CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
The issue of distress in Nigeria of recent has called to question the need for a closer examination of internal auditing as an instrument for effective financial discipline have raised serious doubts in the minds of the public and the customers as to the effectiveness of the internal controls which is the “internal audit” in these banks. The wide and strongly held belief is that if the banking industry in Nigeria had a well developed and managed internal control system or auditing practice, most of these errors that contributed to the distress and consequent liquidation of some bands recently would have been detected early enough and remedial action taken.
The general assumption is that if the banking industry in Nigeria has made good use of internal auditing checks the standard of financial management in the banks would have been higher and more reliable than what it is today. In order to examine the authenticity or otherwise of this statement or assumption, we feel it is necessary as a part of the background to the study to briefly discuss the concept of internal auditing and its background. Internal auditing is an independent appraisal activity within an organization for the review of operation as a service to management development of internal auditing, public accountants were finding an increasing demand for independent audits leading to the expression of an opinion on financial statements, and they recognized that they could seldom perform the function of detailed verification as effectively or efficiently as could the company’s own specialist. To ensure the judicious application of funds and inculcate in the banking industry the culture of probity and accountability, internal auditing was made the corner stone for effective financial management in the establishment of the community banks.
1.2 Statement of Problem
In Nigeria, the oil boom of the early 1970’s increased the funds available to the public sector, expanded economic opportunities, but has conversely created chronic problem relating to financial impropriety of the part of the public officials. Increased availability of money led to wide spread fraud in ;contract awards and execution. This among other factors has increased the need for an efficient auditing system in public sector in public sector financial management. With reference to the banking industry in Nigeria it is distributing to note that financial impropriety which internal auditing exist to check still occur on recultent basis, despite the establishment of internal audit units or its equivalent (inspectorate units). The effectiveness of the internal auditing as an instrument of financial management.
The level of resources available to the internal audits in the OSPOLY Microfinance Bank in terms of equipment, human and other operational facilities. The result of all these tests or assessments would therefore, aim at finding possible solution to the identified problems. So as to allow internal auditing to achieve its objectives of functioning as an instrument for effective financial management in the banking industry with particular reference to OSPOLY MICROFINANCE BANK.