Submit your papersSubmit Now
For Enquiries: [email protected]
IIARD LogoIIARD

Internal Audit and Risk Management in Nigeria’s Public Sector

Avendei, Mathias

Abstract

This study examines the relationship between internal audit and risk management in ten selected MDAs in Rivers State. Data were generated with the aid of necessary information collected from the study through the cross-sectional survey via copies of questionnaire administered. A total population size of 150 and sample size of 109 was determined using Taro Yamane ‘s formula at 0.05 level of significance. Also, 109 copies of questionnaire were distributed to the respondents, while 90 copies were completed and retrieved. The instruments were validated with reliability above 0.7 co-efficient, using Cronbach Alpha technique. Six research questions and six hypotheses were raised which was tested with spearman ‘s rank order co-efficient of correlation using SPSS 23 version. From the findings, the concept of internal audit creates positive impact on risk control and risk financings. In conclusion, internal audit has a significant impact in risk management in the Nigerian public sector MDAs. Based on the findings and conclusion, it could be recommended among others that any internal auditor who cannot demonstrate the appropriate skills and knowledge should not undertake work in the area of risk management. Furthermore, internal audit should maintain high level of objectivity and independence in carrying out their core function of evaluating and providing management with assurance on risk management.

Keywords

Internal AuditRisk ManagementPublic Sector

References

Abiola, J. O (2015). Audit expectation gap: Auditors in unending role conflict. . Retrievedfrom https://www.ajol.info/index.php/ijdmr/article/download/120974/110403 Adeniji, A.A. (2011). Auditing and investigations. Ikeja, Nigeria: wyse associates limited. AIRMIC, Alarm & IRM (2010). A structured approach to Enterprise Risk Management and the requirements of ISO 31000. Retrieved from http://www.theirm.org/media/886062/ISO3100_doc.pdf. Alleyne, P. A. & Devonish, D. (2006). Perceptions of auditor independence in Barbados. Managerial auditing journal, 21 (6): 621 – 635. ANAO (2011). Better practice guild: Public sector internal audit. Retrieved from http://www.anao.gov.au//publications. ANAN (2014). PEA Auditing. Jos, Plateau: Hamtul press ltd. ISBN: 978-978-944-770-1 Appah E. & Oyadonghan, J. K. (2011). Role theory and the concept of audit expectation gap in South South, Nigeria. Current Research Journal of Social Sciences 3(6): 445-452, ISSN: 2041-3246. Antonio B. & Barbara G. (2013). Risk Management. Springer-Verlag, Italy.ISBN: 978-88- 47025301, DOI: 10.1007/978-88-470-2531-8. Awn metlib A – Shbail & Turki A. A.T. (2017). A theoretical discussion of internal audit effectiveness in Kuwaiti industrial SMEs. International Journal of Acade Research in Accounting, Finance and Management Sciences, 7(1), 107-116. Beasley, M.S., Branson, B. C., & Hancock, B. V. (2010). Are you identifying your most significant risks? Strategic Finance journal, 92 (5):29–35. Retrieved from http://www.hbs.edu/faculty/Publication. Chell E. (1985). The entrepreneurial personality: A social construction. 2nd edi. London, U.K. Routledge Taylor and Francis group. Christo, A. & Ben Marx (2016). Internal Audit Risk Management in Metropolitan Municipalities. Risk, Governance & Control: Financial Markets & Institutions. 6. 45- 51.10.22495/rcgv6i3art7. Coetzee, G.P. et al (2012). Advance internal audit, (3rd ed.). South Africa: LexisNexis. COSO (2004). Enterprise risk management – integrated framework: Executive summary. Retrieved from http://www.coso.org. Creswell, J. W., Plano Clark, V. L., Gutmann, M. L. & Hanson, W. E. (2003). Advanced mixed methods research designs. Handbook on mixed methods in the behavioral and social sciences (pp. 209-240). Thousand Oaks, CA: Sage Publications. Deloitte (2011). Internal audit in public sector: The quiet revolution. Retrieved from http://www.deloitte.com. Department of Administrative Reforms and Public Grievances . Internal control and risk management framework (II). Retrieved from https:// darpg.gov.in/documents. Dimitris N. C, (2008). Risk accounting and risk management for Accountants, CIMA publishing, U.S.A. ISBN: 978-0-7506-8422-4. Drennan, L. T. & Mcconnell, A. (2007). Risk and crisis management in the public sector. Routledge, England. Drogalas G. et al (2015). Factors associated with internal audit effectiveness: Evidence from Greece A journal of accounting and taxation, 7(7), 113-22. Eisenhardt, K. M. (1989). Agency theory: An assessment and review. Academy of management JAFM review. 14(1). 57-74. 10.5465/AMR.1989.4279003. Elizabeth, M. & Diane V. G. (2014). Nine elements required for internal audit effectiveness in the public sector. An IIA research foundation research report, Florida, U.S.A. Ennouri W. (2013). Risk management: new literature review. Polish journal of management, (8), 288-297. Enofe A. O. et al (2013). The role of internal audit in effective management in public sector. A research journal of finance and accounting, 4(6). Retrieved from www. Iiste.org, Eugeria T. & Aurelia S. (2009). Internal audit and risk management in public sector entities, between tradition and actuality. Annales Universitatis Apulensis Series Oeconomica, 11(1). Fone M. & Young P. (2000). Public sector risk management. Butterworth Heinemann, New De0lhi Fraser, I. & Henry, W. (2007). Embedding risk management: structures and approaches. Managerial Auditing Journal, 22(4), 392-409. Doi: 10.1108/02686900710741955. Fulop, M.T. & Szekely, S.V. (2017). The evolution of the internal auditing function in the context of corporate transparency, Audit Financiar, 3(147). 440-450. Gberegbe, F.L. & Micah C. L. (2013). Public sector accounting & fundamentals of public finance. Port Harcourt: Davidstones project ltd. George L. H. (2009). Risk Management— why and how. An illustrative introduction to risk management for business executives. IRMI Inc. ISBN 978–1–933686–16–5.Retrieved from: www.irmi.com Gerrit S., Christian D. V. & Diane V. G. (2010). Risk management and internal control in the public sector: An in-depth analysis of Belgian social security public Institutions. A paper presented at the 2nd european risk conference, Milan. Gerry Dickinson (2001). ERM: Its origin and conceptual foundation. The Geneva papers on risk and Insurance, 26(3), 360 – 366. Ghaleb, Al Masri (2004). Risk management implementation in the public sector. The IIA research foundation. Retrieved from http://www.internalauditor.me/article/risk management implementation-in-the-public-sector. Gherai D. S. & Balaciu D. E. (2004). Role of internal auditing in risk management in public sector and local entities – a case study on Bihor County, Romania, department of finance & accounting, University of Oradea. Global Humanitarian Assistance Report (2014). Future humanitarian financing: What is risk financing? Retrieved from: www.globalhumanitarianassistance.org/report/gha-report. Gramling, A. A. & Myers, P. M. (2006). Internal auditing's role in ERM. The internal auditor 63(2), 52-56, 58. Retrieved from https://digitalcommons.kennesaw.edu/facpubs/1326/ IIA (2015, 2016). International professional practice framework . Retrieved from http://na.theiia.org/standards-guidance/Public Document/IPPF-standards. IFAC (2006). Code of ethics for professional Accountant. Retrieved from http://www.ifac.org. Ignacio C. S. (2013). Risk management theory: the integrated perspective and its application in the public sector. Estado, Gobierno, Gestión Públication, 21(2013), 89-126. ISSN 07176759 INTOSAI (2004). Guidelines for internal control standards for the public sector. Retrieved from http://psc-intosai.org. James, A. & Marianne, O. (2014). Objectivity and independence: The dual roles of external auditors. Journal of Forensic & Investigative Accounting, 6(2). Retrieved from http://web.nacva.com/JFIA/Issues/JFIA-2014-2_6.pdf. Jensen, M. & Meckling, H. (1976). Theory of the firm: Managerial behavior, agency costs and JAFM ownership structure. Journal of Financial Economics. 3. 305-360. 10.1016/0304405X(76)90026-X. Retrieved fromhttps://www.researchgate.net/ /222453506 John Dudovskiy (2018). The ultimate guide to writing a dissertation in business studies: A step-by step assistance. E-book. Accesed from https://research methodology.net/sampling-in- primary data-collection/purposive-sampling. John M. (2014). Measuring control effectiveness. LHS businrss control, Hertfordshite, England. Retrieved from www.lhscontrol.com. Karagiorgos T. et al (2019). Efficient risk management and internal audit. Research gate publication. Retrieved from: https://www.researchgate.net/publication/265626193. Kenton, W. (2018). Risk Management. Investopedia. Retrieved from: https://www.investopedia.com/terms/r/riskmanagement.asp Kokobe, S. A. & Gemechu, D. (2016). Risk Management Techniques and Financial Performance of Insurance Companies. International Journal of Accounting Research, DOI:10.4172/ijar. 1000127. Landquist, Hanna & Hassellöv, Ida-Maja & Rosén, Lars & Lindgren, John & Dahllöf, Ingela. (2013). Evaluating the needs of risk assessment methods of potentially polluting shipwrecks: Outline of the risk management process (based on ISO, 2009). Journal of environmental management. 119C. 85-92. László Domokos & Melinda Nyéki & Katalin Jakovác & Erzsébeth Németh & Csaba Hatvani, (2015). Risk analysis and risk management in the public sector and in public auditing. A 4 public finance quarterly journal, State Audit office of Hungary, 60(1). Lawrence A. G. & Martins P. L. & Chih-Yang T. (2009). Enterprise risk management and firm performance: a contingency perspective. J. Account public policy, Elsevier. Doi:10.1016/j.jacpubpol2009. 06.006 Liuksiala, O. A. (2012). Use of risk Management standard ISO 31000 in finnish Organization (Master‘s thesis). Retrieved from http://tampub.uta.fi/bitstream/handle/10024/84249/gradu06462.pdf. Lydia P. (2014). A calculated risk: how donors should engage with risk financing and transfer mechanism. OECD development co-operation working paper 17, Retrieved from www.oecd Margareth Wood (2001.1). A contingency theory perspective on the risk management control system within Birmingham City Council: a CRIS discussion paper series, University of Nottinham, England. Marquette University (2019). Risk management: what is Risk management? Marquette University publication. Retrieved from:https://www.marquette.edu/riskunit. Meyer, J.W. and Rowan, B. (1977). Institutionalized Organizations: Formal Structure as Myth and Ceremony.' The American Journal of Sociology, 83 (2): 340-363. Michael, A., (2001). Human resources management practice. London, Kogan page ltd. Mu‘azu S. B. & Siti Z. S. (2012). The Relationship between risk management and internal audit effectiveness at local government level. Journal of social and development sciences, Malaysia. Retrieved from: http://www.ifrnd.org/admin/jsds/27.pdf. Namaz M. (2012). Role of the agency theory in implementing management's control. Journal of Accounting and Taxation. 5(2), 38-47, DOI: 10.5897/JAT11.032. ISSN 2141-6664. Retrieved from http://www.academicjournals.org/JAT. JAFM NAO (2011). Managing risk in government. Financial management and reporting, U.K. Retrieved from: www.nao.org.uk/ginancial-management. Oduware U. (2015). COSO: A Framework for enhancing Internal Control over Financial Reporting. Financial reporting, a publication of deliotte. Okibo, B. W. & Kamau, C. G. (2011). A study to explore internal auditors‘ compliance with quality assurance standards: a case of state owned corporation in Kenya. International journal of research studies in management. 1(1), 109-126. ISSN:2243-7770. Olivier B. (2018). Institutional theory of organizations. Research gate publication. 10.1007/9783- 319-20928-9_63. Owolabi, S. A., Jayeoba, O.O. & Ajibade, A. T. (2016). Evolution and development of auditing. A unique journal of business management research. 3(1), 032 -042. ISSN 2333- 6935.Retrieved from http://www.uniqueresearchjournals.org/UJBMR. Palermo, T. (2014). Accountability and expertise in public sector risk management: a case study. Financial Accountability & Management, 30 (3). pp. 322-341. ISSN 0267-4424 Petersen T. (1993).The Economics of organization: The principal-agent relationship. Acta Sociologica, 36(3), 277 – 293. Doi: 10.1177/000169939303600309. Peter M. (2016). Financial risk management: Sources of financial risk and risk assessment. Edinburgh business school, U.K. Retrieved from: www.ebsglobal.net. Panda B. & Leepsa M. N. (2017). Agency theory: Review of theory and evidence on problemsand perspectives. Indian Journal of Corporate Governance,10(1),74–95. Doi:10.1177/0974686217701467 . Philip S. (1948). Foundations of the Theory of Organization. American Sociological Review, 13(1): 25-35. Pom & Associates (2019). The fifth pillars of risk control. Retrieved from: https://www.pomsassoc.com . Pratt, John & J. Zeckhauser, Richard. (1985). Principals and Agents: The Structure of Business. Retrieved from https://www.researchgate.net/publication/247249967. IIA & RIMS (2012). Risk management and internal audit: forging a collaborative alliance, an executive report published by risk and insurance management society , U.S.A. Robert Wolf, (2008). The evolution of enterprise risk management. The actuary magazine, issued by the society of actuaries. 5(2). Retrieved from https://www.soa.org/library. Scott, W. R. (2004). Institutional theory. Encyclopedia of Social Theory, Sage, CA, 408-14. SEC (2008). Code of corporate governance for public companies (reviewed), Part E: risk managementand audit, Securities and Exchange Commission, Nigeria. Retrieved from http://www.sec.gov.ng . Shewamene H. (2014). Determinants of internal audit effectiveness in the public sector: Case study in selected Ethiopian public sector offices. Thesis. Jimma University. Simona Fionda (2010). The changing faces of risk management: the evolution of a concept. Published by , U.S.A. Sridhar Ramamoorti, (2003). Internal auditing: history, evolution and prospect. IIA research foundation, Florida, U.S.A. Stewart, J. & Subramanian, N. (2010). Internal audit independence and objectivity: Emerging research opportunities. Managerial auditing journal. Emerald Group Publishing, 25(4),328-360. Swinkels, W. H. A. (2012). Exploration of a theory of internal audit: a study on the theoretical JAFM foundations of internal audit in relation to the nature and the control systems of Dutchpublic listed firms Delft: Eburon. Taiwo O. A. et al (2016). Promoting good governance through internal audit function : The Nigerian experience, an international business research; 9(5). Published by Canadiancenter of science and education, Canada. Thomas C. (2010). Strategic risk management in the municipal and public sector. Harris centre,U.S.A Udeh, S. N. & Eugene O. N. (2016). Evaluation of the effectiveness of internal audit in the Nigeria public sector. European journal of business, economics and accountancy. 4 (3). ISSN 2056 6018, progressive academic publishing, UK. Retrieved fromwww.idpublications.org Vaughan E. J & Vaughan T. (2008). Fundamentals of Risk and Insurance. John Wlley & Son Inc. New William F. M. Jr. (2003). Audit and assurance services: a systematic approach. New York, McGrew Hll Companies Inc. Yuhua Q. (2007). Public risk management: development and financing. Journal of public Budgeting, Accounting and Finance Management, 19 (1), 33- 55https://doi.org?10.1108?JPBAFM-19-01

More Articles from JOURNAL OF ACCOUNTING AND FINANCIAL MANAGEMENT

Cashflow Management and the Performance of Commercial Banks in Nigeria

Author: Jeffrey Ayas Iyakonbogha, Clement E. Ozele

The Nigerian Code of Corporate Governance and Financial Performance of Deposit Money Banks in Nigeria

Author: i, Eneaniofu Daniel Mmaduakonam, ii, Azolike Nkiru Nkechi, iii, Emeter Patrick Okechukwu, iv, Okwor Emmanuel Ejimnkonye