The major goal of any organization is to overcome business constraints and become profitable and sustainable in the long run. However for educational institutions, the goal extends beyond profitability and sustainability to ensuring that they are able to adequately impart knowledge into the public thereby contributing to the development of their immediate society. Internal audit operations and recommendations serve as the backbone of an organization and also determine the prosperity or the down fall of the particular organization. This study determine the impact of internal audit function and efficiency on organizational performance of Babcock University.
The study adopted descriptive survey research design. The simple random sampling technique was used in selecting the respondents of the study. The data for the study were collected using structured questionnaire. The data collected were analyzed using descriptive statistics of mean and standard deviation and inferential statistics of regression and correlation analysis.
The results from the analysis revealed that the that there is positive and significance impact of internal audit competency on operational efficiency; there is positive and significance impact of internal audit experience on organizational effectiveness; there is a positive and significance relationship between internal audit independence and job performance and internal audit function has positive and significance effect on organizational performance.
The study concludes that there is significant impact of internal audit function and efficient on organizational performance of Babcock University. The study recommends that, for the university to have sound operational efficiency, organizational effectiveness and organizational performance, the management of the university should ensure that there is a functional internal audit unit filled with experience and competence auditors. Also, in order to enhance job performance of employees in the university, the management of the university should ensure that the internal audit unit are fully independence in their operations.
Key words: Audit function, Audit efficiency, internal audit, Organizational performance, effectiveness,
Word Count: 296
1.1 Background to the Study
All over the world, Tertiary educational institutions plays a significant role in the development of society. This is so because they are an important component of the economic system of any country as they bear the responsibility for the development of the human capital within the economy (Adeniyi, 2014). As a result without well-functioning tertiary education institutions,the quality of human capital is bound to be poor which has adverse effects on the economy and society in general. Thus,they have a great influence on the growth and development of any country (Anao, 2012). Therefore, there is a need for the efficient management of the resources and the internal affairs of tertiary education institutions and one of the ways this can be achieved is through internal audit (Fernandez & Rainey, 2016).
According to the Institute for Internal Auditors (2009), internal audit can be described as an independent, objective, assurance and consulting activity designed to add value and improve an organization’s operations. Furthermore, Christopher (2015) define internal audit as an internal and objective activity of insurance and consulting, which is designed to create value and improve the operations of an entity. Furthermore, Anao (2012) defined internal audit as a system that provides an independent and objective review and advisory service to-provide assurance to the Chief Executive and Board that the entity’s financial and operational controls designed to manage the organization’s risks and achieve the entity’s objectives are operating in an efficient, effective, economical and ethical manner. Internal auditing is defined as a process, carried out by an appointed qualified person within an organization, whereby the records and financial statements of an entity are subjected to independent examination in such detail as will enable the auditor form an opinion as to their truth and fairness of the financial statements (DeSimone, 2018). According to Unegbu and Obi (2017) internal auditing can be defined as an independent review and examination of records and activities to assess the adequacy of system controls, to ensure compliance with established policies and operational procedures, and to recommend necessary changes in controls, policies, or procedures.
Internal audit is important in every organization since the management is responsible for reporting the financial state or position of the organization to the stakeholders of the organization. The objective of an audit of financial statements is to enable the auditor to express an opinion whether the financial statements are prepared, in all material respects, in accordance with an identified financial reporting framework and that the financial statements give ‘a true and view’ or “present fairly, in all material respects” the financial results and state of affairs of the organizations (Goodwin, 2014). Furthermore, Okechukwuand Mohammed (2011) noted that the function of internal audit in an organization is to prevent the occurrence of fraud and financial mismanagement. Based on the contingency theory, the goal of any audit function is to check or determine the reliability of the data, guidelines and approaches of an organization. In improving the management of the assets of any organization, internal audit is essential and this helps to improve the performance of such organization (Pratono, 2016).
Globally, organizations are primarily concerned with their performance and the attainment of their goals and objectives. Thus, every organization in the world will do whatever is ethically possible to attain and maintain excellent organizational performances in order to please the stakeholders involved with the organization. This includes educational institutions particularly tertiary education institution because their performances unlike most business organizations is not just measured by their profitability or financial performances but by other metrics such as the academic performance of students, the job performance of employees and the corporate image or reputation of the institution (Adejola, 2019). The primary objective of Tertiary Educational Institutions is to provide educational services to desirous members of the public (Modibo, 2015). Consequently, it is important to appreciate the fact that for Tertiary Educational Institutions be it private or public institutions to achieve its desired objectives effectively, the management of such tertiary educational institution must establish an effective internal audit unit which would be able to furnish the management of the institutions with necessary analyses, appraisals, and recommendations for onward decision making (Dinapoli, 2007).
However, despite the seeming importance of internal audit a lot of critics have dismissed it citing several cases of organizations like Enron, WorldCom, Marconi, Parmalat, Independent Insurance, Equitable Life, Maxwell and the Lehmann brotherswho instituted internal audit systems but still ended up collapsing and shutting down (Brown, Falaschetti & Orlando, 2010). As such there have been questions amongst scholars of over the impact of internal audit functions in organizations and whether they significantly improve the performance of organizations especially in the education industry. Therefore, this study will aim to determine the impact of internal audit function and efficiency on organizational performance.
1.2 Statement of the Research Problem
The major goal of any organization is to overcome business constraints and become profitable and sustainable in the long run. However for educational institutions, the goal extends beyond profitability and sustainability to ensuring that they are able to adequately impart knowledge into the public thereby contributing to the development of their immediate society. For this goal to be achieved, there has to be an effective administration put in place to manage the organizational affairs and operations efficiently. According to Modibbo (2015) this cannot be achieved without the institution of an effective internal audit function. However, many educational organizations in Nigeria especially tertiary institutions have failed to adequately adopt internal audit function within their organization’s operations and as a result have experienced problems with ineffective administration within the institution.
According to Akomolafe (2012) a major reason why many tertiary institutions in Nigeria have failed to adequately integrate internal audit function into their organizational operations is due to the fact many of these institutions are unwilling to spend a significant part of their financial resources on an organizational function they are unsure will yield dividends for them in terms of a significant improvement in terms of their organizational performance. Furthermore, due to the fact that there have been a scarcity of studies showing the link between internal audit function and the organizational performances of tertiary institutions in Nigeria, there are very few empirical evidences for educational institutions in Nigeria to base their decision to adopt internal audit function in their organizations. Therefore, this study aims to provide solution to this problem by studying the impact of internal audit function and efficiency on organizational performance using Babcock University as a case study.
1.3 Objectives of the Study
The general objective of this study is to determine the impact of internal audit function and efficiency on organizational performance of Babcock University. The specific objectives are:
1. To ascertain the impact of internal audit competency on theoperational efficiency of Babcock University.
2. To ascertain the effect of internal audit experience on the organizational effectiveness of Babcock University.
3. To evaluate the relationship between internal audit independence and the job performance of employees in Babcock University.
4. To determine the effect of internal audit function on the organizational performance of Babcock University.
The questions this study is concerned with are:
1. What is the impact of internal audit competency on the operational efficiency of Babcock University?
2. To what extent does internal audit experience affect the organizational effectiveness of Babcock University?
3. What is the relationship between internal audit independence and the job performance of employees in Babcock University?
4. What is the effect of internal audit function on the organizational performance of Babcock University?
For the purpose of this research study, the following hypothesis will be tested
H0: There is no significant impact of internal audit competency on the operational efficiency of Babcock University
H1: There is a significant impact of internal audit competency on the operational efficiency of Babcock University
H0: There is no significant effect of internal audit experience on the organizational effectiveness of Babcock University
H1: There is a significant effect of internal audit experience on the organizational effectiveness of Babcock University
H0:Internal audit independence does not have a significantrelationship with the job performance of employees in Babcock University.
H1:Internal audit independence has a significantrelationship with the job performance of employees in Babcock University.
H0: There is no significant effect of internal audit function on the organizational performance of Babcock University.
H1: There is a significant effect of internal audit function on the organizational performance of Babcock University.
1.6 Scope of the Study
The study will focus on the impact of internal audit function and efficiency on organizational performance. The study will particularly center on Babcock University. The target population are the accounting and finance staff in Babcock University. Thesample size for the study will be gotten through the Taro Yamane sampling formula. The study will adopt the quantitative methodology using primary data as its main source of data collection. The research instrument will be a well-structured questionnaire to be self-administered by the researcher. Thus the geographical location for the study will be Babcock University,Ilishan-Remo, Ogun State. The period for the study will be between November 2020 and April 2021 (6 months).
1.7Significance of the Study
This research work will be significant to the following people:
Accountants and Auditors: Since auditors duties within the organization have increased on a steady basis according to the organizations need and preference, auditors need to know how powerful the strength of internal audit function is in every organization especially in improving the performance of an organization. Consequently the study will show how internal audit function can improve organizational performances.
Management of Babcock University: This research will provide adequate information to the management of Babcock University on the role and importance of internal audit functionplays in boosting their organizational performance.
Students: This research will help educate students on the concept of internal audit and its efficiency and the merits to an organization.
Researchers: This research work can be used by other researchers and knowledge accumulators who wish to improve the knowledge base of internal audit function and its impact on organizational performance. It will be particularly helpful as there have been few research done into the impact of internal audit function on the organizational performance of tertiary institutions in Nigeria. Thus this study will help to fill that gap in the body of knowledge.
1.8Limitations to the Study
1. Time Frame: Due to the short timeframe given for the submission of the research work the research was carried out within the constraint of time and this limited the research methodology and findings of the study.
2. Honesty: The respondents were unwilling to express themselves in honest manner as they were careful not to disclose vital company information.
3. COVID 19 Pandemic: The current pandemic ravaging the world called the COVID 19 pandemic has restricted social interaction in the world. As such, the researcher may not physically be able to gather data from the case study. However, the researcher will find other means to ensure the data collection process is smooth and doesn’t affect the validity and reliability of the study.
1.9Definition of Terms
Audit: Mautz (2009:3) defines auditing as being “concerned with the verification of accounting information provided in the financial statement, to determine the reliability and accuracy of accounting and reports”.
Internal auditing: Internal auditing is an objective assurance, independent and consulting activity developed to improve organizations operation and add value to the system. It helps organization accomplish their goals and objectives by introducing a scientific and well organized approach to improve and evaluate the efficiency and effectiveness of risk management, governance process and control (IIA, 1995).
External auditing: External audit can be defined as periodic or an audit for a specific purpose (ad hoc) carried out by qualified and independent accountants. The objectives of external audit is to determine if the companies records are accurate and complete, if the companies report is prepared according to the provisions of Generally accepted accounting principles (GAAP), if the statement prepared present the true and fair value of the organizations position.
IIA (institute of internal Auditors): This is the regulatory body of auditors in Nigeria. They oversee the entire operations of auditors in Nigeria and ensure compliance with the necessary rules and statues.
Financial statement: A formal record of the financial activities of a business, persons, or other activities.