Selam Final
Selam Final
I
Acronyms
CPA: certified public accountants
II
Table of Contents
Abstract .......................................................................................................................................................... I
Acronyms ...................................................................................................................................................... II
CHAPTER ONE ............................................................................................................................................... 1
INTRODUCTION ............................................................................................................................................. 1
1.1. Background of the Study .................................................................................................................... 1
1.2. Statement of the problem ................................................................................................................. 2
1.3 Research Question .............................................................................................................................. 2
1.4 The objectives (purpose) of the study ................................................................................................ 3
1.4.1. General objectives ...................................................................................................................... 3
1.4.2 Specific objective of the study ..................................................................................................... 3
1.5. Significance of the study .................................................................................................................... 3
1.6. Scope of the study ............................................................................................................................. 4
1.7. Limitation of the study ....................................................................................................................... 4
CHAPTER TWO .............................................................................................................................................. 5
2. LITRATURE REVIEW ................................................................................................................................... 5
2.1 THEORETICAL LITERATURE REVIEW .................................................................................................... 5
2.1.1 Basic Concepts of Auditing ........................................................................................................... 5
2.1.2 Definition of auditing ................................................................................................................... 5
2.1.3 Types of Audits and Auditors ....................................................................................................... 6
2.1.4 Internal Auditing .......................................................................................................................... 7
2.1.5 The relationship of internal and external auditors .................................................................... 11
2.5.2 Difference................................................................................................................................... 12
2.1.6 Performance standards of internal auditing .............................................................................. 12
2.1.7 The nature of internal control.................................................................................................... 14
2.1.8 Evaluating internal control......................................................................................................... 17
2.2 Empirical Literature Review .............................................................................................................. 17
CHAPTER THREE .......................................................................................................................................... 19
METHODOLOGY .......................................................................................................................................... 19
3.1 Introduction ...................................................................................................................................... 19
3.2. Research Design ............................................................................................................................... 19
III
3.3. Data Sources .................................................................................................................................... 19
3.4 Data Collection instruments ............................................................................................................. 19
3.5 Target Population.............................................................................................................................. 20
3.6 Sample Size and Sampling Technique ............................................................................................... 20
3.7 Methods of data analysis and presentation ..................................................................................... 20
CHAPTER FOUR ........................................................................................................................................... 21
DATA PRESENTATION AND ANALYSIS ......................................................................................................... 21
4.1. INTRODUCTION ................................................................................................................................ 21
4.2. Analysis of personal profile of the interviewees.............................................................................. 21
4.3. Qualification of Internal Auditors .................................................................................................... 22
4.4. Manpower........................................................................................................................................ 22
4.5 Importance of Internal Auditing ....................................................................................................... 23
4.5.1. Internal Audit Report .................................................................................................................... 23
4.5.2. Audit Procedures....................................................................................................................... 24
4.5.3. Audit Plan .................................................................................................................................. 24
4.5.4. Internal Audit Practice .............................................................................................................. 24
4.6. Attitudes of Employees and Management toward Auditors ........................................................... 25
4.7. The Applicability of Internal Auditing .............................................................................................. 26
CHAPTER FIVE ............................................................................................................................................. 28
SUMMARY, CONCLUSION AND RECOMMENDATION ................................................................................. 28
5.1 Summary ........................................................................................................................................... 28
5.2. Conclusion ........................................................................................................................................ 28
5.3. Recommendation............................................................................................................................. 29
References .................................................................................................................................................. 31
IV
CHAPTER ONE
INTRODUCTION
(David N. 1982)
Auditing is a systematic process of objective obtaining and evaluating evidence regarding
assertion about economic action and event to ascertain the degree of correspondence between
those assertion and established criteria and communication the result to interested users.
Auditing is an important activity for all types of organization where governmental, private for
profit, nonprofit or any other. (Konrath,1992,)
The internal control process is a mechanism for reducing insurance for fraud, misappropriation
and errors. It has recently become more extensive addressing all the various activities faced by
the organization it is now recognized that internal control process in critical to organization
ability to meet is goals and objectives and to maintain its financial viability. (Kamal, 1999)
Throughout the world internal auditing is being performed in diverse environments and within
which vary in purpose size structure and objectives. In addition, the law and customs with in
countries differ from one another. Those differences may affect the practice of internal auditing
in each environment. (Atkinson, 1986)
An internal audit function can provide assurance to management that the broad objectives of the
internal control are being achieved. Internal audit encompass the examination and evaluation
adequate and effectiveness of the organization. System of internal control and quality of
performance carrying out assigned responsibilities. (Konrath, 1992,)
Internal auditing always support management in ensuring that there is a proper internal control
system in practice and that the operations of the company are carried out effectively, efficiently
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and economically. Internal auditors who perform their job effectively may become expertise in
the design and implementations of all other types of controls. (Konrath, 1992,)
Different change and factor have been influenced the auditing profession in recent year.
Technology announcement and regularity bodies have caused the auditing policy to reexamine
its purpose intention and methodology because of this the profession has improved from
transaction based approach to arise based focus. Therefore, all these change have affected the
internal auditing components of profession. (Konrath, 1992,)
The need for auditing, either external or internal auditing is increasing from time to time by
because it enables organizations that their resources have been utilized for intended. Internal
auditing is an independent, objective assurance and consulting activity designed to add value and
improve as organizations operations it helps an organization accomplish its objectives by
bringing a systematic disciplined to evaluate and improve the efficiencies of risk management,
control and governance processes.
The auditor’s broad view of trends and control helps raise awareness of risks before they become
problems that can affect virtually every business unit within an organization. The researchers
observed that previous researches conducted by other researchers did not show in how to
encourage the organization to prepare strong internal audit reports. This study would try to assess
the performance of internal auditing through analyzing the internal auditing practice of
commercial bank of Ethiopia in Shashemene harupa Branch and recommend or give solution for
the problem observed so far.
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2. What are the qualifications of internal audit worker in commercial bank of Ethiopia in
shashemene harupa branch?
3. How the Employees and Management perception toward Auditors in commercial bank of
Ethiopia harupa branch?
4. Is internal auditing importance in the existing condition with in the Commercial bank of
Ethiopia in shashemene harupa branch?
5. How internal Auditing applies in commercial bank of Ethiopia harupa branch?
1. To determine audit procedures and audit plan in commercial bank of Ethiopia harupa
branch
2. To identify the quality of internal audit worker in commercial bank of Ethiopia harupa
branch.
3. To assess attitudes of employees and management toward auditors in commercial bank of
Ethiopia harupa branch.
4. To assess the importance of internal auditing system in the existing condition with in the
commercial bank of Ethiopia
5. To assess the applicability of internal auditing in commercial bank of Ethiopia harupa
branch.
Various problems that related to internal auditing would be investigated and presented
and presented to the organizations for the purpose of coping with it.
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The finding of this study suggests the possible solution of internal auditing related
problems that leads the organization to apply the proper internal auditing principle.
The finding of this research helps the researchers to elaborate the knowledge and know
how about internal auditors.
This helped the auditor in this organization to know their role in the organization.
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CHAPTER TWO
2. LITRATURE REVIEW
Auditing is the accumulation and evaluation of evidence about information to determine and
report on the degree of correspondence between the information and established criteria.
Auditing should be done by a competent independent person (Arens, 1997, p.2).
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2.1.3 Types of Audits and Auditors
In one organization, the auditor might evaluate the relevancy and sufficiency of information used
by management in making decision to acquire new fixed asset, while in the different
organization the auditor may evaluate the efficiency of the paper flow in processing sales. In
operational audit, the reviews are not limited to accounting.
Compliance Audits:- the purpose of a compliance audits is to determine whether the audit is
following specific procedures or rule set down by some higher authority. A compliance audit for
private business could include determining whether accounting personnel are following the
procedures prescribed by the company controller. Reviewing wage rates for compliance with
minimum wage laws, or examining contractual agreement with banks and other lenders to be
sure the company is compiling with legal requirements. Results of compliance audits are
generally reported to someone within the organization unit being audited rather than to be broad
spectrum of user.
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General Accounting office (GAO) Auditors:- the united state (US) is a non partisan agency in
the legislative branch of the federal government. The GAO which is headed by the comptroller
general, report to and is responsible solely to congress. Many of the GAO’s audit responsibilities
are the same as those of certified public accountants (CPA). Mach of financial information
prepared by various government agencies is audited by the GAO before it is submitted to
congress. In many states, experience as GAO auditors the experience requirement for becoming
CPA.
Internal revenue agents:- the internal revenue service’s (IRS) under the direction of the
commissioner of internal revenue, has as its responsibility the enforcement of the federal tax
laws as they have been defined by congress and interpreted by the courts. A major responsibility
of IRS is to audit the returns of tax payers to determine whether they have complied with tax
lows. The auditors who perform these examinations are referred to as internal revenue agents.
Internal auditors:- internal auditors are employed by individual companies to audit for
management much as the GAO does for congress. The internal audit group in some legal firm
can include over a hundred persons and typically report directly to the president, another high
executive officer or even the audit committee of board of directors.
Internal auditor’s responsibilities vary considerably, depending on the employer some internal
audit staff consist of only one or two employees who may spend most of their time doing routine
compliance auditing. Other internal audit staff consists of numerous employees who have diverse
responsibilities, including many outside accounting areas.
Certified public accountant (CPA):- CPA firm have as their primary responsibility the
performance of audit function on published financial statement of all publicly traded companies,
most other responsibly large companies and many small companies and non commercial
organization. The use of the title certified public accountant (CPA) is regulated by state law
through the licensing department of each state.
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The institution of internal auditor (IIA) defines the internal auditing as an independent appraisal
activity established within an organization to examine and evaluate its activities as service to the
organization. This definition explains that internal auditors (profession of internal auditing) has
being done the extent and nature of assignment performed and the action taken by the
managements as result internal audit report. This is the activities within the organization and
internal auditors must have in departmental in mental attitude to world the appraisal of internal
auditor. (Howard F, 1980)
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2.1.4.3 The reason for internal auditing
Audits are made for number of reasons. Some stem from the accountability that subordinates
own to their superiors for the accomplishment of task. This has given risee to the theory of
agency the owners as principal, the manager as agent. The agent must provide objectively that
tasks have been efficiently and effectively accomplished. The jobs of most managers are two
extensive to accomplish by themselves. The managers need the help of skilled internal auditors
(konrath, 1999, P.676-677).
1. Principles
2. Rule of conduct
In the code, the six principles are identified as follows:
Responsibilities
The public interest
Integrity
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Objectivity and independence
Due care
Scope and nature of services
Responsibility
CPA’s render important and essential services in our free enterprise system all members have
responsibilities to those who use their professional services. In addition, members have an on
going responsibility to cooprate with other member to:
Members should accept the obligation to act in a way that will serve the public interest, honor the
public trust, and demonstrate commitment to professionalism. The public interest is defined as
the collective well-being to the community of people and institutions that CPAS aerie the CPA’s
public interest includes clients, creditor, grantors, governmental agencies, employees, stock
holders, and the general public.
Integrity
To maintain and brooders public confidence, members should perform all professional
responsibilities with the highest sense of integrity. Integrity is a personal characteristic that is in
dependable in CPA. This element is the benchmark by which members must ultimately judge all
decisions made in engagement integrity is also the quality in which public trust is based.
Objectively is a state of mind although this principle is not precisely measurable, it nevertheless
is held up to members as an imperative objectivity means being impartial and unbiased in all
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matters pertaining to an engagement. Independence is the corner stone of the profession’s
philosophical structure.
Due care
Member should observe the profession’s and ethical standards, strive continually to improve
competence and the quality of services, and discharge professional responsibility to the best of
the member’s ability the principle of due care is at the center of the profession’s on going quest
for excellence in the performance of professional services. Due care requires each member to
discharge his her professional responsibilities with competence and diligence.
Member in public practice should observe the principle of the code of professional conduct in
determining the scope and nature of service to be provide. This principle applies only to a
member who renders services to the public.
2.1.5.1 Similarities
More specifically, the work of both the internal and the external auditor is carried out largely by
similar methods in such areas as:
Both must be competent as auditors and remain objective in performing their audits,
including planning and performing test of control and substantive tests.
An effective system of internal check to prevent and /or detect errors and fraud and that it
is operating satisfactorily.
An adequate accounting system to provide the information necessary for preparing true
and fair financial statements.
Examination of the soundness and effectiveness of internal cheek
Examination and checking of accounting records and statements
Verification of asset and liabilities
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Observation, enquiry, the making of statistical comparison and other measures as may be
judged necessary.
Performance of detailed examination of balance and transaction
2.5.2 Difference
There are some fundamental differences between the two forms of audit:
Scope:- in the case of an independent audit, the duties responsibilities, rights and liabilities so
the auditor are laid down under the respective statues. On the other hand, the extent of the work
to be undertaken by the internal auditor is mainly determined by the management the company.
Approach:- the internal auditor’s approach is with the view of ensuring that the accounting
system is efficient and effective so that accounting system (information) presented to the
management through the period is accurate and discloses material facts. The independent
auditors approach, however, is governed by his duty to satisfy himself that the accounts to be
presented to the share holders show a true and fair view of the profit or loss for the financial
period and of the state of the company’s at the end of that period.
Responsibility:- the responsibility of the internal auditor is towards the management whereas,
the independent auditor is responsible directly to share holders. The external auditor is
responsible to financial statement users who rely on audit to add credibility to the statement.
Professional guidance:- For internal auditors is provided by the institute of internal auditors
(IIA). The IIA is an organization similar to the AICPA that establish ethical and practice
standards, provides education and encourages professionalism for its members.
Independence:- the independent auditor has get an independent status, while the internal auditor,
being and employee of the organization does not possess this independence of status.
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Planning:- the chief audit executive should establish risk based plans to determine the priorities
of the internal audit activity consistent with the organization’s goals.
The chief audit executive should consider accepting proposed consulting engagements based on
the potential to improve managements of risk, add value and improve the organization’s
operations. Those engagements that have been accepted should be included in the plan.
Resource management:- the chief audit executive should ensure that internal audit resources are
appropriate, sufficient and effectively employed to achieve the approved plan.
Reporting to the board and senior management:- the chief audit executive should report
periodically to the board and senior management on the internal audit activity’s purpose,
authority, responsibility and performance relative to its plan. Reporting should also include
significant risk exposures and control issues, corporate governance issues and other matters
needed or requested by the board and senior management.
This ties however unduly deny the universal applicability of internal auditing to all type of
organization more over they fail to recognize that some of the most progressive internal auditing
is how being done by non business type organization a related fact also is that many organization
are blend of business and non business activities all of these development confirm that the need
for internal auditing exist in all type of organization when the completeness of activities, the
volume of transaction and dependence on large number of people to exist in some combination
to create operational problem
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The qualifications and technical training of the internal audit personnel insome cases both
the internal auditors and the independent auditors belong to the same professional
organization and are subject to the same professional regulation except for independence.
The clients practices for the recruitment and training of the internal audit personnel.
The extent of supervision provided by the chief internal auditor, including the supervision
on planning, monitoring progress, assessing conclusions reached, reviewing reports and
following up to ensure that recommendations accepted are carried out.
The standing of and regard for the abilities internal Auditors personnel in the client
organization.
2.1.6.4 Degree of independence of the internal auditors and the objectivity with which the
work is performed
The independent auditor should ensure himself that the internal auditor is in a position to
perform his work with a satisfactory degree of independence and objectivity. In assessing this
independent auditor should satisfy himself that the internal auditors reports or has access to the
highest levels of management.
In such a case he is likely to be more objective than when he reports to lower lever of
management. The nature and extent of any constraints placed on the work of the internal auditor
by management should carefully be considered by the independent auditor. A review of the
findings and recommendations contained in the reports of the internal audit personnel will
usually be useful factors in judging their independence and objectivity.
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2.1.7.1 Importance of internal control
The importance of internal control to management and independent auditors has been recognized
in the professional literature of or many years. In 1947 publication by the AICPA entitled
internal control cited the following factors as contributing to the expanding recognition of the
significance of internal control.
The scope and the sit of the business entity has become so complex and wide spread that
management must rely on numerous reports and analyses to effectively control
operations.
The check and review inherent in good system of internal control afford protection
against human weaknesses and reduce the possibility that errors or irregularities will
occur.
It is impracticable for auditors to make audits of most companies with in economic fee
limitation without keying on the client’s system of internal control.
Other objectives and related controls may also be relevant if they pertain to data the auditor uses
in applying audit procedures example includes objectives and related controls that pertain to:
Non financial data used in analytical procedures such as the number of employees, volume
of goods manufactured, and other production and marketing statistics.
15
Certain financial data developed primarily for internal purposes such as budgets and
performance data used by auditor to obtain evidence about the amount reported in the
financial statements.
Because of these in beret limitation of controls and because auditors cannot have more than
reasonable assurances of their effectiveness, there is almost always some level of control risk
greater than zero. Therefore, even with the most effectively designed internal controls the auditor
must obtain auditor must obtain audit evidence beyond testing the controls for every material
financial statement account.
It is general accepted that internal control procedures can provides reasonable in no such case,
absolute assurance that the object of control relating to accounting system are achieved this could
be due to possible existence of creation inherent limitation includes:
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The possibility of circumvention of control through collusion with parties outside the
entity or with employees of the entity.
The possibility that person responsible for exercising control could abuse that
responsibility.
Most of the control procedures are devised in relation to anticipated types of transactions
and hence may not be effective in relation to unusual or extraordinary transactions.
Human errors due to errors to judgment or interpretation, misunderstanding, carelessness,
fatigue or distraction may undermine the effective operation of control procedures.
In addition, some control may have been redesigned, but not yet implemented, an auditor must
be of control by pass and redesigned control in order to assure studying and evaluating control
which actually exist.
Under generally accepted auditing standards, the scope of study and evaluation of internal
control includes accounting control, but not administrative control.
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bank perform the internal auditing practice in a better way there is some draw back in the bank
and these draw back will be solved if the management of the bank given attention and initiative.
Temesgen Wale (2013) conducted a study that assessment of internal auditing practice in
Abyssinia bank (among other objectives) and came up with Abyssinia bank properly applied
internal auditing practice and the bank also practice (applied) some of the internal auditing
principles like due professional care, independence and proper planning and supervision etc. The
factors affecting internal auditing practice of Abyssinia bank were rules and regulations of the
bank, the auditor’s independent less, and lack of competency of auditors. The major drawback of
Abyssinia bank shortage of skilled manpower (competent auditor) and also independent less of
the auditor was a draw back as the researcher found out from questionnaires and interviews
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CHAPTER THREE
METHODOLOGY
3.1 Introduction
This chapter presents the methodology that will be used in conduct the study. The section
focuses on research design, data sources, data collection instruments, sample size and sampling
technique, as well as methods of data analysis.
Interviewee is given the opportunity to talk freely about events, behavior and beliefs in relation
to the topic area, so that this type of inter-action is sometimes called ‘non-directive’. It has been
labeled as an informant interview since it is the interviewee’s perceptions that guide the conduct
19
of the interview. In comparison, a participant (or respondent) interview is one where the
interviewer directs the interview and the interviewee responds to the questions of the researcher
(Easterby-Smith et al. 2008; Ghauri and Grønhaug 2005; Robson 2002).
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CHAPTER FOUR
4.1. INTRODUCTION
In this part of the paper, the data collected through interview have been presented, analyzed and
interpreted. Since the Commercial Bank of Ethiopia, Harupa branch has only three internal
auditors the target group to collect the data are only eleven peoples including the manager and
employees. The responses are edited and classified under their respective interview question so
as to prepare it for further analysis and interpretation. Secondary data collected from the branch
were also analyzed as follows.
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Manager 1 Degree
As the information gathered from the interview indicates that in commercial bank of Ethiopia
Harupa branch two internal auditors have BA degree, one has diploma. The manager has degree
and four employees have BA degree and three have diploma. All which have service experience
of twenty years, five years, fifteen years, twenty-nine years, six years, seven years, five of
employers two years respectively.
As it has been discussed under the general information of respondents, internal auditors have a
work experience of between five and twenty-nine years and they are degree and diploma holder.
This shows that internal auditors qualification related to working experience is very good in
commercial bank of Ethiopia Harupa Branch. However, internal auditors have less skill and
knowledge relative to latest technology. As peoples’ understanding for the importance and role
of internal auditors, its’ operation becomes latest. Internal audit function need competent and
efficient manpower like good computer skill, good understanding of procedures and having
detail accounting knowledge. In this required, the manager suggests that internal auditor’s
quality is low interims of their competency and they have only the work experience of a long
years, lacking to test auditor skills, knowledge and attitude.
4.4. Manpower
In many organizations, lack of manpower in internal audit department is a major challenge. The
number of auditors determines the complexity of the organization for the auditor. According to
the comments of auditors of commercial Bank of Ethiopia Harupa Branch, before applying the
currently in use smart Banking system, there was only one internal auditor. Following the
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government’s strategy of business process re engineering, hiring the right person to the right
position to keep the quality of the activities and to safeguard both the employees on the operation
area and the organization as a whole currently there are three auditors in internal control
department of Commercial Bannk of Ethiopia Harupa Branch. Their ability is mainly approved
by keeping the quality of their controller’s activities, i.e, more than any of other staff, branch
controllers should be conscious to take percussion on banking operation. The auditors also
enable to provide the proper and updated audit evidence with in shorter period of time.
Interviewees responded that internal audit system is the bank bone for the organization. There
are two types of internal audit activities in the commercial bank of Ethiopia Harupa branch, i.e.
financial audit and operational audit. Internal auditors are responsible to ensure the fairness of
financial statement and detect incorrect financial transaction records in banking activity and
operational auditors ensure whether each and every activities in organization are operate
effectively and as per the plan prepared to achieve the goal of each department and the
organization as a whole. Since banking system need accurate reliable record, internal auditors are
very important for commercial banks.
According to the auditors, the audit reports are classified as analytical and informal type.
Analytical audit reports are authorized by higher authority and they usually travel upwards in an
organization structure, while informal reports are generated without being requested by top level
management.
Interviewees also replied that internal auditors of commercial Bank of Ethiopia Harupa Branch
prepare audit report monthly and present to the management. These creates contact of interest
and prevent fraud on their professional practice.
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Table 4.2 The Requirement of Audit Report.
Briefness Reports which get point quickly are most likely to get read.
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The organization’s assets may see destructed by any means such as carelessness of the workers,
in proper layout of material and facility in the organization ,etc, Since the major assets of bank is
cash it need more protection than other assets, without internal control system the asset of
commercial bank of Ethiopia, Harupa branch could not be safeguarded. Therefore, internal
auditors need to adjust periodical review for the safeguarding of organizations assets that is cash,
receivables and other assets such as computer, furniture etc, In line with this, operational auditors
are expected to assure whether all banking operations are undertaken as per the rule of the
organization. The manager forwarded that there is effective operational audit activity.
According to the manager, the employees of the organization cannot sufficiently understand the
internal control system of the bank. This indicates that the internal auditors did not aware the
workers how to audit and run activities. Due to this reason, the mistake is repeatedly committed
by the reviewing tasks insufficiently. In order to update the knowledge of auditors on their day-
to-day activities, training is important for all the employees of the organization.
According to the interviewees, training and development is given to those internal auditors
though it is not properly planned by the bank. From this we can understand that, in the bank, the
planned and properly designed training and development program is not prepared. However,
internal auditors can effectively do their works when they get training concerning tasks being
undertaken in the bank. For examples, tasks related to accounting, audit procedures and ways of
finding information that used for decision making process of the auditors. The training program
helps them to control each activity done by the employees on the daily basis in the branch. The
internal auditors’ capability building program provides them knowledge of how to control or
how to auditors day-to- day activities performed within the organization, and they can apply
what they acquire from training on their day-to-day auditing practices. In the brunch, training
program given at the district level is not sufficient, as the audits where forwarded their responses.
25
performance of each unit of the organization. Since, the internal auditor of this branch have
communicate skill, they can communicate effectively the duty, control and responsibility with
workers, they enable to establish the channel of communications for people to up action by
management resulting from communications resaved from internal auditors, customers and other
parities.
Table 4.3: Duty responsibility and the performance indicators of internal auditors in the
commercial bank of Ethiopia Harupa branch
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Source: job –description of audit department of the branch
The prevention of defaults and errors are the primary function of auditors. Errors and fraud
happens in the organizations as error of omission, error commission, error arising from omitting
to record a transaction fully or partially in the book of account. Failure may be failure of
observing fundamental principle of accounting in recording the transaction, incorrect allocation
of expenditure between capital and revenue, incorrect bases of valuation of current asset and
fixed assets. Error also arises from recording the transaction twice and posting the some data
twice to the ledger. Related to this, interviewees replied that the auditors correct faults through
review with the accounts and vice manager of the branch after the problem has occurred. This
indicates the auditors did not work more to prevent errors and faults, before it happens. If
internal auditors fail to prevent the problem of errors and faults, the workers of the organization
simultaneously or frequently committed the same errors of recording these problems in the bank
causes the customers frustration, reduce accountability, and the customer flow to decrease. Thus,
the main responsibility of the controllers is to follow up and give the direction of correcting the
problems and the general conditions within the branch.
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CHAPTER FIVE
5.1 Summary
One of the key element in ensuring business success is to build a strong and efficient internal
auditing system, especially in banking venture, efficient customer service are base to remain
business in operation and organizing an effective internal auditing system for safeguarding
resource of the organization. The objective of this study is to assess quality of internal audit work
and importance of internal auditing system. In order to achieve, the planned objective the method
of data gathering are held with the internal auditors.
5.2. Conclusion
Based on the finding of the study, the following conclusion was made by the researcher:
1. Internal audit is very important for the overall operation of the organization in ensuring
the fairness of financial statement, evaluating whether the activities in the bank operated
effectively and efficiently, and detecting incorrect financial transaction records in
banking activity.
2. Internal audit function need competent and efficient auditors that have good computer
skill good understanding of procedures and having detail accounting knowledge.
However internal auditors of commercial bank of Ethiopia Harupa Branch are not
qualified because they lack knowledge and knowhow of current principles and standard
of audit function. From view point of the manager, these auditors lack good computer
skill, good understanding of audit procedures and accounting knowledge.
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3. Procedures are not properly implemented by the employees of the Commercial Bank of
Ethiopia Harupa Branch. The auditors and other workers of the bank sometimes forget
the procedures of auditing to do the tasks as per the procedures.
4. Internal auditors of Commercial Bank of Ethiopia Harupa Branch and periodically
measure, evaluate and review the bank’s assets whether its uses in the proper manner.
5. Employees did not sufficiently understand internal control system of the bank. The
auditors and the concerned body did not aware the employees about the activities and
tasks of internal auditors.
6. The planned and properly designed training and development program is not prepared
over though there is training in the organization. The training program given at the
district levels is not sufficient and it is not supported by any visual aids and practice.
7. The auditors correct faults through review with the accountants and vice manager of the
branch after the problem occurred. This indicates the auditors did not work more to
prevent errors and faults before it happens.
5.3. Recommendation
The researcher recommends that the following issue based on the finding and analysis that have
made.
1. Internal auditors of commercial bank of Ethiopia Harupa Branch are not qualified because
they lack knowledge and knowhow of current principles and standard of audit function.
The researcher recommends the Commercial Bank of Ethiopia Harupa branch would rather
have to hire CPA qualified auditors because of it can match its auditing activity with the
current principle and standards.
2. Procedures are not properly implemented by the employees of the commercial bank of
Ethiopia Harupa branch.
To solve these problem operational auditors would like very effective to ensure that all
procedures are followed by employees. They have to communicate the role of internal
audit, its producers and its activity to all workers closely and openly in order to make them
aware of the internal control system.
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3. The auditors and the concerned body did not aware the employees about the activities and
tasks of internal auditors. There would be multi-dimensional communication mechanism
with top management, customer and other functional departments that can help the audits,
and workers to understand internal control system of Commercial Bank of Ethiopia Harupa
Branch.
4. The planned and properly designed training and development program is not prepared over
though there is training in the organization
To reduce these problem internal audit department should give special attention in the
organization because deals with examining the fair preparation of the statements of
financial position, performance result and liquidity of the organization.
5. Finally, the researcher knows that the organizations data were needed by different parties
for different reasons. The Commercial Bank of Ethiopia Harupa Branch data is not
available for external parties. The researcher recommends that the organization must
change its perception in this regard and at least provide the data needed for some purpose
having no impact on the organization. Thus, it helps the customers to understand the
service delivered researcher to identify the problems in the organization and suggest the
possible solution for those problems to cope with it.
30
References
Arens 1997.Auditing integrated approaches 7th edition jersey (USA).
Howard F (1980) “Auditing principle” 4th edition prentice Hall of India
Kamal G (1996) “Fundamentals of Auditing” Hill publishing Company
Konrath. Larry. Auditing Concept & Application. A risk Analysis. Approach 4th ed. South
Western Cole USA. 1999.
David N. Richute, Auditing Concepts and Standard, South Western publishing Co. 1982. USA.
Appendix 1
Arba Minch university
College of Business and Economics
Department of Accounting and Finance
Questionnaire of filled by employee engaged in commercial bank of Ethiopia Harupa branch
Shahemene
Direction: Taking your existing situation in to consideration, indicate your choice by putting
(√) mark 1= strongly agree 2= agree 3= disagree 4= strongly disagree
I. Personal information
1. Educational level
2. year of services
II. Main question
3. Do you believe that internal auditing department of your origination is functioning well?
4. Does the internal audit in CBE are skilled in dealing with people in communicating
effectively?
5. Do you believe that of internal auditors of CBE has enough level of practical experience?
6. Are the audit procedures including the lasting & sampling technique use properly used?
7. At what areas the manager of the organization & internal auditors works together?
8. Is there adequate planning and supervision in the organization?
9. Do employees have sufficiently understood internal control structure of the organization?