The notion of the auditor being bound or a watchdog is
gradually changing for the better as internal auditing has undergone
tremendous changes in recent past.
The actual functions of the auditor is often surrounded in secrecy or held in some kind of awe.
Major notes of internal auditing have not been clear to the
majority of people in the society. In view of numerous corrupt practice,
frauds and embezzlement often uncovered by probe tool has often been
It is the realization of this that I have set out to look
critically into internal audit department of Afribank with a view to
finding whether effective internal auditing practices ensure effective
control. The mode of appointment, independence and duties of the
internal Auditor was looked into an determining whether the internal
audit department is being operated as a management or efficiency audit.
The finding shows that internal auditor is not completely independent
and mode of operation has a combination of characteristics of various
types of auditing especially the operation type of audit.
Nevertheless a high degree of internal control exists in the bank. In
consideration of improvement in some area, recommendations are
1.1 BACKGROUND OF STUDY
In view of the recent global recession of 2009-10, when investments
made by banks and financial institutions proved unsafe and almost
triggered a financial meltdown that required strong input and investment
by most democratic governments, the need for internationally regulated
and well-audited financial institutions are greater than ever. Therefore
financial institutions have started to concentrate on rigorous internal
audit processes undertaken by an internal audit team that conducts
regular control self assessments. According to Obazee, (2009), internal
audit can be define as an independent activity objectively,
confirmatory, and consultant determined to add value and imp rove the
organization’s operations and by helping them to achieve their
objectives through a systematic and disciplined method to evaluate and
improve the effectiveness of risk management and control processes and
The financial institutions accountant has the responsibility of
developing systematic arrangements to assist management in the
performance of the services of the institution while the financial
institution auditor has among other duties the complementally role to
examine whether management actually performs that efficiently. The
financial institutions auditor has to satisfy himself that the presented
have been prepared in accordance with statutory and constitutional
requirements and regulation and that proper accounting practice
have been observed in their compilation. With the growing size and
complexity of financial institutions in the recent years, the importance
of the internal audit has correspondingly increased so that it is today
major factor in establishing the quality of the financial institutions
internal control and its development has made considerable contribution
to the improvement of the financial institutions management (Klein,
2002). The internal audit is one of the important means for management
to confirm and verify the compliance of administrative units in the
financial and administrative policies, legislations, financial and
administrative systems and the adopted public policies. The internal
audit has been developed and increased the attention to it and
standards, guidelines and moral constitutions had been issued and became
one of the important units in most banks in the world. Banks forms
the chief corner-stone of any financial system, and indeed of the
economy of a nation (James, 2003). At the heart of banking, is the audit
function, this is evident by the fact that all other departments are
linked with the internal audit department. Organizations have recognized
internal audit as a tool for ensuring effective working of the internal
control system. Efficient performance entails achieving goals with
minimum waste of resources that is making the best use of resources that
is making the best use of money, time materials and people (Lewin and
1.2 STATEMENT OF THE PROBLEM
Internal audit is an integral part of the internal control system of
financial institutions, at the heart of banking is the audit function:
This is evidenced by the fact that all other departments are linked with
internal audit department. The importance of internal audit system
cannot be overemphasized, since organizations have recognized internal
audit function as a tool for ensuring effective workings of the internal
control system. Okolo, (2001) describes internal audit functions as an
aspect of control mechanism, within a business, manned by specially
assigned staff. However, in Nigeria, the audit function in the banking
sub-sector has not been fully taped. This could be seen in the numerous
cases of errors, intent to defraud and other fraudulent acts that exist
in the banking industry.
It is therefore, no wonder that the distress in the banking sub-sector in the
nineties reflected lack of effective control mechanism of the audit
function in the banking industry. The experience of failed banks in
Nigeria and other nations have called for reinforcement of audit and the
strengthening of the control system in the Nigerian banks. It is
against this background that, this study seeks to evaluate the role of
internal auditing in enhancing efficient performance of financial
institutions in Nigeria considering the fact that, the banking
institutions is critical to the survival of any economy.
1.3 RESEARCH QUESTIONS
1. How does internal audit practice help to achieve organizational objectives?
2. How does internal auditor help to eradicate fraud in banking industry?
3. Is the internal auditor completely independent of the management in organizations?
4. Is there any significant relationship between internal audit and organizational objectives?
Does internal audit practice have positive impact on organizational performance?
1.4 RESEARCH HYPOTHESES
The following hypotheses have been formulated and stated in null form to be tested in the course of this study.
Ho: Internal audit practice does not help to achieve organizational objectives.
Hi: Internal audit practice helps to achieve organizational objectives
Ho: Internal Auditor does not help in eradication of fraudulent activity.
Hi: Internal Auditor helps in eradication of fraudulent activity.
1.5 OBJECTIVES OF THE STUDY
The objective of the study is to examine the impact of internal audit
activities on the performance of banks in Nigeria. The specific
objectives are stated below:
i. To examine the impact of internal audit in the achievement of organizational objective.
ii. To observe the relationship between internal audit and organizational objectives.
iii. To investigate the impact of internal audit meetings on return on assets of banks
To investigate the impact of financial expert on return on assets of banks
1.6 SIGNIFICANCE OF STUDY
The researcher now discovered that it will be reasonable to encourage
Nigeria business promoters (both public and private) to introduce a
proper and vital accounting system where fraud and all forms of
embezzlements can be checked in all the organizations.
1.7 SCOPE OF THE STUDY
Internal audit is vast and complex subject as it involves internal
accounting check and balancing, but the researcher concentrates her
study on role of internal auditing in on Nigerian economy with emphasis
on First Bank Nigeria Plc, Aduwawa Branch, Benin City.
1.8 LIMITATION OF THE STUDY
During the conduct of this research work, some factors posed as
constraints to the determined efforts of the research to carryout the
research study to such a depth and in such a manner that it ought to
have been carried out judging from its relevance to management, such
a. Management Restriction: management more often than now allow
access to information that are considered very confidential in nature
like detail information of organization of the organizational corporate
profile. As a result of the restrictions the author was able to work
with only the information that he has access to.
b. Time Constraint: Time is also another factor tat acts as
hindrances in carrying out this research study. This is as a result of
the fact that other things were still being attended to in the course of
carrying out this research work.
c. Financial Constraint: money also acts as a problem in the
conduct of the research work. Traveling expenses were incurred in
getting the materials for the research work. Also incurred, were
expenses for the typing and distribution, building and a lot of other
1.9 DEFINITION OF TERMS
1. Auditing – an official examination of business and financial records to see that they are true and correct.
2. Fraud/Embezzlement – illegal methods of collecting/getting money from organization (it is a criminal offence).
3. Ethnics – rules, principles or order governing a profession.
4. Leader – person in authority (Head of a country of organization)
5. Boss – a superior officer having subordinate under him.
6. Management – the art of running and
controlling a business or similar organization. According to Fubara
(1986) views management as an activity carried on in an environment that
comprise of resources in capital and human, having alternative uses.
7. Dishonesty – lack of trust and intending to deceive people.
8. Frustrated – discouraging.
9. Internal Auditor – professional expert in checking of books of account or records.