Accounting Project Topics

Contributions of Internal Auditing to the Performance of Financial Institution

Contributions of Internal Auditing to the Performance of Financial Institution

Contributions of Internal Auditing to the Performance of Financial Institution

Chapter One

Objectives of the Study

The primary objective of this study is to examine the impact of internal auditing on the profitability of financial institution. Specifically, we would focus on:

  1. The various ways internal auditing has improved profits in the banks.
  2. The factors militating against effective internal audit in financial institution.
  3. Examine the relationship between effective internal audit and profitability of financial institution.




When internal auditing is accepted and acknowledged by an organization’s leaders as a management activity, internal auditors can fulfill their most fundamental role — supporting management and the board in achieving organizational objectives. And competent internal audit professionals bring to the table objectivity, integrity, expertise in communication, the ability to identify enterprisewide risks, and the skill to assess the effectiveness of controls put in place by management to mitigate those risks. As partners to management, internal auditors are positioned to help protect the organization against both traditional and emerging risks; provide consultation about how opportunities and vulnerabilities can be balanced; and make valuable recommendations for assessing and strengthening corporate governance. In this section of the study, our focus is to review some literatures in line with the subject matter. This review will be under three subheadings which includes the conceptual, theoretical and empirical studies.

Conceptual Framework

Internal Auditing

According to Unegbu and Obi (2012), internal audit is part of the internal control system put in place by management of an organization to ensure adherence to stipulated work procedure and as aid to management. Deepak (2010) sees internal audit as an independent and objective assurance and consulting function designed to help an organization to achieve its objectives. The Institute of Internal Auditors [IIA] (1999) defines internal auditing as an independent, objective assurance and consulting activity designed to add value and improve an organisation‘s operations. It assists an organization to achieve its objectives by bringing a systematic disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes. Adeniji (2011) states that internal audit is part of the internal control system put in place by management of an organization to act as an aid to management which ensures that the financial operations are correctly carried out according to the law and also in accordance with the wishes of the board or council. Unegbu and Obi (2012) believe that internal audit measures, analyses and evaluates the efficiency and effectiveness of other controls established by management in order to ensure smooth administration, control cost minimization, capacity utilization and maximum benefit derivation. This implies that internal audit is an integral part of a complex system designed by the management of any organization to ensure orderly conduct of its business and prevent abuse of assets.

According to the IIA (2009) definition, internal auditing can as well be classified into three diverse areas; risk management, corporate governance and internal control. Internal auditors play a basic role not only in risk management but also providing consultants and assurance services to the executives. Previously, the IIA issued ―The Role of Internal Auditing in Enterprise Wide Risk Management (ERM)‖ as a track to the internal auditors that they supposed to play their role in the enterprise risk management procedure. Lately, related to consulting services the IIA report portrays four essential activities for internal auditor to be accountable, which are; coordinating Enterprise-Wide Risk Management activities, facilitating the identification and evaluation of risks, maintaining and developing the Enterprise- Wide Risk Management framework, and for the management support developing of risk management strategy. Internal auditors are employed by individual companies to audit for management. The internal audit group in some firms (e.g. legal firms) can include over a hundred persons and typically reports directly to the CEO, other high executive officers or even the audit committee of board of directors. Internal auditors‘ responsibilities vary considerably, depending on the employer. Some internal audit staff consists of only one or two employees who may spend most of their time doing routine compliance auditing. Other internal audit staff may consist of numerous employees who have diverse responsibilities, including many outside accounting areas (Liu, 2013).

Enofe, Mgbame, Osa-Erhabor and Ehiorobo (2013) contend that the aim of internal auditing is to improve organizational efficiency and effectiveness through constructive criticism. This means that identification of areas of weakness and suggestions for improvement are the main thrust of internal auditing. Little wonder Sawyer (1995) state that internal auditor‘s job is not done until defects are corrected and remain corrected. Other researchers such as Deepak (2010) identify the objectives of internal auditing to include: Effectiveness and efficiency of operations (programmes and projects), reliability of financial and operational information, safeguarding of assets, compliance with rules and regulations and prevention and detection of fraud. Barker (1999) while corroborating the views of Owler and Brown (1999) extends the objective of internal audit to include review of the operations and records of the undertaking and in course of these checks, much of the detailed work of the organization in respect of financial and other statements are effectively audited. Vos (1997) also states the internal auditor‘s main objective is to evaluate effectiveness of financial and operating control, confirm compliance with company policies, procedure, protect assets, and verify the accuracy and consistency of organization‘s external and internal reports. While Stoner (1994) believes that the objective of internal audit is to evaluate several of the organization‘s reports for accuracy and usefulness and also recommending improvement of the control system, Owler and Brown (1999) argue that the objective of internal auditor is to protect management against errors of principle and neglect of duty.






In this chapter, we described the research procedure for this study. A research methodology is a research process adopted or employed to systematically and scientifically present the results of a study to the research audience viz. a vis, the study beneficiaries.

Research Design

Research designs are perceived to be an overall strategy adopted by the researcher whereby different components of the study are integrated in a logical manner to effectively address a research problem. In this study, the researcher employed the survey research design. This is due to the nature of the study whereby the opinion and views of people are sampled. According to Singleton & Straits, (2009), Survey research can use quantitative research strategies (e.g., using questionnaires with numerically rated items), qualitative research strategies (e.g., using open-ended questions), or both strategies (i.e. mixed methods). As it is often used to describe and explore human behaviour, surveys are therefore frequently used in social and psychological research.

 Population of the Study

According to Udoyen (2019), a study population is a group of elements or individuals, as the case may be, who share similar characteristics. These similar features can include location, gender, age, sex or specific interest. The emphasis on study population is that it constitutes individuals or elements that are homogeneous in description.

This study was carried out to examine the contributions of internal Auditing to the performance of financial institution using GTbank as a case study. Hence, the population of this study comprises of staff and management of GTbank PLC.




This chapter deals with research questions and analysis of participants’ responses.




The objective of this study has been to understudy the contributions of internal Auditing to the performance of financial institution. Our place of focus was the GTbank PLC, Uyo branch. In this chapter, we summarize the study and conclude the findings.


This study on the impact of internal auditing on the performance of financial institution was carried out in five chapters. In the first chapter, we stated the problem of the research, the need for internal auditing and its unflinching advantages. The scope of the study was described as well as the objectives. In the second chapter, we reviewed related and relevant literatures, we reviewed the study under the conceptual framework, the theoretical and the empirical studies. In the third chapter, we described the methodology adopted in carrying out this study. We employed the simple percentage as a tool for recording the responses from the respondents while the Pearson correlation was employed to test the hypothesis. In the fourth chapter, we analyzed the responses and clearly highlighted the various ways, internal auditing is contributing to the GTbank profitability. This method of contribution can be described as the subtraction method. This is because, internal auditing subtracts from the organization costs that it could have incurred directly or indirectly, either by law, error of omission or error of commission.


Internal audit is a fundamental part of the banking system. Their advantages cannot be over-emphasized as they act like watchdog for any organization. Internal auditors’ diverse capabilities bring tremendous value to the board and the audit committee in their corporate governance responsibilities and risk management oversight. It is critical that the chief audit executive (CAE), senior management, and the audit committee have sufficient contact and communication to ensure that the parties understand and accept their individual and collective responsibilities for risk management. Competitive pressures demand that today’s organizations squeeze the most they can from all their resources and the internal audit process is clearly among the most critical. In addition to their responsibility for assessing and recommending internal controls, internal auditors’ skills in risk management and their broad-based perspective of the organization uniquely position them as a valuable resource for strong corporate governance. As a result, informed senior managers and boards are relying on internal auditors for advice and counsel on everything from analysis of operations and assessment of risk to recommendations for improved corporate governance. Moreover, internal audit practitioners are increasingly being challenged to apply their expertise in much broader ways than ever before such as evaluating emerging technologies, detecting and deterring fraud, analyzing the effectiveness of policies and procedures, and identifying opportunities to save the organization and its shareholders money. When it comes to adding value across the board, there’s no better resource than internal auditing. Based on the findings the researcher recommends that Daily call over, reconciliation and auditing at every level Surprise internal cash count. Regular review and cleaning of all surprises accounts preparation of monthly account and board of central bank return.


The following recommendations are hereby made with the view of seeing internal audit as a major tool in achieving organisational objectives.

On the basis of the findings and decisions in this study, i hereby make the following recommendations:

The need to orientation course: employees apart from those in audit department need to be told why there is need for internal control. They should know that instituting good control procedures are not an insult to the integrity of present employees of job relation and forced vocations.

  1. More than one employee becomes familiar with certain duties and procedures so that replacement of employees in case of emergency is less difficult.
  2. It broadens the training of personnel in general.
  3. Rotation frequency serves as a general check on the efficiency of the employee on vocation.
  4. Irregulations which may have been committed by an employee may be discovered while the employee is on vacation and his duties are assumed by someone else.

Budgetary and reporting controls are effective without the active participation of a senior management in the review process. There should be need to improve the system of internal audit, so that it is a real asset to management by finding management or efficiency audit.

Internal audit department must realize that they have been designed to help management run the organization effectively.

The issues of visiting auditors to area officers. It was gathered that auditors are permanently at the head office and are only in area office when need arise which is risky as the visiting auditor may not be familiar with all the operating aspects of the area offices. This may not have free and independent mind to give good and unbiased judgements. The auditor should make an unscheduled visit to the area office.

Review of the accounting system and relative internal control.

Duties should be allocated in such a way that one person’s job is independently proved or checked by others. Different jobs should be allocated to different people so as to call for checks and balances.


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