AN APPLICATION OF INTERNAL AUDITING IN LOCAL GOVERNMENT ADMINISTRATION

20

AN APPLICATION OF INTERNAL AUDITING IN LOCAL GOVERNMENT ADMINISTRATION (A CASE STUDY OF INI LOCAL GOVERNMENT COUNCIL)

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Originally the need for internal auditing arose when managers of early large companies realized that annual audits of the financial statements by the certified public accountants were not enough. Subsequently, the demand for reliability of the published accounts gave rise to the expansion of internal auditing. This demand resulted in the expansion of the internal auditor’s responsibilities, including a more detailed test of internal control and other accounting information not taken into consideration by the external auditors. Internal auditing process is considered to be part of administration structure run with organization operational procedures at all government units. Historically, internal auditing as Asare posits, has been perceived as being merely the proper maintenance of accounting and underlying records, the safe guarding of assets and the compliance with policies and procedures. With changing times, the concept of internal auditing has undergone significant change with regards to its definition, scope of coverage and approach. Asare asserts that, in some organizations, the scope of modern internal auditing has been broadened from financial issues to include valve for money, evaluation of risk, management effectiveness and governance processes. In 2002 the Institute of Internal Auditors (IIA), revised its definition of internal audit function as “an independent, objective, assurance and consulting activities designed to add value and improve an organization and accomplish its objectives by bringing systematic, disciplined approach to evaluate and improve the effectiveness of risk management control and governance process. With the increased emphasis on accountability, transparency and improvement in public sector performance especially in the developing countries where the various stakeholders including civil society and the media are becoming more interested in how public funds are allocated and expended, it is imperative that government are seen to have a sense of responsibility coupled with an effective and efficient financial control mechanisms. Asare 2008, p. 61) noted that public sector auditing, particularly public expenditure, ensuring financial accountability, and strengthening governance systems of public institutions. The local government as a segment of public sector is the third tier of government in Nigeria. At that level the authority is entrusted with public resources and charged with the task of ensuring their proper utilization. To optimize the utilization or resources of entrusted to control expenditures and sources of financing these expenditures. To ensure adherence to financial regulations, laid down procedures, policies and plans, internal audits are established. The Uyo local government is a creation of statute of federal government of Nigeria. It is by creation one of the 36 local government councils that make up Akwa Ibom State, which is one of the 36 states of the federation of Nigeria. Its creation was a condensed account of political struggle of people existence of Uyo local government area, the Akwa Ibom State capital as providing the nucleus for the development of the people once neglected. The town became the capital of the state on September 23, 1987 following the creation of Akwa Ibom State from erstwhile Cross River State.

1.2 STATEMENT OF THE PROBLEM

In Nigeria, the oil boom of early 1970’s increased the funds available to the public sector, hence the local government system in Nigeria as a third tier government is expected to perform more crucial role(s) for the citizenry at the grass root level. However the Nigerian local government has encountered serious internal problems which handicap the achievement of its goal. Hence, a necessity of auditing to sanitize the sector and make it relevant to the present day government for proper financial accountability. Despite the various internal control measures adopted in local government, the objective of auditing is yet to be achieved. Sometimes, execution of project to public interest are diverted for personal interest. Problems of bond development is still at peak, occasionally the inability of the chairman to exhibit high sense of financial prudence and whether to what extent does the local government accounting practices conform with the relevant financial regulations. The application of internal auditing method will lead to immune of any organization from falling into any cases of fraud or manipulation embezzlement, but however, there must be a regulator of any process; this is what a system analysts can do, but many of them lack knowledge or competence in order to carry out any fullest efficiency and effectiveness; organizations which has not any in-depth analyzing systems, they will suffer naturally from lot of fraud and manipulations, so it is difficult for any with absence of auditing system, will be hard to detect any of these cases. In the majority of local government internal audit has a systematic attitude, which constantly fails to asses and to develop the effectiveness of the risk management and controlling procedures of local government accounting practices. Hence this research carried out to empirically examine the application of internal auditing in promoting accountability, good governance and transparency in local government administration.

1.3 OBJECTIVES OF THE STUDY

The objectives of the study include:

To know whether internal auditing in the council is effective.

To ascertain if internal auditing promotes accountability, good governance and transparency in the council.

To examine whether the books of account are properly kept and transactions properly recorded.

To examine the extent to which the council’s internal auditing practice conforms with financial regulations.

To know how effective and efficient internal auditing is in terms of meeting the yearly budgeted revenue and in detecting errors and frauds.

1.4 STATEMENT OF HYPOTHESIS

The following hypothesis has been drawn for the study:

H : The application of internal auditing does not significantly promotes accountability, good governance and transparency in Uyo Local Government Council.

H : The application of internal auditing significantly promotes accountability, good governance and transparency in Uyo Local Government Council.