ABSTRACT
The “Effectiveness of Audit Report on Improvement of Financial Management in Nigeria Federal Parastatals with emphasis on the educational system in Nigeria. The study aims at determining or examining the effectiveness of audit report in improvement of financial management in the Federal Parastatals particularly the Educational System in Nigeria. It is thus set out to achieve objectives among which are; (i) to identify the major challenges confronting auditors from giving effective audit reports (ii) to examine the extent to which auditors independence is infringed upon by the hospitality or public relation practices of some Parastatal of Federal Ministry of Education. It also set out to answer research questions including (i) what are the major challenges confronting auditor from giving effective reports to the Federal Parastatals in Education Sector in Nigeria (ii) what is the extent to which auditors independence is infringed upon by the hospitality or public relation. To properly guide the work, four research hypotheses were formulated: (i) wrong choice of audit firm, audit fees, lack of independence and registering of audit firms under different names constitute the major challenges confronting auditors in effective audit reports, (ii) non disclosures of classified information available to the auditors of Federal Parastatals in Education Sectors in Nigeria in their audit report significantly affects the effectiveness of this report among others. The survey research design was adopted in this study. The primary source of data was employed and the instrument of data collection was the questionnaire. The population of the study is made up accounting officers, internal audit staff and other staff of the studied parastatals. The Taro Yamane’s formula was used in selecting the sample size 476. The respondents was analysed using both descriptive and inferential statistics. Specifically, the hypothesis was tested using chi-square, multiple linear regressions, Pearson Product Moment Correlation Coefficient and Analysis of Variance (ANOVA). These were done through the application of the computer based statistical package for social sciences (SPSS) version 17.0 software. The major findings of this research includes normal or symmetrically distributed (Z = 1.250, p < 0.05) information from the Auditors of the federal parastatals that Wrong choice of audit firm, Audit Fees, Lack of Independence and Registering of Audit Firms Under Different Names, all constitute the major challenges confronting auditors in giving effective audit reports and normal or symmetrically distributed (Z = 1.869, p < 0.05) information from the Accounting Officers & other staff of the federal parastatals that Non-disclosure of classified information available to the auditors of federal parastatals in the education sector in Nigeria in their audit reports significantly affects the effectiveness of these reports, among others. The study concluded that management of public fund at the various Federal Parastatals in Education Sector in Nigeria is weak. It is therefore recommended that government of Nigeria should establish a supervisory body in auditing specially meant for monitoring and controlling the finances of its parastatals.
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
Proper financial management and accountability over public funds is a central component of good governance. Public funds are meant to be used effectively and efficiently to ensure that citizens are receiving the quality services for which the public funds have been allocated (Okoh and Ohwoyibo, 2010). The bane of public sector financial mismanagement in Nigeria since the oil boom years, (a period under which there existed structurally weak control mechanism), have created a variety of loopholes that have facilitated geometrically and sustained corrupt practices in the country up till date. The plague has diffused itself into all parts of the country: private and public business places.
As a watchdog for government throughout all its parastatals, departments for internal auditors whose primary concern is to critique the books of accounts of the parastatals and constantly report to the senate about the financial state of the corporations or parastatals were set up.
The main objectives of auditors of Ministries/Departments or parastatals are to ascertain whether: (a) All receipts of public money emanating from the operations of the period under review are collected and properly accounted for; (b) The accounting system in operation provides financial information that is reliable and free from material errors to facilitate the preparation of the accounting and financial statements required by law.
The audit of business accounts did not just become common today but in the nineteenth century. The enormous increase in trade in that period, which was fostered by the discovery of steam power and by mechanical inventions, generally led to the formation of numerous joint stock companies, and other corporate undertakings, involving the use of large sums of capital under the management of a few individuals (Akpomi & Amesi, 2009). Under these conditions, the advantages to be obtained from utilizing the services of auditors became apparent to the public generally, and a great increase in the practice of auditing resulted; as the present day forms the most important part of a professional accountant’s practice (Walter, 2009). With the increasing complexities in both public and private sectors, the duties of auditors became heightened. These complexities were met with ostensible corruption, a major feature of developing economies thereby threatening the independence, integrity and objectivity of the auditors. As a result of the increase in the level of business activities, both in the public and private sectors, it is now required by statute that activities of governmental and corporate business organizations be audited. The implication of this requirement is to ensure that those entrusted with funds are held accountable. Auditing therefore ensures that accounts and records of organization show a true and fair view. Auditors do this by thorough examination of the books of accounts of businesses and to confirm whether there is appropriate approval and authorization for every transaction.
If auditors are not competent especially in bringing their skills to bear in a corrupt environment, then the whole audit process is of no value. In Nigeria, as well as the developed countries, Chartered Accountants in practice (Auditors) are seen as competent but a number of recent events including corruption and failures of some banks and companies have given rise to doubts in the minds of the business community (private and public sectors). An interesting idea put forward by Abadi (2005), is that competence is constantly being improved but at the same time economics has dictated that the time spent on auditing is constantly being reduced even though modern laws, in accounting systems and structure are steadily becoming more complex. It is against this backdrop that this study is undertaken to find the extent to which the reports of the auditors can help improve financial management at the Nigeria federal parastatals
1.2 Statement of Research Problem
The phenomenon of corruption, public funds misappropriation, looting and scandalous events have deeply engulfed the country since the early 1980s and has persisted and resisted all solutions crafted by successive governments, thus turning into a hydra- headed monster so characterised of national terror impeding economic development. Under Section 85(5) of the 1999 Constitution, the Auditor-General for the federation is required within ninety days of the receipt of Accountant General’s financial statement to submit copies of the accounts of the federation signed by the Accountant-General to the National Assembly together with a certificate of audit and a report upon his examination and audit of all accounts relating to public funds.
The problem however, is that in spite of this regular audit exercise expected to cover even government parastatals, there remains a high level of inefficiency in the management of public funds in Nigeria. This study identified the problem of high level of inefficiency in the management of public funds despite regular audit reports, and this has led to the collapse of several governmental parastatals in Nigeria such as NITEL, NEPA, NRC, and NCC. It is thus aimed at examining the effectiveness of audit reports on government parastatals in the education sector in enhancing efficiency in the management of public fund.
1.3 Objectives of the Study
The main objective of this study is to determine the effectiveness of audit report on the improvement of financial management in Nigerian federal parastatals, in the educational sector. However the specific objectives are:
1. To identify the major challenges confronting auditors from giving effective audit reports on the federal parastatals in the educational sector in Nigeria.
2. To examine the extent to which auditors independence is infringed upon by the hospitality or public relations practices of the federal parastatals in the education sector.
3. To assess the level of significance of classified information available to the auditors but not disclosed in their final reports on the parastatals in the education sector.
4. To examine the level of significant of the gap between public expectation and content of the auditor’s report on the parastatals in the education sector.
1.4 Research Questions
1. What are the major challenges confronting auditor from giving effective audit reports on the federal parastatal in the education sector in Nigeria?
2. What is the extent to which auditors independence is infringed upon by the hospitality or public relations practices of the federal parastatals in the education sector.
3. What is the level of significant of classified information available to the auditors but not disclosed in their final report on the parastatal in the education sector.
4. What is the level of significance of the gap between public expectation and actual content of auditors’ report on the parastatals in the education sector in Nigeria.
1.5 Research Hypotheses
1. Wrong choice of audit firm, audit fess, lack of independence and registering of audit firms under different names do not constitute the major challenges confronting auditors in grouping effective audit reports.
2. Hospitality and public relations practices of federal parastatals in the education sector in Nigeria do not significantly infringes upon the independence of auditors of these parastatals.
3. Non-disclosure of classified information available to the auditors of federal parastatals in the education sector in Nigeria in their audit reports do not significantly affects the effectiveness of these reports.
4. There is no significant gap between the public expectation and actual content of the audit reports on the federal parastatals in the education sector in Nigeria.
1.6 Scope of the Study
In terms of capacity and the extent of coverage in this study, three federal parastatals in the education sector were covered with their headquarters in Abuja these include: The Joint Admission & Matriculation Board [JAMB]; National University Commission [NUC]; and the National Mathematical Centre [NMC]. The study though, exhaustively reviewed many related extant journal publications so as to identify the gaps to be bridged for essence of knowledge contribution, shall last for a minimum period of six months. All research activities in terms of the pre-study survey, the actual survey – data collection, sorting and analysis, and reporting were all managed within the forecast duration.
1.7 Significance of the Study
This study is of importance to the following classes of beneficiaries.
Internal Auditors
This study is of significant paramount importance to the internal and external auditors at both federal and state government parastatals in Nigeria. It shall help to urge them (the auditors) of the better way to render their professional duties despite the challenges they might be facing in carrying their basic auditing functions.
Government Agencies
Another important significance of this study is that, government agencies who are responsible for overseeing the activities of public or government institutions can make use of the outcome of this type of work for policy formulation purposes.
Non-Governmental Organizations (NGOs) and Pressure Groups
Non Governmental Organization (NGOs) as well as Pressure Groups like Nigerian Labour Congress (NLC) are not exempted from benefiting from the findings of this type of study. The NGOs may find the outcome of the study useful for their researches on national development while the pressure groups (particularly those government workers at the parastatals studied) on the other hand can be brought to the light of the statutory duties of different types of auditors so that their expectations will not continue to be misconstrued with auditors’ mere declaration of the true and fair view of the parastatals’ financial statements.
Researchers
Finally, researchers cannot but benefit from the outcome of this proposed study especially those authors whose studies shall be improved upon as well as those in academic who may wish to carry out similar study in the future.
1.8 Limitation of the Study
The study was limited to three federal parastatals in the education sector in Nigeria to wit; JAMB, NUC and NMC. These parastatals have been chosen due to their role, scope of operation and proximity in location. The study was as well limited to the period of 2002 to 2013.
1.9 Definition of Terms
Audit & Auditing
Audit is simply an evaluation of a person, organisation, system, process, enterprise, project or product.
Auditing is defined as a systematic and independent examination of data, statements, records, operations and performances (financial or otherwise) of an enterprise for a stated purpose. The auditor perceives and recognizes the propositions before him for examination, collects evidence, evaluates the same and on this basis formulates his judgment which is communicated through his audit report.
1.9.2 Audit Report
This is a formal opinion, or disclaimer thereof, issued by either an internal auditor or an independent external auditor as a result of an internal or external audit or evaluation performed on a legal entity or subdivision thereof (called an “auditee”). The report is subsequently provided to a “user” (such as an individual, a group of persons, a company, a government, or even the general public, among others) as an assurance service in order for the user to make decisions based on the results of the audit. An auditor’s report is considered an essential tool when reporting financial information to users, particularly in business.
1.9.3 Financial Management
The term ‘finance’ in its simplest form means the art or science of procuring and utilising funds or money while the term ‘management’ on the other hand means the planning, organizing, directing and controlling of an activity. Based on these, the term financial management however means the procurement and utilization of funds in such an efficient and effective form or manner so as to accomplish the objectives of the organization.
1.9.4 Parastatal
This is any government-owned corporation, state-owned enterprise, state enterprise, government business enterprise, etc. In Nigeria, the Joint Admission and Matriculation Board [JAMB], National Mathematical Centre [NMC], National University Commission [NUC] which are institutions proposed to be studied here in this study are all federal government parastatals.
This material content is developed to serve as a GUIDE for students to conduct academic research
EFFECTIVENESS OF AUDIT REPORT ON THE IMPROVEMENT OF FINANCIAL MANAGEMENT IN FEDERAL PARASTATALS
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