THE IMPORTANCE OF INTERNAL AUDIT OF PUBLIC SECTOR MANAGEMENT A CASE STUDY OF MINISTRY OF FINANCE, IMO STATE

CHAPTER ONE

1. INTRODUCTION

There is a general awareness all over the world of the need to pay greater attention to the improvement of public sector management. The reason is obvious government in most if not all nations, constitutes the largest single business entity and in many places the care of the economy. It’s pattern of expenditure through various parastatals, agencies and commissions or manners of resources allocation determines the extent to which accountability for economy, efficiency and effectiveness can be achieved. Hence, initiative is being taken all over the world towards improvement of the standards of accounting and auditing in government. The United Nations department for technical co-operation for development and international consortium on government (1987) has also joined in a world wide crusade for more effective management functions in public sector of which the key ingredients is “AUDITING”.

The development of modern accounting and auditing should be credited to great organization in commerce and industry which ahs taken place since the industrial resolution. At the time when there were small business transactions and properties took active part in the management of their business, it was perhaps felt  that there was little or no need for auditing. But as business transaction increased and investment in public sector came along, the need for accountability for find and properties of the business became necessary. On this note, government made provision for the account of public sector to be examined and reported on by persons other than the people managing the business. Thus, auditing and internal audit continue to grow with the increasing complexity in the modern business and accounting systems.

In the public sector management, internal audit serves as a good instrument, internal audit cannot be discussed without discussing internal control and it’s nature. Internal control is defined according to the auditing guidelines as the “whole system of control financial and otherwise established by the management in order to carry on the business of the enterprise in an orderly and efficient manner, ensures adherence to management policies, safeguard the assets and secure as fara s possible the completeness and accuracy of records”. Internal control extends beyond accounting and financial functions. It includes method adopted by management to delegate authority and assign responsibilities for various functions. Apart from internal audit, it comprises also of internal checks, accounting controls and other forms of control.

According to  Okezie (1995:46) internal audit is therefore defined as an independent appraisal function within an organization for the review of systems of control and quality of performance, as a service to the organization. It objectively examine, evaluate and reports on the adequacy of internal control as a contribution to the proper economic, efficient and effective sue of resources. Internal audit department is responsible to the accounting officer. The public sector accounts and records are audited by the internal auditor and a report to that effect is submitted to the accounting officer.

According to Ogbonna (1938:20) public sector accounting deals with the account of government institutions or organization and as an information tool that provides management with primary data which can be sued with other data generated else where in the system to develop analytical device for purposes of preparing economic development plans. Public sector auditing on the other hand means an independent examination of an expression of opinion on the financial statement of government establishment and in compliance with the enabling decree. The public sector auditor has to satisfy himself that the account have been prepared in accordance to statutory and constitutional requirements and regulations and that proper accounting practices have been observes in their complication. The duties of an external auditor in relation to internal audit in government establishments are similar to those applied other business organizations. The external auditor should consider to which extent he should rely on the work of the internal auditor.