Internal Audit As A Tool In Ar Chiving The Organizational Objective



Internal Audit: The system of controls adopted in any economy greatly determines the development and growth of that economy. To ensure optimization in money, materials machine, time, resource and management of men, controls are essentials.

These controls are installed by many organizations including banks to check how effective and efficient they maximize their resource. One of such controls commonly used to minimize wastage and guide plans to their eventual accomplishment is internal auditing. Auditing has been in existence for many years, it was in ancient Egypt and the great mercantile establishment of the middle ages. This shows that internal auditing can neither be neglected nor under rated in our modern economy for it was borne out of the complexities of modern business climate and transaction involved. In that other management of various large business organizations and government concern recognized internal auditing as a valuable machinery in achieving and objective deemed accurate at a given point in time.

The term “Audit” is from a Latin word “Audire” which means hr hears. This is because the account of an estate domain were checked by having them called out of those who complied them to those in authority. With the growth of trade and commerce the need for more accurate method of recording business activities arose. This, auditing is more a question of he hears but a whole process where by the books of account and vouchers of business entities (including charities, trusts) are subjected to critical examinations by professionally qualified and independent account (Auditors) on such a detail as will enable them from an option as to their truth and fairness. The Auditing is the bridge across the creditability gap created by the separation of management from ownership.

The complexity of the art of management extents to increasing aware of business fraud, embezzlement and the cash squeeze which often cripple many companies. The management has to look inward in order to uphold the space of activities and keep abreast with the changes in their immediate and external environment, and this can only be achieved a good and effective internal control system of which internal auditing is a major section. A writer maintained that the existence of an efficient and effective system of internal control both in design and operation which is the responsibility of management with best to prevent fraud or at worst help to detect such fraud at the earliest opportunity.

It is a function carried out by an independent staff in audit department with the sole aim of reporting on the fairness and truly of financial statements. However since the internal auditors are employee of the firm or the establishment concern, independence is not always achieved.

The comprehensive coverage of an internal audit upon several factors. A general rule is that department should of course have as much freedom as possible without interference from the management. In such circumstances the internal auditor will have a greatly enhanced share in recommending a new and conducting investigations where appropriate. The terms of references should be defined as lack of this may lead the department and those in another.

To avert this ugly incident and ensure greater coverage during investigations, management issues guidelines to heads of division to always make necessary documents/records/files available to audit staff as may be demanded by them while performing their duties.

A proper audit work should be able to:

Review the accounting systems as related to internal control.
Examine financial and operating information for management.
Review the economy efficiency and effectiveness of operation.
Review the implementation of corporate policy plans and procedures.
Assist in implementation of new accounting system.
Providing a training ground for both financial and general management personnel.
Internal Audit functions can help to spot out deficiencies in the systems so as to evolve corrective measure at the earliest opportunity. Internal auditor appraise, analyses and report

upon the policies and methods employed in the bank.

The duties of internal Auditor to the general performance of the whole organizations can not qualified which makes it very importance for all organization to maintain a good internal control system maintained by qualified chartered accountants.


Internal control system may be insufficient based on some predicaments. These may include lack of segregation and assignment of duties to accounting staff. Also the scope of duties of internal audit unit are so wide and their scales of operations so low as well as the shortage of qualified staff to carry out internal auditing and accounting duties.

Independence of Accounting officer can easily be maneuvered by management which can affect the internal audit system of an organization clearly defined as a result of two or more dishonest staff can collide to override the efficiency of the internal control system. The criticisms of the internal control system have been extended to the banking industry hence this study of internal audit as a tool for effective management.


This study aims at assessing the internal audit as a subsystem of internal control being operated in the bank.

i. The purposes are outlined below

ii. To aid good accounting system

iii. To eliminate wastage and losses

iv. To survey the internal audit unit of Afribank Plc, Head quarters

at Victoria Island so as to review the predominant audit practice

in the bank.

v. To point out deficiencies in the internal control system used by

the bank.

vi. To appoint out the implications of the system and suggest

Recommendation that will bring improvement.

vii. To evaluate the expenditure procedure of the bank.

To ensure adherence management policies procedures, secure completeness and accuracy of record and safe guard all assets.


The ignorance of the public as to efficient contribution of internal audit department to efficient management makes this study essential. It is the believe of some people that internal audit is not necessary as it delays jobs, while some think it is only to detect frauds and misappropriate on, so this project will makes clear the merits of having a source of internal audit.

Secondly, inability of workers to efficiently and effectively utilize resources and lack of proper control mechanisms has led to wastage of human resources, time financial and materials resources. This study will help management in bringing about greater efficiency and effective use of resources and this same management cost. E.H Woo if (1988) (FCA) maintained that a great deal of the work of an internal auditor is curled with the evaluation of systems of internal cheek, conservations with officials (the result of when was later conformed by examination of records) and general seripling of records.

Though many researchers have been conducted system, one can say that this study will contribute in no small way to the available interactive.

This study makes more, insight into the deficiencies in current internal audit practices in the banking section and suggests useful innovation for making necessary changes in both the organization and implementation into internal audit function as it obtains in Afri- bank Nigeria plc.

Lastly. This study will at most expose the benefit of this great department to companies who do not have such, so that they can establish this control department without delay.


In this section the hypotheses selected in chapter one is tested. Relevant question from the question form the questionnaire aroused to test the hypothesis


Ho: – Internal Audit is not a source of help to efficient management operations

Hi: Internal Audit is a source of help to efficient management operation.


Ho: The recognition accorded to the internal Auditor in the organization hierarchy has not enhanced the system of the organization.

Hi: the recognition accorded to the internal Auditor in the organizational hierarchy has enhanced the system of the organization.


Various measures of internal control systems are considered in Afri-bank, but more concentration world be made on internal audit aspect for the purpose of this study.

Accounting systems and related internal control measure, the position, the independence of the auditor as well as the slope of his works is the areas to be studied.


In carrying out this study, it is important to have a set of assumption to base the study

(a) that internal auditing helps in making efficient management of the company’s resources by evaluating the other control departments.

(b) That fraud is reduced to the barest minimum that when it occurs most often then not it is easily discoursed.

(c) That the responses to the questionnaires are true and accurate.

(d) That the internal audit unit in the bank has adequate knowledge of practice of the organization.

(e) That the resporident co-operated by giving the information demanded from them without reservation.

Certain problems and limitations are expected to face study like this, such problems are lack of resources or time to study or go ground another divisions of the bank.

Also, some staff may not like to reveal information, which they regard as classified, deputes the fact that the manager of the bank has given the manager of the bank approval.

A case study approach will be adopted which will be extensively and intensively carried out by personal calls on the bank. The main method of data and information collection will include both primary and secondary sources. The primary sources will be through personal interview with the intense Audit department’s staffs. Questionnaire will also be designed and distributed.

The secondary sources are textbooks and journals.


It is necessary that clear definition of some technical terms and words are given to avoid any possible confusion that may arise because of their usage.


It is sometimes referred to as external auditing or simply as auditing the American Accounting Association committee on basic Accounting concepts (1972) has defined it as “A systematic process of objectively obtaining and evaluating evidence regarding assertions about economic action and events to ascertain the degree of correspondence between those assertion and established criteria and communicating the result to interest users.

Also the consultative council of Accountant defines Audit as “The independent examination and expression of opinion on the financial statement of an enterprise by an appointed auditor in pursuance of that appointment and in compliance with an relevant statutory obligation.


A.H. milligram defines it as “An independent appraisal activity within an organization for the review of accounting financial and other operations as a basic of services to management. It is a managerial control, which functions by measuring and evaluating the effectiveness of other control.
It is a vital part of internal control and forms the eves and ears of the board in the enterprises. It is also a series of process and techniques through which an organization own employee ascertain for the management, by means of first hand on the job observations, whether established management controls are adequate the effectively maintained, records and reports financial, accounting and other wise reflect actual operation and results accurately an promptly and each division in carrying out the plans, policies and procedure for which it is possible.

INTERNAL CONTROL: the institute of chartered accountants of England and Wales define it as “A whole system of control, financial or other wise established by the management in order to carry out the business of an enterprise in an orderly and efficient manner, ensure adherence to management policies, safeguard the assets and secure as far as possible the completeness and accuracy of the records”.
But the definitions given by a special committee report of the American institute of corporate Accountant (A.I.C.A) is more impressive. It said that “internal control comprises the plan of organizations and all of the co-ordinate methods and measures adopted within a business to safeguarded its asset, check the accuracy and reliability of its accounting data promote operational efficiency and encourage adherence to prescribed managerial policies.

In this paragraph, we will consider the definition in detail.

(a) The whole system internal controls can be seen as single procedures (Example clerk A checks the calculations performed by clerk B).

(b) Financial and other wise: the distinction is not impotent perhaps financial include the use of control accounts and other wise may include physical access restrictions to computer terminals.

(c) Established by the management: internal control system are established by the management, either directly or by means of external consultants, internal audit, or accounting personnel.

(d) “Carry on efficient manner dearly the converse is unacceptable in any business.

(e) Ensure adherence to management policies: Not all management have expressed policies, but as an example a budget is an expression of management policy and adherence to the budget can be achieved by procedure such as variance analysis.

Another example might be the selling prices of the enterprises products being kid down by the management and controls existing to ensure that these prices are adhered to

(f) Safeguard the assets: Obviously allowing assets to be broken, lost or stolen is unacceptable and procedures are always devised to safeguard them. Examples are locks and keys, the keeping of a plant register regular reviews of debtor balances etc. An aspect of this which is often over looked is the payment where no benefit have been received as payment for piece of work not done or the setting up of liabilities where no benefit has been received as in fraudulent purchase and subsequent embezzlement of goods by employees are both examples of failure to safe guard assets.

(g) And accuracy of the records: Again, the converse is unacceptable. Examples of procedures to achieve this include checking of the work of one clerk by another or, the use of control accounts, independent comparison of two sets- of records e.g. stock records and stock, or piece-work payments and good work put into store.


The types of internal control are categorized in the appendix to the operational auditing guideline on internal controls and this categorization is followed here, giving examples.

In organization, an enterprise should;

Have a plan of organization which should
Define and allocate responsibilities: Every function would be in the charge of a specified person who might be called the responsible official.
(a) Thus the keeping of petty cash should be entrusted to a particular person who is then responsible and hence answerable for that function.

Identify line of reporting: In all case, the delegation of authority and responsibility should be clearly specified.
A employee should always know the precise power delegated to him, the extent of his authority and to whom should report. Two examples:

i Responsibility for approving by the board of Directors for items over tax and within the competence of the works manager for a budgeted amount agree by the board.

ii Responsibility for the correct operation of internal controls may be delegated by the board of specific management personnel and the internal audit department.

(b) Segregation of duties

(c) No one person should be responsible for the recording and processing of a complete transaction.


it is defined as the allocation of authority and work in such a manner as to afford checks on the routine transactions of day to day work by means of the work of one person being proved independently by another, or of the work of one person being a complementary to that of another.


A report prepared by a qualified account and to express the opinion that the accounts snow a true and fair view and comply with statutory requirements.


The use of deception for unlawful gain or unjust advantage.


Afri – bank Nigeria plc formerly known as international bank of west Africa (IBWA) was granted a license to carry out banking business on 26th October, 1059 and began operation on 4th January, 1960 with the opening of a branch in Kano and shortly afterwards another branch was opened in Apapa.

The head office was subsequently established in 1961 at 94 Broad Street, Lagos. Originally owned by Bangue Del’ Afrique occidentale (BAD). It was renamed Bangue international pour I’ Afrigue occidental (BIAO/” IBWA”) to reflect it 49th acquisition in 1964 by first National City Bank Inc and consequent international ownership.

The bank was later incorporated under Nigerian companies Act, 1968 as a private limited liability company on 30th may, 1969. In 1976, the federal government of Nigeria acquired 60’h ownership of the bank. The staff Trustee ownership scheme off loaded later 10% while BIAO retained 4’h share holding as technical partner.

Afri-bank is one of the most diversified banks in the country over the last few years. The bank has worked it self up to become one of the top four leading banks in Nigeria and it has a net work of 123 branches covering the entire country, an asset base in excess of N11.06 Billion and a wide spectrum of corporate, institutional and individual customers that enjoy the professional services of the bank.

In meeting the full range of its customer’s requirements, the bank has diversified its operations into the following wholly owned subsidiaries to compliment its comprehensive financial services delivery

– Afribank international limited (merchant bankers)

-IBWA finance company limited, Dublin, Republic of Ireland.

– Afribank insurance broker.

-Afribank Estate Company Limited (for in- house services)

-Afribank’s trustees and securities company limited

-Afribank’s mission is to achieve the position of a leading international growth providing comprehensive and qualitative banking and financial services which meet the changing needs of its customers through the employment within the group of high caliber personnel and utilization of up – to – date technology while ensuring optimum returns to its shareholders”

As approved by the federal ministry government based upon the recommendation of the technical committee on privatization and commercialization (TCPC), the ministry of financial incorporated (MOF) in 1993 relinquished all of its equity holdings in Afribank for sale to the public.

The shares of Afribank Nigeria Plc were admitted and listed on the fistler market of the Nigeria stock exchange on 29th October 1993.


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