ANALYSIS OF AUDIT PROCEDURE IN A PUBLIC SECTOR ORGANIZATION (A CASE STUDY OF KADUNA STATE WATER BOARD)
ABSTRACT
Auditing is a critical tool for good governance in government. It is an essential control mechanism for ensuring proper economic resource management and compliance with prescribed financial policies and regulations.
Effective audit procedures are essential for public sector organizations in order to reduce the rate of financial mismanagement and abuse, which impedes the organization’s growth and proper administration.
In the public sector, auditing has expanded beyond the traditional financial statement audit to include a value for money audit. The economy, efficiency, and effectiveness of a specific function or department within the body whose affairs are being audited are the focus of this audit.
Data for the study were gathered through the use of a questionnaire, observations, and other written documents.
The research’s major findings are as follows:
– Auditing cannot exist in the absence of account preparation.
– The auditing has aided in the discovery of irregularities, errors, and other financial mismanagement.
– Auditing is essential in the public sector because it helps motivate and maintain operational autonomy while also ensuring economic stability.
CHAPTER ONE
INTRODUCTION
1.1 THE STUDY’S BACKGROUND
As it is practically impossible to speak of a building without a foundation, it is also professionally unbalanced to speak of “Audit procedure in a public sector organization” without first bringing to light what the public sector organization represents.
Public sector organizations are those established by the government for the purpose of providing social services with a profit motive in the background, if any.
In the eyes of the law, a “organization” is a living being. It is an intangible person with many of an individual’s legal rights, powers, and obligations. It can enter into contracts, own and sell property, and sue and be sued in its own name.
Organizations are thus the result of creation, and they are owned and managed differently as a result of their unique artificial legal structure. Among these organizations are the Kaduna State Water Board and the National Electric Power Authority, to name a few.
Every human organization, on the other hand, simply needs written records in order for management or administration to keep decisions, formulation of general rules, policy formulation, and legal validation of the organization’s status, procedures, and relationships with other organizations or individuals.
Every civilization, ancient or modern, that had a commercial background or that had to solve any difficult problems of governmental organization or administration had to keep financial or numerical records of some kind.
Auditing being the exercise aimed at ensuring that the accounts being reported on show the auditor’s opinion, a true and fair view of the financial position as at the balance sheet data and of the profit and loss for the period ended the date, suffix to say that as erroneously carried out, the goal of an audit is not to detect fraud, although fraud or defalcation may surface during audit.
Auditing an organization’s financial statements entails verifying the balance sheet, income and expenditure accounts, and examining the underlying records to test their reliability and the basis on which these statements were prepared. It entails going over the financial transactions that gave rise to the records.
In the public sector, such as the Kaduna State Water Board, auditing and an audit program must be developed, which will serve as a guide for the audit work. The audit program will seek to verify the effectiveness of the internal control system, with a focus on internal controls, division of duties, and managerial supervision.
The proper operation of the bookkeeping and accounting system, with particular reference to the accuracy, completeness, and dependability of the records being compiled, as well as the extent of the true and fair view of the financial statements produced as a result.
An audit involves a number of procedures, including general financial control procedures, cash controls and procedures involving receipt and payment, salaries and wages control, sales and trade debtors control procedures, contract award procedures, and fixed asset and investment control.
1.2 SUMMARY OF PROBLEMS
This research work aims to investigate effective audit procedure analysis in a public sector organization in order to gain an understanding of how it affects individuals and governments, as well as how proper audit procedure analysis aids in attracting and retaining financial positions in the public sector.
The following are the problem statements:
i. To what extent do auditors follow procedures in a public sector organization?
ii. What are the constraints that prevent auditors from performing internal control procedures?
iii. What is the relationship between the auditing process of the company and the level of accountability?
1.3 THE STUDY’S GOALS AND OBJECTIVES
Auditing in the public sector, particularly in public corporations such as the Water Board, has been severely neglected by the government in recent years. Most of the relevant books consulted in the field of auditing have said little or nothing about auditing of public corporations. The audit of limited liability companies has been a major source of concern.
This research, on the other hand, is intended to help readers understand the procedure in the auditing process in public sector organizations with reference to the Kaduna State Water Board, as well as the role of auditors in public sector organizations.
1.4 THEORETICAL STATEMENT
To have a bearing on this study, hypotheses must be developed, which is an opinion statement on the research question, and data obtained during the research work will be used to test the hypothesis.
Akuzuito and Nnadozie (1995 P.32) “A research hypothesis is a preliminary response to a research problem/question.” It is an educated or intelligent guess at a solution to the research problem under consideration. It is, however, an answer that lacks evidence until a full investigation is conducted. As a result, the research hypothesis can be viewed as an opinion statement.”
Given the problems already mentioned, the data collected during this study will be used to test the following hypothesis:
Hi: The auditing process has a positive and significant relationship with a public sector organization’s level of accountability.
Ho: There is no positive and significant relationship between the auditing process and the level of accountability in a public sector organization.
Hi: Internal control procedures are hampered by a lack of effective and efficient performance.
Ho: A lack of effective and efficient internal control performance has no effect on auditor procedures.
Hi: The lack of independence of most internal auditors has no effect on the effectiveness of the internal control system.
Ho: Internal auditors’ lack of independence affects the effectiveness of the internal control system.
1.5 THE STUDY’S IMPORTANCE
With the country’s economy rapidly deteriorating, the effect of audit procedures can be highly detrimental to users of a company’s report if not properly carried out.
The Kaduna State Water Board is a public sector organization in the Nigerian economy. It is necessary to investigate how audit procedures are carried out in such a public organization.
The impact of these audit procedures on individual investors, customers, and other government agents is critical. It is hoped that the research will raise pertinent questions that will necessitate further analytical investigation, thereby expanding existing knowledge on the subject.
1.6 THE STUDY’S SCOPE AND LIMITATIONS
The study was primarily limited to areas of concern to the Kaduna State Water Board, namely the analysis and procedure in a public sector organization. This study’s process includes the Board’s control and procedure for expenditure as well as receipts. It is also important to note that the project research is purely academic in nature.
Time Constraint: Time is an important consideration in research. A lot of time must be invested by a researcher in order to exhaust all of the requirements for a specific study. However, due to other academic obligations, the time allotted for this research work is limited.
Financial Constraint: Following closely behind the preceding constraint was finance. This type of research necessitates a large budget; a small budget does not allow for large-scale research that includes organizations.
Respondent Constraint: Most audit and accounting staffs approached for information were hesitant to release it for fear of leaking official secrets, making it difficult for the researcher to obtain adequate information for the study.
1.7 TERMS AND CONDITIONS
The following are some terms that will be used in this project.
Audit Program: A schedule of operations to be carried out during a specific audit exercise.
Audit Planning: Audit planning refers to the work plan developed by a firm of accountants or a government audit department to ensure that the entire audit job is completed within a year.
Audit Evidence: Any and all information obtained by the auditor in reaching a conclusion on any matter within the scope of his audit.
.F.M. stands for value for money audit.
Audit Working Papers: Working papers consist of a file of evidence obtained during audit work, details of the methods and procedures used by the auditor, and the conclusion reached regarding the audit’s subject matter.
Testing is the process of selecting and examining representative items from a large set of similar items in order to draw conclusions about the set’s characteristics.
Audit Procedures: The actions taken by the auditor in order to achieve the examination’s objectives.
1.8 KADUNA STATE WATER BOARD’S HISTORICAL BACKGROUND
The Board was established by Kaduna State (then Nigeria’s North Control State) through Edict No. 2 of 1971. Since then, the Board has used a separate set of books of accounts and treasury for the payment of vouchers, and new procedures and accounting systems have been introduced through circulars and on-the-job training to bring the Board’s Accounting system up to date.
All of these circulars and instructions, however, are in loose form, and some are also unwritten. The purpose of implementing a commercial accounting system at the Kaduna State Water Board is to provide appropriate, sufficient, and authentic management information to aid in decision making and operation planning.
This information is divided into two categories:
i. Financial and management information
ii. Financial data control and flow for future planning.
Accounting data must be classified and coded in order to be processed quickly. Revenue and expenditure have been coded and classified in accordance with these goals.
The accounting officer of the Board is the general manager/chief executive. Any officer who spends money on the board does so on behalf of the CEO. The chief executive’s powers in this regard are defined in circulars issued by the government from time to time and in accordance with the edict.
REFERENCES
A.H. Milichamp, Auditing Continuum, London and New York, 2000. The Special Edition
A. B. Ekwere, Contemporary Auditing, Fab Education Book, Jers, Nigeria, 1991.
Paper 14 of the AAT Study Pack, Public Sector Accounting and Auditing/2, was published in September.
E. O. Akuezuilo and B. M. Nnadozie (1995), Nuel Centi (Nig) Publishers Akwa, Research Methods and Statistics in Education, Social and Management Sciences.
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ANALYSIS OF AUDIT PROCEDURE IN A PUBLIC SECTOR ORGANIZATION (A CASE STUDY OF KADUNA STATE WATER BOARD)
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