INTERNAL AUDIT AS A MEANS OF MANAGEMENT CONTROL IN PUBLIC ENTERPRISES A CASE STUDY OF POWER HOLDING COMPANY OF NIGERIA, SAPELE STATION

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INTERNAL AUDIT AS A MEANS OF MANAGEMENT CONTROL IN PUBLIC ENTERPRISES A CASE STUDY OF POWER HOLDING COMPANY OF NIGERIA, SAPELE STATION

ABSTRACT

This project is on “Internal Audit as a Means of Management Control in Public Enterprises” with special reference to Power Holding Company of Nigeria (PHCN), Sapele Power Station. Chapter one deals with background of the study, statement of the problem, objective of the study, significance of the study, scope of the study and operational definition of terms. Chapter two base on literature where authorities in the filed of auditing were discussed. This include method of introducing internal audit in a company, purpose of internal audit, essential of a good internal control system as well as responsibilities of internal audit and references. Chapter three contains the methodology of research under this chapter the employed to source for data is both primary and secondary source. The statistical tools employed is the use of table and simple percentage, limitation of the study. Chapter four based on data presentation and analysis of result while chapter five entails the summary of findings, conclusion and recommendations. The researcher discovered the internal audit may have been seen as cash functions which does not add value of an organisation product or service, it states that effective internal auditing can help reduce, identify ways to improve efficiency and minimize exposure to possible losses when there is no proper guard of assets, it therefore, recommends that trained accountant should help audit department so that their functions can be discharged effectively.

TABLE OF CONTENTS

Title Page i

Approval page ii

Dedication iii

Acknowledgement iv

Abstract v

Table of contents vi

CHAPTER ONE

Introduction

Background of the study 1

Statement of the study 3

Purpose of study 4

Research question 4

Significance of study 5

Scope of the study 5

Limitation of study 6

Operational definition of terms 6

CHAPTER TWO – Review of Related Literature

Historical Background of the Case Study – PHCN 8

Historical Development of Internal Auditing 9

Definition of Internal Audit 11

How to Introduce Internal Audit in an Organisation 14

Objectives/Purpose of Internal Audit 15

How Internal Audit Aids Management Control 16

Internal Control 18

Essential Characteristics of Good Internal Control 19

Internal Check 19

Responsibilities of Internal Auditor 20

Comparison Between Internal Audit and External Audit 21

CHAPTER THREE – Research methodology

Introduction 22

Research Design 22

Population of the Study 22

Sampling size 23

Sampling Technique 23

Research instrument 23

Validity of the Instrument 24

Reliability of the Instrument 24

Method of Data collection 24

Method of Data analysis 25

CHAPTER FOUR – Data Presentation and Analysis

Introduction 26

Data presentation 26

Data Analysis 26

CHAPTER FIVE – Summary, Recommendations and Conclusion

Summary 35

Recommendations 35

Conclusion 37

References 38

Appendix 29

Questionnaire 40

CHAPTER ONE

INTRODUCTION

Background of the Study

The word auditing has its origin from the Latin word audit meaning to hear essentially auditing to concern with an examination and inquiring into a statement of accounts. The underlying records, documents, assets and liabilities by an independent person with a view to express an opinion as to compliance and correctness of the financial statement to relevant acts and regulations and communicating the opinion to interested users.

It origin has been traced to the early times of ancient Greek, Romans and Egyptians where they would ask group of persons to sit down and hear (or listed explanations from another group of persons concerned with the financial records).

In the middle ages, great landowners appoint persons who are called Stewards to manage the land for them. Stewardship as it was called is the name given to the practice by which productive resources are managed by one person or group of persons on behalf of one person or group of persons. The concept of stewardship gave rise to accountability where the servants or works has to render accounts to the master as at when required to do so.

Since the shareholders gave their resources for expansion of the company they are very much interested in the sincerity and truthfulness attached to the director hence, they decided to engaged the services of a professional labeled “Auditor” to ascertain the fruitfulness of the records so maintained and presented.

In the early days of auditing, the prime qualification for the position of an auditor for his integrity and independence of mind would be sought for his position, the matter of technical ability being entirely secondary. Consequently upon this, the function of the auditor in those days were confused with that of an accountant.

This issues under consideration in this research work involves another special kind of auditors.

Many organisations have found a need for internal audit, internal auditors are employees of the organisation and they work exclusively for the organisation. Internal auditing can be therefore defined as an independent appraisal activity with an organisation as a service to management. It is a managerial control which functions by measuring and evaluating the effectiveness of other control.

Agbawe (2005) described internal audit as “Audit conducted by an employee of an organisation into any area of its affairs”. This is usually a day-to-day activity involving pre-payment audits, post-payment audits and other audit functions. Internal audit involves the following process.

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