Assessment of Internal Auditing Practice in Commercial Bank of Ethiopia Dume Branch
Assessment of Internal Auditing Practice in Commercial Bank of Ethiopia Dume Branch
JUNE, 2016
HAWASSA, ETHIOP
I
CHAPTER ONE
INTRODUCTION
1
1. 2 Statement of the Problem
2
1. 3 .2 Specific objective
To assess the performance of internal audit in commercial bank of Ethiopia
Dume branch.
To evaluate the procedures of internal auditing in commercial bank of
Ethiopia Dume branch.
To identify the major factor that hinder the effectiveness of internal auditing
commercial bank of Ethiopia Dume branch.
3
The first chapter introduces the research study and highlights the general overview of
the Study. Chapter two focuses on reviewing literature on definition of terms,
concepts, Publications and scholarly articles on the study. The Chapter three focuses
on the Methodology of research, the researcher adopted covering the sample size and
techniques, methods of data collection, and methods of data analysis. Chapter four
presents time and cost budget.
4
CHAPTER TWO
LITERATURE REVIEW
2. 1. Definition of Auditing
Many scholars and profession institutions in the field of define auditing in different
manner. According to William and water perspective on modern auditing books,
auditing is exercise whose objective is to enables auditor to expirees and opinion
about the fairness of the financial statement. In addition auditing is the accumulation
and evaluation of evidence about the quality of the economic entity to determine and
regard the degree of correspondence between the information and established standard
(Setter, 1980, p.10).
Auditing is systematic examination of financial statement and related operation to
determine adherence to generally accepted accounting prince piles management
polices as stated requirement (Meigas and Teal, 1989).
Auditing is the accumulation and evaluation of evidences about information to
determine and reporting the degree of correspondence between the information and
establishes criteria (Whittington and Pant, 1995).
Different scholar and institute define internal auditing indifferent way. However, audit
definitions are almost similar in sense. According to the institute of internal auditor
define in the following manner. Internal auditing is an independent, appraisal
objective assurance and consulting activity designed to add value and improved and
organization operate. It helps an organization accomplished its objective by bringing a
systematic discipline approach to evaluate and improve the effectiveness of risk
management, control and governance process. Internal auditing is helpful to assist
member of an organization in the effective discharge of their responsibility (Atkinson,
1986, p.4).
Internal auditing is review of operation and records under taken within a business by
specially assigned staff (Meigas and Teal, 1989).It is review to evaluate the
5
correctness of records and the effectiveness of operation. The term internal audit has
been defined as independent approval of activity within an organization.
Meigas and Etal (1995), it provides the following benefit to the organization: the
internal audit activity shall assist the organization to maintain effective control
through evaluating their effectiveness and efficiency by promoting continuous
improvement ', reliability and integrity of financial and operational information and
compliance with laws and procedures.
2. 5 Nature of Auditing
6
2. 6 Characteristics of internal auditing.
Auditors are company’s employee
Review of company's activities in continues employee
Have direct influence on the scope of external auditor activity.
Primary concern is in serving the needs of the organization.
Accountable for management
Does not issue opinion to the general public.
Working is sub divided primarily according to the operating function and line
management responsibility.
Internal auditor should be independent of the activities they audit. Internal auditor is
independent when they can carry out their work freely and objectively, independent
permits internal auditor to render the logical and unbiased judgment essential to the
proper contact to audit it's achieved through organizational status and objectivity.
7
The same responsibility if internal auditors are as follows
8
2. 12 Disadvantage of Internal of internal auditing
Internal audit provides the following limitations. Thus are: Extra cost, the cost of
running internal audit department is very high ', biased opinion, ‘the internal audits
departments’ employee are the paid staff of the organization. In most cases they have
to work according to the direction of the management and so it is not expected that
they have provide biased opinion about financial statement and possibility of
becoming the effective: If the employee of the internal audit department (Megs and
Etal 1989)
Principles of independence: The audit work should independent from account and
the auditor should examine the book of account the dependently.
Principles of objectivity: The audit work should based on evidences
Principles of full disclosure: The employer's client should make all proofs
explanation and auditor should declare clearly the result his examination.
Principles of Materiality: it has always been fundamental to the whole process of
accounting (Arens and Loebbock 2003).
According to (Arens and Loeb bock, 2003) the audit has the following procedures.
They are:
9
Internal auditing operates in the following areas: The establishments of an adequate
accounting system and related control is the responsibility of the management which
demand proper attention The internal audit function is often assigned to specific
responsibility of the management for reviewing the accounting system and related
Accounting control to monitoring their operation and suggesting improvement.
10
CHAPTER THREE
3. Research Methodology
3.1 Research Design
The study will be used descriptive method. Descriptive design is preferred because of
as it helps to show accurately the characteristics of a particular situation.
3.2 Population and Sampling Technique
The population of this study is employees and department heads of credit
management, account section and international banking.
3.3 Sources of Data
In the study primary and secondary data will be used. Primary sources will be
collected from those employees and manager of the bank. The secondary sources that
will be considered includes: books, annual reports, related websites, and other related
materials.
3.4 Method of Data Collection
The data will be collected using both open and close ended questioners. In addition
oral interviews and discussions will be also carried out to gather additional
information on the targeted issues.
3.5 Data Analysis Method
Data will be analyzed by using tables, percent and frequencies supporting discussion
and interpretation.
11
4. Time and cost Budget
No Months Task
1 February Back ground research and literature review
2 March Research design planning
3 April Data collection and preparation
4 May and June Data analysis
5 July Writing and presentation
5. Cost Budget
No Item Cost/birr
1 Transportation 500
2 Paper 100
3 Total 600
12
References
Arens and Leobbocke, Auditing and Internal approach (2003), 7th edition.
13
APPENDIX
14
A. 1-2 years
B. 3-4 years
C. 4 Years and above
PART TWO: THE FOLLOWING QUESTIONS ARE PREPARED TO GET
SPECIFIC INFORMATION.
PLEASE RESPOND BY PUTTING (x)
1. Does the bank follow proper internal auditing procedure?
YES NO
2. If your answer for question No one is no, what is the reason?
____________________________________________________________
____________________________________________________________
______________________________
3. Is there internal control structure?
YES NO
4. If your answer for question No three is no what is the reason, justify
____________________________________________________________
____________________________________________________________
______________________________
5. How do you rate the quality of internal auditors?
Excellent Fair
Very good Poor
Good
6. Do you implement the internal audit recommendation?
YES NO
7. If your answer on question No. six is no, what is the reason?
8. Do you think that there are problems on the internal audit assessment?
YES NO
9. If your answer for question No. eight is yes, state some of the problems
____________________________________________________________
____________________________________________________________
15
______________________________
10. Do you think that the internal audit procedure forms are adequate to
perform the internal audit?
YES NO
11. If your answer on question No. ten is no, what is the reason justify
____________________________________________________________
____________________________________________________________
______________________________
12. How do you rate the effectiveness of internal auditing system?
Excellent Fair
Very good Poor
Good
16
APPENDIX II
17
2. Is there adequate and competent internal audit in the organization?
3. Do you believe that auditor of OIB have enough audit experience?
4.What is the problem of internal audit procedure practice in OIB fitche branch?
18