1.1 BACKGROUND OF STUDY
Very large organization and some small ones have found a need for internal audit in addition to an external audit. Internal auditors are employee of the organization and work exclusively for the organization. Their functions partly overlap those of the external auditors and in parts are quite different. The precise function of external auditors are either laid down by statute or embodied in a letter of engagement. The functions are determined by management and vary greatly from organization to organization. Internal audit defined as an independent appraisal functions established by the management of an organization for the review of the internal control system as a service to the organization. It objectively examines, evaluate, and report on the adequacy of internal control as a contribution to the proper economic, efficient and effective use of resources.
A) Internal audit is thus: i. Having the scope to arrange his own priorities and activities. ii. Having unrestricted access to records, asset and personnel’s. iii. Internal audit personnel with an objective frame of mind set. iv. Freedom to report to higher management and where it exists to an audit committee. v. Internal audit personnel who have no conflicts of interest or any restriction placed upon their work by management. vi. Internal audit personnel have no responsibility for line work or for new system. A person cannot be objective about some things he or she has taken responsibility for. On the other hand the internal audit should be consulted on new or revised system. vii. Internal audit personnel who have know non audit work.
Since internal auditors employee is difficult to ensure that they are truly independent in mind and attitude. B) as a service to the organization, the organization, the management requires that: i. Its policies are fulfilled ii. The information is required to manage effectively and should be and complete. This information is not only that provided by the accounting system. iii. The organization assets are safe guard. iv. The internal control system is well designed. v. The internal control system work in practices vi. The internal auditor’s activities will be directed to ensure that these requirements are met. C) Other duties may include: i. Being concerned with the implementation of social responsibility policies adopted by top management. ii. Being concerned with the response of the internal control to errors and requires changes to prevent error. iii. Being concerned with the response of the internal control system to external stimuli. The world does not stand still and the internal control must continually change. iv. Acting as a training oicer in internal control matters. v. Auditing the information given to management particularly interim accounts and management accounting report. vi. Being concerned with compliance with external regulations such as those on the environment, money laundering, financial services, and related parties. etc.
1.2 STATEMENT OF PROBLEMS
Internal audit is an integral part of the internal control system of most organizations, at the heart of an organization is the audit function: This is evidenced by the fact that all other departments are linked with internal audit department. The importance of internal audit system cannot be overemphasized, since organizations have recognized internal audit function as a tool for ensuring effective workings of the internal control system. However, in Nigeria, the audit function in most government parastatalss has not been fully taped. This could be seen in the numerous cases of errors, intent to defraud and other fraudulent acts that exist in the government parastatals. It is therefore, no wonder that the anguish in such parastatals in the nineties reflected lack of effective control mechanism of the audit function in the organization. The experience of low productivity of some public enterprises in Nigeria has called for reinforcement of audit and the strengthening of the control system in the public sectors. It is against this background that, this study seeks to evaluate the internal audit as a tool for efficient performance in organizations in Nigeria considering the fact that, the public enterprises are critical to the survival of any economy.