ASSESSMENT OF THE ROLE OF INTERNAL AUDITING IN THE EFFECTIVE MANAGEMENT OF PUBLIC ORGANIZATION

ABSTRACT

This research was on “Assessment of the Role of Internal Auditing in the Effective Management of Public Organization” with reference to Benue State University, Makurdi, as a case study. The study specifically examined the role of internal auditing in the areas of planning, organizing, staffing, directing and controlling which constituted the variables of the study. Five research questions and five hypotheses guided the study. The survey method was used for the study with a population of 70 respondents comprising Head of Departments, staff of the Internal audit Department, Bursary unit and Lecturers of Educational Management, of which a sample size of 50 was used. A self structured questionnaire titled “The Role of Internal auditing in the Effective Management Questionnaire (TRIAEMQ)”was used to collect data from the respondents. The data was analyzed using simple percentages. The study made the following findings that: internal auditing has significant influence on planning in Benue State University; there is a significant impact of internal auditing in organizing Benue State University; internal auditing has significant impact on staffing in Benue State University; internal auditing has a significant role to play in directing the affairs of the school; internal auditing has a significant impact in controlling the institution: Due to the relevance of internal auditing, the researcher recommended that: plans should be properly scrutinized by the internal auditors before implementation so as to help detect and correct errors; the school management should adopt the recommendations of the internal audit department; staff audit should be carried out at regular intervals and should be handled strictly by the university’s audit department; the management on their part should acknowledge the report submitted to them and allocate more power to the internal audit unit to ensure independence; the internal auditors should be allowed to carry out audit on the bursary unit, as this will ensure financial control.

CHAPTER ONE

INTRODUCTION

1.1     Background of the Study

The role which internal auditing plays is enormous in any organization or educational institution, thus the function and existence of internal audit department in an organization or educational institutions cannot be overemphasized considering the enormity and embodiment of trust, responsibility and accountability accorded to this department.

According to Obazee, (2009), internal auditing can be defined as an independent activity objectively, confirmatory, and consultant determined to add value and improve the organization’s operations and by helping them to achieve their objectives through a systematic and disciplined method to evaluate and improve the effectiveness of risk management and control processes and governance.

According to the American Institute of Management (1959:6) management is guiding human and physical resources into dynamic organizational units which attain their objectives to the satisfaction of those who served and with a high degree of morale and sense of attainment in the part of those rendering services.

Ogbonanya (2009) defined management as a social process that has goals and objectives to achieve. Management is also the guidance or directing of people towards the attainment of organizational goals and objectives. Management involves Planning, Organizing, Staffing, Directing and Controlling.

Planning is the basic function of management. It deals with chalking out a future course of action & deciding in advance the most appropriate course of actions for achievement of pre-determined goals. According to Koontz (1968) “Planning is deciding in advance – what to do, when to do & how to do. It bridges the gap from where we are & where we want to be”. A plan is a future course of actions. It is an exercise in problem solving & decision making.

Organizing is the process of bringing together physical, financial and human resources and developing productive relationship amongst them for achievement of organizational goals. According to Henry Fayol (1999), “To organize a business is to provide it with everything useful for its functioning i.e. raw material, tools, capital and personnel”. To organize a business involves determining & providing human and non-human resources to the organizational structure. Organizing as a process involves:

1. Identification of activities.
2. Classification of grouping of activities.
3. Assignment of duties.
4. Delegation of authority and creation of responsibility.
5. Coordinating authority and responsibility relationships.

Staffing is the function of manning the organization structure and keeping it manned. Staffing has assumed greater importance in the recent years due to advancement of technology, increase in size of business, complexity of human behavior etc. The main purpose of staffing is to put the right man on the right job i.e. square pegs in square holes and round pegs in round holes. According to Koontz & O’Donell (1968) “Managerial function of staffing involves manning the organization structure through proper and effective selection; appraisal & development of personnel to fill the roles designed on the structure”. Staffing involves:

1. Manpower Planning (estimating man power in terms of searching, choose the person and giving the right place).
2. Recruitment, Selection & Placement.
3. Training & Development.
4. Performance Appraisal.
5. Promotions & Transfer.

Directing is that part of managerial function which actuates the organizational methods to work efficiently for achievement of organizational purposes. It is considered life-spark of the enterprise which sets it in motion, the action of people because planning, organizing and staffing are the mere preparations for doing the work. Directing is that inter-personal aspect of management which deals directly with influencing, guiding, supervising, & motivating sub-ordinates for the achievement of organizational goals. Directing has following elements: Supervision, Motivation, Leadership, & Communication.

Controlling implies measurement of accomplishment against the standards and correction of deviation if any to ensure achievement of organizational goals. The purpose of controlling is to ensure that everything occurs in conformities with the standards. An efficient system of control helps to predict deviations before they actually occur. According to Theo Haimann, “Controlling is the process of checking whether or not proper progress is being made towards the objectives and goals and acting if necessary, to correct any deviation”. According to Koontz & O’Donell “controlling is the measurement & correction of performance activities of subordinates in order to make sure that the enterprise objectives and plans desired to be obtained are being accomplished”. Therefore controlling has following steps:

1. Establishment of standard performance.
2. Measurement of actual performance.
3. Comparison of actual performance with the standards and finding out deviation if any.
4. Corrective action.

Planning is an intellectual and continuous managerial function and is the beginning of the process of management. Planning as earlier stated is a futuristic course of action aimed at harnessing the organizational resources such as man, material, financial and time resources. The main reason for planning is to utilize the available but limited resources; the essence of planning is to distribute these resources to various departments according to their needs and priorities. Hence internal auditing comes to play an active role carried out by the internal auditor. The internal auditor establishes checks to ensure that such resources are deployed to the various units and are effectively utilized in line with its purpose as earlier planned. The internal auditor also cross checks all plans to ensure that they are relevant in moving the organization forward and not just mere schemes for money laundering.

The organizing function of management naturally and logically follows the planning function. The school management decides what they want to accomplish, be it profit, and return on investment, student graduated or whatever performance measure and the objectives for the type of institution they are managing. But before these objectives can be established, somebody must do some work and they must do the right work. It is through this that the management decides what strategy to be used in ensuring accomplished planned objective, it also involves the line of authority and how responsibilities are assigned. It is now the responsibility of the internal audit department to ensure that there is a smooth flow of delegation of duties from a superior to a subordinate. The internal auditor goes through the organizational structure to ensure the right people are in their right positions because an effective organizational structure will enable the managers allocate resources amicably.

Staffing involves managing the organizations structure through proper and effective selection, appraisal and development of personnel to fill the roles designed into the structure. It is also concerned with the placement, growth and development of members of the organization whose function is to get things done through the efforts of other individuals. Internal auditing assumes a very important role in the employment of staff. During recruitment of staff the auditor ensures that only people who merit the job are offered employment. Nevertheless, the internal audit department also helps in discovering ghost workers through staff audit.

 Directing is a process in which the managers instruct, guide and oversee the performance of the workers to achieve predetermined goals. Directing is the heart of management process. Planning, organizing, staffing has got no importance if directing function does not take place. After instructions have been passed to the subordinates, the internal auditors serve as supervisors who guide the efforts of employees and other resources to accomplish stated to ensure that every instruction is executed to the latter.

Controlling is an important function of management because it helps to check the errors and to take the corrective action so that deviations from standards are minimized and stated goals of the organizations are achieved in a desired manner. Controlling therefore is the job of internal auditors to do, thereby evaluating performance compared to plan, reporting deviations in time, taking corrective actions by establishing standards and goals, appraising performance and correcting deviations.

Internal auditing therefore becomes a necessity, taking into cognizance the extended span of control faced by the management with regards to Planning, Organizing, Staffing, Directing and Controlling of labor, and materials in conducting the affairs of the institution. The work and activities carried out by the internal audit department is very relevant and important especially in our modern day organizations and have been saddled with the responsibility to offer advice to the management and enforce the operations of internal control and internal checks in the organization. The hitches, inefficiencies and impediment during day to day activities are controlled. Internal auditing is an organizations initiative to monitor and analyze its own operations in order to determine how well it conforms to a set of criteria.

Internal auditing is an ongoing appraisal of the financial health of an organization by its own employees; employees who carry out this function are called internal auditors (www.investorswords.com). Their duties are usually defined by the management and they include:

1. Measurement of the adequacy and effectiveness of the internal control system on a continuous basis;
2. Routine checks to prevent and detect errors and frauds;
3. Provision of hireling advice to management on internal control matters;
4. Investigation of reported cases of all practices;
5. Provision of statistical data for management information and decision making.

1.2     Statement of the Problem

Internal auditing for years has been a very vital tool which aids an organization to detect errors and discrepancies before they occur. It is a proactive measure towards unforeseen contingences. In the course of this study here in Benue State University, the researcher was able to make observations, inquiries and gather information regarding the problems of the management of institution that proper auditing would have detected and taken care of. Below are the problems;

Over population: is an undesirable condition where the number of existing human population exceeds the carrying capacity. This is the biggest problem faced by the school management; the university is congested and cannot accommodate the thousands of students seeking admission into the school. Currently the management is admitting more than she can cater for, this situation would have been avoided had it been proper auditing was employed from the onset. It is the responsibility of the internal auditor to advice the school management on the number of students to offer admission considering the available facilities in the school, but perhaps maybe the internal audit department was boycotted. 

Poor maintenance culture: It is only proper maintenance that enables equipments and facilities to reach or exceed its life span; however poor maintenance leads to its malfunctioning and damage. The maintenance unit of the school charged with the responsibility of carrying out proper maintenance on equipments and facilities within the school campus are lagging behind. For instance, at the initial commissioning of the Chemistry Department Auditorium, all air-conditions were working in their full capacity, but today not even one is active. This is as a result of poor maintenance, now this is where internal auditing play a very important role to make sure that money allocated for this purpose is utilized and not looted by officials.

Inadequate Hostel accommodation: This complements the first problem mentioned (over population), a situation where the school admits 7000 students and has accommodation for only 2000 students it becomes difficult for the school management to monitor the activities of her students. This also exposes students to various social vices such as cultism, prostitution, robbery e.t.c since 70% of the total number of students stay outside the school campus, the researcher is also affected.

Shortage of lecture halls: Due to the overpopulation of students in the university there is shortage in lecture venues, students now receive lectures in dilapidated buildings such as the Technical block, and lectures are held in improvised open arena like the convocation square which is not conducive for learning.

All these problems have in one way or the other affected the development and smooth running of the institution, in essence the problem is lack of internal auditing and supervision in all the various departments in the university.

1.3     Purpose of the Study

The purpose of this study is to examine the role of internal auditing in the effective management of Benue State University, Makurdi. The purpose of this study is;

1. To investigate how internal auditing facilitates planning in Benue State University.
2. To find out if internal auditing has any role to play in organizing Benue State University.
3. To find out how internal auditing affects staffing in the University.
4. To find out what role internal auditing plays in directing the affairs of the school.
5. To find out how internal auditing assists in controlling the institution.

1.4     Research Questions

To guide this project, (5) five research questions were formulated as follows:

1. How does internal auditing facilitate planning in Benue State University?
2. What are the roles internal auditing plays in organizing the University?
3. Do you think internal auditing affects staffing in the University?
4. What are the roles internal auditing plays in directing the affairs of the school?
5. Do you know if internal auditing assists in controlling the institution?

1.5     Research Hypotheses

Ho_1:  Internal auditing has no significant influence on planning in Benue State University.

Ho_2:  Internal auditing has no significant role to play in organizing Benue State University.

Ho_3:  Internal auditing has no significant influence on staffing in Benue State University.

Ho_4:   Internal auditing has no significant role to play in directing the affairs of the school.

Ho_5:  Internal auditing has no significant effect in controlling the institution.

1.6     Significance of the Study

The findings in this work will reveal reasons why internal auditing is a vital tool used in enhancing the effective management of any organization, especially Benue State University. It will also establish reasons for the need of an internal audit department in every organization. This research work will be beneficial to the following group of persons;

Organizations: This work will be of relevance Benue State University because the researcher discloses the basic rudiments required to foster effectiveness, the research provides moral influence to protect efficiency and assist the management in dealing promptly with issues which would have created problems if left to linger until they generate more problems.

The researcher: will be of utmost benefit because this project will test his intellectual abilities, it will also broaden the researcher’s knowledge and enable him read wide. It will make the researcher acquainted with various concepts and principles.

Educational Management Students: This work will serve as a reference point to students who will like to carry out further research on the same topic or a similar topic to this because the researcher has put together a body of knowledge that will be useful.

1.7     Scope of the Study

The scope of this study focuses on the role of internal auditing in effective management, using Benue State University, Makurdi.

The study covers the basic functions of management that makes up the variables of this study. They are; Planning, Organizing, Staffing, Directing & Controlling as they relate to auditing in Benue State University.

1.8     Operational Definition of Terms

In this section, the researcher will give definitions of the basic concepts of the search.

1. Internal auditing
2. Management
3. Effective
4. Planning
5. Organizing
6. Staffing
7. Directing
8. Controlling

1. Internal Auditing: Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. 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.
2. Management: Management is the coordination of all the process of planning, organizing, staffing, directing and controlling in order to attain organizational objectives. Management is the judicious application of the human, infrastructural, material, financial and time resources towards the attainment of organizational objectives.
3. Effective: Been adequate to accomplish a purpose, producing an intending or expected result.
4. Planning: Deciding today what you want to achieve in the near future considering your available resources. It is laying down pre-determined goals and defining means of achieving them.
5. Organizing: Establishing a relationship between all components of an organization, creating structural line of authority which define what is to be done, by whom and how.
6. Staffing: This entails recruitment, replacement and training of personnel as well as maintenance of favorable work climate or condition of service.
7. Directing: Deciding what specific thing each staff should do, establishing order and instructions for each member as well as offering leadership in the entire work place.
8. Controlling: The appraisal and examination of results during which weaknesses and errors are uncovered and steps taken to prevent their reoccurrence.

Click to: DOWNLOAD

Tagged with: Assessment, Auditing, Effective, Effective Management, Internal Auditing, Management, Organization, Public, Public Organization