LIMITATION OF INTERNAL CONTROLS

According to Adeniyi (2010), internal controls are essential features of any

organization that is expected to be well managed effectively and efficiently.

However, it is noteworthy to realize that internal controls have inherent

limitations which include;

a) The possibility of circumvention of controls either done or through

collusion with parties outside or inside the entity.

b) Abuse of responsibility.

c) Fraud.

d) Management override of controls.

e) Changes in environment making controls inadequate.

f) Human cleverness or ingenuity.

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g) Potential human error caused by stress of work-load, alcohol, carelessness,

distraction, mistakes of judgment, and the misunderstanding of

instructions.

h) Internal control tends to be directed at routine transactions. The one-off or

unusual transaction tends not to be the subject of internal control.

i) Poor remuneration system.

j) Poor working condition

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CHAPTER THREE

3.0 RESEARCH METHODOLOGY

This study is specially designed to carry out a thorough investigation and

assess the roles of internal auditor in curbing wastes and losses in institution.

Various methods of fact findings were used. This write-up is basically on facts

through research into books, internet, and or personal discussions.

3.1 POPULATION

The population under consideration has been restricted to the staff of the

internal audit department of the Federal Polytechnic Ado Ekiti.

3.2 SAMPLE POPULATION

The sample size covered all the sections, units and groups in the

department i.e. the internal audit department of the Federal Polytechnic Ado

Ekiti.

3.3 SOURCES OF DATA

The types of data collected are from both primary and secondary sources.

Data obtained from primary sources were done via the use of questionnaire and

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personal interview (oral) from appropriate knowledgeable polytechnic official of

the internal audit department. Data from secondary sources on the other hand

were obtained through the use of textbooks and internet.

These data were collected and make up analysis into a more

comprehensive form to make up a formidable and complete material for the

purpose of writing the project.

3.4 DISTRIBUTION OF QUESTIONNAIRES

Questionnaires were distributed to the population concerned that

comprises of eight (8) major staff, with adequate instructions on how they should

be attended to. Interviews were equally conducted among selected staff and

sections covering all the cadres of the institution staff.

3.5 METHOD OF DATA ANALYSIS

The questionnaires received from various respondents were edited for the

purpose of accuracy and consistency with the responses. The questionnaires were

collected and properly arranged for further statistical process such as extraction

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of data and classification of information by the use of percentage table for data

presented.

The chi-square test statistics was used in the testing of the hypothesis. The

formula is given as

X2 = ∑ (0 - E) 2

E

Where, X2 = Chi-square

0 = Observed value

E = Expected value

The degree of freedom for the hypothesis is calculated with the formula below:

d.f = (r – 1) (c – 1)

Where, r = Row

c = Column

The critical value of the X2 test read up in the relevant statistic table under 5%

level of significance.

The H0 is accepted where computed X2 is less than tabulated X2 value, otherwise

H0 is rejected and the alternative HI is accepted.

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3.5 PROBLEMS ENCOUNTER ON THE FIELD

In carrying out the research, various problems were encountered which

initially were a set back on the progress of the research work. These problems

include;

Inaccessibility of textbooks; the focusing of the research is almost on a

virgin ground of which little or no theoretical complication in the form of

books has been made. This to some extent limit the extent the researcher

could go in the gathering of data from text book consulted.

Time constraints; the topic considering its practical nature needs much

time in the collection of relevant data. The school calendar as well as the

class time table has lightened up the available time that the research would

have been affected adversely if not for the importance attached to the

research work by the researcher.

Finance; the current Nigeria economy which had multiplied the cost of

everything, if not more has a negative impact on the researcher’s budget

collection and analysis of data, typing and binding all of which cost

fortune in Nigeria today had reduced the volume of the research work.

35

Communication barrier; the communication barrier encountered on the

field is too much.

36

CHAPTER FOUR

4.0 PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA.

4.1 INTRODUCTION

This chapter outlines the analysis of data collected from the respondent through

questionnaires. They will be presented with the use of tables. The information

given by the respondents was qualified with numerical series and then converted

to percentages. The research findings were then discussed.

4.2 PRESENTATION AND ANALYSIS OF DATA

Eight (8) questionnaires were issued out to members/staff of the internal

department consulting both the population and the sample of the study and all of

them were returned filled. The questionnaire was categorized into two:

1 Section A (Bio-data)

2 Section B (General Question)

The percentage was used to analyze generally all data obtained from the

respondents through the questionnaire, but specifically the data used for the

hypothesis were analyzed and interpreted by the use of chi-square (X2).

37

SECTION A

The questionnaire was administered in various section of the audit department of

the institution.

Table 4.1 Position of the respondents

Alternatives Numbers of Respondent PercentageChief Auditors 2 25%Principal Auditor 1 12.5%Auditor 2 25%Confidential Secretary 1 12.5%Clerical Officer 2 25%

Total 8 100%

SOURCE: FIELD SURVEY 2011

Table 4.3 above indicates that 2 respondents which represent 25% of the

total respondents are chief internal auditors, 1 respondent which represents

12.5% of the total respondents is principal auditor and 2 respondents which

represent 25% of the total respondents are auditors and 1 respondent which

represent 12.5% of the total respondents is confidential secretary and 2

respondents which represent 25% of the total respondents are clerical officer.

38

Table 4.2 Sex of the Respondents

Alternatives Numbers of Respondent PercentageMale 5 62.5Female 3 37.5Total 8 100%


From table 4.2, 5 of the respondents are male while 3 respondents are

female. This shows that 62.5% and 37.5% of male and female respond

respectively.

Table 4.3 Age Distributions

Alternatives Numbers of respondent PercentageUnder 25 - -25-35 4 5036-45 3 37.546 and above 1 12.5Total 8 100%


Table 4.3 above shows age distribution of the respondents, no respondent

is under 25 out of all the respondents, 4 of them are between 25 to 35 while 3 of

them are between 36 to 45 and the remaining 1 is above 46 years of age.

39

Table 4.4 Working Experience

Alternatives Numbers of respondent PercentageBelow 3 years 1 12.53-6 2 257-10 3 37.511 years and above 2 25Total 8 100%


From the above table, it can be seen that 1 of the respondents have been in

the internal audit department for less than 3 years while 2 of them has worked in

the department for between 3 to 6 years and 3 of the respondents has worked in

the department between 7 to 10 years while 2 of them has worked in the

department for above 11 years.

Table 4.5 Educational Professional Qualifications

Alternatives Numbers of respondent PercentageWASSCE and below - -OND/ATS/NCE 1 12.5B.Sc/HND 5 62.5Professional Qualification

2 25

Total 8 100%SOURCE: FIELD SURVEY 2011

The above table shows that no respondent is working with WASSCE and

below, 12.5% of the total respondents which is 1 respondent out of the 8 have

OND/ATS/NCE while 5 respondents which represent 62.5% have B.Sc/HND 40

and also 2 of the respondents have professional qualification which represent

25% of the total respondents.

SECTION B

Question 1: the department size and structure is adequate to meet its established objectives

Table 4.6

Alternatives Numbers of respondent PercentageStrongly agree 4 50Agree 2 25Disagree 1 12.5Strongly disagree 1 12.5Total 8 100%


The table above shows that 4 respondents representing 50% of the

respondents strongly agree that the department size and structure is adequate to

meet its established objectives, 2 of the respondents representing 25% of the

respondents agree, 1 respondent representing 12.5% of the respondents disagree

while 1 respondent representing 12.5% of the respondents strongly disagree.

41

Question 2: Audit planning includes written audit plans and programs.

Table 4.7

Alternatives Numbers of respondent PercentageStrongly agree 7 87.5Agree 1 12.5Disagree - -Strongly disagree - -Total 8 100%


The table above shows that 7 respondents representing 87.5% of the

respondents were strongly of the opinion that audit planning include written audit

plans and programs while 1 respondent representing 12.5% of the respondent

agree

Question 3: Management responds in an appropriate and timely fashion to significant recommendations and comment made by the internal auditor.

Table 4.8

Alternatives Number of respondent PercentageStrongly agree 2 25Agree 4 50Disagree 1 12.5Strongly disagree 1 12.5Total 8 100%


Table 4.8 shows that 2 respondents representing 25% of the total

respondents strongly agree that management responds in an appropriate and

42

timely fashion to significant recommendations and comment made by the

internal auditor, 4 respondents representing 50% agree, 1 respondent

representing 12.5% disagree and 1 respondent representing 12.5% strongly

disagree.

Question 4: internal audit procedures encompass operational as well as financial areas.

Table 4.9

Alternatives Number of respondents PercentageStrongly agree 7 87.5Agree 1 12.5Disagree - -Strongly disagree - -Total 8 100%


Table 4.9 shows that 7 respondents representing 87.5% of the total

respondents strongly agree that internal audit procedures encompass operational

as well as financial areas, 1 respondent representing 12.5% agree.

Question 5: internal audit team keep itself informed about and involved in professional activities.

43

Table 4.10

Alternatives Number of respondents PercentageStrongly agree 6 75Agree 1 12.5Disagree 1 12.5Strongly disagree - -Total 8 100


Table 4.10 shows that 6 respondents representing 75% of the total

respondents strongly agree that internal audit team keep itself informed about

and involved in professional activities, 1 respondent representing 12.5% of the

total respondents agree while the remaining 1 respondent representing 12.5% of

the total respondent disagree.

4.3 TESTING OF HYPOTHESIS

The hypothesis in chapter one of this project work will be tested

statistically with the use of chi-square.

Chi-square (X2) can be defined as the statistical distribution that can be

used to test if an assumed series of value differ significantly from what was

expected.

Two alternatives statement are usually made and are donated by Ho and Hi.

44

Where Ho is Null hypothesis

Hi is Alternative hypothesis

Decision rule: this will guide the decision to be made in the hypothesis that has

being tested such as;

Accept Null hypothesis (Ho) if chi-square (X2) tabulated (table value) is greater

than chi-square (X2) calculated.

Accept Ho if X2 tab> X2 C otherwise reject.

Chi-square calculated formular

X2 C = ∑ {(oi - ei)}

ei

Where oi = observed value

ei = expected value

Chi-square tabulated formular

X2 tab = X2 %, D.F {Degree of Freedom}

Where D.F = {r – 1}{c – 1}

Where r = row on the table

C = column on the table

Hypothesis 1 to 3 will be tested in this work.

45

46

Hypothesis 1

Is the department size and structure adequate to meet its established objectives?

Ho: the department size and structure is adequate to meet its established objectives.

Hi: the department size and structure is not adequate to meet its established objectives.

X2 calculated

Alternatives oi ei oi – ei {oi – ei}2 {oi–ei}2÷ ei

Strongly agree

4 2 2 4 2

Agree 2 2 0 0 0Disagree 1 2 -1 1 0.5Strongly disagree

1 2 -1 1 0.5

Total 8 6 3

ei = total responds = 8 = 2

No of alternatives 4

X2 calculated = {oi – ei}2 = 6 = 3

ei 2

X2 tabulated is X2 %, degree of freedom i.e {r – 1} {c – 1}

Where r = row and c = column on the table

Testing from 5% level of significance

X2 tabulated = 5% d.f

d.f = {4 - 1}. {2 – 1}

= 3.147

d.f = 3

X2 tab = 5%, 3

X2 tab = 7.815

Decision: From above calculations, we can see that X2 tab is greater than X2 cal

i.e X2 tab 7.815 > X2 cal 3. We therefore accept {Ho} which is null hypothesis

and reject {Hi} which is alternative hypothesis and concluded that the department

size and structure is adequate to meet its established objectives.

Hypothesis 2

Does audit planning include written audit plans and programs?

Ho: audit planning include written audit plans and programs

Hi: audit planning does not include written audit plans and programs

X2 calculated


Strongly agree

7 2 5 25 12.5

Agree 1 2 -1 1 0.5Disagree 0 2 -2 4 2Strongly disagree

0 2 -2 4 2

Total 8 34 17ei = total responds = 8 = 2

No of alternative 4


ei 248





d.f = {4 - 1}. {2 – 1}

= 3.1

d.f = 3

X2 tab = 5%, 3

X2 tab = 7.815

Decision: From above calculations, we can see that X2 tab is less than X2 cal i.e

X2 tab 7.815 < X2 cal 17. We therefore reject {Ho} which is null hypothesis and

accept {Hi} which is alternative hypothesis and concluded that the audit plan

does not include written audit plans and programs.

Hypothesis 3

Does management responds in an appropriate and timely fashion to significant recommendations and comment made by the internal auditor.

Ho: Management responds in an appropriate and timely fashion to significant recommendations and comment made by the internal auditor.

Hi: Management does not respond in an appropriate and timely fashion to significant recommendations and comment made by the internal auditor.

X2 calculated


49

Strongly agree

2 2 0 0 0

Agree 4 2 2 4 2Disagree 1 2 -1 1 0.5Strongly disagree

1 2 -1 1 0.5


No of alternative 4


ei 2





d.f = {4 - 1}. {2 – 1}

= 3.1

d.f = 3

X2 tab = 5%, 3

X2 tab = 7.815

Decision: From above calculations, we can see that X2 tab is greater than X2 cal

i.e X2 tab 7.815 > X2 cal 3. We therefore accept {Ho} which is null hypothesis

and reject {Hi} which is alternative hypothesis and concluded that management

50

responds in an appropriate and timely fashion to significant recommendations

and comment made by the internal auditor.

Hypothesis 4

Do internal audit procedures encompass operational as well as financial areas.

Ho: internal audit procedures encompass operational as well as financial areas.

Hi: internal audit procedures do not encompass operational as well as financial areas.

X2 calculated


Strongly agree

7 2 5 25 12.5

Agree 1 2 -1 1 0.5Disagree 0 2 -2 4 2Strongly disagree

0 2 -2 4 2


No of alternative 4


ei 2





51

d.f = {4 - 1}. {2 – 1}

= 3.1

d.f = 3

X2 tab = 5%, 3

X2 tab = 7.815



accept {Hi} which is alternative hypothesis and concluded that the internal audit

team does not keep itself informed about and involved in professional activities.

Hypothesis 5

Does the internal audit team keep itself informed about and involved in professional activities.

Ho: the internal audit team keeps itself informed about and involved in professional activities.

Hi: the internal audit team does not keep itself informed about and involved in professional activities.

52

X2 calculated

Alternatives Oi ei oi – ei {oi – ei}2 {oi–ei}2÷ ei

Strongly agree

6 2 4 16 8

Agree 1 2 -1 1 0.5Disagree 1 2 -1 1 0.5Strongly disagree

0 2 -2 4 2


No of alternative 4


ei 2





d.f = {4 - 1}. {2 – 1}

= 3.1

d.f = 3

X2 tab = 5%, 3

X2 tab = 7.815



53

accept {Hi} which is alternative hypothesis and concluded that the internal audit

team does not keep itself informed about and involved in professional activities.

54

CHAPTER FIVE

5.0 SUMMARY, CONCLUSION AND RECOMMENDATION

5.1 SUMMARY AND CONCLUSION

Having reviewed the following in chapter one that the internal audit

department assists operating management in achieving polytechnic financial and

operating goals by evaluating controls to ensure systems function adequately by

identifying weaknesses, and by providing recommendations. Through complete

and unrestricted access to records, property and personnel, internal audit

provides the polytechnic with an additional resource in meeting these goals.

Chapter two reviewed that the internal auditing department is established by the

board of directors, and its responsibilities are defined by the audit committee of

the board of directors as part of their oversight function. Relevant literature were

duly reviewed.

Chapter three reviewed the methodology use in obtaining data which are

questionnaire and interview. In chapter four, the data were analysed and

interpreted using frequency estimate method and Hypothesis were formulated

and tested using chi- square techniques.

55

5.2 CONCLUSION

Having considered all the points analyzed in this project, it will be seen

that emphasis has been laid on evaluating the effectiveness of internal audit

department in curbing waste and losses, which shows that the level of efficiency

and effectiveness in this institution depends on the condition of accounting

system made available.

5.2 RECOMMENDATION

in view of this findings and other relevant information from the research

assignment, the researcher therefore makes the following recommendations:

56

REFERENCES

Adedoyin J.A and Adelabu I.T, (2006): Essential of Auditing and Investigation, Published by Aseda Publishing, Ibadan.Adeniyi A. Adeniji, (2004): Auditing and Investigation, Value Analysis Consult Publisher, Lagos.Adeniyi A. Adeniji, (2010): Auditing & Assurance Services, Value Analysis Consult Publisher, Lagos.Ayantoye Adeshola Olufemi, (2010): Management Accounting and Economics Dictionary, Greater Concept Media, Vol 1, No 1, page 17.Ayeye R.O, (1994): Auditing Liability, Ross Press Limited, Lagos.Brian Hock and Carl Burch, (2011): The Internal Audit Activity’s Role In Governance Risk and Control, published by HOCK international, Oxford.Consultative Council of Accountancy (CCAB)Hayes Rick and Schilder Arnold, (2005): An Introduction to International Standards on Auditing, Published by Pearson Education Limited, London.Hornby A.S, (1996): The Teaching of Structural Words and Sentences Pattern, Published by Oxford University Press, London.Howard L.R, (2008): Auditing, Pitman Publishing, London.John Clark (2001): Auditing Practice, Published by Oxford University Press, London.John W. Cook and Gary M.W, (1976): Auditing: Philosophy and Technique, published by Houghton Mifflin Company, Boston.Millichamp A.H (2002): Auditing Eighth Edition: Published by BookPower/ELST imprint, LondonMillichamp A.H (2004): Auditing: An Instructional Manual for Accounting Students, Letts Educational Publisher, London. Olatunji B.O, Dada O.D and Bankole K.D, (2008): Principles and Practice of Auditing, Happy Home Ventures, Ado.

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Retrieved August 15, 2011, from http://www.unabridgeddictionary.comRetrieved August 20, 2011, from http://www.be.pitt.edu/intaudit/Retrieved October 3, 2011, from http//www.theiia.orgRetrieved October 12, 2011, from http//www.icaew.comSawyer L.B, (2001): The Practice of Modern Internal Auditing Appraisal Operations for Management, Pitman Publishing, London. Tunde Oremade, (1998): Auditing Standard and Guidelines, Gavina Press limited, Ibadan.

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http://www.unabridgeddictionary.com/

APPENDIX

QUESTIONNAIRE

This questionnaire is designed on a review of the effectiveness of internal audit department in curbing waste and losses. The questionnaire is to be used purely for academic purpose, so any information given or supplied therefore will be considered strictly confidential. Thanks

QUESTIONNAIRE

SECTION A

INSTRUCTION: Please tick as appropriate

1. Name: …………………………………………………………………………(Not compulsory)

2. Post / Rank: ………………………………………

3. Age of respondent;(a) Below 25 years( ) (b) Between 25-35Years ( )

(c) Between 36-45 years ( ) (d) 46 – above ( )

4. Sex; (a) Male ( ) (b) Female ( )

5. Marital Status:(a) Single ( )(b) Married ( ) (c) Divorced ( )

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6. The department size and structure is adequate to meet its establish objectives.

Strongly Agree ( ) Agree ( )Disagree ( ) Strongly disagree ( )

7. The experience level of the internal auditors are adequateStrongly Agree ( ) Agree ( )Disagree ( ) Strongly disagree ( )

8. The department appears to be objective.Strongly Agree ( ) Agree ( )Disagree ( ) Strongly disagree ( )

9. The technical knowledge of the department member is sufficient.Strongly Agree ( ) Agree ( )Disagree ( ) Strongly disagree ( )

10.The department has an appropriate continuing education program.Strongly Agree ( ) Agree ( )Disagree ( ) Strongly disagree ( )

11.Department members possess sufficient information systems in auditing expertise to address a level of technology used by organization.


12.The department’s work is planned appropriately.

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13.Planning include written audit plans and program.Strongly Agree ( ) Agree ( )Disagree ( ) Strongly disagree ( )

14.The internal audits queries are issued on a timely basis.Strongly Agree ( ) Agree ( )Disagree ( ) Strongly disagree ( )

15.The internal audit team keeps itself informed about and involved in professional activities.


61

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