This study was conducted into the Role of Internal Auditors in Government Parastatals with N.N.PC. as a case study. The study is divided into five chapters.
Chapter one introduces the subject matter as well as the object of the case study. It presents the proposal for the work and the significance of the study. Finally, it defines key terms used in the study.
Chapter Two presents literature review on theoretical framer-work of auditing and internal auditing in particular. Government parastatals and corporate irregularities were also discussed in this chapter.
Chapter three presents the procedure adopted by the researcher in the conduct of the study. This involves the gathering of data which will be analyzed and presented with a view of finding solution o the research problems.
Chapter four deals with the data analysis and discussion and testing of hypothesis. Tables and percentages as well as chi-square were used in analyzing and testing the hypothesis.
Chapter five, being the conclusively chapter, presents a summary of findings and recommendations. The limitations of the study were also discussed and suggestions for further studies made.
BACKGROUND OF STUDY
A country’s economy develops as the industrialization process depends on ‘extent on the system of internal control. This is because;
“Today’s economic environment requires that Management and boards of these companies should take adequate steps considered prudent to be satisfied that an effective internal Accounting control system is in place in their organization. Connor (1979)”.
LISTS OF CHARTS
1.1 Organisation charts of NNPC
1.2 PPMC’s Organisation Structure
1.3 Pipeline and Products Marketing
Company Ltd. Internal Audit Department (Organisation Chart).
The complexities of an adequate system of internal control, have led to the development of internal auditing as a form of control over all other internal controls. Internal Auditing therefore, is an essential elements of the internal system.
The internal Auditors are responsible for evaluating internal controls as an aid to management. In this capacity, internal Auditors provide management with information that is useful in assessing operational efficiency. The internal Auditors in assuring themselves that accounts properly reflect the fact s also appraise policies, procedures, use of authority, quality of management effectiveness of methods, special problems and other phases of operations.
The Internal Auditors are expected to anticipate problems, lack or failure of controls. visualize improvements and propose preventives action. The internal Auditors conduct functional Audits, and responsibility Audits. In a functional Audit, a single activity is reviewed and evaluated where as in a responsibility audit; all activities under the jurisdiction of one person are and evaluated.
internal Auditors assist the operations of the independent auditor by ensuring that good system of internal
control is maintained within the organization. Notably, the starting point of
independent control. Thus with a system of internal control, and a
satisfactory, internal audit an independent auditor is in a better position to
render an opinion as regards the truth and fairness of the financial reports of
Irrespective of the activities of the internal auditors advocated, a lot of 1s and loopholes still exist in most, if not all the system of internal control in Government parastatals. These loopholes are easily exploited by people interested in indulging in fraud. Government parastatals have always been notorious of being fertile grounds for corporate irregularities like fraud, embezzlement as well as misappropriate of funds and other assets why our
dailies (Newspapers) are usually full of probe panels or commissions of inquiry setup by government to look into the activities of these people, but these panels and communities of inquiry seen not to achieve much.
- HISTORICAL BACKGROUND OF THE NNPC ESTABLISHMENT AND ACTIVITIES
The Nigerian National Petroleum Corporation (NNPC) came into being on April 1, 1977, by a merger of the defunct Nigerian National Oil Corporation (NNOC) and the former Federal Ministry of Petroleum Resources. The statutory instrument Decree No. 33 of 1977, which established the created a public Organization that would on behalf of
government, adequately manage Petroleum Industry:- From exploration of natural gas; refining or processing of crude oil and natural gas to producing Petroleum products and other derivatives both for domestic consumption and export.
Other aspect of the corporation’s activities includes transportation and distribution of petroleum products through the Nation; production of Petrochemicals to provide the needed raw materials for rapid agricultural 1-: industrial development of the country. Their responsibilities also include the supervision of the activities of oil companies and service companies operating in the nations petroleum industry (both foreign and indigenous), particularly those in which government has participatory interest and the statutory regulation of a activities of the Nations Petroleum Industry
In order to provide sufficient Petroleum Products for the nation’s domestic NNPC has built four refineries: one at Warn and Kaduna respectively while Port-Harcourt has two.
Through the efforts of NNPC, the Country’s refining capacity has increased quite impressively from 30.000 barrees of crude oil barrels Jay at inception in 1977 to 230,000 barrels per day in 1987, and 445, 000 barrels in 1989 when the forth refinery goes into operation. Today, the corporation is producing petrochemicals in five (5) plants at Ekpan, Kaduna and Eleme.
However, the NNPC of today comprises of a Holding offices and its Twelve Subsidiaries located Nationwide.
THE HOLDING OFFICE
The Headquarters office of the corporation is made up of corporate services, operation and the National Petroleum Investment Management Service (NAPIMS).
The Corporate Service Division, headed by a Group Deputy Managing Director, looks after the finance, legal and insurance, administration and personnel, Technology and Corporate Planning and Development Divisions
The Operations group, also headed by a Group Deputy Managing Director is responsible for the exploration, production, Gas Manufacturing, Petrochemicals and International trading Divisions.
The third grouping, NAPIMS, is under the charge of the co-ordination of Federation’s investment in exploration and production
Companies It is therefore responsible for supervising the joint venture
Activities of the joint ventures partners. It markets the Federations accruable Crude and engages in direct exploration services in new frontiers area where the oil companies hesitate to carry out exploration.
The heads of the three groups report directly to the Group managing Director, who is the Chief Executive of the corporation. The Secretary to the Corporation and the Group Internal Auditor also report to the managing Director.
Operationally, the Subsidiary managing Directors report to the Group
managing Director (Operations).The Subsidiary Board report to the Holding Boards of Directors with the Minister as chairman.
(see organization Chart Below)
1.2.3 The twelve (12) Subsidiaries of NNPC are as follows:
1. The Nigerian Petroleum Development Company (NNPC)
2. Integrated Data Services Company Limited
3. Warn Refinery and Petrochemical Company Ltd. (WRPC)
4. Kaduna Refinery and Petrochemical Company Ltd (KRPC)
5. Port-Harcourt Refinery Company Ltd (PHRC).
6. Pipelines and Product Marketing Company Ltd. (PPMC).
- Nigerian Gas Development Company Ltd. (NGDC).
8. Eleme Petrochemical Company Ltd.
9. Engineering Company of Nigeria Ltd. (NETCO).
10. Nigerian Liquefied Natural Gas Company. (NLGC)
11. CALSON (BERMUDA) Ltd and Hyson (NIG) LTD.
All twelve subsidiaries listed above are limited liability companies, some Wholly owned by NNPC while others are jointly owned between NNPC and foreign and local private investors. They all have their own boards of directors and of this study; the researcher shall focus on the pipelines and product marketing company. This is because the researcher will not be able to cover other subsidiaries of NNPC within the limited time frame.
1.2.4. PIPELINE AND PRODUCTS MARKETING COMPANY LIMITED (PPMC).
This subsidiary provides customers services by transporting Crude oil to the refineries and moving white Petroleum products to existing and future market efficiently and at low cost through a safe and well maintained pipelines and depots. They also market refined Petroleum and petrochemicals products in the domestic as well as export market especially in the ECOWAS sub-region, provide marine service and also maintain uninterrupted movement of refined petroleum products from the local refineries. They also stimulate the sale of special products and promote import substitution of Petroleum Products and special products (Nephtha, Solvent, DAK, Waxes, Bitumen and Sulphur).
The company buys the crude oil from the Federal Accounts on behalf of NNPC. It then takes the crude to the refining companies for their services s it usual in such arrangement. It then take the products obtained there is its depots through the products obtained thee to its depots through its pipelines system for sale and distribution to the petroleum marketing companies. From the facts stated above it evidently clear that this NNPC wholly owned company is responsible for distribution of Petroleum and Petrochemical products to all parts of the country and internationally’
1.2.5. PIPELINES AND PRODUCTS MARKETING COMPANY’S ORGANIZATION OF AUTHORITY
This line of authority and responsibility in this subsidiary runs from the managing directors to the operations division and the services divisions the audit divisions have a staff authority. Basically, this subsidiary is up of operations, services and Audits. The operations divisions and services divisions are headed by Executive Directors while the authority and responsibility mentioned above. Also is shows the manager of oil movement and quality control, and all Area office manners reports to the Executive Directors (Operations). The manager of marine transportation division, technical services and maintenance also report to the Executive Director. While the managers of administration and personnel department, finance and accounts, and commercial services report the executive director (Services).