THE EFFECTIVENESS OF AUDIT IN GOVERNMENT PARASTATALS (A CASE STUDY OF ENUGU STATE WATER CORPORATION,ENUGU STATE BROADCASTING SERVICES AND ENUGU STATE LIBRARY BOARD).
ABSTRACT
This study is aimed at identifying the EFFECTIVENESS OF AUDIT IN GOVERNMENT PARASTSTALS, using Enugu State Water Corporation, Enugu State Broadcasting services and Enugu State Library board all in Enugu state as a study guide. The entire work was dividend into five (5) chapters and the data for the study was collected using both primary and secondary sources, questionnaires, textbooks, literary materials and journals respectively. The population of the study is 116; while the sample size was derived using YARO YAMANI 1964 formula and it gave 90. Thereafter, the data collected were presented in tables, analyzed using percentage analysis. Then the hypothesis of the study was tested using chi square formula. The findings of the study was that, there is no effective audit in government parastatals, because of how often external audit is carried out. There is consistent and effective internal audit accountable to management. Also, the government influences on parastatals affect their business objectives. This is observed in the role of decision taking by the government on public enterprise, which result in delay of job execution. Finally, the researcher made some useful recommendations to the parastatals that; when audit function is utilized to ensure the competency of public servants and improvement in the activities, procedures and administration of public enterprises. The cry about outright privatization will not be necessary.
CHAPTER ONE
INTRODUCTION
- BACKGROUND OF THE STUDY
Government participation in business (through public enterprise) unlike every other private enterprise has not yielded the desired result in terms of social, economic and political considerations. It is against this backdrop that this study seeks to examine the effectiveness of audit in government parastatals. Nevertheless, the economic consideration as a major business objective of any enterprise, be it, public or private will dominate other considerations in this study. Thus, the economic considerations of government establishing public enterprises are to fulfill her social responsibilities to the masses.
Profits are needed from the government parastatals not only for sustaining the existing parastatals but also for establishment of new ones. Government does not have in mind to establish parastatals for profit making but intervenes where the system of perfect competition has broken down. Nevertheless, we are primarily concerned with mobility of public enterprises in Nigeria to at least breakeven vis-à-vis some of their private counterparts that make surplus profits. There could have been no better time for this study than now when government debts are accumulating daily and foreign exchange earnings declining. This points to the fact, why government wants their parastatals to generate enough profit to at least pay for their consumables and argument on their salaries where possible. No wonder the government stance on public enterprises tagged “privatization”.
The proponents of privatization argue that better resource utilization is likely to be attained by transferring of the ownership of public enterprises to private sector for better management, or by the commercialization of public enterprises for the benefit of the public or by the winding up of unviable public enterprises. Privatization, they maintain apart from increasing efficiency, will also provide the government with fund to engage in other priority activities especially now that the government traditional sources of revenue are drying up. These reasons are academically sound, but this school of thought has failed to consider among other things, an element which is essential for profit motivation and control-audit effectiveness. Hence, this study examines the extent to which auditing has been applied effectively to government parastatals as a means of controlling, safeguarding and motivating profit. Therefore, if government must participate in profit oriented ventures and succeed, it must apply all the principles and methods required to achieve business objectives.
- STATEMENT OF THE PROBLEM
The primary goal of any business entity, whether private or public, is to make profit. Profit is made only when the total revenue exceeds total cost, and loss incurred when the reverse is the case. A breakeven situation occurs when total revenue is equal to total cost. Since excess of income over expenditure is profit, there is the need for any business entity to exercise full or at least reasonable control over cost so as to make profit or breakeven, but with the high and disgusting rate of losses and eventual failures of public enterprises in spite of government annual grants and subventions, one is inclined to ask questions as to whether some reasonable control is exercised over public enterprises. Since the ineffectiveness of government parastatals does not only affect the government, but also the entire economy. Therefore the first question that needs to be answered is: Is government aware of the need and effects of audit in government parastatals?
Secondly, whether the policies of government encourage the maintenance of proper accounting systems in government parastatals? Are those at management level in government parastatals in Nigeria aware of government policies and objectives in establishing those parastatals? Is the management of public assignment, functions and responsibilities in line with government policies and overall business objectives? Finally, are those government bureaucratic bottle-necks extended to the public enterprises? All these questions will be answered from the findings of the researcher.
- OBJECTIVES OF THE STUDY
The functions of auditing goes beyond merely checking and ensuring compliance with laid down internal procedures and controls but also along way in assisting management inefficiencies in allocating of resources in the organization. The objective of this study therefore is to recommend a system of checking and evaluating the performance of government parastatals. Specifically the study will:-
- Ascertain the significance of audit report in complimenting management control functions in the organization.
- To identify bureaucratic bottle-necks that could militate against the realization of business objectives.
- To recommend based on the study findings, how consistent and effectiveness of audit in government parastatals could enhance profitability and continuity of public enterprise.
1.4 RESEARCH QUESTIONS
Based on the purpose of the study, the following questions are raised to provide a guide and solution to the research problems:
- Is the account of government parastatals audited annually by external auditors?
- Does consistent and effective internal audit enhances performance in government parastatals?
- Do government influences on parastatals affect their business objectives?
- RESEARCH HYPOTHESIS
In the contemporary business world of economic depression, characterized by the strict application of all accounting principles and methods of better results by firms, one may ask if such principles and method are also applicable and adopted by enterprises. Thus, in order to achieve the stated objectives, the researcher stipulated the following null hypothesis to aid in testing the validity of the data obtained.
Ho1: The account of Government parastatals are not audited annually by the appropriate external auditors.
Ho2: There is no consistent and effective internal auditing in Government parastatals.
Ho3 There are bureaucratic bottle-necks in government parastatals and hence pose obstacles to the realization of business objectives.
- SIGNIFICANCE OF THE STUDY
The study is of particular significance to business organizations and government owned establishments in general and Enugu State Government parastatals in particular, in that it will sensitize them into developing efficient audit system in their establishment. Above all, the study will benefit students, scholars, lecturers, statisticians and potential investors, in further research work on the subject. Also internal and external auditors will benefit, in that the study will broaden their understanding of the relevance of audit function to the own functions to determine their degree of relevance on the audit work. Accountancy students who are potential auditors, it will throw some light on the intricacies of audit.
Finally, study will also enable employers appreciate the problems faced by auditors and be able to formulate policies that will make the audit work attractive and more result oriented.
1.6 SCOPE AND LIMITATIONS OF THE STUDY
The scope of this research work covers the effectiveness of audit in government parastatals Enugu State Water Corporation, Enugu State Broadcasting Services and Enugu State Library Board. The focus is on those areas of the government parastatals activities that have direct dealings with auditing. The constraints encountered by the research include time factor. Being a regular student the researcher has to allocate part of her time to classroom work, assignment, domestic work and other activities such as personal interviews which formed part of the data collection. The persons to be interviewed being public servants have limited time to attend to the researcher include non-availability of key officers at the office, several visits had to be made before they were met. Even at that, they were not forth coming with certain information which they refer to as “classified” or” confidential”.
However, the constraint notwithstanding the research was able to carryout an in depth study to a successful completion.
1.7 DEFINITION OF TERMS
In order to avoid the confusion that surrounds words, the following technical terms have been precisely defined as they relate to the context of the research work.
ACCOUNTABILITY
This means holding an individual accountable giving account of ones stewardship.
AUDIT
An audit is an independent examination of an expression of opinion on, the financial, statement of an enterprise by an appointed auditor in pursuance of that appointment and in compliance with any relevant law and relation.
AUDITOR’S REPORT
The written description of an auditor’s findings together with the auditor’s professional opinion regarding the credibility of management claims as contained in the financial statements presented by him.
GOVERNMENT ACCOUNTING
The system of keeping record’s of government financial transactions and of summarizing these data in appropriate reports for management or government agencies.
SUBVENTION
A grant of financial aid or relief by a government or other official sources for a scientific or cultural institution, organization, or program.
AUDITOR
An auditor may be defined as an accountant who has undergone a recognized professional course and is a member of one of the recognized accountancy bodies’ resident in Nigeria and who is carrying out a professional accountancy practice.
PARASTATALS
Commercially – oriented government establishment. This may be called public enterprises or public corporation.