INTERNAL AUDIT FUNCTION AND FINANCIAL CONTROL IN LOCAL GOVERNMENT

INTERNAL AUDIT FUNCTION AND FINANCIAL CONTROL IN LOCAL GOVERNMENT. CASE STUDY OF LOCAL GOVERNMENT IN YOBE STATE.

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CHAPTER ONE

INTRODUCTION

  • Background to the Study

The internal audit function plays a crucial role in enhancing financial control in local government in Nigeria. According to Okezie and Nwankwo (2018), the internal audit function is a critical component of governance that ensures the effective management of resources and accountability in the public sector. The authors argue that the internal audit function is instrumental in identifying and mitigating risks associated with financial management in local government.

A study by Ojeka, Iyoha, and Obigbemi (2016) further emphasizes the importance of the internal audit function in local government. The authors found that the internal audit function significantly influences financial control measures, such as budgeting, financial reporting, and internal control systems. The study suggests that an effective internal audit function can enhance the transparency and accountability of financial management in local government.

However, the effectiveness of the internal audit function in local government in Nigeria has been questioned. A study by Adeyemi and Salami (2011) found that the internal audit function in many local governments in Nigeria is not independent and is often influenced by political interference. This lack of independence undermines the effectiveness of the internal audit function in enhancing financial control.

In addition, a study by Okoye and Ani (2016) found that the internal audit function in local government in Nigeria is often understaffed and lacks the necessary skills and competencies. The authors argue that this lack of capacity hinders the effectiveness of the internal audit function in enhancing financial control. They recommend that local governments in Nigeria should invest in capacity building to strengthen the internal audit function.

Despite these challenges, there are efforts to strengthen the internal audit function in local government in Nigeria. For example, the Nigerian Institute of Internal Auditors (NIIA) has been advocating for the professionalization of the internal audit function in the public sector (NIIA, 2019). The NIIA argues that professionalizing the internal audit function can enhance its effectiveness in enhancing financial control.

The internal audit function plays a crucial role in enhancing financial control in local government in Nigeria. However, there are challenges that undermine its effectiveness, including political interference and lack of capacity. There is a need for concerted efforts to strengthen the internal audit function in local government in Nigeria to enhance financial control.

  • Statement of the Problem

The problem of internal audit function and financial control in local government in Nigeria is a multifaceted issue that has been the subject of numerous studies. The internal audit function is a critical component of financial control in any organization, including local government. It is responsible for ensuring that financial transactions are carried out in accordance with established procedures and regulations, and that resources are used efficiently and effectively (Ojeka, 2011).

However, in Nigeria, the effectiveness of the internal audit function in local government is often compromised by a variety of factors. One of the most significant is the lack of independence of the internal audit function. In many cases, the internal auditors are directly under the control of the local government executives, which can lead to conflicts of interest and compromise the objectivity of the audit function.

Another major problem is the lack of adequate training and professional development opportunities for internal auditors in local government. This often results in a lack of technical competence, which can undermine the effectiveness of the audit function (Adeyemi & Salami, 2008). In addition, there is often a lack of adequate resources and support for the internal audit function, which can further compromise its effectiveness.

The consequences of these problems are significant. They can lead to financial mismanagement, corruption, and a lack of accountability in local government. This, in turn, can undermine public trust and confidence in local government, and hinder the delivery of essential services to the public (Adeyemi & Salami, 2008).

There is a need for further research to identify effective strategies for improving the internal audit function and financial control in local government in Nigeria. This could include studies on the impact of different models of internal audit function, the role of professional development and training for internal auditors, and the impact of increased resources and support for the internal audit function (Ojeka, 2011).

The problem of internal audit function and financial control in local government in Nigeria is a complex and pressing issue. It is a problem that requires urgent attention and action, and one that has significant implications for the effectiveness and integrity of local government in Nigeria.

Aim and Objectives of the Study

The aim of the study is to examine Internal audit function and financial control in local government. The specific objectives are:

  1. To examine the role of internal audit in enhancing financial control in local government.
  2. To investigate the effectiveness of the internal audit function in detecting and preventing financial irregularities within local government.
  3. To assess the level of independence and objectivity of internal auditors in local government.
  4. To evaluate the impact of internal audit reports on the financial management decisions in local government.

 Research Questions

The research questions are buttressed below:

  1. What role does the internal audit play in enhancing financial control in local government?
  2. How effective is the internal audit function in detecting and preventing financial irregularities within local government?
  3. What is the level of independence and objectivity of internal auditors in local government?
  4. How does the internal audit report impact financial management decisions in local government?
  • Research Hypothesis

The hypothetical statement is buttressed below:

Ho:  Internal audit will not enhance financial control in local government.

H1:  Internal audit will enhance financial control in local government.

 1.6 Significance of the Study

The significance of the study on the internal audit function and financial control in local government is multi-faceted and far-reaching. The internal audit function is a critical component of any organization, including local government. It provides 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. Therefore, studying this function in the context of local government can provide valuable insights into how these entities manage their resources and achieve their objectives.

Secondly, the study of the internal audit function and financial control in local government is significant because it can help identify potential weaknesses or areas of improvement in the current system. By examining the existing processes and controls, the study can highlight areas where there may be inefficiencies or vulnerabilities to fraud or mismanagement. This can then lead to recommendations for improvements, which can enhance the overall effectiveness and efficiency of the local government.

Thirdly, the study is significant because it can contribute to the body of knowledge on public sector auditing and financial management. This can be particularly useful for other local governments, auditors, and researchers who are interested in this field. The findings and insights from the study can be used to inform best practices, develop new methodologies, or guide future research.

Fourthly, the study can have practical implications for local government officials and employees. By understanding the role and importance of the internal audit function and financial control, they can better appreciate the value of these activities and support their implementation. This can lead to a stronger culture of accountability and transparency within the local government, which can enhance public trust and confidence.

Fifthly, the study can also have implications for policy-making. The findings can inform the development of policies or regulations related to internal auditing and financial control in local government. This can help ensure that these entities have the necessary frameworks and mechanisms in place to effectively manage their resources and deliver public services.

Lastly, the study is significant because it can help promote good governance and financial stewardiness in local government. By highlighting the importance of the internal audit function and financial control, the study can encourage local governments to prioritize these activities and invest in their capacity and capabilities. This can lead to better financial management, which can ultimately benefit the communities that these local governments serve.

  • Scope of the Study

The study examines the internal audit function and financial control in local government. The case study is a selected local government in Yobe State.

 1.8. Operational Definition of Terms

  1. Internal Audit: This is a function within an organization, performed by its own staff or by an external firm, designed to review the organization’s operations. This includes evaluating and improving the effectiveness of risk management, control, and governance processes. It’s a way of making sure the organization is complying with relevant laws and regulations, and that its own internal policies and procedures are being followed.
  1. Function: In the context of an organization or business, a function refers to a specific area or department that performs a set of related activities. For example, the finance function would be responsible for managing the company’s money, while the human resources function would handle employee-related matters.
  1. Financial Control: This is a business practice aimed at managing a company’s financial resources, ensuring efficiency, and preventing fraud. It involves the implementation of various policies and procedures, such as budgeting, risk management, and financial reporting, to ensure the company’s financial health and stability.
  1. Local Government: This refers to the lowest level of government within a country, typically responsible for administering areas such as cities, towns, counties, or districts. Local government responsibilities can vary greatly, but often include services like public transportation, parks and recreation, and waste management. They also play a role in local planning and zoning, public safety, and public health initiatives.

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INTERNAL AUDIT FUNCTION AND FINANCIAL CONTROL IN LOCAL GOVERNMENT. CASE STUDY OF LOCAL GOVERNMENT IN YOBE STATE.