Internal Audit As An Instrument Of Management Control

Internal Audit As An Instrument Of Management Control

Chapter One

Preface

An effective internal inspection department is a prerequisites to the growth and survival of any business association since all association either small or big, profit acquainted, operate within the conditions or coffers constraints and also run high pitfalls of fraud and crimes, in view or this, there’s a need to introduce or establish operating rules and procedure by establishing on internal inspection department in other to insure that the use of their resource are maximized and that the implicit threat of internal threat and unintentional irregularities are reduced to the minimum.

This study attempts to examine the internal inspection as rehearsed by government parastatals which is described as those parastatal whose means of operation is lower than average comparing with company( s) for the government of the confederation through an assessment of Lagos State bar, for the purpose of these write up a review of internal inspection would be carried out to determine the effectiveness and problems of internal inspection department in a government parastatals. In the light of this study, a brief discussion of information protection and control as vital aids to operation would be explained. utmost information demanded by operation in order to keep informed about finance and the progress of operations comes from the account records. The information to be maximum value must be variable complete and timely. thus inaccurate information is no little better than no information at all.

The bracket of account, all aspect of the account system must be designed to help operation gather information as to answer the question “ DOWE HAVE ENOUGH STAFF TO MEET THE ANTICIPATED VITAL ASPECT OF INTERNAL CONTROL ” protection of the coffers of government is important against a multitude of possible losses ranging from embezzlement to similar cases as careless use of government parcels.

Internal inspection is necessary to insure that government programs and directives are duly stuck to operation internal inspection is a crucial factor in the effectiveness and effective operation of a government parastatals. Internal auditing can be said to be a form of auditing.

Auditing can be said to be such an examination of the books, testimonial and accounts of a business and shall enable the adjudicators to satisfy himself whether or not the balance distance and profit and loss account are duly complied so as to live it a true and fair view of the affair to the business, whereas internal inspection is independent appraisal or review conditioning with the association for the review of the operation as a service to operation, it’s a operation control which serve by measuring and assessing the effectiveness of other control.

Internal inspection as defined by millichamp as an independent appraisal function established by the operation of an association for the review of the internal check and internal control system as a service to the association, it objectively examines, estimate and report on the delicacy of internal controls as a donation to the proper economics effective and effective use of coffers.

From the below description it’s clear that-

a) Internal inspection is an internal function which means that it’s conducted by the workers of an association especially assigned for that purpose.

b) Internal inspection is a service to operationi.e is a directorial control, accordingly the compass and objects depend upon the operation assessment of what’s demanded and its amenability to assign the task to the internal inspection departments.

c) Part of the internal inspection function is to review and to estimate the associations operation and records.

The functions of internal inspection or adjudicator is to be independenti.e to be a special and separate reality.( It means separate department from the account department and it reports to the top superintendences).

The description of internal inspection is broader than the meaning occasionally attributed to the term, it recognizes that internal inspection extends beyond those matters which relates directly to the function of the account department. This broad description may be epitomized by stating that internal inspection is the means by which operation obtains the information and protection of crimes and fraud that are vital to the successful operation of government parastatals.

A good internal inspection department has a direct bearing on the trustability of a concern account records permitting the independent adjudicator( extend) to place a great confidence and applicability.

In the account and audited records and thereby justifying reduction in the compass of the adjudicators examination and redirection of loss sweats.

numerous operation of government parastatals large association and small bone had set up a need for an internal inspection in addition to external inspection. Internal adjudicators are hand of the parastatlas and work simply for the operation. Their functions incompletely lap those of the external adjudicators and infact are relatively different.

The precise function infrequently laid- down of internal inspection are determined by the operation and varies greatly from association to association.

There’s a laid down rule issued in June 1990 to guide the internal inspection department.

Internal auditing is therefore carried out by independent particular called internal adjudicator who are workers of the establishment and this independence isn’t always easy to consive. still it can be supported by

a) Reporting to the top operation of his backing without being bias.

b) Having no conflicts of interests or any restrictions placed upon their work by operation.

c) Having nonon-audit work.

d) Having the compass of arranging its own precedences and conditioning.

e) Having unrestricted access to records means and labor force.

The operation of a government parastatal need a complete and accurate account and other departmental records because

i) The parastatals can not be else controlled.

ii) The fiscal statement which are needed for multitudinous purpose can only be prepared it acceptable primary records exists.

iii) bills frequently have a specific demand on record keeping for specific form of government parastatals.

The introductory need for an inspection is to restore the problem which live between the directors and the possessors interms of report which they believe may contain crimes, not bared fraud, designedly deceiving, inadvertently deceiving, fail to expose applicable information. The result to this problem of credibility in reports and account lies in appointing an independent person called an adjudicator to probe the report and their report on there chancing .

Auditing an educational primers for Account scholars byH.A. MILLICHAMP expressed the auditing guideline issued in June 1990 give a veritably good summary of the stages in a system of inspection as-

a) relating the system parameter.

b) Determine the control objects

c) relating the anticipated control to meet control objects.

d) Review the system against anticipated control.

e) Test the operation of control in practice.

f) Give an opinion grounded an inspection ideal as to whether the system provides an acceptable introductory for effective control and whether it’s duly operated in practice.

In carrying out an internal inspection of an association or government parastatals there’s need to follow the underlisted stages of planning an internal inspection therefore

a) relating the objects of the association.

b) Define internal inspection objects

c) Take account of applicable changes in legislation.

d) gain a comprehensive understanding of the organisation’s system structure and operation.

e) Identify, estimate and rank threat to which the association is exposed to.

f) Take account of change instructure or major system in the association.

g) Take account of given strength weakness to the internal control system.

h) Take account of operation enterprises and prospects.

i) Identify inspection areas by services, functions and major systems.

j) Determine the type of inspectione.g system, verification or values of plutocrat(e.g stock control, cash balances)

k) Take account of the plan of internal inspection and other review agencies.

l) Assess staff coffers needed and match with coffers available.

Internal inspection as an instrument of operation involves a periodic review of the account and internal control system as well as the result of operations in order.

i) To report on the effectiveness and effectiveness of the internal control and account system and to suggest enhancement where necessary similar as nonstop update of being controls to block loopholes.

ii) To report on result of operations, variations from plans and the reason thereof.

iii) guard the asset of the parastatal effectively.

iv) Study the terrain and recommended enhancement on review of being controls.

The success of internal inspection will depends on the degree of support it receives form the operation which must be seen in a positive light rather there as a big stick to weild against line operation and must also be seen to be independent.

A quality internal inspection services will make a positive donation of the objects of any association. The crucial areas where an internal inspection department can be effective are

a) GOVERNMENT programs operation at a distance can be backed by application of internal inspection more traditional policy part, while also counting compliance with commercial programs and procedure.

b) VALUE in plutocrat A value of plutocrat inspection is an independent appraisal of the performance of operation in seeking to secure frugality effectiveness and effectiveness in the use of coffers at its disposal. This value for plutocrat approach can be espoused when undertaking of a product service department.

c) OPERATION INFORMATION One of the key to successful is the quality of the operation information available, its delicacy and its trustability. Then the internal inspection department has a big part to play in assessing the acceptability and felicity.

d) FINANCIAL CONTROL Where as the external will take a view of the fiscal controls operated within the establishment during their periodic inspection, this may not cover establishment during their periodic inspection, this may not cover particulars or areas where there are value which would be considered immaterial similar as suitable cash or expenditure. But the delicacy of controls over these conditioning can frequently give a good index as to the control exercised over fiscal conditioning as a whole. The internal adjudicator is again immaculately positioned to insure that these and other base fiscal control are in place at each of the parastatals operation.

Statement Of Problem

In designing, installing, maintaining and operating any internal checkups, the operation would have to examine.

a) inspection compatible with overall objects of the parastatals.

b) assay the nature of threat in- actuality.

c)Non-compliance with the rule and regulation set up by government for both particular and operation thereby over siding control.

d) Causes, nature and types of frauds discovery and precluding of fraud in relation to acceptable internal inspection department.

Ideal Of The Study

This write- up is intended to study the need for aiding the fiscal statement of government parastatali.e the significance of auditing to operation of a government parastatals. At the end of this exploration work an attempt would have been made to look critically into the problems mentioned and their impact in an association. The donation of internal inspection in working the problem. And this design work will also cover the part of internal inspection as an instrument of internal check to operation it’ll also touch internal control.

Significance Of The Study

This exploration work will be carried out with the end of checking for the problem of fraud, extence of applicability on internal inspection by external inspection in an establishment by some set of people through their department substantially regard department in the course of this study attempt will be on chancing out if internal inspection department has any effect to the operation and shall be compared with external inspection.

Limitation Of The Study

Auditing as a total is a wide spreed course and important have this formerly been written about it. still, for the purpose of this study the experimenter will be limited to the impact of internal inspection to operation of Lagos State bar.

Brief History Of Lagos State Judiciary

Judiciary is a function of government parastatals which is responsible to the director of Lagos State, it serve as a profit from which Lagos State Government induce important find though government pump in plutocrat to this area of parastatals to carry out is operations plans they anticipate them “ bar ” to return part of the plutocrat they realize at the end of the time to government resources.

This arm of government parastatals induce important fund to government resources which is relate to as returns to government. Lagos state bar induce important finances from different aspect of their function among which are probate registry of high courti.e collection of estates freights from the estate of the dropped, this aspect of “ probate ” is where bar induce utmost of its fund because for every estate freights collected they charge a commission of about 10 which is been paid directly to government resources. They also induce plutocrat from actioni.e filling freights, movements, process, writes of process, and through deposit of choices.

utmost of the plutocrat they induce and those pump in by government inform of budget are been spent on conservation of office outfit and movables , they use part to repair and buy ministry or meanse.g buses , office outfit and pay staff payment.

Lagos state bar are positioned at different are of the state.i.e most original government have their bar including the recently created bones and practice is appertained to as the “ GEOGRAPHICAL SPREAD of JUDICIARY ”.

Judiciary as been headed by the principal judge whose office is positioned at Ikeja. Men are always appointed as Chief judge in the confederation not until 1995 when ChiefMrs. Omotosho was appointed principal judge in the whole confederation which makes a history to Lagos state bar.

The main end of bar is ‘ CASE ”i.e chastising malefactors and enforcing government rule and regulation and also settle disagreement between company and individualities they encourage the citizen of the country and also ameliorate the frugality of the country by aiding individualities of their rights.

Organogram Of Lagos- State Judiciary

Principal Judge

Principal Register

Top

Accountant

Elderly Accountant

Internal

Adjudicators

Profit

Collectors

Assistant

Director