INTERNAL AUDIT IN THE PUBLIC SECTOR

The Institute of Internal Auditors defined internal auditing as “the independent
appraisal activity within an organisation for the review of the accounting,
financial and other operations as a basis for protective and constructive
service to management.”

Objectives and Scope

The basic objective of internal auditing is to assist the management in the
effective discharge of its responsibilities. The internal audit department
provides this assistance by furnishing management with analysis, appraisals,
recommendations and comments regarding the activities reviewed. Internal
auditors can be concerned with any phase of the operations of the department/
ministry. This may involve going beyond accounting and financial records to
obtain a full understanding of the operation under review. Internal auditing is
a managerial control in itself and a duty performed by personnel employed for
such specific purpose. Internal audit exists in every Ministry/Department to
carry out pre-auditing of all activities of the establishment. Pre-audit is the
audit performed with the main objective of checking before payment for a
transaction takes place in order to ensure compliance with the rules governing
each transaction.
In order to attain the overall objective, internal audit activities should include:
(a) Reviewing and appraising the soundness, adequacy and application of
accounting, financial and other administration controls, and promoting
effective controls at reasonable cost;
(b) Ascertaining the extent of compliance with established policies, plans
and procedures;
(c) Ascertaining the extent to which the assets of the department/ministry
are accounted for and safeguarded from losses of all kinds;
(d) Ascertain the reliability of data developed or produced;
(e) Preserving the integrity of files on which those transactions and related
data are stored; and
(f) Appraising the quality of performance in carrying out assigned
responsibilities.

Operation of Internal Audit

Internal auditor derives his powers from the power as delegated by the
Auditor-General. Internal auditor has full access to all the department/
ministry’s records, properties and personnel that could be relevant to the
subject under review. The internal auditor should be free to review and
appraise policies, plans, procedures and records. Most of the actions carried
out by the internal auditor fall within the following responsibilities executed
by him in the establishment:
(a) Operation Audit: which focuses on a particular activity within the
establishment e.g. audit of Agricultural and Rural Development in a
local government.
(b) Functional Audit: which focuses on a particular function e.g. audit of
salary preparation etc.
(c) Organisational Audit: which focuses on all activities with the
establishment globally viewed. It includes (i) & (ii) above.
(d) Investigation: Focuses on ad-hoc assignments.
(e) Management Audit: Focuses on advising on policies introduced from
time to time by the establishment.

Responsibilities of Internal Auditor

The Internal Auditor is responsible for:
(a) Reviewing, evaluating and reporting on the adequacy or otherwise of
the controls installed and operated and the extent to which they assure
propriety, security, completeness and accuracy of operations of the
establishment;
(b) Performing the responsibility imposed by the Civil Service Reforms. The
Reforms state that he shall carry out complete and continuous audit of
accounts and records of revenue and expenditure, plant stores and
assume the duty of Stock Verifier where none exists in an establishment;
and
(c) Confirmation of reliability and accuracy of extracted financial
information to management.

Matters Influencing Setting up of Internal Audit Unit

These include:
(a) The necessity of the internal audit unit in the circumstances of the
government, bearing in mind the provisions of Civil Service Reforms/
guidelines and relevant extant laws;
(b) Determining the size and structure of the unit;
(c) Preparation of Audit Manual;
(d) Recruitment of appropriate staff for respective office; and
(e) Training and inducting the staff.
The above-stated procedures are of equal application to the audit of other tiers
of government - the State and Local Governments.

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