THE ROLE OF THE INTERNAL AUDITING DEPARTMENT IN ORGANIZATIONS: A CASE STUDY OF SELECTED BANKS IN ENUGU STATE

Thesis Overview

<p> </p><p><strong>INTRODUCTION</strong></p><ol><li><strong>Background to the Study</strong></li></ol><p>Through out the past decade, Nigeria has witnessed<br>a rise and fall in several businesses. The businesses or organizations which<br>are still in existence and experiencing growth set up structures and practices<br>of boards so as to monitor the performance of the organizations. This is done<br>so as to impress the shareholders of the various businesses and attract new<br>investors.</p><p>The companies or establishments which<br>did not make it could have suffered from one problem or another. The most<br>prominent one which can not be ignored is that of fraud. This alone has caused<br>a lot of damage in the financial markets and the entire economy has been<br>plunged into a terrible crises. The fall of a company like Enron in the United States of America<br>caused an up rise and raised so many eyebrows hence leading to a sagging investor’s<br>confidence.</p><p>On the other hand, there are some<br>organizations growing in strength. One of the factors that could contribute to<br>the steady growth of companies is the setting up of an Internal Auditing Department.<br>As fraudulent financial reporting and restatements of earnings have become more<br>prevalent, auditing (be it external, internal or governmental audits) has<br>become more important. So to monitor the procedures and adherence to principles<br>to an organization, internal auditing could be looked upon as a key. A typical<br>example is seen in the case of World com, (a financial establishment in United States of America)<br>when Cynthia Cooper (Vice President of the internal auditing team) and her<br>staff unveiled several auditing practices which were not in line with the<br>Generally Accepted Accounting Principles (GAAP). In carrying out this audit, it<br>was discovered that for previous two years, $3.8 billion in cost had been<br>capitalized rather than expensed. This announcement was made in June 2002.</p><p>&nbsp;Pinero (2001), in his paper presented at a<br>workshop for internal auditors stated that “the prime objective if the Internal<br>Auditing Department (IAD) in any bank is to evaluate whether the bank’s<br>framework of risk management, internal control and corporate governance processes<br>are adequate and functioning properly and carried out throughout the year. He<br>added that the objective of the internal auditing department (IAD) includes<br>suggesting and recommending the management for improvement in internal control<br>and risk mitigating factors. Internal audit services provided by the IAD<br>therefore exist to add value to the organization, to concentrate on the key<br>risks, to evaluate and assess the Internal Control System (ICS) and contribute<br>to the proper economic, efficient and effective use of resources in banks and<br>other organizations (Miten Keynes Council,2002). As such the IADs of Oceanic<br>bank plc, UBA plc and First bank plc could be looked up to as monitors in their<br>various organizations as they check the risks and ICS of the organizations. Therefore<br>internal auditors in Nigeria,<br>in carrying out their function and roles judiciously could as well save a<br>company or organization from a fall.</p><p>From the above, it will be reasonable<br>enough to agree with Frigo (2000) who points out that it is wrong to think of<br>auditing as only “financial” in nature. According to him the scope of internal<br>auditing within an organization is very broad and may involve topics such as:</p><ul><li>The<br>efficiency of operations</li><li>The<br>reliability of financial reporting</li><li>Deterring<br>and investing fraud</li><li>Safeguarding<br>assets and</li><li>Compliance<br>with laws and regulations</li></ul><p>As a result of the broad scope of<br>involvement, internal auditors (those who carry out the profession of internal<br>auditing) may have a variety of higher educational and professional<br>backgrounds.</p><p>It can be interpreted from the above that audit departments in organization function in a particular way to ensure the growth and development of the organizations.</p> <br><p></p>