EVALUATION OF INTERNAL AUDITING AS A MECHANISM FOR EFFECTIVE MANAGEMENT AND ACCOUNTABILITY IN PUBLIC SECTOR
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- NGN 5000
BACKGROUND OF THE STUDY
Recently, proper management and accountability of financial resources like funds in the public sector has begun to receive much prominence. This is primarily due to an increase in fraud and high inflation rates, which devalue idle or unaccounted cash and, more importantly, the failure of the goals of establishing such enterprises and extra ministerial departments. Okezie (2017) observed that most government establishments are tightening their internal control system to ensure strategic management planning and transparency. This duty call has become necessary as a result of the near-collapse of government institutions caused by the abuse of funds and its vulnerability to corrupt officials who are always working to cheat and evict themselves from the organization. To keep its financial resources safe from theft, an organization must understand its revenue and expenditure vouching system, accounting system, and base authorization method, cash control system, and so on in terms of cash inflows and outflows. This explains the exponential growth in the misappropriation of public monies by officials and government technocrats entrusted with their protection. It is important for patients to remember that cash and other near-money resources, whether real or financial, are the most valuable current assets for the proper operation of her machinery. It is the input required to keep the firm running on a continual basis. Such resources are required for salary payments, payment for contacts, and other infrastructure improvements required to maintain a decent quality of life.
According to Aguolu (2019), the appropriate use of corporate funds is an important aspect of real and financial asset administration. Such activity may be planned and controlled thanks to thorough internal auditing, which includes strict internal controls, adherence to accounting rules, and a principle vouching and permission system. This is necessitated by the fact that business is cyclical in nature, with declining government funding, and that a significant period of time elapses between the receiving of an order, its shipment, and the depositing of payment. An investment in cash and real assets is required in order to meet pressing operational demand. The uneven flow in the receipt and disbursement of funds causes seasonal fluctuations and so on. Furthermore, the receipt and disbursement of funds is usable on a daily basis and within the month with a strong cash management and control system (models).
Importantly, effective cash management and accountability are essential for an organization's overall success; yet, many public sector organization in Nigeria, particularly those controlled by the government and the state, are devoid of legal cash control and other real asset management systems. Serem (2016) asserts that While some organization prepare a cash budget at the start of their fiscal year with no follow-up authorization and control process, others simply shift cash control to a monthly basis in the form of bank reconciliation statements that are doctored to clan up their augean stables. Unfortunately, it is only when a cash problem arises that management begins to look for the immediate and remote causes and possible remedies while they are the problem themselves.
According to Stever (1994), auditing in all its forms, whether internal or external, provides a unique platform and instrument for accountability, since no manager wants to be found wanting for failing to produce an accurate account of the funds entrusted to him or her. As a result, it serves as a deterrent to managers of public funds from committing fraud (Owler & Brown, (2018). More importantly, internal auditing is a type of control that functions by measuring and evaluating the effectiveness of other types of control. It is an independent appraisal of activity within an organisation for the review of accounting, financial, and other operations as a basis for protective and constructive services to management.
The researcher intends to investigate the nature of internal auditing as a possible tool for effective management and accountability of financial instruments, with specific reference to the public sector, the third tier of government, and to evaluate the internal control system in accordance with approved international standards and principles, using Udi local government council as a case study.
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