Impact of Internal Audit function on the university system in Nigeria

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Impact of Internal Audit function on the university system in Nigeria



As institutions grow in scope, size, and complexity, this prompts the need for an internal audit system. Although internal audit and internal control systems have been in existence for many years in most Nigerian universities, the act of financial crime has continued to be on the increase. Examples of these include; fraud supported by academic and non-academic staffs, financial irregularities, collusion among senior and highly-trusted employees to creatively defraud the universities, financial misstatement, breaches of control, amongst others.

Interestingly, only very few tertiary institutions in Nigeria, have successfully developed strong measures to prevent these occurrences. This accounts for the reason why the management of most universities have put in place various policies to ensure that internal audit and internal control activities are always very efficient and effective.

The Chartered Institute of Public Finance and Accountancy (CIPFA), as cited by Johnson (1996), defined internal audit as “an independent appraisal function within an organisation for the review of activities as a service to all levels of management. It is a control measure, which evaluates and reports upon the effectiveness of internal control, either financial or otherwise, and also contributes to the efficient use of resources within an organisation.

Auditing, on the other hand, can be defined as the examination of accounting records to establish their accuracy and compliance with relevant statutory provisions, accounting standards, professional pronouncements, and organisational policies. Auditing also assists in providing a solution to the re-occurring problem of credibility in most universities. It detects, prevents errors and frauds and in the long run produces a report of the true and fair view of the financial statement after the audit.

Internal audit has grown tremendously in most universities in the recent past, this can be attributed partly to the growth of the organizations, which has resulted in extended operations and in the need to ensure that the organizations policies and basic accounting controls are observed at every facet of the organization. Internal audit can also be seen as a measure put in place by management to ensure compliance with relevant statutorily and professional regulations. It also enables both public and private universities to guard against conflicts and inconsistence with the law.

It is typical that as the organization expands and supervisory responsibility broadens, the head (i.e. the management) can no longer have personal knowledge of every aspect of the organization, in fact, it becomes practically impossible for management to control or monitor the continuing effectiveness of all controls.

This prompts calls for the delegation of this responsibility to a separate department called the internal audit department. Internal Audit Department is a department set up by management, and it is usually manned by a Chartered Accountant, as established in section 358 of the Companies Act (1976), to receive the activities of other employees thereby enhancing controls in the organization. (Adetoso and Akinselure 2016).

Financial accountability in both public and private institutions started since the distinction between the providers of economic resources and the management of such resources. Based on this assertion Audu, (2013) stated that greater attention has always been to the improvement of government institutions because government constitutes the largest single entity which its expenditure through its agencies, parastatals and commission stimulates the economy.

Parameters are being taken gradually towards the improvement in the accounting standards for audit practice in the public sector and the movement from the historically function of the internal audit department that is confined on the management of assets due to various incidence of accounting scandals that led to the defunct of government institutions such as Power Holding Company of Nigeria Plc (PHCN), Nigeria Postal Services (NIPOST). This has made internal control compliance, transparency in financial management and accountability to come under sharp scrutiny by the public to ensure efficiency in internal audits in the public sector (Babatunde, 2013).

In the same vein Prawitt et al.,(2009) opine that in other to forestall a continued increase in accounting scandals in recent years internal audit function has received impressive attention due to its important role in ensuring effective and efficient corporate governance and financial reporting. This is based on the fact that high-quality internal audit functions focused on improving financial reporting by ensuring compliance with standards.

Okoya, (2002) affirmed that internal auditing furnishes authorities with analysis, appraisals, recommendations, and information concerning all activities reviewed. The internal audit unit is also vested with the power of independent checks, to assess compliance with established rules and regulations laid down by the organization.

Badara (2012) stated that internal auditing is based on the examination of the system and procedure in place to ensure their conformity with the regulations as the case may be. The measure for performance evaluation in the public sector has been a debate for decades, due to the pluralistic of the sector and may lead to dissatisfaction (Carter et al., 1992).

Hyland et al., (2008) reported that Public sector organizations are putting considerable energy into measuring performance, the effectiveness of the measure adopted varies considerably.

In Nigeria, the discounted performance of government institutions had been blamed on diverse reasons such as bureaucratic poor auditing system, red-tapism, high incidence of Fraud, parliamentary control financial indiscipline and lethargy of the civil service which is still intact in the management and operations of the government (Makoju, 1991). Also, Salawu and Agbeja (2007) state that the reason for the ineffective public sector is as a result of ineffective internal control systems and political interference.

1.1 Statement of Problem

The need for financial accountability has existed ever since it became necessary for one individual to entrust the care of his or her possession or business to another, this separation of control between managers (i.e. Vice Chancellor and Registrar) and owners (i.e. board of Trustees) have led to enormous external pressure on both business and social lives of most individuals and organisation involved in auditing all over the world. Also another major challenge facing auditing today in most universities is the inability to provide unbiased, independent and objective views of the financial statement or report prepared by the audit department of the university. This is usually because most of Nigerian universities, (i.e. both private and public) usually engage their auditor as a regular employee of the universities rather than as an independent employee and this often makes it difficult for them to carry out their task effectively and objectively.

1.2 Aim of the study

            This study aims to investigate how the functions of the internal audit affect the university systems in Nigeria.

1.3 Objectives of the study

            The specific objectives of the study are to:

(i)  Examine if Internal audit effectiveness has a relationship with management approval in public and private universities

(ii) Ascertain if there are auditing standards in both public and private universities that must be complied with in other to achieve the university’s goal and objectives.

1.4 Research Hypothesis

1.4.1 Null Hypothesis (Ho)


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