EFFECTIVENESS OF AUDIT IN GOVERNMENT PARASTATALS

THE EFFECTIVENESS OF AUDIT IN GOVERNMENT PARASTATALS (A CASE STUDY OF ENUGU STATE WATER CORPORATION,ENUGU STATE BROADCASTING SERVICES AND ENUGU STATE LIBRARY BOARD)

ABSTRACT

This study is aimed at identifying the EFFECTIVENESS OF AUDIT IN GOVERNMENT PARASTSTALS, using Enugu State Water Corporation, Enugu State Broadcasting services and Enugu State Library board all in Enugu state as a study guide. The entire work was dividend into five (5) chapters and the data for the study was collected using both primary and secondary sources, questionnaires, textbooks, literary materials and journals respectively. The population of the study is 116; while the sample size was derived using YARO YAMANI 1964 formula and it gave 90. Thereafter, the data collected were presented in tables, analyzed using percentage analysis. Then the hypothesis of the study was tested using chi square formula. The findings of the study was that, there is no effective audit in government parastatals, because of how often external audit is carried out. There is consistent and effective internal audit accountable to management. Also, the government influences on parastatals affect their business objectives. This is observed in the role of decision taking by the government on public enterprise, which result in delay of job execution. Finally, the researcher made some useful recommendations to the parastatals that; when audit function is utilized to ensure the competency of public servants and improvement in the activities, procedures and administration of public enterprises.  The cry about outright privatization will not be necessary.

CHAPTER ONE

INTRODUCTION

  1. BACKGROUND OF THE STUDY

Government participation in business (through public enterprise) unlike every other private enterprise has not yielded the desired result in terms of social, economic and political considerations. It is against this backdrop that this study seeks to examine the effectiveness of audit in government parastatals. Nevertheless, the economic consideration as a major business objective of any enterprise, be it, public or private will dominate other considerations in this study. Thus, the economic considerations of government establishing public enterprises are to fulfill her social responsibilities to the masses.

Profits are needed from the government parastatals not only for sustaining the existing parastatals but also for establishment of new ones. Government does not have in mind to establish parastatals for profit making but intervenes where the system of perfect competition has broken down. Nevertheless, we are primarily concerned with mobility of public enterprises in Nigeria to at least breakeven vis-à-vis some of their private counterparts that make surplus profits. There could have been no better time for this study than now when government debts are accumulating daily and foreign exchange earnings declining. This points to the fact, why government wants their parastatals to generate enough profit to at least pay for their consumables and argument on their salaries where possible. No wonder the government stance on public enterprises tagged “privatization”.

The proponents of privatization argue that better resource utilization is likely to be attained by transferring of the ownership of public enterprises to private sector for better management, or by the commercialization of public enterprises for the benefit of the public or by the winding up of unviable public enterprises. Privatization, they maintain apart from increasing efficiency, will also provide the government with fund to engage in other priority activities especially now that the government traditional sources of revenue are drying up. These reasons are academically sound, but this school of thought has failed to consider among other things, an element which is essential for profit motivation and control-audit effectiveness. Hence, this study examines the extent to which auditing has been applied effectively to government parastatals as a means of controlling, safeguarding and motivating profit. Therefore, if government must participate in profit oriented ventures and succeed, it must apply all the principles and methods required to achieve business objectives.

  1. STATEMENT OF THE PROBLEM

The primary goal of any business entity, whether private or public, is to make profit. Profit is made only when the total revenue exceeds total cost, and loss incurred when the reverse is the case. A breakeven situation occurs when total revenue is equal to total cost. Since excess of income over expenditure is profit, there is the need for any business entity to exercise full or at least reasonable control over cost so as to make profit or breakeven, but with the high and disgusting rate of losses and eventual failures of public enterprises in spite of government annual grants and subventions, one is inclined to ask questions as to whether some reasonable control is exercised over public enterprises. Since the ineffectiveness of government parastatals does not only affect the government, but also the entire economy. Therefore the first question that needs to be answered is: Is government aware of the need and effects of audit in government parastatals?

 Secondly, whether the policies of government encourage the maintenance of proper accounting systems in government parastatals? Are those at management level in government parastatals in Nigeria aware of government policies and objectives in establishing those parastatals? Is the management of public assignment, functions and responsibilities in line with government policies and overall business objectives? Finally, are those government bureaucratic bottle-necks extended to the public enterprises? All these questions will be answered from the findings of the researcher.

  1. OBJECTIVES OF THE STUDY

The functions of auditing goes beyond merely checking and ensuring compliance with laid down internal procedures and controls but also along way in assisting management inefficiencies in allocating of resources in the organization. The objective of this study therefore is to recommend a system of checking and evaluating the performance of government parastatals. Specifically the study will:-

  1.       Ascertain the significance of audit report in complimenting management control    functions in the organization.
  2.       To identify bureaucratic bottle-necks that could militate against the realization       of business objectives.

3.         To recommend based on the study findings, how consistent and effectiveness of  audit in government parastatals could enhance profitability and continuity of public enterprise.

1.4 RESEARCH QUESTIONS

         Based on the purpose of the study, the following questions are raised to provide a guide and solution to the research problems:

  1.    Is the account of government parastatals audited annually by external auditors?
  2.    Does consistent and effective internal audit enhances performance in government parastatals?
  3.    Do government influences on parastatals affect their business objectives?

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