Factors that Contribute to the Effectiveness of Internal Auditing In

Public Sectors in Tanzania.

A Case of Ubungo District Council

MBAPILA GODIFREY, P
NIT/BATF/2O19/962
RESEARCH PROPOSAL

Research proposal to be sumitted as fulfillment of requirement study for Bachelor

Degree in Accounting And Transport Finance
 TABLE OF CONTENT

TABLE OF CONTENT……………………………………………………………………………………………………………………………………………………………………………1

CHAPTER ONE…………………………………………………………………………………………………………………………………………………………………….……………….1

INTRODUCTION………………………………………………………………………………………………………………………………………………………………………..………….1

1.1 General introduction…………………………………………………………………………………………………………………………………………………………………….1

1.2 Background of the study……………………………………………………………………………………………………………………………………….………………………1
1.3 Statement of the problem………………………………………………………………………………………………………………………………………………….…………2
1.4 Objective of the problem…………………………………………………………………………………………………………………………………………………..………….3
1.5 Research question………………………………………………………………………………………………………………………………………….…………………………….3
1.6 Significant of the study………………………………………………………………………………………………………………………………………………………………….3

CHAPTER TWO………………………………………………………………………………………………………………………………………………………….………………….………
4

LITERATURE REVIEW………………………………………………………………………………………………………………………………………………...…..…………………….4

2.1 Introduction……………………………………………………………………………………………………………………………………………………………………...
…………………4

2.2 Theoretical reterature review……………………………………………………………………………………………………………………………………………………..…4

2.3 Empirical reterature review……………………………………………………………………………………………………………………………………………………………8

2.4 Conceptialframework…………………………………………………………….………………………………………………………………………………………………………8

CHAPTER THREE………………………………………………………………………………………………………………………………………………………………………………….9

RESEARCH METHODOLOGY…………………………………………………………………………………………………………………………………………………………………9

3.1 Introduction…………………………………………………………………………………………………………………………………………….…………………………………….9

3.2 Research design……………………………………………………………………………………………………………………………………………………………………………9

3.3 Study area………………………………………………………………………………………………………………………………………………………………………..…………10

3.4 Sampling techniques………………………………………………………………………………………………………………………………………………….……………….11

3.5 data collection……………………………………………………………………………………………………………………………………………………………………………12

3.6 Data analysis………………………………………………………………………………………………………………………………………………………….………………….13

 CHAPTER ONE

INTRODUCTION

1.1 Introduction

This chapter deal with background of the study, statement of the problem and objective of the
study include main objective to specific objective. Also the study will shows research questions
from specific objectives and explain the significance of doing this research to different public
sector.

1.2 Background of the Problem

Internal auditing is most important part in any public sector because it deals with identifying and
evaluating the adequacy and effectiveness of internal controls; risk management controls and
governance processes in organization. The performance depends to the nature, size, objective,
structure, complicities and cultural environment of organization. Internal auditing make
organization to fulfill its operation, strategic, financial, and objective regulatory.

Internal auditing is a governance method of meeting effective internal control systems in any
organization including public and private sector (Eden & Moriah, 1996). The importance of
effective Internal auditing management raised the interest of researchers to study into this matter.
The matters of transparency, accountability and improvement in governing public resources in
developing countries are other parts that effective internal audit function can address in
management of government and corporate resources to unity together in order to achieve the
intended audit function. (Tackie, Marfo-Yiadom and Achina, 2016).

In Tanzania Controller and Audit General reports time to time shows there is misuse of public
resources from member of parliament and community at large. The situation raised some
questions on the effectiveness of the internal auditing of the public organization in the country.
As known that auditing is expensive but reduces information risks to business due to accuracy
but this has not been the case for most of the public sectors in the country. Professional existing
between internal audit and the external auditor bring benefits to parties along the process of
safeguarding the public resources. It is essential internal audit seek input from the external
auditor in developing the internal audit strategy and internal audit work plan so that to strengthen
the effectiveness of the internal audit unit in the public sectors. Due to the misuse of the
resources to public sectors make a great mistrust by society and rise the need to study, to identify
the effectiveness of the internal audit in public sector in Tanzania.

1.3 Statement of the Problem

Further study is needed to study the internal control in organization due to lack of effectiveness.
Providing money from the government on time and weak corporate management become
problem. Many problems encountered by government on its effectiveness perfuming risk
management and money are not releasing on time. Insufficient evaluation of internal audit due to
few staff workers, lack of enough resources, training, ability to make plan, and mis maintenance
of paper function file location of many resources to fulfill the audit staff.

Various research especial on internal audit have been conducted over the year among of those
study. In Tanzania local government authority make accountability on use of public resources to
measure how council offers services to community. The local government through internal
auditing has special unity which provide effective defense against fraud misappropriation of
asset and misreporting financial information (Dordevicand dukic2015). Internal auditing is
established as important part of management governance mechanisms of organization to all
sectors (Ditterhofer and Goodwin2001). Kibet (2008) claimed that the internal audit deal with
function in corporate governance. Ahmad (2013) argue that internal audit process makes
efficient management of public fund. The study also fails to shows factors lead effectiveness of
internal auditing. Enofe et al (2013) claimed internal audit plays important function of in
ensuring effective management in public sectors but the study fail to link with the factors lead
effectiveness of internal audit. Otieno (2010) shows the impact to poor performing internal
auditors in public sectors due to weak internal audit process and procedure, make failure to
detect fraud and major loss. Regulation 33 of the public finance level management defined
internal audit as a control measure used to evaluate reports upon the effective and efficient use of
resource

Due explanation of different study above on the internal audit, less has been done to investigate
of the effectiveness of the internal audit in public sectors in Tanzania; this is what the researcher
tries to find out.
1.4 Objective of the Study:

The objective of the study includes general and specific objectives as follow.

1.4.1 Main Objectives.

The main objectives of this study were to evaluate factors which contribute to the effectiveness
of internal audit in public sectors.

1.4.2 Specific Objectives.

The specific objectives of the study as follow

1.To examine the independence of internal audit in public sectors.

2.To examine the audit competence in public sectors.

3.To examine the management support and value to the internal audit in public sectors.

1.5 Research question

Research Questions as follow

1. Do internal audit in public sectors is independent?

2.How competent is the internal audit in public sectors?

3.Do the management support and value to the internal audit in public sectors?

1.5 Significance of the Study.

This study will significant the public sectors, auditors, management and policy makers because
will gives greater assurance to accounting officers, management and the Audit firm the analyses
The study will also make the quality of management’s knowing of the function of internal audit.
 CHAPTER TWO

LITERATURE REVIEW

2.1 Introduction

Meaning of Internal Audit: The examination, monitoring and analysis of activities related to a
company’s operation, including its business structure, employee behavior and information
systems. An internal Audit is designed to review what a company is doing in order to identify the
potential threats to the organization’s health and profitability, and to make suggestions for
mitigating the risk associated with those threats in order to minimize costs. This chapter will
discuss the reviewed some related literatures, both theoretical and empirical concerning the
effectiveness of internal audit in public sectors.

2.2 Theoretical Literature Review

Auditing is originally a financial management concerned with assessing practice for the internal
financial status of the organization and the evaluations of the financial performance of the
organization, Mihret and Yismaw (2007). They further argued that, after the revolution and
beginning the 20th century the reporting practice of auditors, which involved submitting reports
of their duties and findings, was standardized as the Independent Auditor's Report. Since then,
the auditing practices have evolved over theyears and develop into the broader aspects to become
into a field of fraud detection and financial accountability.

It also provides feedback on organization financial information and reporting. It also becomes a
tool for an analysis of any fraudulent activity, potential and actual within the organization. In
Tanzania, Internal audit profession has become into the main business after the formation of the
Internal Auditor General (IAG). There are a number of researches had been done in the area of
the internal audit in private and public sector. The fact that effective internal audit can contribute
to the significant impact to the quality of management has raised the interest for researchers to
explore into this matter. Effectiveness of internal audit will contribute to the effectiveness of the
client and the organization as a whole Dittenhofer (2001). According to Okafor &Ibadin (2009)
they argue that the internal audit exercises a critical role in improving corporate governance in
organizations. In terms of accountability and management relationship. Furthermore, Saren and
De Beelde (2006) found that Internal Auditors are playing a pioneering role in the creation of a
higher level of risk and control awareness in managing risk in the management system. Internal
audit is a ‘comfort provider’ to the Audit Committee especially in its assurance role and its
involvement in improving internal control. Furthermore, Australian research study on Financial
Reporting and Auditing Bridging the Expectation Gap suggested that apart from management,
internal auditing is the centre of integrated activities within organization, and it is the best suited
for the new roles as agent of change.

2.3 Empirical Literature Review

2.3.1 Auditors Competency

Competency can be related to the ability of an individual to perform a job or task properly base
on the educational level, professional experience and the effort of the staffs for continuing
professional development. Auditors’ competency determines the effective auditing in the
organization. It contributes to the ability of the auditors to perform the systematic and discipline
audit approach to improve the effectiveness of internal audit. Mihret&Yismaw (2007) concluded
in their study that internal audit office constantly faces the problem of low technical staff
proficiency and high staff turnover, which would limit it capacity to provide effective service to
management. Whereby Unegbu et al (2011), found in their study that, internal audit can
effectively carry out their duty in the public sector if there are enough internal audit personnel
with required competencies. Competency of auditors determines the quality of the audit work
performed in an organization. Competency is measured in terms of academic level, experience,
skill and the effort of the staffs for continuing professional development. Competency
determines the efficiency of the auditor in setting a systematic and disciplined approach to
evaluate and improve the effectiveness of the organization’s activities and financial management
as well as governance processes.

2.3.2 Independence of Internal Auditors

The other factor that may contribute to the effective government audit activities is the need of
organizational independence which allow the audit activity to conduct work without interference
by any party for the audit task. The independence of internal auditing is with respect to both
assurance services and consulting for the organization. Independence is closely related where the
freedom from conditions that may threaten objectivity and no significant quality compromises
are made during rendering the audit service, IIA (1999). In fact, the audit activity should have
sufficient independence from those it is required to audit so that it can both conduct its work
without interference and be seen to be able to do so IIA (2001). This is very crucial element in
conducting audit because the auditors can access to any document relating to the audit work
without favor and fear. This will make the auditors provide the objective report and reliable
professional judgment on the auditing work to achieve the mandate given to them with integrity.
Independence of auditors would not be considered to be impaired if the auditors do not appear to
act in a capacity equivalent to a member of client management or as an employee Caplan (1999).
In certain extent there is a confusion of the role of IA as internal auditors are part of the
management team and at the same time to independently evaluate management’s effectiveness
and efficiency. However, in more recent years, there has been heightened interest in issues
associated with the independence and objectivity of internal audit. This could affect the
effectiveness of internal auditing as even though internal auditor are charged with upholding the
best interests of their employer, they may be reluctant to counter management, regardless of
consequences (study mode.com, 03.2011).

2.3.3. Management Support to the Roles of Internal Auditor

The support and commitment of management also have the certain impact to make sure internal
audit is functioning effectively. The success of internal audit function will depend on the strength
of management’s support for the auditing process. They have to accept the fact that the internal
audit process is just as critical and important activity as any other process within the
organization. Some study found that without management approval, support, and encouragement,
the internal audit process is likely to face failure and worse – time and money wasted. Ali et al
(2007) on their study on internal audit in the state and local government of Malaysia found that,
the effectiveness of the internal audit function in State and Local Government appears to be
directly related to the management style of organization heads and their links, relationships and
position in the social contract. Some internal audit function appears to be doing well; the
determining factors appear to be the attitude and leadership qualities of the head of an
organization and audit reports that are ignored by everyone, Ali et al (2007). Mihret&Yismaw
(2007) on their study also found that internal audit recommendations are not afforded enough
attention. Though the audit reports are generally well prepared, they do not separately highlight
the status of past audit results and they could be presented in a more consistent way. Besides, the
audit evidence is attached to the reports. This provides a bulky appearance of the audit reports
and reduces readability. The distribution of the audit reports is limited where copies are not
provided to other senior management officers 128 to which related to audit report. Their study
also concluded that management supports to internal audit as a determinant of internal audit
effectiveness.

2.4 Conceptual Framework

Independent variables

Competence

•Education qualification

•training Dependent variables

Independence of internal auditors

Effectiveness of internal auditing in
 Submitting report to auditing public sectors in Tanzania
committee
 Submitting report on time
Relationship of internal auditor

Management support

 Management consideration
of internal auditor’s report
in their decision
 CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Introduction

This chapter presents the procedures that were employed in the study. The chapter therefore,
presents the methodology that was deployed in the study by specifying the study area, research
design, study population, sampling size and sampling Techniques, data collection methods,
reliability and validity measurement methods and also data analysis.

3.2 Research Design

The study will employ survey design. The survey study design is selected based on the
researchable reasons that is; it focuses more on an identical areas or organization. Therefore, it is
important to note that survey study design can permit the use of variety of data collection
methods to be deployed during the whole conduct of the study. The focus is that, this type of
research design permitted the researcher to explore and analyze information over the life of a
single unit, which is Ubungo District Council (Birkinshaw, 2004; and Welch, 1998). The study
will employ mixed approach of both qualitative and quantitative research approaches.

3.3 Study Area

The term research area, Refer to interdisciplinary fields of research pertaining to a particular
geographical, natural and cultural region to where the study is limited( babbie, 2001). The study
will be conducted at Ubungo District Councl

3.4 Study population

Population can be defined as a group of individual, iterms or objects from which samples are
taken from mwesurement (kombo,2005). This defination related directly to the purpose of the
study.The population of the study will include staff of ubungo district councl
3.5 Sampling Techniques

According to Stasch et al., (1985) the procedure of selecting a sample for a study is an important
step in any research project since it is rarely practical, efficient, and costly, to study the whole
population. The researcher therefore will employ purposive and convenience sampling
techniques.

i) Purposive Sampling Technique

The researcher will use purposive sampling in selecting the key respondents, namely auditors
who are the custodians of the internal control system, accountants, Human resources officers,
were involved on the study since the internal control touches directly their area of responsibility.

ii) Convenience Sampling Technique

The researcher will convenience sampling technique allows clustering the sample first before
selecting them randomly to the respondent.

3.5 Data Collection Methods

These are the ways that will use to extract information. The methods will employ documentary
and questionnaires. The researcher considered these methods appropriately to enable gathering
accurate and enough information. Primary data was collected through questionnaire and
interview. Secondary data was gathered from direct view.

3.5.1 Questionnaire Method

This study used questionnaires as one of the methods of data collection. The questionnaires were
administered to the Ubundo district councl staffs (internal auditors, accountants. Human
resources officer, DED). The method of administering questionnaires will help this study to have
the intended numbers of the respondents. Also administering questionnaires reduced some
ambiguities of understanding some of the word(s) on the questionnaires where by clarifications
were provided.

3.6 Data Analysis Methods

Data to be collected was divided into two categories, qualitative data and quantitative data. To
analyze these data the study will use tabular way of analyzing data, percentage and descriptive
ways.

3.6.1 Qualitative Data Analysis

These data will be collected questionnaires that required respondents to explain in answer for
their own words. The data will reanalyzed a descriptive way by refining the common responses.
The qualitative data that shall be obtained were used to enhance the discussion of the findings in
quantitative data.

3.6.2 Quantitative Data Analysis

Data will collect, coded and analyses. The Descriptive analysis will conducted to enable the
researcher to summarize the collect data and organize in a way that the researcher will able to
answer the research questions. Descriptive analysis allows data to be quantified and analyses.
The use of different tools like tables, and percentages was considered, also in some areas further
analysis was conducted depending on the nature of the data.