2. Journal of Emerging Trends in Economics and Management Sciences (JETEMS) 2(4):302-309 (ISSN:2141-7024)
OBJECTIVES OF THE STUDY audit to ensure adherence to these instructions by
The objectives of the study are as follows; personnel involved in public sector administration.
• To find out whether Internal Audit According to Howard (1998) it is appropriate to
Departments of the Public Sector in Kano contrast the public sector with that of private sector.
State are adequately staffed to check fraud To the former, the main objective of the enterprise in
and fraudulent activities in such Ministries. principles is not to make profit but render services.
• To finding out the persistent existence of Nwanyawu (2002) opined that public sector auditing
frauds and fraudulent activities in ministries means independent examination of and expression of
despite the existence and adequate opinion on the financial statements of government
functioning of Internal Audit Departments. establishment, by appointed auditor in pursuance of
that appointment and in compliance with the enabling
SIG IFICA CE A D SCOPE OF THE STUDY constitution. The final accounts in the public sector
There is the need for the internal audit to be effective especially for the Federal, State and Local
so as to create improvement in the government government are classified into funds, including:
parastatals. Positive improvements in the public a. Consolidated Revenue Fund
sector will definitely benefit the citizenry of the b. Development Fund
Nigerian nation. The research was based mainly on c. Treasury Fund
the Kano State ministry of finance Kano, Kano State d. Special and Trust Funds
auditor-General’s office Kano, and Internal Audit e. Contingency Fund.
departments in the Public Sectors of Kano State
Government. Decisions and conclusions were only Vos (1997) said that objective of internal auditor is to
based on the views expressed by respondents and no evaluate effectiveness of financial and operating
special investigations were conducted in addition. control, confirm compliance with company policies,
procedure, protect assets verify the accuracy and
RESEARCH HYPOTHESES consistency of organization’s external and internal
In order to achieve the stated objectives, the reports. Stoner (1994) was of the opinion or view that
researchers stipulated the following null hypothesis; the objective of internal audit is to evaluate several of
HO1: Significant numbers of Public Sector the organization’s reports for accuracy and usefulness
Departments do not have internal audit units. and also recommending improvement of the control
HO2: Internal audit cannot effectively check fraud system. Owler and Brown (1999) stipulated that the
in Kano State public sector. objective of internal auditor is to protect management
HO3: There are no significant reasons for the against errors of principle and neglect of duty. Barker
persistent of fraud and fraudulent activities in (1999) agreed with Owler and Brown but added that
Kano State Public Sectors save the it is to review the operations and record of the
inadequate staffing and insignificant numbers undertaking and in the course of these checks much
of public sector audit departments. of the detailed work of the organization in respect of
financial and other statements are effectively audited.
THEORETICAL FRAMEWORKS Tracey (1994) is of the view that it is the
Unegbu and Obi (2007) defined internal audit as part responsibility of the internal auditor to review how
of the Internal control system put in place by well the accounting system works and also evaluate
management of an Organization to ensure adherence the effectiveness and efficiency of many operations in
to stipulated work procedure and as aid to the organization. A lot of public sector has been
management. According to Unegbu & Obi (2007) operating without internal auditor. This can be
Internal audit “measures, analyses and evaluates the attributed to the fact that few people outside the
efficiency and effectiveness of other controls accounting profession realize the importance of the
established by management in other to ensure smooth internal auditor. Emphasis was laid on discharging
administration, control cost minimization, ensure accountability for the use of owners fund through the
capacity utilization and maximum benefit derivation. internal auditor report. Some public sector
In the view of Adeniji (2004) Internal audit is part of management adduces the argument that internal
the internal control system put in place by auditors, being employees in public sector do not
management of an organization. It is an aid to have the liberty to exercise the unbiased and
management; it ensures that the financial operations independent attitude so necessary to an auditor.
are correctly carried out according to the law and also
in accordance with the wishes of the board or council. Roles and Duties of Internal Auditor
Internal audit is a branch of management, which Internal auditors owe a responsibility to the
enables compliance with established financial management and the board, providing them
instructions on expenditures. In order to achieve with information about the adequacy and
agreed objectives, public sector officers must incur effectiveness of the sector’s system of internal
expenses in line with established financial control and the quality of performance.
instructions. It is the responsibility of the internal
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3. Journal of Emerging Trends in Economics and Management Sciences (JETEMS) 2(4):302-309 (ISSN:2141-7024)
The internal auditor ensures adherence to all decisions and the formulation of long range
financial, personnel, lending, data processing, plans.
the other administrative policy and procedure 3. The external reporting mainly for credibility
as well as the economy, efficiency and purpose before external entities, government,
effectiveness with which resources are used. financial houses, foreign creditors especially
Internal audit serves a major management for legislation and decision on lending and
control tool are to provide an assurance to investment activities.
management that the financial information
furnished to management to aid decision Management Control in Public Sector
making is reliable, accurate and based on In the eye of Woolf (1986) the public sector is
reliable records and where otherwise to draw primarily composed of non-profit making
the attention of management to deficiencies in organizations. Management control in its broadest
the organization or system of internal control context is the means by which an organization carries
and to highlight areas of management practices out its objectives effectively and efficiently. Public
requiring corrective actions. sector management can be generally distinguished as
having hierarchical structures composed of
Other responsibilities are: responsibility centers, units, sections, departments
To review, evaluate and report on the and divisions. Central government department, the
adequacy or otherwise of financial control natural health services depend directly on the
framework existing in the agency and its exchequer for all their funds. If changes are made for
efficiency in assuring property, prudence, certain services they are usually nominal and have a
completeness and accuracy of the agency’s little impact on the level of services offered.
activities and transactions. Autonomous bodies are subjected to high degree of
To carry out a complete and continuous Central government control. Local government
auditing of the accounts and records of authorities receive by far the largest proportion of
revenue, expenditures, plant, stores and their funds through the rate support grant or
other property. allocation. They can equally raise revenue locally,
To evaluate whether actual performance is primarily by levying rates; the extent of their power
within the established financial control is strictly monitored by central government.
framework (compliance auditing). Therefore, the management and control of the public
purse is the heart of government administration. The
According to Johnson (1996) General duties of an internal audit reports directly to the chief executive,
internal auditor in the public sector management the financial regulations, however, enjoins the chief
include the following: executive of each ministry to ensure that the
a. An audited copy of a statement of the accounts accounting and finance functions and internal audit
is to be submitted in a prescribed form functions are placed under the direct control of
together with any report to the appropriate suitable competent accountants.
minister or secretary of state who in turn
presents the accounts before the National
Assembly. Economic Implications Of Ineffective Internal
b. The auditors must state whether the accounts Auditing System In The Public Sector
in their opinion give a true and fair view of the Management
operation affairs. The dramatic collapse of the global stock markets and
c. The auditor must state whether the accounts subsequent economic crises with its impacts, which
give all the information required under accompanied it, resulted in a sharp concentration in
enabling statute. both public and private sector established in Nigeria.
d. The auditors will normally report if they are For an economic development of any public sector to
not satisfied with any aspects of the financial be put correctly as well as guard the pattern its
statements. revenue and expenditure, a proper record of the
expenditure items must be kept. The effectiveness of
Purposes of Auditing System in A Public Sector auditing System can be reinforced. Economically,
Management internal auditing is meant for internal consumption
There are three major types of report that are with varying socio-economic benefits. In Public
basically germane for auditing purposes. These are Sector according to Azubike (2002), internal control
for: is highly effective in increasing the reliability of
1. The internal reporting to managers for accounting data and in protecting against fraud. The
purposes of planning and control of current economic implications of an ineffective auditing
and anticipated operations. system in a public sector management are the
2. The internal reporting to chief Executives and negative aspects of the positive development of the
Directors or Managers for institutional policy auditing system such as:
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4. Journal of Emerging Trends in Economics and Management Sciences (JETEMS) 2(4):302-309 (ISSN:2141-7024)
i Inability to plan effectively due to the Privileges Of Office: The lack of adequate
availability of unconfirmed financial remuneration and pre-requisites of office has
operations of the enterprise in past years. made some internal auditors to compromise
ii. Inability to make effective financial their positions in favor of fraud stars.
decision. Hazards Of Office: Another factor, which
iii. Lack of credibility of enterprise before impairs internal audit efficiency, is the
external entities-government financial hazards that stare the honest and principled
house, creditors etc. internal auditor in the face there are reported
iv. Inadequacy of information about the cases of assassinations, burglary, native
enterprise’s assets. medicine and acid attacks on the lives and
v. Inability of the enterprise to rely on any properties of internal auditors.
proper statement on past, current and
proposed future balance sheet on revenue, RESEARCH METHODS
revenue sources, expenditure items, profits Brief on the Population of study:
and losses. Kano State is located in North-Western Nigeria.
vi. Difficulties in controlling the financial Created on May 27, 1967 from part of the Northern
operations of the enterprise. Region, Kano state borders Katsina State to the
vii. There is the possibility of the emergence of north-west, Jigawa State to the north-east, and Bauchi
fraud. and Kaduna states to the south. The capital of Kano
viii. Inability to detect easily the compliance of State is Kano. The ministry of finance is charged with
enterprise financial accounts with the the responsibility of formulating and implementing
requirement of law. the financial, monetary and overall development plan
policies of the state Government. It is also
Reasons for ineffectiveness of internal auditing in the responsible for the collection, safekeeping and
public sector management are as follows. disbursement of Government funds in such a way that
Lack of Audit Manual: The absence of efficiency in the utilization of the financial resources
standard internal audit manual and detailed is enhanced just as it collects and analyzes vital
audit work plan will affect the quality of statistics for rational decision-making. The following
audit work particularly for internal auditors parastatals are under the supervision of the ministry:
who are either non-accountants or non- i. Kano State Investments and Properties. Ltd
qualified accountants. (ksip)
on-Career Auditors and Lack of ii. Board of Internal Revenue
Growth Prospect: Most internal auditors iii. State Pension Board
who are professionally qualified accountants iv. Kano State Computer Center
have been prevented from ascending to
levels or status that are equivalent to those DATA COLLECTIO A D A ALYSIS:
held by their professional colleagues in the The researchers made use of questionnaires. The
finance/accounts department. This gives techniques used in analyzing the collected data is chi-
such colleagues in the accounts department square statistical tool with SPSS version 16 based.
an advantage and a feeling of superiority to Five hundred and eighty questionnaires were
the internal auditor hence they stifle with administered, half each to willing and available
imparity the process of information flow to Accountants and Auditors of various levels in the
the auditor and makes available only thing Public Sector of Kano State. A total of five hundred
they want the auditor to see. and ten questionnaires were turned in and correctly
Reporting Structure and Professional filled.
Independence: The internal auditor used to
be a unit of the accounts department in the A ALYSIS OF DATA A D HYPOTHESIS
past but to ensure a level of independence, TESTI G:
they were made to report directly to the To test hypothesis 2 which states that internal audit
Chief Executive. The change however cannot effectively check fraud in the public sectors,
negatively impacted on Public Sectors as we used the result from question one, the data which
most Chief Executives are political office- appeared in table 1 below;
holders, having no permanent interests and
leading to non-commitment to internal audit Table I. Can the internal auditor effectively check
reports. fraud in the public sector management?
Scope of Work: The absence of a proper Categories Responses Total
definition of the duties, rights, privileges and Yes No
Auditors 153 102 255
limitations of the internal auditors also Accountants 191 64 255
inhibits the satisfactory performance of his Total 344 166 510
duties.
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Testing of hypothesis 11: Internal audit cannot Outcome of Question 2 and testing of hypothesis
effectively check fraud in the public sectors 1:
To test the stated hypothesis, we made use of Table 4: The internal audit department does not
Pearson’s Chi-square statistical tool, using SPSS significantly exit in the public sector?
based program. The result appeared as seen in tables Categories Responses Total
2 and 3. Yes No
Auditors 153 102 255
Accountants 64 191 255
Table 2: Answers from Respondents – Crosstab of Total 217 293 510
Effectiveness of Internal Audit
Table 5: Crosstab of the Significance level of exists of Internal
Frequencies Audit Department in the Public Sector
64 102 153 191 Total Frequencies
Answers Yes Count 0 0 153 191 344 64 102 153 191 Total
Expected Answers Yes Count 64 0 153 0 217
43.2 68.8 103.2 128.8 344.0
Count
Expected
% within 100.0 100.0 27.2 43.4 65.1 81.3 217.0
.0% .0% 67.5% Count
Frequencies % %
% within
% of Total .0% .0% 30.0% 37.5% 67.5% 100.0% .0% 100.0% .0% 42.5%
Frequencies
No Count 64 102 0 0 166 % of Total 12.5% .0% 30.0% .0% 42.5%
Expected No Count 0 102 0 191 293
20.8 33.2 49.8 62.2 166.0
Count
Expected
% within 100.0 100.0 36.8 58.6 87.9 109.7 293.0
.0% .0% 32.5% Count
Frequencies % %
% within
% of Total 12.5% 20.0% .0% .0% 32.5% .0% 100.0% .0% 100.0% 57.5%
Frequencies
Total Count 64 102 153 191 510 % of Total .0% 20.0% .0% 37.5% 57.5%
Expected Total Count 64 102 153 191 510
64.0 102.0 153.0 191.0 510.0
Count
Expected
% within 100.0 100.0 100.0 100.0 100.0 64.0 102.0 153.0 191.0 510.0
Count
Frequencies % % % % %
% within
% of Total 100.0 100.0% 100.0% 100.0% 100.0% 100.0%
12.5% 20.0% 30.0% 37.5% Frequencies
%
% of Total 12.5% 20.0% 30.0% 37.5% 100.0%
Table 3: Chi-Square Tests of effectiveness of Internal
Audit to check fraud in the Public Sector Table 6: Chi-Square Tests of the Significance level of
existence of Internal Audit in the Public Sector.
Asymp
. Sig. Exact Asymp
(2- Exact Sig. Sig. (1- Point . Sig. Exact
Value df sided) (2-sided) sided) Probability (2- Sig. (2- Exact Sig. Point
Value df sided) sided) (1-sided) Probability
Pearson Chi-
5.100E2a 3 .000 .000 Pearson Chi-
Square 5.100E2a 3 .000 .000
Square
Likelihood
643.558 3 .000 .000 Likelihood
Ratio 695.642 3 .000 .000
Ratio
Fisher's Exact
623.203 .000 Fisher's
Test 674.858 .000
Exact Test
Linear-by-
Linear 4.196E2 b
1 .000 .000 .000 .000 Linear-by-
Association Linear 68.706b 1 .000 .000 .000 .000
Association
N of Valid
510 N of Valid
Cases 510
Cases
Discussions of the Result of Hypothesis 2:
From the result of table 3, which shows that p < 0.05 Discussions of the result of hypothesis 1:
meaning that the outcome is significant, we therefore Though the Crosstab outcomes of hypotheses 1 and 2
reject the null hypothesis. The null hypothesis states differed, their outcome of chi-square tests seems the
that internal audit cannot effectively check fraud in same. As the result showed that p is significant, we
the public sectors, is hereby rejected because the reject the null hypothesis which states that significant
significance level of the result is very high. numbers of Public Sector Departments do not have
internal audit units.
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6. Journal of Emerging Trends in Economics and Management Sciences (JETEMS) 2(4):302-309 (ISSN:2141-7024)
Testing of Hypothesis 3: operations and electronic data processing because of
The data for this which were collected for the test of the impact, which the advent of computer has made
hypothesis 3 came of the question which asked in our lives. It is envisaged that some task such as
respondents to list reasons for persistent existence of salary preparation, pension accounts, automation of
fraud and fraudulent activities in Kano State Public vote book recording and many other could be tapped.
Sectors despite the presence of internal auditors in In a system where manpower or manual operation are
those offices. The collected data appeared as depicted in use as it is a known fact, auditors are expected to
in table 7 operate at a tolerable level of performance for total
system to run properly. Therefore training personnel
Table 7: Frequency table of reasons for the persistent as well as other training infrastructure becomes an
existence of Fraud and Fraudulent activities in Kano important ingredient in the successful operation of
State Public Sectors other than inadequate staffing & control in such government parastatals, public sector
insignificant numbers of Public Sector audit organizations are carried out periodically in order to
Departments identify weaknesses in executing responsibilities and
S/N Reason Frequency of make recommendations for improvements such
Assertions reviews should either be weekly, bi-weekly or
1 Internal Audit Reports are hardly considered 300
for decisions by Management monthly. Heads of internal audit unit should be in
2 Lack of existence and knowledge of EDP, 200 attendance at top management meetings to be aware
Computer and Computer Aided Audit of policies affecting organizational objectives.
programs in the Public Sector audit
departments
3 Lack of progressive career structure and 350
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