ABSTRACT The aim of writing this project is to produce a realistic picture of Internal Audit Department in curbing wastes and

losses using The Federal Polytechnic Ado Ekiti as a case study, hence, this project entitled A Review of the Effectiveness of Internal Audit Department in Curbing Wastes and Losses a case study of the Federal Polytechnic Ado Ekiti, talks about how the Internal Audit Department of the Polytechnic is effective in curbing wastes and losses, various literatures are reviewed to analyze the Development of Internal Auditing, Definitions of Auditing, Wastes, Losses, Internal Auditing, Functions of the Internal Audit Department of The Federal Polytechnic Ado-Ekiti, Roles of the Internal Audit Department, Types of Audit Performed, the Internal Audit Process, Authorization and Responsibilities, Professional Standards, Authority and Independence of the Internal Audit Department, to achieve this aim, the researcher gathers relevant data from both primary and secondary sources, These data are classified and analyze into a more comprehensive work with the use of simple percentages and chi-square method, the result of the findings revealed that larger percentage of the respondents are of the opinion that internal audit department if properly structured and possessed the needed skills by the staff and independent in its dealings is effective in curbing wastes and losses, it is however recommended that internal audit department should be enhanced in order to help curb wastes and losses.

CHAPTER ONE 1.0 INTRODUCTION

Auditing has certain outstanding characteristics and features which makes it a specialized subject of study. This research work has therefore been taken to give the readers an insight into Internal Audit Department in curbing wastes and losses using The Federal Polytechnic Ado Ekiti as a case study. The Internal Audit Department was established for the purpose of providing management and the Audit Committee of the Board of Trustees with reasonable assurance that the management control systems throughout the Polytechnic are adequate and operating effectively. Internal Audit provides an independent and objective appraisal of activity for management and furnishes them with analyses, recommendations, counsel, and information concerning the activities reviewed. This includes promoting effective controls at reasonable cost. To accomplish its threefold mission of teaching, research and public service, the Polytechnic must maintain the confidence of its schools, departments, staff, students, alumni, the public and elected officials, and various other constituencies. Confidence in the institution is paramount if the Polytechnic is
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going to achieve its stated objectives. The Internal Audit Department provides valuable support in maintaining the publics confidence by performing independent and objectives reviews and reporting to the Audit committee and responsible administrative and academic officers on their findings so that corrective actions or enhancements can be initiated. The Internal Audit Department assists operating management in achieving Polytechnic financial and operating goals by evaluating controls to ensure systems function adequately, by identifying weaknesses, and by providing recommendations. Through complete and unrestricted access to records, property and personnel, Internal Audit provides the Polytechnic with an additional resource in meeting these goals. With the support of Polytechnic management and the Audit Committee, the Internal Audit Department provides the highest quality of auditing services, thus enhancing fiscal control at the Polytechnic.

1.1 REPORTING STRUCTURE OF THE INTERNAL DEPARTMENT OF THE FEDERAL POLYTECHNIC ADO

AUDIT

The Internal Audit Department reports to the office of the Rector and the Audit committee of the Board of trustees. This reporting structure allows the Internal Audit Department to remain independent and report all items of significance to the Rector and the Audit Committee. The Director of Internal Audit attends all Audit Committee meetings and brings appropriate matters to the Committees attention. Table 1.0 RECTOR

CHIEF INTERNAL AUDITOR (C.I.A)

ASST. C.I.A ASST. CHIEF OFFICER HIGHER EXECUTIVE OFFICER

PRINCIPAL OFFICER

SENIOR OFFICER

Secretary

Clerk

Structure of the internal audit department of the Federal Polytechnic Ado-Ekiti SOURCE: INTERNAL AUDIT DEPARTMENT GAZETTE

Operation of internal Audit Department of the Federal Polytechnic Ado is discussed below: 1. Examination of financial and operating information; this may include review of the means used to identify, measure, classify and report information and specific enquiry into individuals items including detailed testing of transactions, balances and procedures. 2. Review of the accounting and internal controls system; Management is responsible for the establishment of adequate accounting and internal control system. Often, internal audit is assigned specific responsibility for reviewing the design of the system, monitoring their operation and recommending improvement. 3. Review of economy efficiency and effectiveness; this review may include the non-financial controls of an organization. 4. Review of compliance; this review may cover compliance with laws, regulations and other external requirement and with internal policies and directives and other requirements including appropriate

authorization of transaction. 5. Special investigation; one example is suspected fraud.

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1.2

STATEMENT OF THE PROBLEM

The following are some of the problems identified with the internal audit department in the performance of its duties in curbing wastes and losses; The small size and structure of internal audit department was a limiting factor in their ability to curb wastes and losses. The management responds to recommendations and comments made by the internal audit department were delayed which made it difficult to curb wastes and losses. Internal audit department were unable to curb wastes and losses because their staff were inadequately trained. The management determines the scope and functions of internal audit department and the department act in line with the directives of the management in order not to lose their jobs. As a result, they might not display enough professional skill in all cases which made them ineffective in curbing wastes and losses. However, this project work wants to proffer solutions to the aforementioned problems.
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1.3

AIM AND OBJECTIVE OF THE STUDY

This study which is a review of the effectiveness of internal audit department in curbing wastes and losses, a case study of The Federal Polytechnic Ado Ekiti has the following objectives; To examine that a structural framework exists for the efficient use of resources in the institution. To examine that the policies decide on and adopted by management are consistently followed by those responsible for implementing them. To examine that important documentations which provide the information on which significant strategic and tactical decision are based provide a complete and timely records of relevant events. 1.4 SIGNIFICANCE OF THE STUDY

The following are the significance of this study: TO THE RESEARCHERS: it will serve as a stock of knowledge for further researchers on internal audit.

 TO THE PUBLIC: It will broaden the knowledge of the public about internal audit both in private and public organizations or higher institutions. TO THE GOVERNMENT: this research work will assist government in enhancing its internal audit department in order to curb wastes and losses in their various ministries. TO ANALYSTS: this work will be a reference material for them. 1.5 HYPOTHESIS

The formulation of hypothesis is therefore an inevitable task in quest of searching for an acceptable fact. In this research work, the notable hypotheses to be tested for are; The Department size and structure is adequate to meet its established objectives. Audit Planning include written audit plans and programs. Management responds in an appropriate and timely fashion to significant recommendations and comment made by the internal auditor.

 Internal Audit procedures encompass operational as well as financial areas. The Internal Audit team keeps itself informed about and involved in professional activities. 1.6 RESEARCH QUESTIONS

The following research questions serve as guidelines to this research. Is the department size and structure adequate to meet its established objectives? Does audit planning include written audit plans and programs? Does management respond in an appropriate and timely fashion to significant recommendations and comment made by the internal auditor? Do internal audit procedures encompass operational as well as financial areas? Does the internal audit team keep itself informed about and involved in professional activities?

1.7

SCOPE OF THE STUDY

The scope of this study will cover internal audit department effectiveness in curbing wastes and losses using the Federal Polytechnic Ado Ekiti as a case study. The essential information to be used for the study will be sourced through administration of questionnaire and interview of staff at the internal audit department of the Federal Polytechnic Ado Ekiti and also from the secondary sources, like internet sites and books. 1.8 LIMITATION OF THE STUDY

This project work faced the following obstacles which caused setbacks for the researcher for earliest completion of the study. They are financial constraints, time constraints, communication barrier and poor library facilities i.e. internet services. 1.9 OPERATIONAL DEFINITION OF TERMS AUDITING: Ayantoye (2010) defines Auditing as an accounting procedure which checks thoroughly the authenticity of a companys accounts. According to Consultative Council of Accountancy (CCAB),
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Auditing can be defined as the independent examination of, and expression of opinion on, the financial statements of an enterprise by an appointed auditor in pursuance of the appointment and in compliance with any relevant statutory obligation. Howard (2008) defines Auditing as the examination of certain statement covering the transaction over a period and the financial position of an organization on a certain data in order that the auditor may issue a report on them. WASTES AND LOSSES: Unabridged Dictionary.com defines waste

as to spend or consume uselessly or carelessly or to fail to use. Also defines loss as the act of losing, disadvantage from losing, amount lost. Hornby (1996) defines wastes as using more than what is needed i.e. spending extravagantly in an organization or higher institution while John (2001) defines wastes as the excess of expenditure over receipts, which normally reduces an organization capital and John (2001) defines losses as forfeiture of money or negative profit. According to Ayantoye (2010) waste is any material which is no longer of use to the system that produced it and which has to be disposed of. And define loss (finance), is when the

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expenses of an entity exceed sales or revenues of the entity, i.e. items are sold for less than they cost the firm. INTERNAL AUDIT: According to Olatunji B.O, Dada O.D and

Bankole K.D (2008) internal audit is an audit exercise which is carried out mainly to review activities and the records of an entity on continuous basis. The Institute of Internal Auditors (IIA), the U.S. professional organization of internal auditors, has defined internal auditing as: An independent, objective assurance and consulting activity designed to add value and improve an organizations 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. INTERNAL AUDITOR: According to Olatunji B.O et al, internal auditor is an employee of the organization, a servant responsible solely to the management. He is not independent as the statutory auditor and does not required any letter of engagement before he can perform his duty as management must given him full employment and job procedure.
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1.10 ORGANISATION OF THE STUDY The research work is limited to five (5) chapters and it contains the following details; CHAPTER ONE: This chapter is an introductory aspect of the research project and it will shed more light on the following; Introduction, Reporting Structure of the Internal Audit Department of The Federal Polytechnic Ado Ekiti, Statement of the problem, Aim and Objectives of the study, Significance of the study, Hypothesis, Research Questions, Scope of the Study, Limitation of the study, Operational Definition of terms and Organization of the study. CHAPTER TWO: this chapter includes literature review, types of audit performed, the internal audit process, role of internal audit department, role in internal control, role in risk management, authorization and responsibilities. CHAPTER THREE: This chapter includes the following research methodology, population, sample population, sources of data, method of data analysis, problem encountered on the field CHAPTER FOUR includes presentation and analysis of data
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CHAPTER FIVE: contains summary, conclusion and recommendation Reference page is included as well.

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CHAPTER TWO 2.0 LITERATURE REVIEW

The researcher will deal with the view of many authors concerning this study. What some scholars say about this study. 2.1 THE DEVELOPMENT OF INTERNAL AUDITING

The concept of auditing is nothing new and records show that even the earliest of civilizations (e.g., Mesopotamian, Egyptian, Chinese, and Persian) had some form of auditing as far back as 5,000 years ago. Even these early civilizations realized the importance of being able verify what they had, particularly when it came to verifying the amount of grain they had on hand, because it was primarily through the control of food supplies that they remained in power. As the saying goes a hungry population is a restless population. It was at about this time that the concept of internal control took hold. For example the Egyptians required the actual witnessing of grain being brought to the granaries and demanded that receipts of grain be certified. Sawyers Internal Auditing, 5th edition But, it really wasnt until during the Industrial Revolution period that auditing began as we know it today. During this period, accountants were used to check
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and verify financial information. To do this, they had to scrutinize written records and compare the book entries with documentary evidence. This is what we generally think of as auditing. For the most part, it was only in the 1920s that companies started to publish their audited financial statements. This was primarily done for the benefit of the bankers who wanted some assurance about the validity of the balance sheets. The concept of internal audit was started by the railroads because railroad executives needed to have some assurance that their stationmasters across the country were properly handling receipts. They felt that the work done by the external auditors did not adequately address this issue. Hence, internal auditing became the function that did this for the railroads. Brian Hock and Carl Burch (2011) 2.2 DEFINITION OF AUDITING

According to Ayantoye (2010), Auditing is an accounting procedure which checks thoroughly the authenticity of a companys accounts. According to Consultative Council of Accountancy Bodies (CCAB), Auditing can be defined as the independent examination of, and expression of opinion on, the financial statements of an enterprise by an appointed auditor in pursuance of the
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appointment and in compliance with any relevant statutory obligation. Howard (1998) defines Auditing as the examination of certain statement covering the transaction over a period and the financial position of an organization on a certain data in order that the auditor may issue a report on them. Adeniyi (2010), defines Auditing as a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between the assertions and established criteria and communicating the results to interested users. According to John and Gary (1976), auditing may be defined as the systematic investigation and appraisal of transactions, procedures, operations, and resulting financial statements. They further explained that auditing purpose is to determine the degree of adherence to prescribed criteria and to express an opinion thereon, if the person performing the audit is an employee of the entity whose procedures and records are being reviewed, he or she is called an internal auditor. Within an organization internal auditors should be independent of those whose work is reviewed. They occupy a staff position and should report to someone high in the administrative ranks of the organization. Internal auditors fulfill an important function within business corporations, governmental units, or other forms of
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organization. By reviewing the internal information system, an internal auditor determines whether or not the system is effectively designed to communicate managements directives, to collect necessary data, and to report results of operating activities to management. An auditors review results in an in an evaluation of the system design, observations about the functioning of the system, and recommendations for its improvement. An internal auditor also investigates activities such as quality control, market penetration, personnel policies, and many other matters only remotely related to financial accounting. The internal auditor must be constantly alert to detect and report matters anywhere within the organization that need to be brought to managements attention. Internal auditing has undergone major changes in the past few decades and has come to include areas of specific expertise, and is used outside of financial and accounting matters. This growth of the role and expectations of internal auditors led to the development of internal auditing as a profession. The Institute of Internal Auditors (IIA), the U.S. professional organization of internal auditors, has defined internal auditing as:

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An independent, objective assurance and consulting activity designed to add value and improve an organizations 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. http//www.theiia.org Hayes and Schilder (2005), said internal auditors are employed by individual companies to investigate and appraise the effectiveness of company operations for management. Much of their attention is often given to the appraisal of internal controls. A large part of their work consists of operational audits; in addition, they may conduct compliance audits. In many countries internal auditors are heavily involved in financial audits. In these circumstances the external auditor should review the work performed by the internal auditor. The internal audit department reports directly to the president or board of directors. An internal auditor must be independent of the department heads and other executives whose work he reviews. Internal auditors, however, can never be independent in the same sense as the independent auditors because they are employees of the company they are examining.
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According to Olatunji B.O, Dada O.D and Bankole K.D (2008), internal audit is an audit exercise which is carried out mainly to review activities and the records of an entity on continuous basis. According to Olatunji B.O et al, internal auditor is an employee of the organization, a servant responsible solely to the management. He is not independent as the statutory auditor and does not required any letter of engagement before he can perform his duty as management must given him full employment and job procedure. According to Ayeye (1994), internal audit is the review of operations and records sometimes continuously undertaken within an organization by specially assigned staff. The internal auditor is an employee of the organization and he is a servant of the organization and is responsible to the management of the organization. Adedoyin and Adelabu (2006) defined internal audit as the independent appraisal activity within an organization, for the review of operations as a service to management. It is a management control which functions by measuring and evaluating the effectiveness of other control.

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Unabridged Dictionary.com defines waste as to spend or consume uselessly or carelessly or to fail to use. Also defines loss as the act of losing, disadvantage from losing, amount lost. Hornby (1996) defines wastes as using more than what is needed i.e. spending extravagantly in an organization or higher institution while John Clark (2001) defines wastes as the excess of expenditure over receipts, which normally reduces an organization capital and John Clark (2001) defines losses as forfeiture of money or negative profit. According to Ayantoye (2010) waste is any material which is no longer of use to the system that produced it and which has to be disposed of. And define loss (finance), is when the expenses of an entity exceed sales or revenues of the entity, i.e. items are sold for less than they cost the firm. 2.3 ROLE OF INTERNAL AUDIT DEPARTMENT

The internal auditing department is established by the board of directors, and its responsibilities are defined by the audit committee of the board of directors as part of their oversight function. ROLE IN INTERNAL CONTROL; internal auditing activity is primarily directed at improving internal control. Under the COSO framework, internal
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control is broadly defined as a process effected by an entitys board of directors, management and other personnel designed to provide reasonable assurance. Effectiveness and efficiency of operations Reliability of financial reporting Compliance with laws and regulations ROLE IN RISK MANAGEMENT; internal auditing professional standards require the function to monitor and evaluate the effectiveness of the organizations risk management processes. Risk management relates to how an organization sets objectives, then identifies, analysis and responds to those risks that could potentially impact its ability to realize its objectives. Some of the key risk assessment activities, strategic in organization include: marketing planning, strategic planning incentive payout determination, credit authorization and capital planning each of which can be audited in one or more projects. In larger, more complex organizations, major strategic initiatives are implemented to achieve objectives and drive changes. As a member of senior management, the chief audit executives (CAE) may participate in status updates on these major initiatives. This places the CAE in the position to report on many
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of the major risks the organization faces to the audit committee, or ensure managements reporting is effective for that purpose. 2.4 TYPES OF AUDIT PERFORMED

The Internal Audit Department performs a wide range of audit services including financial audits, compliance audits, operational audits, information technology audits and consulting services. FINANCIAL AUDITS: Address questions regarding accounting and the propriety of financial transactions. COMPLIANCE AUDITS: Determine the degree of adherence to laws, regulations, policies and procedures. OPERATIONAL AUDITS: Review operating information and

procedures to determine if any modifications of the operations could result in greater efficiency and effectiveness. INFORMATION TECHONOLOGY AUDITS: Evaluate system

processing controls, data security, physical security, systems development procedures, contingency planning and systems requirements.

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 CONSULTING SERVICES: Encompass a wide range of services which allow the Polytechnic community to utilize the Departments financial and information technology expertise to address a known problem or need. (htts://www.be.pitt.edu/intaudit/). 2.5 THE INTERNAL AUDIT PROCESS

When an audit is scheduled, an announcement letter is sent to the responsible parties. An entrance meeting is scheduled to discuss the objectives and scope of the audit. At the entrance meeting, any concerns or questions about the audit process are discussed. A typical audit is comprised of five stages: Planning, fieldwork, reporting and follow-up. The audit team will collect data and document the procedures, controls and / or activities being reviewed. Based on our risk assessment, the audit team will perform various types of tests and conclude on the adequacy of the control system. During the audit and at the conclusion of the fieldwork, the audit team will discuss with the appreciate staff of an area being audited any findings and recommendations noted during the audit process. A formal exit conference is
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held to discuss the audit findings and recommendations with the Dean, Director, supervisor etc. of the area being audited. Next, the audit team will issue a draft report summarizing the findings and recommendations. The draft report has limited distribution, and the management of the audited department are provided approximately two weeks to draft written management responses as to how they plan to address the recommendations. The management responses are incorporated into the draft report along with any agreed upon changes, thus becoming a final report. The final report is distributed to the appropriate Polytechnic management. All audit information is treated as confidential and is reported only to those within the Polytechnic who need to know. (http://www.be.pitt.edu/intaudit/). 2.6 AUTHORIZATION AND RESPONSIBILITES

Authorization is granted for full and complete access to any of the organizations records (either manual or electronic), physical properties, and personnel relevant to an audit engagement. Documents and information given to internal auditors during a periodic review will be handled in a confidential and prudent manner as required by the international institute of internal auditors code of ethics.
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Internal auditors have no direct responsibility or any authority over any of the activities or operations that they review. They should not develop and install procedures, prepare records, or engage in activities, which would normally be reviewed by reviewed by internal auditors. Recommendations on standards of control to apply to a specific activity may be included in the written report of audit findings and opinions, which is given to the operating management for review and implementation copies of final reports will be distributed to polytechnic management and the Rector. (http://www.be.pitt.edu/intaudit/). 2.7 PROFESSIONAL STANDARDS

According to Millichamp (2004), Internal Auditing Staff shall govern themselves by adherence to The Institute of Internal Auditors Code of Ethics. The Institutes International Standards for the Professional Practice of Internal Auditing (Standards) shall constitute the operating procedures for the department. These two documents constitute an addendum to their charter. The Institute of Internal Auditors Practice Advisories will be adhered to as applicable. In addition, Internal Auditing will adhere to the institution policies
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and procedures and Internal Auditings Standard Operating procedures manual. The Standard Operating Procedures Manual shall include attribute, performance, and implementation standards to guide the Department. 2.8 AUTHORITY

According to Sawyer (2001), authority is granted for full, free and unrestricted access to any and all of the institution records, physical properties and personnel relevant to any function under review. All employees are requested to assist internal auditing in fulfilling their staff function. Internal auditing shall also have free and unrestricted access to the chairman of the Board of Directors, and the audit committee of the Board of directors. Documents and information given to internal auditing during a periodic review will be handled in the same prudent and confidential manner as by those employees normally accountable for them. 2.9 INDEPENDENCE

All internal audit activities shall remain free of influence by any element in the organization, including matters of audit selection, scope, procedures, frequency, timing or report content to permit maintenance of an independent and objective mental attitude necessary in rendering reports.
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Internal auditors shall have no direct operational responsibility or authority over any of the activities they review. Accordingly, they shall not develop nor install systems or procedures, prepare records, or engage in any other activity, which would normally be audited.http//www.theiia.org According to Millichamp (2002), internal auditing is thus carried on by independent personnel. Internal auditors are employees of the firm and thus independence is not always easy to achieve. However it can be assisted by: Having the scope to arrange its own priorities and activities Having unrestricted access to records, assets and personnel Freedom to report to higher management and where it exists to an audit committee Internal audit personnel with an objective frame of mind Internal audit personnel who have no conflicts of interest or any restrictions placed upon their work by management Internal audit personnel having no responsibility for line work or for new systems. A person cannot be objective about something he/she has taken

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responsibility for. On the other hand the internal auditing should be consulted on new or revised systems. Internal auditing personnel who have no non-audit work. Since internal auditors are employees it is difficult to ensure that they are truly independent in mind and attitude. 2.10 INTERNAL CONTROL SYSTEM The Institute of Chartered Accountants of England and Wales defined internal control system in their guideline as: the whole system of control, financial or otherwise, established by the management in order to carry on the business of the enterprise in an orderly and efficient manner, ensure adherence to managements policies, safeguard the asset and secure as far as possible the completeness and accuracy of the records. The individual components of an internal control system are known as controls or internal controls. Adeniyi (2010) and the Auditing Practices Committee in its guideline also define Internal Control System as earlier defined by ICAEW. According to the International Standards on Auditing (ISA 400), the term Internal Control System means all the policies and procedures (internal controls) adopted by the management of an entity to
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assist in achieving managements objective of ensuring, as far as practicable, the orderly and efficient conduct of its business, including adherence to management policies, the safeguarding of assets, the prevention and detection of fraud and error, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information. 2.11 LIMITATION OF INTERNAL CONTROLS According to Adeniyi (2010), internal controls are essential features of any organization that is expected to be well managed effectively and efficiently. However, it is noteworthy to realize that internal controls have inherent limitations which include; a) The possibility of circumvention of controls either done or through collusion with parties outside or inside the entity. b) Abuse of responsibility. c) Fraud. d) Management override of controls. e) Changes in environment making controls inadequate. f) Human cleverness or ingenuity.
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g) Potential human error caused by stress of work-load, alcohol, carelessness, distraction, mistakes of judgment, and the misunderstanding of instructions. h) Internal control tends to be directed at routine transactions. The one-off or unusual transaction tends not to be the subject of internal control. i) Poor remuneration system. j) Poor working condition

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CHAPTER THREE 3.0 RESEARCH METHODOLOGY This study is specially designed to carry out a thorough investigation and assess the roles of internal auditor in curbing wastes and losses in institution. Various methods of fact findings were used. This write-up is basically on facts through research into books, internet, and or personal discussions. 3.1 POPULATION The population under consideration has been restricted to the staff of the internal audit department of the Federal Polytechnic Ado Ekiti. 3.2 SAMPLE POPULATION The sample size covered all the sections, units and groups in the department i.e. the internal audit department of the Federal Polytechnic Ado Ekiti. 3.3 SOURCES OF DATA The types of data collected are from both primary and secondary sources. Data obtained from primary sources were done via the use of questionnaire and
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personal interview (oral) from appropriate knowledgeable polytechnic official of the internal audit department. Data from secondary sources on the other hand were obtained through the use of textbooks and internet. These data were collected and make up analysis into a more comprehensive form to make up a formidable and complete material for the purpose of writing the project. 3.4 DISTRIBUTION OF QUESTIONNAIRES Questionnaires were distributed to the population concerned that comprises of eight (8) major staff, with adequate instructions on how they should be attended to. Interviews were equally conducted among selected staff and sections covering all the cadres of the institution staff. 3.5 METHOD OF DATA ANALYSIS The questionnaires received from various respondents were edited for the purpose of accuracy and consistency with the responses. The questionnaires were collected and properly arranged for further statistical process such as extraction

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of data and classification of information by the use of percentage table for data presented. The chi-square test statistics was used in the testing of the hypothesis. The formula is given as X2 = (0 - E) 2 E Where, X2 = Chi-square 0 E = Observed value = Expected value

The degree of freedom for the hypothesis is calculated with the formula below: d.f Where, = r c (r 1) (c 1) = Row = Column

The critical value of the X2 test read up in the relevant statistic table under 5% level of significance. The H0 is accepted where computed X2 is less than tabulated X2 value, otherwise H0 is rejected and the alternative HI is accepted.

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3.5

PROBLEMS ENCOUNTER ON THE FIELD In carrying out the research, various problems were encountered which

initially were a set back on the progress of the research work. These problems include; Inaccessibility of textbooks; the focusing of the research is almost on a virgin ground of which little or no theoretical complication in the form of books has been made. This to some extent limit the extent the researcher could go in the gathering of data from text book consulted. Time constraints; the topic considering its practical nature needs much time in the collection of relevant data. The school calendar as well as the class time table has lightened up the available time that the research would have been affected adversely if not for the importance attached to the research work by the researcher. Finance; the current Nigeria economy which had multiplied the cost of everything, if not more has a negative impact on the researchers budget collection and analysis of data, typing and binding all of which cost fortune in Nigeria today had reduced the volume of the research work.
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 Communication barrier; the communication barrier encountered on the field is too much.

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CHAPTER FOUR 4.0 4.1 PRESENTATION, DATA. INTRODUCTION ANALYSIS AND INTERPRETATION OF

This chapter outlines the analysis of data collected from the respondent through questionnaires. They will be presented with the use of tables. The information given by the respondents was qualified with numerical series and then converted to percentages. The research findings were then discussed. 4.2 PRESENTATION AND ANALYSIS OF DATA

Eight (8) questionnaires were issued out to members/staff of the internal department consulting both the population and the sample of the study and all of them were returned filled. The questionnaire was categorized into two: 1 2 Section A (Bio-data) Section B (General Question)

The percentage was used to analyze generally all data obtained from the respondents through the questionnaire, but specifically the data used for the hypothesis were analyzed and interpreted by the use of chi-square (X2).

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SECTION A The questionnaire was administered in various section of the audit department of the institution. Table 4.1 Position of the respondents Numbers of Respondent 2 1 2 1 2 8 Percentage 25% 12.5% 25% 12.5% 25% 100%

Alternatives Chief Auditors Principal Auditor Auditor Confidential Secretary Clerical Officer Total

SOURCE: FIELD SURVEY 2011 Table 4.3 above indicates that 2 respondents which represent 25% of the total respondents are chief internal auditors, 1 respondent which represents 12.5% of the total respondents is principal auditor and 2 respondents which represent 25% of the total respondents are auditors and 1 respondent which represent 12.5% of the total respondents is confidential secretary and 2 respondents which represent 25% of the total respondents are clerical officer.

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Table 4.2

Sex of the Respondents Percentage 62.5 37.5 100%

Numbers of Respondent Male 5 Female 3 Total 8 SOURCE: FIELD SURVEY 2011

Alternatives

From table 4.2, 5 of the respondents are male while 3 respondents are female. This shows that 62.5% and 37.5% of male and female respond respectively. Table 4.3 Age Distributions Percentage 50 37.5 12.5 100%

Alternatives Numbers of respondent Under 25 25-35 4 36-45 3 46 and above 1 Total 8 SOURCE: FIELD SURVEY 2011

Table 4.3 above shows age distribution of the respondents, no respondent is under 25 out of all the respondents, 4 of them are between 25 to 35 while 3 of them are between 36 to 45 and the remaining 1 is above 46 years of age.

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Table 4.4

Working Experience Percentage 12.5 25 37.5 25 100%

Alternatives Numbers of respondent Below 3 years 1 3-6 2 7-10 3 11 years and above 2 Total 8 SOURCE: FIELD SURVEY 2011

From the above table, it can be seen that 1 of the respondents have been in the internal audit department for less than 3 years while 2 of them has worked in the department for between 3 to 6 years and 3 of the respondents has worked in the department between 7 to 10 years while 2 of them has worked in the department for above 11 years. Table 4.5 Educational Professional Qualifications Percentage 12.5 62.5 25 100%

Alternatives Numbers of respondent WASSCE and below OND/ATS/NCE 1 B.Sc/HND 5 Professional 2 Qualification Total 8 SOURCE: FIELD SURVEY 2011

The above table shows that no respondent is working with WASSCE and below, 12.5% of the total respondents which is 1 respondent out of the 8 have OND/ATS/NCE while 5 respondents which represent 62.5% have B.Sc/HND
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and also 2 of the respondents have professional qualification which represent 25% of the total respondents. SECTION B Question 1: the department size and structure is adequate to meet its established objectives Table 4.6 Alternatives Numbers of respondent Strongly agree 4 Agree 2 Disagree 1 Strongly disagree 1 Total 8 SOURCE: FIELD SURVEY 2011 Percentage 50 25 12.5 12.5 100%

The table above shows that 4 respondents representing 50% of the respondents strongly agree that the department size and structure is adequate to meet its established objectives, 2 of the respondents representing 25% of the respondents agree, 1 respondent representing 12.5% of the respondents disagree while 1 respondent representing 12.5% of the respondents strongly disagree.

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Question 2: Audit planning includes written audit plans and programs. Table 4.7 Alternatives Numbers of respondent Strongly agree 7 Agree 1 Disagree Strongly disagree Total 8 SOURCE: FIELD SURVEY 2011 Percentage 87.5 12.5 100%

The table above shows that 7 respondents representing 87.5% of the respondents were strongly of the opinion that audit planning include written audit plans and programs while 1 respondent representing 12.5% of the respondent agree Question 3: Management responds in an appropriate and timely fashion to significant recommendations and comment made by the internal auditor. Table 4.8 Alternatives Number of respondent Strongly agree 2 Agree 4 Disagree 1 Strongly disagree 1 Total 8 SOURCE: FIELD SURVEY 2011 Percentage 25 50 12.5 12.5 100%

Table 4.8 shows that 2 respondents representing 25% of the total respondents strongly agree that management responds in an appropriate and
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timely fashion to significant recommendations and comment made by the internal auditor, 4 respondents representing 50% agree, 1 respondent representing 12.5% disagree and 1 respondent representing 12.5% strongly disagree. Question 4: internal audit procedures encompass operational as well as financial areas. Table 4.9 Alternatives Number of respondents Strongly agree 7 Agree 1 Disagree Strongly disagree Total 8 SOURCE: FIELD SURVEY 2011 Percentage 87.5 12.5 100%

Table 4.9 shows that 7 respondents representing 87.5% of the total respondents strongly agree that internal audit procedures encompass operational as well as financial areas, 1 respondent representing 12.5% agree. Question 5: internal audit team keep itself informed about and involved in professional activities.

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Table 4.10 Alternatives Number of respondents Strongly agree 6 Agree 1 Disagree 1 Strongly disagree Total 8 SOURCE: FIELD SURVEY 2011 Percentage 75 12.5 12.5 100

Table 4.10 shows that 6 respondents representing 75% of the total respondents strongly agree that internal audit team keep itself informed about and involved in professional activities, 1 respondent representing 12.5% of the total respondents agree while the remaining 1 respondent representing 12.5% of the total respondent disagree. 4.3 TESTING OF HYPOTHESIS The hypothesis in chapter one of this project work will be tested statistically with the use of chi-square. Chi-square (X2) can be defined as the statistical distribution that can be used to test if an assumed series of value differ significantly from what was expected. Two alternatives statement are usually made and are donated by Ho and Hi.
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Where

Ho is Null hypothesis Hi is Alternative hypothesis

Decision rule: this will guide the decision to be made in the hypothesis that has being tested such as; Accept Null hypothesis (Ho) if chi-square (X2) tabulated (table value) is greater than chi-square (X2) calculated. Accept Ho if X2 tab > X2 C otherwise reject.

Chi-square calculated formular X2 C = {(oi - ei)} ei Where oi ei = observed value = expected value

Chi-square tabulated formular X2 tab Where Where D.F r C = X2 %, D.F {Degree of Freedom} = {r 1}{c 1} = row on the table = column on the table

Hypothesis 1 to 3 will be tested in this work.

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46

Hypothesis 1 Is the department size and structure adequate to meet its established objectives? Ho: the department size and structure is adequate to meet its established objectives. Hi: the department size and structure is not adequate to meet its established objectives. X2 calculated Alternatives Strongly agree Agree Disagree Strongly disagree Total ei oi 4 2 1 1 8 = total responds No of alternatives X2 calculated = {oi ei}2 ei = = 8 4 6 2 =3 ei 2 2 2 2 oi ei 2 0 -1 -1 {oi ei}2 4 0 1 1 6 =2 {oi ei}2 2 0 0.5 0.5 3

X2 tabulated is X2 %, degree of freedom i.e {r 1} {c 1} Where r = row and c = column on the table Testing from 5% level of significance X2 tabulated d.f = 5% d.f = {4 - 1}. {2 1}
47

= 3.1 d.f X2 tab X2 tab =3 = 5%, 3 = 7.815

Decision: From above calculations, we can see that X2 tab is greater than X2 cal i.e X2 tab 7.815 > X2 cal 3. We therefore accept {Ho} which is null hypothesis and reject {Hi} which is alternative hypothesis and concluded that the department size and structure is adequate to meet its established objectives. Hypothesis 2 Does audit planning include written audit plans and programs? Ho: Hi: audit planning include written audit plans and programs audit planning does not include written audit plans and programs

X2 calculated Alternatives Strongly agree Agree Disagree Strongly disagree Total ei oi 7 1 0 0 8 = ei 2 2 2 2 oi ei 5 -1 -2 -2 {oi ei}2 25 1 4 4 34 total responds No of alternative
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{oi ei}2 12.5 0.5 2 2 17

8 4

X2 calculated

{oi ei}2 ei

34 2

= 17

X2 tabulated is X2 %, degree of freedom i.e {r 1} {c 1} Where r = row and c = column on the table Testing from 5% level of significance X2 tabulated d.f = 5% d.f = {4 - 1}. {2 1} = 3.1 d.f X2 tab X2 tab =3 = 5%, 3 = 7.815

Decision: From above calculations, we can see that X2 tab is less than X2 cal i.e X2 tab 7.815 < X2 cal 17. We therefore reject {Ho} which is null hypothesis and accept {Hi} which is alternative hypothesis and concluded that the audit plan does not include written audit plans and programs. Hypothesis 3 Does management responds in an appropriate and timely fashion to significant recommendations and comment made by the internal auditor. Ho: Management responds in an appropriate and timely fashion to significant recommendations and comment made by the internal auditor. Hi: Management does not respond in an appropriate and timely fashion to significant recommendations and comment made by the internal auditor.
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X2 calculated Alternatives Strongly agree Agree Disagree Strongly disagree Total ei oi 2 4 1 1 8 = ei 2 2 2 2 oi ei 0 2 -1 -1 {oi ei}2 0 4 1 1 6 total responds No of alternative X2 calculated = {oi ei}2 ei = 8 4 = 6 2 =3 = 2 {oi ei}2 0 2 0.5 0.5 3

X2 tabulated is X2 %, degree of freedom i.e {r 1} {c 1} Where r = row and c = column on the table Testing from 5% level of significance X2 tabulated d.f = 5% d.f = {4 - 1}. {2 1} = 3.1 d.f X2 tab X2 tab =3 = 5%, 3 = 7.815

Decision: From above calculations, we can see that X2 tab is greater than X2 cal i.e X2 tab 7.815 > X2 cal 3. We therefore accept {Ho} which is null hypothesis
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and reject {Hi} which is alternative hypothesis and concluded that management responds in an appropriate and timely fashion to significant recommendations and comment made by the internal auditor. Hypothesis 4 Do internal audit procedures encompass operational as well as financial areas. Ho: internal audit procedures encompass operational as well as financial areas. Hi: internal audit procedures do not encompass operational as well as financial areas. X2 calculated Alternatives Strongly agree Agree Disagree Strongly disagree Total ei oi 7 1 0 0 8 = ei 2 2 2 2 oi ei 5 -1 -2 -2 {oi ei}2 25 1 4 4 34 total responds No of alternative X2 calculated = {oi ei}2 ei = 8 4 = 34 2 = 17 = 2 {oi ei}2 12.5 0.5 2 2 17

X2 tabulated is X2 %, degree of freedom i.e {r 1} {c 1} Where r = row and c = column on the table Testing from 5% level of significance
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X2 tabulated d.f

= 5% d.f = {4 - 1}. {2 1} = 3.1

d.f X2 tab X2 tab

=3 = 5%, 3 = 7.815

Decision: From above calculations, we can see that X2 tab is less than X2 cal i.e X2 tab 7.815 < X2 cal 17. We therefore reject {Ho} which is null hypothesis and accept {Hi} which is alternative hypothesis and concluded that the internal audit team does not keep itself informed about and involved in professional activities. Hypothesis 5 Does the internal audit team keep itself informed about and involved in professional activities. Ho: the internal audit team keeps itself informed about and involved in professional activities. Hi: the internal audit team does not keep itself informed about and involved in professional activities.

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X2 calculated Alternatives Strongly agree Agree Disagree Strongly disagree Total ei Oi 6 1 1 0 8 = ei 2 2 2 2 oi ei 4 -1 -1 -2 {oi ei}2 16 1 1 4 22 total responds No of alternative X2 calculated = {oi ei}2 ei = 8 4 = 22 2 = 11 = 2 {oi ei}2 8 0.5 0.5 2 11

X2 tabulated is X2 %, degree of freedom i.e {r 1} {c 1} Where r = row and c = column on the table Testing from 5% level of significance X2 tabulated d.f = 5% d.f = {4 - 1}. {2 1} = 3.1 d.f X2 tab X2 tab =3 = 5%, 3 = 7.815

Decision: From above calculations, we can see that X2 tab is less than X2 cal i.e X2 tab 7.815 < X2 cal 11. We therefore reject {Ho} which is null hypothesis and
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accept {Hi} which is alternative hypothesis and concluded that the internal audit team does not keep itself informed about and involved in professional activities.

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CHAPTER FIVE 5.0 5.1 SUMMARY, CONCLUSION AND RECOMMENDATION SUMMARY AND CONCLUSION Having reviewed the following in chapter one that the internal audit department assists operating management in achieving polytechnic financial and operating goals by evaluating controls to ensure systems function adequately by identifying weaknesses, and by providing recommendations. Through complete and unrestricted access to records, property and personnel, internal audit provides the polytechnic with an additional resource in meeting these goals. Chapter two reviewed that the internal auditing department is established by the board of directors, and its responsibilities are defined by the audit committee of the board of directors as part of their oversight function. Relevant literature were duly reviewed. Chapter three reviewed the methodology use in obtaining data which are questionnaire and interview. In chapter four, the data were analysed and interpreted using frequency estimate method and Hypothesis were formulated and tested using chi- square techniques.

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5.2

CONCLUSION Having considered all the points analyzed in this project, it will be seen

that emphasis has been laid on evaluating the effectiveness of internal audit department in curbing waste and losses, which shows that the level of efficiency and effectiveness in this institution depends on the condition of accounting system made available. 5.2 RECOMMENDATION in view of this findings and other relevant information from the research assignment, the researcher therefore makes the following recommendations:

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REFERENCES Adedoyin J.A and Adelabu I.T, (2006): Essential of Auditing and Investigation, Published by Aseda Publishing, Ibadan. Adeniyi A. Adeniji, (2004): Auditing and Investigation, Value Analysis Consult Publisher, Lagos. Adeniyi A. Adeniji, (2010): Auditing & Assurance Services, Value Analysis Consult Publisher, Lagos. Ayantoye Adeshola Olufemi, (2010): Management Accounting and Economics Dictionary, Greater Concept Media, Vol 1, No 1, page 17. Ayeye R.O, (1994): Auditing Liability, Ross Press Limited, Lagos. Brian Hock and Carl Burch, (2011): The Internal Audit Activitys Role In Governance Risk and Control, published by HOCK international, Oxford. Consultative Council of Accountancy (CCAB) Hayes Rick and Schilder Arnold, (2005): An Introduction to International Standards on Auditing, Published by Pearson Education Limited, London. Hornby A.S, (1996): The Teaching of Structural Words and Sentences Pattern, Published by Oxford University Press, London. Howard L.R, (2008): Auditing, Pitman Publishing, London. John Clark (2001): Auditing Practice, Published by Oxford University Press, London. John W. Cook and Gary M.W, (1976): Auditing: Philosophy and Technique, published by Houghton Mifflin Company, Boston. Millichamp A.H (2002): Auditing Eighth Edition: Published by BookPower/ELST imprint, London Millichamp A.H (2004): Auditing: An Instructional Manual for Accounting Students, Letts Educational Publisher, London. Olatunji B.O, Dada O.D and Bankole K.D, (2008): Principles and Practice of Auditing, Happy Home Ventures, Ado.
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Retrieved August 15, 2011, from http://www.unabridgeddictionary.com Retrieved August 20, 2011, from http://www.be.pitt.edu/intaudit/ Retrieved October 3, 2011, from http//www.theiia.org Retrieved October 12, 2011, from http//www.icaew.com Sawyer L.B, (2001): The Practice of Modern Internal Auditing Appraisal Operations for Management, Pitman Publishing, London. Tunde Oremade, (1998): Auditing Standard and Guidelines, Gavina Press limited, Ibadan.

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APPENDIX QUESTIONNAIRE This questionnaire is designed on a review of the effectiveness of internal audit department in curbing waste and losses. The questionnaire is to be used purely for academic purpose, so any information given or supplied therefore will be considered strictly confidential. Thanks QUESTIONNAIRE SECTION A INSTRUCTION: Please tick as appropriate 1. Name: ( Not compulsory) 2. Post / Rank: 3. Age of respondent; (a) Below 25 years( ) (c) Between 36-45 years ( )

(b) Between 25-35Years ( ) (d) 46 above ( )

4. Sex;

(a) Male ( )

(b) Female ( )

5. Marital Status:(a) Single ( ) (b) Married ( ) (c) Divorced ( )

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6. The department size and structure is adequate to meet its establish objectives. Strongly Agree ( ) Agree ( ) Disagree ( ) Strongly disagree ( ) 7. The experience level of the internal auditors are adequate Strongly Agree ( ) Agree ( Disagree ( ) Strongly disagree ( 8. The department appears to be objective. Strongly Agree ( ) Agree ( Disagree ( ) Strongly disagree (

) )

) )

9. The technical knowledge of the department member is sufficient. Strongly Agree ( ) Agree ( ) Disagree ( ) Strongly disagree ( ) 10.The department has an appropriate continuing education program. Strongly Agree ( ) Agree ( ) Disagree ( ) Strongly disagree ( ) 11.Department members possess sufficient information systems in auditing expertise to address a level of technology used by organization. Strongly Agree ( ) Agree ( ) Disagree ( ) Strongly disagree ( ) 12.The departments work is planned appropriately. Strongly Agree ( ) Agree ( Disagree ( ) Strongly disagree (
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) )

13.Planning include written audit plans and program. Strongly Agree ( ) Agree ( Disagree ( ) Strongly disagree ( 14.The internal audits queries are issued on a timely basis. Strongly Agree ( ) Agree ( Disagree ( ) Strongly disagree (

) )

) )

15.The internal audit team keeps itself informed about and involved in professional activities. Strongly Agree ( ) Agree ( ) Disagree ( ) Strongly disagree ( )

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