Internal Auditing in the Effecting Management Control in Government

Internal Auditing in the Effecting Management Control in Government

Internal Auditing – The aim of this chapter is to review and briefly discuss the relevant literature in the area of research investigation. C. Settiz et al acknowledged the fact that reviewing the works of expert is necessary for a sound knowledge of a particular study when he argued that one of the ways of economizing efforts in an inquiry is to review and build upon word already done, in order to appreciate the recent trends in internal auditing in the local government circle in Nigeria. i consider the federal government pronouncement in this correction as recorded in the financial memorandum and guidelines on the application of the civil servants reforms in the local government service.

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An internal audit unit shall be set up in each local government under the internal auditors which shall be directly responsible to the local government council for the performance of his duties. The financial memorandum clearly spelt out the duties of the internal audit as follows:

The internal audit shall be responsible for carrying out an independent appraisal of the accounting financial and other processes of the local government with objectives:

  1. To assist in protecting the assets and inherent of the local government by carrying out a continuous examination of activities in order to detect fraud, misappropriation, irregular expenditure and losses due to waste, extravagance and non-administration.
  2. To ensure the continued maintenance of soundly based system of control within each area of departmental responsibility.
  3. To review and where necessary, make recommendations for the improvement of systems, control procedures to ensure that they are both efficient and effective, and that they remain adequate in the light of changing circumstances and are adhere to in practice.
  4. To monitor the use of resource in the pursuit of the defined objective of the local government.

Akuanyiom on a paper presented to local government clerical officers (accounts) at the community center, Awgu, on the 28th June 1990 maintained that though the above financial institution came into force in 1976, the behaviors and attitude of the persons who operated the local government resulted in many local government not setting up internal audit unit or if set up, they were not functional. The federal government has set in motion real wave of change in 1998. A new frame work of internal auditing in the local government is consequently, described in the guidelines as summarized in part as follows; “There shall be established in each local government an internal audit unit headed by a qualified accountant to provide a complete and continuous audit of the accounts and records of revenue, expenditure, plant allocated and allocated stores where applicable.

The guidelines further stated that: “the internal audit of each local government shall be directly responsible to the accounting officer. He shall submit to the accounting officer and the auditor general of local government a detailed audit programme, and therefore, he shall report monthly to them on the true progress of the audit.”

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The guideline also spelt out the role of the audit alarm committee and established the work of the audit alarm committee shall be facilitated by the following officials.

  1. Secretary to the local government.
  2. Treasurer to the local government
  3. Head of internal audit.

Nzeribe 1991, maintained that the internal audit of the local government should be concerned with the following:

  1. Control of cost
  2. Detection of errors
  3. Detection of errors and prevention of fraud
  4. Detection of errors and errors of principle
  5. Means of distribution of social amenities to local government areas.

She maintained that the internal audit is the most powerful instrument of reducing most forms of larceny and embezzlement, as well as falsification of documents and records. In her opinion, the prevention of fraud is of course, one of the more obvious justifications for a system of internal check, since increasing the risk of detection is by far the means of preventing it. There must be in all class an established system under which the internal audit must operate. This is generally known as “standard procedure” the aim of the “standard procedure” applied within the framework prescribed by the object clause establishing the local government; provide the internal auditors with terms of reference.

The work of the internal auditor is a delicate one. The internal auditor must be independent and responsible only to the top management. In many cases, the internal auditor should be responsible to the local government treasurer. Treasurer is probable the most desirable attribute of internal audit staff of all grades.

Although the internal audit staff should be removed from the ordinary day to day work of the undertaking. They must maintain co-operative independence of thought and action. Unless this special relationship is observed, the purpose of internal audit becomes somewhat blurred. Chinedu Nwoko in his article in July/September 1995 issue of Nigerian accountant described the role of an internal auditor to any organization as that of a “WATCH DOG” to his master.

He was of the opinion that the dogs were trained for the purpose and as such protects the masters property from passers-by becoming “hostile, barking and possibly attacking any stranger fellow that attempts to trespass on the property….. the watchdog function is centered around prevention” Mr. Nwoko summarized the important characteristics of the watchdog as follows and likened it to that of the internal auditors:

  1. The dog is present during the action or transaction.
  2. Its main function is to prevent, not to detect. It is not a blow bound;
  3. It is the employment of its master to whom it reports.

Nwosu, writing in the Nigeria Journal of Republic Administration and local government, volume I, number I of June 1998 an the need for an effective internal audit control system in the Nigeria local government councils, maintained that the poor financial positions of the most of the local government councils and the increased economic problems facing Nigeria, as manifested in price, escalation, general scarcity of essential goods and services, and low liquidity of money has necessitated the need for local government councils to adopt more effective internal audit control system which will enable to get full value for their limited resources. He was of the opinion that in any local government where internal auditing is effectively utilized by the officials and elected councilors, planned objectives are easily accomplished.

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Nwosu summarized the advantages of using an effective audit control system as follows:

  1. It helps to eliminate waste and extravagant expenditure.
  2. It helps to ensure that both the recurrent and capital budgets realistic in terms of available funds and achievable objectives.
  3. It ensures that proper and regular financial procedures are faithfully followed in disbursement of funds. The standard for the professional practice of internal auditing states that the objective of internal auditing is to assist members of the organization in the effective discharge of their responsibilities to this end. Internal auditing finishes then with analysis, appraisals, recommendations, counsel and information concerning the activity reviewed. The internal auditor owe a responsibility to both providing management and board with information about  the adequacy and effectiveness of the organization’s system of internal control and quality of performance.

Chinedu Nwoko, in his article “the Internal Auditors is the watchdog” states that management of any sort entails responsibility for the effective and economic planning and regulation (control and co-ordination, e.t.c.) of the operations of an enterprise in the fulfillment of a given purpose.


The function of the internal auditing is very important to any organization regardless of size, profit making or non-profit making in addition to an external audit. According to the National Association of College and University Business Officers (NACUBO), the development of internal auditing as a major element of management control resulted from the need of managers for information relating to all significant aspects of multifunctional operations. The expansion of colleges and universities which begin in early 1950’s (in the United States) caused increasing difficulty monitoring their operations as well as in determining the effectiveness with which objectives were met, policies were being followed and control systems were functioning. It goes on to say that internal auditing as an appraisal activity within an organization reviews operations of the organization within established policy guidelines and provides the manager (executives) with reports, conclusion and recommendations an the results its reviewer. In addition, internal auditing is an element of managerial control and is responsible for measuring and evaluating the effectiveness of such controls with organizations.


The local government like other bodies are required by law to keep proper books of accounts in respect of every transaction that they undertake. They are also required to keep such books as are necessary given a true and fair view of the state of the local government affairs and to explain their transaction.

The internal auditors of the local government are expected to avoid the affairs of the local governments in the process and ensuring the reliability of its records as well as the accuracy of the accounts. It does appear that the duties of the internal auditors are specialized and professional. Some of these internal auditors have different background and varying degrees of competence in this regard. It is necessary to point out that all of them are not professional accountants or administrators and therefore do not posses such knowledge and training as would enable them discharge their duties creditable. Even in a situation where they posses such specialized training and skill that it takes to fulfill the requirement of the law, they may not an their own be able to enforce the controls and measures and ensure compliance by staffers due to the time involved.

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The Institute of Chartered Accountants of England and Wales (ICAEW) defined auditing as “a review of operations and records, sometimes continuous, undertaken within a business by specially assigned staff”. This definition in the opinion of the researcher is not adequate for the purpose of this study. The researcher believes that internal auditing encompasses more than reviewing of operations etc., but also includes enforcement and monitoring of compliance. The researcher therefore considers the following definition as contained in auditing by A. H. Millichamp 1984 as more acceptable. He defined internal auditing “An independent appraisal activity within an organization for the review operations as a service to management, it is a managerial control which functions by measuring and evaluating the effectiveness of the other control.”


Internal Auditing is thus:

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