THE ROLE OF INTERNAL AUDIT AS A MANAGEMENT TOOL FOR ENHANCING ORGANIZATIONAL FINANCIAL PERFORMANCE

 

BACKGROUND OF THE STUDY: The selection of the research topic indicates the researcher's intention to investigate the efficiency and effectiveness of internal audits in various corporate organisations, including banks, manufacturing companies, and government parastatals. Through the findings of this study, the researcher aims to contribute to the development of established policies and procedures, ultimately enhancing the integrity and dependability of internal control systems. According to Oladipupo (2005:96), internal audit is a managerial instrument that operates by scrutinising, assessing, and communicating on the sufficiency of internal control as a means to facilitate the appropriate, efficient, and effective utilisation of resources inside an organisation. According to Nwabueze (2000: 278), internal audit is a mechanism that assesses, appraises, and communicates the efficiency of internal control systems, both financial and non-financial, with the aim of optimising resource utilisation within an organisation. 

According to the Companies and All Matter Act (CAMA) 1990, it is mandatory for management to maintain and preserve accounts that accurately reflect the financial status of the organisation. These accounts must be verified by an external auditor's report to ensure their reliability and fairness. In order to ensure effective implementation of policies and programmes, management establishes its own set of policies that all operational and service units within the organisation must adhere to. To further ensure proper implementation, management also establishes a range of internal control systems, one of which is the internal audit. The internal audit function is an autonomous division inside an organisation that conducts evaluations of financial and non-financial activities. Its primary objective is to provide management with valuable and supportive services aimed at safeguarding and enhancing operations. The effective functioning of any organisation is contingent upon its management, which is responsible for efficiently and judiciously allocating the organization's limited resources. This is achieved through the implementation of appropriate planning controls, which aim to assure the attainment of the organization's overall goals and objectives. The implementation of an internal audit function is not legally mandated, but rather a strategic decision made by management to effectively meet its stewardship responsibilities. The internal audit unit has been recognised as both a component of management and a valuable instrument utilised by management to fulfil its responsibilities.

This study will contribute significantly to enhancing the efficiency and effectiveness of the internal audit function, consequently establishing a robust and dependable control system. The expansion and intricacy of numerous organisations have led to a commensurate rise in the demand for internal audit. Consequently, internal audit has become a significant determinant of an organization's internal control system and its progression.