2.0 INTRODUCTIONMany have done research on internal auditing in the public sector but my research is on ascertaining the factors that creates effective internal auditing in public institutions to promote good economy and eradicate fraud, risk management, to promote the growth of the public sector. 2.1 DEFINITION OF INTERNAL AUDITING Many people have written the definition of internal auditing.Mainoma, 2007; Dandago, 1999 define it as “is an autonomous analysis of, and the explanation of an opinion on financial statements of an organization by a chosen auditor, as per his conditions of his contract and the compliance with statutory rules and experienced requirements.”Millichamp (2000) also defines internal auditing as “an independent appraisal function within an organisation for the review of system of control and the quality of performance as a service to the organization.
It is a systematic investigation and appraisal of transactions procedures, operations and result in financial statements. (Anichebe, 2010)According to IIA, 2006 ” Internal auditing is an independent, objective assurance and consulting services designed to add value to the operations of an organization.” 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.This indicates that internal auditing is executed to reveal high risk areas, loop holes, evaluate internal control system, examine policies, procedures and evaluate the operations in the various public institutions. All these can be achieved efficiently if the needed support from top officers is readily assessable, also the assistance of the audit client.
Internal auditing relieves the workload of external auditors, rescue the organization from misappropriation of funds, assists management to make productive decisions and ensures that high risk areas are given more time to prevent unforeseen incidents and that internal controls are working well. The above causes internal auditing to be very effective.2.3 OBJECTIVES OF INTERNAL AUDITINGThe objectives of internal auditing are as follows:• Assist top officers to examine internal controls, manage risk and governance processes.
• Ensure policies, procedures, rules, regulations and Acts are working for better operations.• Aid management to achieve objectives. According to Okozie, 2004 the main objective of internal auditing is “to help management in the effective execution of their duties by furnishing them with analysis, appraisal, recommendations and pertinent comments concerning the activities reviewed”. Owler and Brown (1999) states that, the aim of internal auditor is to guard management against errors of principle and disregard of responsibilities.
This means internal auditors are not the police as others perceive them but rather are to make sure that the objectives, ideas of public institutions are economically, efficiently, effectively attained by enlightening management to take right decisions , adopt good policies and procedures and accurate internal controls.2.4 INTERNAL AUDITING FUNCTIONStakeholders have different expectations from internal auditors.• Internal auditing assures that operations are focused on the attainment of objectives public institution and also safeguarding public properties.
• Internal auditors assure that financial, operational data are documented for future referral and simple accountability.• They assure that management or council members make better choices to increase the survival rate of public institutions in order to render quality services to citizens.• They aid management to identify risky areas and provide control steps to help those areas.• They assure that resources are distributed to the appropriate sector and used as budgeted efficiently and effectively in the various government institutions.This aids internal auditors to express a true and fair view of how things really are.
Internal auditors should be honest in performing their responsibilities and have full control to operate. According to Rittenberg and Schwieger (1997) “internal auditing is important in many of today’s worldwide organizations by aiding management in examining controls and performance, rendering an Important aspect of worldwide control”.As a result, management and internal auditors have common objective which is to ensure that the institution delivers at its best efficiently, effectively by achieving objectives in general. This encourages internal auditors to work harder to improve government processes, policies, internal control and risk management.
Internal auditing assures that funds have been used in conformance to the terms by which such monies were authorized and proper accounts prepared. (Johnson, 2004).2.5 CHALLENGES IN INTERNAL AUDITIN• The obstruction of top officers in the functions of internal auditors, top officers sometimes think the laws are not meant for them and dislike their offices being audited.
• Restricted access to data and documents, different aims from stakeholders shows that internal auditors can’t satisfy every stakeholder.• Non-implementation of suggestions in reports, internal auditors spends a lot of time to audit various sections and make suggestions to solve issues in the departments audited. Suggestions that are not implemented indicate that findings are left unresolved.Mihret and Yismaw (2007) rank inadequate management assistance as the prime cause for the ineffectiveness of the IA function.Rose and Norman (2008) suggests that requiring the internal audit function to report directly to the audit committee may create threats to internal auditor’s independence and objectivity because of concerns about career and reputation, overreaction of audit committee members, retaliation by management and the requirement that solutions be offered when fraud risks are reported.The objective of the study is to assess and evaluate the effectiveness of internal audit in management and accountability in public institutions.Considering the above literature the following hypotheses were formulated.H1 Management support and independence to operate has an influence on effective internal auditing.H2 Availability of resources, better training, internal controls and good working relationship has an influence on effective internal auditing.