EVALUATION OF INTERNAL CONTROL SYSTEM IN GOVERNMENT PARASTATALS
EVALUATION OF INTERNAL CONTROL SYSTEM IN
GOVERNMENT PARASTATALS
TABLE OF CONTENT
Title Page i
Certification ii
Dedication iii
Acknowledgement iv
- v
Table
of Content vi
- viii
CHAPTER
ONE
1.0 Introduction 1
1.1 Background of the Review 1 - 4
1.2 Statement of the Problem 4
1.3 Justification for the Study 4 - 5
1.4 Objectives of the Study 6
1.5 Significance of the Study 6
- 7
1.6 Scope of the Study 7
1.7
Definition of Terms
7 - 10
CHAPTER
TWO
2.0 literature Review
11-
I 3
2.1 Relationship Between Internal Control and
Internal
Checks 13
– 14
2.2 Internal Audit 14 - 15
2.3 Types of Internal Control 15
- 19
2.4 Internal Control Techniques 19 - 22
2.5 Internal Control and Management 22 - 25
CHAPTER
THREE
3.0 Research
methodology 26
3.1 Historical Background on case study 26 - 27
3.2 Population and sampling 27- 28
3.3 Data Instrument 28
3.4 Method of Data Analysis 28 -29
3.5 Administration of Data Collection Instrument 29 – 30
3.6 Interview questionnaire 30 -
33
3.7 Limitation of the study 33
CHAFFER
FOUR
4.0 Presentation and analysis 34
4.1 Data Presentation 34
-48
4.2 Data Analysis 49
- 51
4.3
Questionnaire and hypothesis testing 51 - 53
4.4 Findings 53
– 54
CHAPTER
FIVE
5.0 Summary, conclusion and recommendations
5.1 Summary 55
- 56
5.2 Conclusion 56
- 57
5.3 Recommendations 57
5.4
References
CHAPTER ONE
1.0
INTRODUCTION
1.1
BACKGROUND OF THE STUDY
The
practice of auditing has come a long way from the days when the auditors has
read his report to his audience the growth of auditing in recent past as been
such phenomenal that the national Teachers Institute is the efficient running
of the government parastatals.
Phases
like management audit and audit committee have surfaced to broaden the
significant of the work of it auditor. This has also resulted in many vital
publications on auditing.
The
present works is an attempt by the auditor to bring into view, the challenging
role internal auditing can play in the evaluation of internal control system in
government parastatals. The book is not only recommended to those in the
national Teachers institute in government parastata1s striving to achieve
maximum efficiency.
To
the National Teachers institute, the work of audit is mainly to detect and
prevents fraud in the institute
of National Teachers.
This write up exposes the other reason
for having audit work conducted especially the internal audit the main function
is to assets, ensuring corrections of financial statement, proper handling of
books and records to confirm the validity of the transaction that take place in
the government parastatals.
Audit
as already stated that the conducted according to the desire of the person
requiring the service of an auditing work for the purpose of certifying the
record of books of account as being correct in a situation where the
organization cannot afford to set up an internal Audit Department.
The
other types of Audit that can be conducted is that which the internal audit
department of the government parastatals undertakes this is mainly to prevent
and detect fraud with the system. The work of the intend audit is determine by
management.
Here,
it must be emphatically stated that the internal auditor is an advisory
capacity to the management is not duty bond to except the advice or
recommendation. The internal auditor work can also aim at providing a basis for
the updating of financial data and there by building a livid and healthy
accounting department with reliable documents & evidences. The presence of
an internal audit in itself is a check on the excess of accounting department
staff as well as other staff. e.g. The store organization staff or officers,
people are aware that one time or one day within the accounting year or even
any time they may be called upon to explain any ambiguity in the process of
records receipts and falsification.
1.2
STATEMENT OF THE PROBLEM
The
observance of a close and critical examination of internal contro1 system in
government parastatals revealed that in the Nigeria press an electronic media
about the permanent nature of fraudulent malpractice in government parastatals
as a result of lack of adequate Internal control system and due to not being
capable on the part of accounting and auditing staff forgery, embezzlement, and
mis - appropriation of funds have been too rampant in our society.
This general trend is expected to
continue unless concrete efforts are intensified to curb the incidence of these
malpractices.
1.3
JUSTIFICATION FOR THE STUDY
There
is need, therefore to prevent or at least minimize to some extend the loss of
government funds through misappropriation and others malpractice in order to
successfully to this, the need for proper accountability in the government
parastatals, and the establishment of a sound system of internal control can
not be over emphasized.
In
any business organization whether profit oriented or non-profit oriented like
the three tiers of government of the federation namely: the Federa1. State and
Local Government of the federation if required internal control and internal
audit. An internal control system is any form of control financial or otherwise
setup the management in order to ensure adherence to management policies,
safeguarded the assets of the business and secure as far as possible the
completeness and accuracy of accounting records.
1.4
OBJECTWES OF THE STUDY
The
main aims of this research work are to know the role played by internal control
system in Government parastatals. The focuses of the research work include.
i.
Reliability of financial Reporting
ii. Effectiveness an Efficiency of operations.
iii.
Compliance with Applicable laws and
Regulations.
iv.
It must be emphasized that the
objectives of internal control is to limit the occurrence of errors and fraud
to the beeriest minimum.
1.5
SIGNIFICANCE OF THE STUDY
It
is true that many books an article have been written on the object matter of
internal control system both in the public and private sectors of the economy.
It is worth mentioning that each other stressed the need of proper internal
control system in strengthened and made workable to the extent that financial
malpractice and loss of government funds would be reduced to the beeriest
minimum.
1.6
SCOPE OF THE STUDY
This
research study focuses on the internal control and the internal audit of the
financial activities of government parastatals. It examines the various types
of control and control techniques. Specifically, the research work studies all
these things as they relate to the National Teacher’s Institute.
1.7 DEFINITIONS OF TERMS
i. Audit:
An audit can be defined as an examination by an auditor to show the evidence
from which the final revenue accounts and balance of an organization have been
prepared in other to ascertain that they present a stature and fair view of the
financial state of the organization as at that date to enable the auditor write
this report.
ii. Auditor: An audit is outside that works
into ensure and review the account of stewardship of management and to express
his opinion as to the fairness or otherwise of the said account.
iii.
Budget:
It is defined as a financial or quantitative statement prepared and approval
prior to a specific period of the policy to be punished during that period for
the purpose of attaining given objective. This may include expenditure income
and the employment of capital.
iv.
Capital
Expenditure: Consist of expenditure the benefit of which cannot be fully
consumed in one period but operate over several periods, example of these are
capital expenditure on the instruction of Road, Water, Project agricultural
project, electricity project and a host of others that are handed by
Directorate for foods, Road and Rural Infrastructure [DFFRI] in collaboration with
the state and Federal ministries of works.
v. Errors: This is an unintentional mistake in
financial statements including mathematical or clerical mistakes, in the
application of accounting principle and oversight or misinterpretation of facts
existing at the term financial statements were prepared.
vi.
Internal
Audit: If is described as a review of operations and records sometimes
continual exercise within a business by specially assigned staff.
vii.
Internal
Abeck: It consist of the allocation of authority and work in such a manner
as to afford checks on the routine transactions of day to day activities by
other or duty of one person being proved independently by other or the duty of
one person being complementary to that of another. Thus affording a means
whereby fraud is prevented or its early detection is facilitated.
Viii. Internal Control:
Is defined as not internal check and internal audit but the whole system of
controls, financial and otherwise, established management in order to carry on
the business of the company in an orderly manner, to safeguard its asset and
secure as far as possible the accuracy and responsibility of its records.
ix.
Irregularities:
Internal distortion of financial statement fraud or misappropriation of assets
referred to as defalcation.
CHAPTER TWO
LITERATURE
REVIEW
According
to Leshe R. Howard (1993) stated that “An Auditing may be described as an
examination by an auditor of the evidence from which the final revenue accounts
and balance sheet of an organization have been prepared, in order to ascertain
that they present a true and fair view of the summarized transactions for the
period under the review and of the financial state of the organization at the
end date, thus enabling the auditor to report there on”.
Furthermore,
Walter W. Biggs, (1988) “An Auditing may therefore be said to be such an
examination of books and accounts and vouchers of a business, as will enable
the auditor to report whether he is satisfied that the balance sheet is
properly drawn up, so as to give a true and fair view of the state of the
affair of the business and that the profit and loss for the financial period.
According to the best of the information and explanation given him and as shown
by the books, and if not report in respects he is not satisfied”.
Furthermore,
the American Institute of Certified public Accountants statement of Auditing
standard No.1 internal control comprises the plan of organization and all of
the co-ordinating methods and measures adopted with in a business to safeguard
its assets, checks the accuracy and reliability of its accounting data, promote
operational efficiency and encourage adherence to prescribed managerial
policies. This definition possibly is broader than the meaning sometime
attributed to the terms. It recognize that a system of internal control extends
to those matters which relate directly to functions of the accounting and financial
department
The
above definitions already cited show that it is important to have adequate
trained staff to oversee the internal control system of a department.
2.1
RELATIONSHIP BETWEEN INTERNAL CONTROL AND INTERNAL CHECKS
Increasing
attention has been paid to the method of internal control in recent year. The
complexity of modern business techniques and the incense in sizes of business
units have encouraged the adoption for these methods which enhance the
efficiency of business and all act as safeguard against error of fraud.
Internal
control embraces both internal a check and internal audit. As earlier stated,
internal check consist manner as to afford check or routine transaction, of day
to day activities by meant of the work of one person being complementary to
that of another quick affording the means of preventing fraud or its early
detection facilitated.
Any
person performing an operation should acknowledge their activities by means of
initial and signature rubber-stamp etc. For instance when preparing payment vouchers,
the different officers involved in the preparations should initial the prepared
column, check column, passed column, etc. Acknowledge of performance is this
way not only allow blame to be ascribed but also has a powerful
Psychological
effect because each staff would be more careful as blame may be apportioned for
errors committed.
2.2
INTERNAL AUDIT
It
forms a valuable part of the whole system of internal control. Internal Audit
has been described as a review of operations and records. Sometime, continuous
under taken within as business by specially assigned staff. When internal
control is properly operated, it may influence the conduct of an audit by limitating
the detailed work of the audit that might be performed where it is not properly
operated, the auditor may be forced to do a great deal of detailed work then
would otherwise be the case.
2.3
TYPES OF INTERNAL CONTROL
According
to ’milliehample “Auditing” the types of internal control include organization
and approval arithmetical and accounting, personnel supervision and management
controls.
a) ORGANIZATION:
An enterprise should have a plan of organization which should define and
allocate responsibilities thereby every function should be in charge of a
specified person who might be called the responsible official. For example, the
keeping of petty cash should be enthuse to a particular person who is then
responsible and hence answerable for that function. Another factor to consider
under organization is the identification of lines of reporting. In all cases,
the delegation of authority and responsibility should be clearly specified. An
employee should know the plovers delegated to him the exert of authority and to
whom he should report.
b) SEGREGATION
OF DUTIES: Means that no one person
should be responsible for the recording and processing for a complete
transaction. It is also opened that the involvement of several people reduce
the risk of intentional manipulation or accident error and increase the element
of checking of work. Examples of function which for a given transaction should
be separated include:- Initiation, authorization, custody and recording.
c) PHYSICAL:
This concerns physical custody of asset and involves procedures designed to
limit access to authorized personnel only.
Access can be direct
e.g. being able to enter the store or indirect, that is by documentation e.g.
through requisition. This guideline is very important in the case of valuable
portable exchangeable or desirable assets. Examples are the looking of
securities like store certificate coequal booklet, Teller and so on in a safe
with procedures for the custody and use of the keys
d) AUTHORISATION
AND APPROVALS: All transaction should require authorization and approved by
an appropriate person. The limits of this authorization should be specified
e.g. credit sale must be approved by the credit control department.
e) ARITHMETICAL
AND ACCOUNTING: These are the control in the recording function which check
that transactions have been authorized, that they are included and accurately
processed. The procedures include checking the arithmetical accuracy of the
records the maintenance and checking of totals reconciliations, control
account, trial balance etc.
f) PERSONNEL:
Procedure should be designed to ensure that personnel operating a system are
competent and motivated to carry out the task assigned to them since the proper
functioning of a system depends upon the competence and integrity of operation
personnel. Measures to motivate include appropriate remuneration and promotion
and career development prospects, selection of people with appropriate personal
characteristic and training and assignment to task of the right level.
g) MANAGEMENT:
These are control exercised by management which are outside and over the day to
day routine of the system, they include over all supervisory control, review of
management accounts, budgetary control, internal audit and any other special
review procedure for example senior management must be aware of the day to day
activities of the organization. Glaring failures of controls [stick thefts,
excess stocking, unnecessary overtime] should be corrected. Budgeting and
variance analysis is a management tool which should prevent or at least defect
departure from management intended plans.
h) SUPERVISION:
All actions by all levels of staff should be supervised. The responsibility for
supervision should be clearly defined and communicated to the person being
supervised.
2.4
INTERNAL CONTROL TECHNIQUES
According
Dicke (2007) he stated that auditing, the objectives of an audit are as
follows:
i. The detection of fraud
i. The detection of technical error
iii. The detection of error of principles.
He
further states that the means for achievement of such objectives is a detailed
analysis of transaction. However, it is the opinion of some experts that for
errors and fraud to be minimized there must be a sound system of internal
control involves checking performance proceeds are planned. The major aspect of
controlling is feed back information against pre-set plans or standards so that
deviation are highlighted for investigation and correction.
Santocki
J. Source [1979] emphasized review that internal control is of paramount
importance to both small and large companies, although its method of operation
will necessary very from number of employees is too few to establish on
adequate division of duties, additional importance is attached to proper
supervision by the owner, manager or other responsible employee.
Special
problems may arise in the circumstance for a small firm whose business is
expanding. There is an intermediate stage when it is no longer practicable for
the owner or manages to maintain his precious close supervision of all aspects
of the business, while the staff remains numerically too small for the adequate
division of responsibilities and instruction of automatic checks which may be
expected of large firms. It should be borne in mind that there are not absolute
standards of internal control. The circumstance and needs of business vary so
greatly that system of control differ from one organization to another, what could
said by way of generalization is that an adequate system of internal is one
that is both economic and effective in regard to the resources, size and nature
of the business concerned.
Certain
procedures should therefore be weighed against the risks they may designed to
check. The cost of operating a check can any particular activity should be view
in relation to the possible loss if they were removed.
It
must be emphasized that the objective of internal control is to limit the
occurrence of errors and fraud to the barest minimum. No matter how effective a
chief internal control system is, error and frauds can occur by collusion;
abuse of authority, human error.
2.5
INTERNAL CONTROL AND MANAGEMENT
The
responsibility for the application of internal control rest with those in
authority within the business itself. The auditor may help advice and report
but has know power to demand that an adequate system of internal control should
exist. The final responsibility remains with those in authority.
In
any efficiently controlled organization, there must be clear line to
demarcation between the responsibility and duties of the staff, and these can
be only operated in conjunction with properly complied records to the various
activities of the business and by circulation of written information [both
vertically and horizontally] is very important and everything must be done to
ensure effective communication.
REFERENCES
ADEYEMO,
[1989]: Practical Auditing Manual, Kaduna, First Edition, New Deal Publication
Limited, page 14,17,21.
AQUALSUA
F.D, [2005]: Auditing and investigation, Kaduna,
First Edition, D’ Lord printing and publishing EFD. Page 143.
SAMTOCK
J. [1979]: Auditing a conceptional and system approach, Lagos First Edition,
Polytechnic publisher page 48.
FERDINERD.J.
OLUSANJO, [1985]: Auditing and investigation
Ibadan,
A Comprehensive Approach, Abakaks publishers Limited page 77,82.
OLOREDE
l.A [1999]: Effective internal control system in a Banking Environment, Abuja, unpublished paper
presented at 3 days workshop
for
people Bank at National woman Development centre. Page 3-6.
LESLUER.
HORWARD, [1993], Principles and practice of Auditing.
WATER W. BIGG [1988],
Auditing for today.
CHAPTER THREE
RESEARCH
METHODOLOGY
This
chapter aims at assessing the research population and the sampling method if
examines the various sources of data and the method of administering of data
collection instruments.
3.1
HISTORICAL BACKGROUND ON CASE STUDY
In an attempt to
train the numerous unqualified teacher absorbed the federal Government
established the National Teachers Institute by the promulgated decree 7 of
April, 1978.
Government
parastatals are non-profit making establishment aimed at providing essential
services for the welfare of the citizen. They are managed by civil security and
financed with public fund. In the course of rendering these services, however,
some government parastatals generate a lot of revenue. An example of this is
the National Teachers Institute where revenue is generated from Headquarters,
soles of eligibility forms, registration for Grade Two [ICT] Examinations, sales
of National Certificate of Education [N.C.E.] forms by Distance learning system
[D.L.S] Tuition fees form N.C.E by D.L.S, sales of T.C.H. syllabus and sales of
T.C.H. course books, etc. Specifically, the revenue collected by the various
department of the institute in 1990 amounted to over N568, 026.00 as against
N476, 983.00 collected in the preceding year.
The
National Teacher’s Institute is charged with all matters realizing to the
registration and training of the unqualified teachers in the country.
3.2
POPULATION AND SAMPLING
The
National Teacher Institute being a true representation of other parastatals,
the questionnaires were distributed to its employees involved in accounting and
auditing duties.
However,
these are some secondary sources of data that assisted in this research
project. These include library research whereby various textbooks, journals are
consulted, magazines and newspaper.
3.3
DATA COLLECTION AND INSTRUMENT
Primary
sources of data used in this study. The originator primary data where collected
through questionnaire distributed to and interview either sample population
[especially these involved and auditing duties in the parastatals the data are
analyzed statistically and by mathematical presentation.
3.4
METHOD OF DATA ANALYSIS
The
data obtained from the above state methods are serious considered necessary and
vital to the study. They are analyzed tools and comparison with establish facts
and point on the past studies that are related using percentage, statistically
tables and responses. Meanwhile, it was glaring to the researcher that the
whole population cannot be used in analysis the study, therefore, it has generally
agreed that accidental sampling of customers met at the company premises on the
day of visit should be adopted to allow an effective analysis of the data collection
of the study. The sampling method was adopted for the analysis and distribution
of the questionnaire the analysis was done base on fundamental comparison of
data collected and fact on ground, debate and argument of professional on the
study, opinion of the professional accountants and documentary of written facts
about the study in the documentary sources.
3.5
ADMINISTRATION OF DATA COLLECTION INSTRUMENT
It
has to be recalled that the data collection instrument used in this work
include questionnaire and interview. The questionnaires were distributed to
those involved in accounting and auditing schedules.
The
researcher visited them often and often to remind them and to collect completed
questionnaire from some of them were consulted for personal interviews and they
responded commendably.
However,
the necessary report was created before answering the respondents question.
There are not data in consistencies, 90% of the questionnaires distributed to
the respondents were returned. Therefore, the percentage of non-response in negoible.
3.6 INTERVIEW QUESTIONNAIRES
The
questionnaire and interview means of data collections were adopted for this
research study. Questionnaire was greatly and largely used for the collection
of relevant information needed those means were chosen due to their cost effectiveness
and affordability for survey study there are also prone to a quantitative
analysis of response and statistics test of hypothesis, through there was a
restriction to the nature of information and volume of data they likely to be
obtained by researchers. The questionnaires was simply designed for better and
easy assimilation so that the respondents can give precise answer to the best
of their knowledge. Also the name of the respondents are not demanded for in
the questionnaire, so that confidentiality can be guaranteed.
Questionnaire
is a document sent to the respondent by the researcher to be filled and
returned, The document contain vital question that will aid in arriving at
dependable analysis of the research study. The prepared question is done in a
way that the questionnaire quantitable simple clear useful legible and
reasonable and not embracing. Interview is face to face discussion and
presentation of verbal question to the respondent. This was used but not always
due to its disadvantage which are beyond the scope of study. The interview
questions are presented in a simple and clear for also probing questions were
asked. Using this method information was easy to obtain from semi illiterate
customer and employees who could not read or write which can be analyzed to
that effect, and result can fulfill the research objective.
Also,
in addition to these, the documentary service information was adopted. This
includes related literature books, journals, symposium pamphlet and national
dailies. This is principally done to arrive at a dependable conclusion about
the study under review for the purpose of this study; the questionnaire that
will be used has the following features and characteristics.
Structure question:
The presentation of question to respondent with a alternative answer to the
questions and can be answer to the questions and can be answer basically by the
respondent through the indication of appropriate answer.
3.7
LIMITATION OF THE STUDY
Time
is the primary limiting factor in this research study. The study was started
very early but, due to the lectures and preparation for the examination delay
the smooth of gathering information.
CHAPTER
FOUR
DATA
PRESENTATION AND ANALYSIS
In
this chapter the information provided by the questionnaire is analyzed. The
questionnaire is divided into two parts. Section ‘A’ and section ‘B’. Section
‘A’ contains the personal characters of the respondent, like section ‘B’ are
questions designed to test the stated hypothesis.
SECTION
A
Sources
field work 2011
From
Table 4.1 shows that male respondents were 6o% while female respondents were
40% of the total number of respondents who has to questionnaire completed and
return.
TABLES 4. II AGES DISTRIBUTION OF
RESPONDENTS
Sources field work 2011
From
table 4.11 above the age distribution of the respondent shows that 25% of the
respondent are below 25 years, 35% are between 25-35 years, 30% are between
36-45 years, and 10o% of the respondent are 46 years and above.
TABLES
4. III DISTRIBUTION BY MATERIAL STATUS
|
MARITAL
STATUS
|
NUMBER
|
PERCENTAGE
|
|
Single
|
20
|
20%
|
|
Married
|
70
|
70%
|
|
Divorce
|
08
|
08%
|
|
Widow
|
02
|
02%
|
|
TOTAL
|
100
|
100%
|
Sources
field work 2011
From
Table 4.111 above, the marital status of the respondents shows that 20% of the
respondents are single, 70% are married, 8% are divorced, while 2% are widow.
Sources
field work 2011
From
table 4.iv above, the relevant working experience data of the respondent show
that 20% of the respondents hours below 5 years working experience, 60% have
between 10 to 15 years working experience, 6% have between 15 to 20 years
working experience and 4% have working experience of 20 years and above.
TABLE 4.V DISTRIBUTION BY
EDUCATION QUALIFICATION
Sources
field work 2011
From
table 4.v above the educational qualification of the respondent were equally
taken into consideration. The data shoot that the respondent who are holders
5.75 are 10%, 20% are holders of WAEC, GCE, Ordinary Level certificates, 25%
are holders of OND/HND, 35% are holders of B.S.SC, or MSC. and 1o% for others.
TABLE 4.VI SALARY DISTRIBUTION OF
RESPONDENTS
|
AGE
|
NUMBER
|
PERCENTAGE
|
|
01 – 04
|
25
|
20%
|
|
05- 08
|
35
|
35%
|
|
09 – 12
|
30
|
30%
|
|
13 and above
|
10
|
105
|
|
TOTAL
|
100
|
100%
|
Sources
field work 2011
From
table 4.VI above the salary destitution of the respondents show that 25% belong
to 01-04 level, 35% belong to the 05-08 level, 30% belongs to the 09-12 levels
while 10% of the respondents belong to the salary grade level 13 and above.
SECTION
B
The
hypothesis stated in various forms in the earlier chapter is now stated for the
reader to have a better understanding the analysis done for the lack up
adequate internal control system is responsible financial mismanagement in
government parastatals.
A.
The following questions were extracted from the questionnaire and analysis
below would give you more understanding of the chosen topic payment condersare
often passed without proper secreting of the various section a departments.
Sources
field work 2011
From
table IB above shows that 20% of the respondents strongly agreed with the above
statement (A), 25% only agreed, 15% were undecided [they don’t know whether to
agree or disagree] 20% disagreed while 20% strongly disagreed with the
statement. The second hypothesis to be stated is that there is incompletence
Using
the Chi-square {x2] statistical table, the following result obtained. The
observed data is divided into there main groups namely Agreed, Undecided,
Disagreed.
TABLE IIB
Sources
field work 2011
X2
= 5.03 Calculated with 5.03-1 = 4.03 degree of freedom, the critical value of
X2 using X2 table is 9.488. The calculated table is 5.03 while X2 road from the
table at 5% significance level is 0.488 or 9.49 since the calculated X2 is less
than the X2 from the table the hypothesis that lack of adequate internal’ control
system is responsible financial management in government parastatals.
(B) Misclassification of payment of vouchers are
common and undiscovered, because of lack of adequate of internal control
system.
Sources field work
2011.
From
table IIIB above shows that only 10% strongly agreed that misclassification of
payment vouchers are common and undiscovered, because of lack of adequate
internal control system, 20% agreed, 20% undecided, 15% strongly disagree while
35% disagreed.
(C) Most officer do
not have enough time to pay serious attention to check vital documents before
passing item for payment.
TABLE
IVB
Sources field work
2011.
From
the table VB above that 20% of the respondent strongly agreed, with the above
statement, 30% agreed, 25% were undecided, 15% strongly disagreed while 20%
disagreed with the statement.
(E)
People with authority in an
organization might exploit their authorities to there own advantages and to the
detriment of the internal control system.
TABLE
VB
Sources field survey
2011.
From
the table VB above shows that 20% of the respondent strongly agreed with the
above statement, 25% agreed, 15% undecided, 15% strongly disagreed, while 25%
disagreed of the respondent with the above statement.
The second hypothesis
to be stated is that there is incompetence of the part of the accountants and
auditors is responsible for the fraudulent management. The following
questionnaire were extracted from the question and analysis• and will give you
a clearer understanding on the chosen topic.
Qualified auditor are
not internated in working in government
establishment because merit system is lacking
TABLE
VIB
Sources field survey
2011
4.2
QUESTIONNAIRE AND HYPOTHESIS TESTING
To
determine the interest, weakness or otherwise of the techniques that are used
in the ministries, questions were asked as to:
i. The internal control system
ii. The design and effectiveness of the system
iii. Variance notice
iv. The corrective action taken to correct such
variance.
To
find out what the management is doing as to the training of accounting and
auditing staffs respondents were asked to provide formation as to:
i. The source and courses of unnecessary
expenditure
ii. The production irregularities and
malpractice which trained personnel could help to effect.
Questions
were also drafted to find out the degree of freedom that auditors have in
vouching and verifying accounts and fixed assets of the parastatals. The
questions were drafted with the ability of the respondent at the back of the
mind.
The question were not
pre-tested get the answers provide were direct and unambiguous which
demonstrated the understanding of the respondents.
This
aspect could deal with research problem which are variable in terms of asking
possible questions or statement about the hypothesis the following proposition
would be tested empirically.
Therefore
let Ho is NULL Hypothesis and Hi be ALTERNATIVE Hypothesis.
Hypothesis
state that Hi adequate internal control system is responsible for financial
management in government parastatals.
Ho:
Misclassification of payment of voucher
is common and undiscovered.
Hi:
Classification of payment of voucher is
common discovered.
HYPOTHESIS
III
Ho:
Most officer dose not have enough time
to pay serious attention to check vital documents before passing them for
payment.
HYPOTHESIS
IV
Ho:
It is not possible for two or more
people to collide and by pass the internal control system and defraud.
Hi: It is possible for two or more people to
collide and by pass the internal control system and defraud.
HYPOTHESIS
V
Ho: People with authority in an organization
might exploit their authorities to their own advantage and to the determent of
the internal control system.
Hi
: People with authority in an
organization might not exploit authorities to their own advantages.
4.3
DATA ANALYSIS
This
investigation was conducted and the research carried out to know the
effectiveness of internal control system in government parastatals, but focus
is primarily laid on a National Teachers Institute.
More
so, this section will briefly explain the analyses that data collected and
presented in the previous section of this chapter. The perse is wider in scope
but for the internal finances it will be borrow analyzed. To start with the
table 4.1, presented the data by using chi-squares (X2) statistical
to the assumption that most of the accountant and auditors in government
parastatals rose through the wrote with any formal training in accounting and
auditing the observed data is reduced to three major groups namely [Agree, Undecided,
and Disagree].
X2 = ∑ (O
-∑)
∑
Where
0 = Observe frequency
∑ = Expected frequency
Sources
field work 2011’.
X2 = 6.00
With
6.oo — 1 = 5.00 degree of freedom, the critical value of X2 using X2
table is 11.070 or 11.07. The calculated X2 is 6.00, while the X2
read from the table at 5% significance level is 11.07 since the calculated X2
is less than X2 from the table. The hypothesis that incompetence on
the part of the accountant auditor is responsible for the fraudulent
mismanagement.
4.4
INTERNAL AUDIT IN GOVERNMENT PARASTATALS
According
to the revised financial regulation which is the financial authority for
government establishment, the existence of an internal audit unit in a
ministry/parastatals does not direct any member of staff of their individual
responsibilities placed upon time neither does it obviate the necessity for
normal departmental checks.
From
the above statement, it can be seen clearly that both internal checks and
internal audit existing side by side are meant to compliment one another in order
to attain the objectives of effective internal control.
Furthermore,
in other to facilitates effectives internal control, the auditor in charge will
ensure that the programme of audit will extend to cover all the records of the
ministry, department parastatals or unit in order to satisfy himself that:
a) The safeguards introduced for the prevention
for the prompt defection of fraud and loss of cast or stores or plan are
adequate.
Normal safeguards
include the observed of government and parastatals regulation and instruction
checks.
b) The systems for the control of the
collection of revenue is adequate and that all the money received have been
promptly brought to account to the correct code.
c) The system for the control of expenditure is
adequate and that all payment made are properly authorized and correct, that
they are paid to the right person from the correct code that they are made for
the purpose for which they were authorized.
d) The system for the control of the issue and
consumption of stores is adequate, that all issue are properly authorized and
correct, that issue are made to the right person and used for the purposed for
which they are authorized there are adequate means for the verification by him
of cash, store, and plants held.
The
accounting records are proper and accurate. There is no doubt, therefore that
if all the safeguard are observed financial malpractice will be reduced
drastically.
4.5
FINDINGS
The findings are
confirmed in the project revealed that there are some areas of operation that
could be improved upon nation news qualitative teacher and teacher’s needs
training in the area of modern material.
i. Modern Machine and
Computer
It is paramount unfortunate to provide
modem machine and computer to replace the aspect of operation which is still
manually operated with modern qualities work will be made easier and faster
which will lead to teacher effectiveness.
ii. Evaluation of
effectiveness of internal control system in government parastartals.
iii. In the area of
modern materials handling equipment and handling technique this will enhance
effective performance of the teacher in the nations.
CHAPTER
FWE
SUMMARY,
CONCLUSION AND RECOMMENDATION
5.1
SUMMARY
The
propose of the study is to examine the weakness inherent in the administration
of the internal control system on government parastatals and how they affect
the disrobement of government funds. Consequently, the following hypothesis
were formulated.
i. Incompetence on the part of the
accountants on auditor in responsible for the perpetuation of fraudulent
malpractice.
ii.
Lack of adequate internal control
system is responsible for the financial malpractice in government parastatals.
The
hypothesis were tested using the chi-square statistical table in conjunction
with the relevant research question and responses from the respondents, Ho
result of the test shows that lack of adequate internal control system and
incompetence on the part of the accountants an auditor in government
parastatals are responsible for the large scale financial malpractice. The
recommendations that follows are designed to enhance the efficiency of the
internal control system and resultant effective and efficient management in
government parastatals.
5.2
CONCLUSION
From
the data collected and analyzed one can easily conclude that lack of adequate
internal control system and incompetence on the part of accounts and auditors
are responsible for financial mismanagement in the government parastatals.
Nevertheless,
if Ho recommendation provided in this research work are adhered to the symptoms
of financial mismanagement in government parastatals can be minimized, cured,
or presented to a considerable degree.
5.3
RECOMMENDATION
There
is need for auditing where by auditors has to trace a transaction from source
document through the accounting circle to ensure that there is proper
accounting process for all transactions entered into. An officer should not be
retained for too long on a particular schedule; a maximum of two years is
recommended fraudulent malpractice staff development should be intensified.
Those staff that has never had any formal training in accounting and auditing
should be encouraged to go for training so as to faster efficiency and
effectiveness in the internal control system. The internal checks already in
existence must improved a responsible and well trained officer should check at
irregular interval and to ensure that there is compliance with those existing
checks payments and remuneration of employees.
REFERENCES
MILLICAMP. A.H.
[1987]: Auditing “An Instructional
Manualfor Acrountirig Student” Lagos,
ELBS. 4TH Edition Longman Nigeria Limited. Page 148, 149.
COULDERY F.A.F.
[1979]: Accounting Standard Study Book, London,
2nd Edition, Pitman Publication. Page 172, 184.
PAULA. L. AND ARTWORK
[19991: Auditing Principle and Practice,
Benin City,
[Geo 1679 Lord] New Era publication.
LESLIE. R. HOWARD [1998]:
Auditing Mac-Donald and Evers Lagos,
2nd Edition, Spectrum Book Limited Page 102,107.
OLOREDE
J.A.
[1999]: Effective Internal Control System in a
Banking
Environment Abuja,
Unpublished Paper Presented a 3
Days
Workshop for People Bank at National Women
Development
Centre Page 3-6.
AQUALSUA F.O.
[2005]: Auditing and Investigation Kaduna,
First Edition, D’ Lord Printing and Publishing Ltd. Page 143
SAMTOCK J.
[1979]: Auditing a Conceptional and System Approach, Lagos, First Edition, Polytechnic Publisher,
Page 48.
FERDINERD .J. OLUSANJO
[1985]: Auditing and Investigation Ibadan, a Comprehensive Approach, Gbabeks.
Publishers Limited Page 77, 82.
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