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    This chapter introduces the background, objectives and methodology of the study. [1] It provides context on internal auditing and its importance for organizations. [2] The study aims to assess internal auditing practices at Abyssinia Bank in Kombolcha branch. Specifically, it seeks to examine the application of practices, quality of audits, independence of auditors, and the relationship with external audits. [3] The research design is descriptive and will collect primary data through questionnaires and interviews and secondary data from documents. It will analyze both qualitative and quantitative data.

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    This chapter introduces the background, objectives and methodology of the study. [1] It provides context on internal auditing and its importance for organizations. [2] The study aims to assess internal auditing practices at Abyssinia Bank in Kombolcha branch. Specifically, it seeks to examine the application of practices, quality of audits, independence of auditors, and the relationship with external audits. [3] The research design is descriptive and will collect primary data through questionnaires and interviews and secondary data from documents. It will analyze both qualitative and quantitative data.

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    305 views6 pages

    CHAPTER ONE-background of The Study

    Uploaded by

    Man TK
    This chapter introduces the background, objectives and methodology of the study. [1] It provides context on internal auditing and its importance for organizations. [2] The study aims to assess internal auditing practices at Abyssinia Bank in Kombolcha branch. Specifically, it seeks to examine the application of practices, quality of audits, independence of auditors, and the relationship with external audits. [3] The research design is descriptive and will collect primary data through questionnaires and interviews and secondary data from documents. It will analyze both qualitative and quantitative data.

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    © All Rights Reserved
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    of 6

    CHAPTER ONE

    INTRODUCTION

    1.1. Background of the study


    Auditing is an important activity for all types of organization where
    governmental, private for profit, non profit or any other. Auditing is systematic
    process of objectively obtaining and evaluating evidence regarding assertion
    about economic action and event to ascertain in degree of correspondence
    between those assertion and established criteria and communication the to
    interested user(korath 1999 ,p2) .

    Auditing is the accumulation and evaluation of evidence about information to


    determine and report on degree of independency correspondences between the
    information and established criteria auditing should be done by a competent
    independent person(Arenas 1997,p.2).Proper internal auditing practice is a
    base for preserving the stability of any company. The study faces on describing
    and analyzing the important control directions that are related to internal
    auditing practice, in regard to see the existing and applicability of attributes
    and the standards in Abyssinia bank of Kombolcha branch performance to
    increase the quality of audit work. Raising awareness of the role and
    significance of internal auditing to the achievement of specific objectives in
    reasonable assurance, accountability, effectiveness and efficiency of operations,
    reliability of financial reporting in compliance with applicable laws and
    regulations (Sawyer, lawyer B, 1989, p.21).
    1.2Historical background of Abyssinia bank

    A bank is a financial intermediary that accepts deposits and channel deposit


    into lending activities either directly by loaning or indirectly through capital
    markets. A bank links customer that have capital deficit and customer that
    with capital surpluses. There are nineteen head quarter banks exist Ethiopia
    currently. Each head quarter has it own branches (merriam Webster).

    A centurial bank has great role to over see the commercial banking system.
    Central bank possesses a monopoly of printing or issuing currency that serve
    as a legal tender. Due to this central banks are called issued banks. In fact of
    history of banking in Ethiopia dates back to the turn of the century when in
    1905 the bank of Abyssinia was established in Addis Ababa under the reign of
    Minilk. This event marked the introduction of banking in the country (Mishkin
    1995).

    In 1905 bank of Abyssinia was established by Britain at the request reign of


    minilik. Even as Abyssinia which is the name Ethiopia used to one of the
    cradle of the civilization and even the bank of Abyssinia shall be a standard
    bearer within the banking industry in Ethiopia as well as an international
    player capable of being compared favorably with best institution of its kind.
    The mission of the bank of Abyssinia is to provide domestic and international
    banking service through an innovative and optimal utilization of technology
    (Arnido Muir 1886)
    1.3 Statement of the problem
    According to ( Dawuda,2010 ) Internal audit is essential for ensuring performance of
    the organization. To achieve organizational objectives, internal audit plays a great role
    by providing value adding service. Internal auditing is examination of internal
    control system in which it functions by measuring and evaluating effectiveness
    of other control on the other hand external auditor has reasonability to report
    on the truth and fairness of the account of the company. The absence of proper
    indenting in the organization leads many problems. The absence of primarily
    internal auditing in the organization will result in lack of continuous assurance
    service. (Konrath, 1999, p. 676)

    The second problem in achieving internal auditing practice is the degree of


    limited independence of internal auditor since internal auditors are employees
    of company this serve, they can’t achieved the certified public accountants
    (CPA) independence in fact. This limited independence reduces their role with
    company to the lever of the more assistance to the top management. The other
    problem is that inadequate internal control can expose the company to various
    identifiable risk, such as waste of company available resource, fraud by
    employees and lack of control over asset. By not having adequate internal
    auditing activities, the company will loss substantial amount of resource and
    have difficulty to achieve its intended objectives.( Arena, 1997)

    All the above mentioned point made the researchers to under take a study of
    this nature. Here in this paper, the researcher wants to assess the existing
    internal auditing system.

    1.4 Research question

    Depending on the above problem the researcher raises the following question:-

     Are the principles of internal auditing apply in practice in Abyssinia bank


    kombolcha branch?
     What is the quality of internal audit work in terms of competence,
    objective and independence?
     How internal audit practice affects external auditing function and what is
    their relationship?
     What is the degree of independence of the internal auditor from those
    task they reviewing?

    1.5. Objective of the Study

    1.5.1. General Objective


    The general objective of this study is to assess internal auditing practice in
    Abyssinia bank of kombolcha branch

    1.5.2. Specific Objective


    The specific objectives of this study are:

     To examining the application of the internal audit practice in the bank


     To identify the quality of internal audit work.
     To identify the degree of independence of the internal auditor from those
    who task they reviewing.
     To identify the effect of internal audit on external audit function and
    their relationship.

    1.6 Research methodology

    1.6.1. Research Design


    For this study the researcher was used descriptive types of research design to obtain desired result of
    for the study and to discover detailed evidence about the problem. This would have been designed to
    examine the assessment of internal auditing practice in Abyssinia bank of kombolcha branch

    1.6.2. Source of data and method of data collection


    The researcher was used both primary and secondary source of data to achieve
    objective of the study. The primary data was collected from the employees of
    the bank through questionnaires where as interview was conducted to the
    manager of the bank. While the secondary source of data collected from the
    written documents such as books and other related review literature. In order
    to collect the primary data the researcher was used both open ended and close
    ended questions was distributed for the employees of the banks and interview
    question was conducted to the manager of the banks.

    1.6.3. sample techniques and sample size


    In Abyssinia banks of kombolcha branch there are 17 employees .The researcher selected all
    employees of the bank as sample by using census sampling techniques. Because the population number
    is small.

    1.6.4. Method of data analysis, presentation and interpretation


    The raw data that collected through questionnaires, interviews and written
    documents was organized and interpreted qualitatively and quantitatively.
    Responses obtained from the closed ended question was organized
    quantitatively. Whereas the data obtained from open ended question and
    interview was analyzed qualitatively. The collected data was presented within
    explanation, interpreted and analyzed through table and percentage.

    1.7 Significance of the Study


    The major benefits and importance of this study are the following:-

     It will be enable the managers to be aware of the importance and use of


    internal audit in achieving intended objective.
     It will be help the auditor in this organization to know their role in the
    organization.
     It will be allowed the researcher to practice a larger similar study that
    could be performed in other organizational sector.
     It will be used as an additional reference to the existing restructure and
    can be used as a spring boards for other research, who wishes to
    conduct a research in the same area.

    1.8. Scope of Study


    Even though,the Abyssinia Bank of Ethiopia have many branches, the study
    would been focused on the assessment of internal auditing practice in
    kombolcha branch because of shortage of time and financial limitation.

    1.9. Limitation of the Study


    There are some limitations to conduct the study, since the study does not cover
    all branch of Abyssinia Bank, the result of the study may not give full
    information about internal auditing practice because of:-

     Financial source is not sufficient to gather all relevant information.


     The time allocated for data collections is not sufficient to gather all the
    relevant information.
     Questionnaire method is primary used to gather primary data. However,
    the information may not free from personal bias of respondent.
     Some of the respondent may not give response sincerely.

    1.10. Organization of paper


    This study has four chapters. Chapter one deals with the introduction part
    which containing, the background of the study, statement of problem, objective
    of the study, research methodology, significance of the study, scope of the
    study, limitation and organization of the paper . Chapter two summarizes
    review of literature. Chapter three deal with the data analysis and
    presentation. Chapter Four deals with summery, conclusion and
    Recommendation.

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