The Effect of Internal Audit in an Organization (A Case Study of University of Ilorin Teaching Hospital Ilorin)

CHAPTER ONE

1.0 Introduction to the Study

1.1 Background of the Study

Internal auditing is an essential component of an organization’s internal control system. It functions as a mechanism for ensuring accuracy, transparency, and accountability in operations (Millichamp & Taylor, 2018). The internal auditor acts as an independent assessor within the organization, providing objective evaluations of financial and operational activities. Although internal auditors are employees of the organization, they report directly to top management or the chief executive officer to maintain a reasonable degree of independence.

The work of internal auditors also supports the external auditors. When external auditors are satisfied with the internal auditor’s procedures and findings, they can rely on these reports to limit the scope of their own tests (Hayes, Wallage & Gortemaker, 2014). For example, if the internal auditor has continuously verified inventory records, the external auditor may accept the closing stock figures without extensive rechecking. However, this reliance is done at the external auditor’s own risk because any errors or fraud discovered later remain the auditor’s responsibility.

Furthermore, internal auditors are closely associated with the day-to-day operations of the organization and often identify areas that require management’s attention. Once the internal audit department has clear terms of reference, it must carry out its duties without interference from other departments. Despite its importance, internal auditing is often challenging because it involves inspecting the work of others, and people naturally resist being evaluated.

1.2 Problems Facing the Internal Audit Department in UITH

The internal audit department at the University of Ilorin Teaching Hospital (UITH) faces several challenges that affect its effectiveness. These challenges stem from weaknesses in corporate governance, compliance pressures, and limited resources for implementing modern audit techniques. Achieving a balance between internal control functions and enterprise risk management (ERM) remains a significant concern (Institute of Internal Auditors, 2020).

The five major challenges identified include:

1. Realigning staff skills to meet new auditing requirements.

2. Expanding audit coverage to address evolving operational risks.

3. Maintaining credibility and strong communication with the audit committee.

4. Enhancing fraud detection and prevention strategies.

5. Strengthening the auditor’s role in assessing and managing organizational risk.

To function effectively, the internal audit unit requires skilled personnel, adequate funding, and appropriate infrastructure. Professional competence and independence are key to ensuring the department fulfills its oversight role effectively.

1.3 Aim of the Study

The primary aim of this study is to examine the importance of internal auditing in promoting effective internal control, ensuring compliance with organizational policies, and improving decision-making. Additionally, the study seeks to highlight the functions of internal auditors and their relationship with other departments, especially accounting and finance, within the University of Ilorin Teaching Hospital.

1.4 Scope of the Study

This research focuses on the internal audit system of the University of Ilorin Teaching Hospital (UITH), emphasizing how internal auditing supports management control and accountability. The study covers major operational areas such as:

• Salary section

• Expenditure section

• Revenue section

• Purchases and supplies section

• Final accounts section

• Cash office

It also examines the internal control procedures related to supplier and contractor payments, identifying how these systems enhance transparency and reduce financial mismanagement.

1.5 Organization of the Study

This research project is organized into five chapters for clarity and systematic analysis:

• Chapter One: Introduction to the study, including the background, problem statement, aims, scope, and structure.

• Chapter Two: Literature review, focusing on internal auditing theories, practices, and its role in internal control systems.

• Chapter Three: Research methodology, describing data collection methods, sampling techniques, and analysis procedures, along with a brief history and organizational chart of UITH.

• Chapter Four: Data presentation and analysis, focusing on findings regarding the role of internal auditors in UITH.

• Chapter Five: Summary, conclusion, and recommendations for improving internal audit effectiveness in the organization.

References (APA Style)

Hayes, R., Wallage, P., & Gortemaker, H. (2014). Principles of auditing: An introduction to international standards on auditing (3rd ed.). Pearson Education.
Institute of Internal Auditors (IIA). (2020). International standards for the professional practice of internal auditing. IIA Global.
Millichamp, A. H., & Taylor, J. (2018). Auditing: An introductory manual (12th ed.). Cengage Learning.