ADMAS UNIVERSITY BUSINESS FACULTY DEPARTMENT

OF ACCOUNTING AND FINANCE

EFFECTIVENESS OF INTERNAL AUDIT IN ETHIOPIA

ELECTRIC POWER CORPORATION
HEAD OFFICE

BY: SAMRAWIT YENENEH

DAGMAWIT TEKALIGN
MESKEREM MAMO
KALKIDAN SOLOMON
TIGIST LETA

ADVISOR: WORKAGEGNEW

OCTOBER 2023
ADDIS ABABA

Acknowledgement........................................................................................................................................I
ABSTRACT....................................................................................................................................................II
CHAPTER ONE........................................................................................................................................2
INTRODUCTION......................................................................................................................................2
1.1Background of the study.................................................................................................................2
1.2 Organizational profile.....................................................................................................................3
1.3 Statement of the problem..............................................................................................................4
1.4Research question..........................................................................................................................5
1.5 Objective of the study....................................................................................................................6
1.5.1 general objective.....................................................................................................................6
1.5.2 Specific objective....................................................................................................................6
1.6 Significance of the study...............................................................................................................7
1.7 Scope of the Study.........................................................................................................................7
1.8 limitation of the study.....................................................................................................................7
CHAPTER TWO.......................................................................................................................................8
LITERATURE REVIEW...........................................................................................................................8
2.1THEORETICAL LITRATURE.........................................................................................................8
2.1.1Definition of Audit.........................................................................................................................8
2.1.2 Definition of internal audit..........................................................................................................8
2.1.3 Evolution/historical development of internal audit..................................................................9
2.1.4 Types of audit............................................................................................................................10
2.1.5Characteristics Of Internal Audit..............................................................................................10
2.1.6 Objectives Of Internal Audit.....................................................................................................11
2.1.7 internal auditing standards.......................................................................................................11
2.1.7.1 Attribute standards.............................................................................................................11
2.1.7.2 PERFORMANCE STANDARD............................................................................................14
A. Resource management..................................................................................................................14
B. Nature of work.................................................................................................................................14
C. Risk management.......................................................................................................................14
E. Engagement scope.........................................................................................................................16
F. Performing the engagement..........................................................................................................17
G. Identifying information................................................................................................................17
H. Analysis and evaluation.............................................................................................................17
I. Engagement supervision...............................................................................................................17
J. Communicating results...................................................................................................................17
2.1.7.3 Implementation standards................................................................................................18
2.2 Empirical Literature......................................................................................................................18
2.2.1 Management Support...............................................................................................................18
2.2.2 Management’s Perception Of Internal Audit’s Value............................................................19
2.2.3 Organizational Independence.................................................................................................19
2.2.4 adequate and competent internal audit staff.........................................................................20
CHAPTER THREE.................................................................................................................................21
Research Methodology..........................................................................................................................21
3.1Introduction......................................................................................................................................21
3.2 Source of Data.................................................................................................................................21
3.3. Research approach.........................................................................................................................21
3.4 Method of Data Collection...............................................................................................................21
3.5 Sample Size......................................................................................................................................21
3.6 Sampling Technique.........................................................................................................................22
3.7 Data Analysis...................................................................................................................................22
ABSTRACT
Internal audit has an important role in helping a firm to achieve its objective when it is
implemented, operated and managed effectively. Organization which effectively
implemented, operated and managed internal auditing were better able to identify their
business risk and system inefficiencies for the sake of taking corrective action and
improvement in the process.The objective of the study is to identify the internal audit
performance in electric power corporation head office (EEPCO). The study used
purposive sampling method and covered the head office internal auditors of EEPCO.
The study found out that internal audit in EEPCO presently are reporting the audit
findings or opinion to the general manager even if the organization structure and
performance standard suggested that it should be reported to the bord to maintain
independency. As a result, reporting to the general manager make the auditors
influenced by the management. Based on our findings we recommend that to give more
attention to the internal audit performance and to evaluate the performance of auditors
to detect misuse of asset and fraud.
Acknowledgement

First and foremost, thanks to the almighty GOD without his grace this opportunity
could have not been conceived. next we would like to give special thanks to our
advisor MRs WORKAGEGNEW FOR patience and conservative comments. we
are also grateful for the unconditional support and live from our family. may
thanks also forwarded to EEPCO and employees for your support. we are grateful
to all friends and advice, support and encouragement during our study.

CHAPTER ONE
 INTRODUCTION

1.1Background of the study

Ever larger and more complex system require greater competencies, thus internal audit has to
become ever more professional.[Cecilia nordin van gansberghe, 2018] In addition, the law and
customs with in varies countries differ from one another. Their differences may affect the
practice of internal auditing in each environment.
Internal auditing is an independent appraisal function established within an organization to
examine and evaluate its activities as a service to the organization. the objective of internal audit
is to assist members of the organization to discharge their responsibilities effectively .
The implication of their performance therefore, will be governed by the environment in which
the internal audit division n carry out its assigned responsibilities, but compliance with the
standards is essential before the responsibilities of internal auditor can be met[jonsun 2018].
The statement of purpose, authority, and responsibility for the internal audit units approved by
management and accepted by the board internal auditing. The statement should make clear the
performance of the internal audit unit; specifically the unrestricted scope its work. The internal
audit department is an integral part of the organization and function’s under the policies and
procedures established by management and the board[ander 2017]
One of the tasks of internal audit may be the evaluation of internal control and the determination
of whether they are functioning effectively. Thus, an internal audit function can provide
assurance to management that the board objectives of internal controls are being achieved.
Internal audit encompasses the examination and assessment of the adequacy and effectiveness of
the organizations system of internal control and the quality of performance in carrying out
assigned responsibilities.
The internal audit performance had an increasing importance as companies expand accounting
and other systems become more complex. An effective internal auditing function can serve as a
high level organizational control, as well as a constructive and protective link between policy
making and operating levels of an organization [elza 2018]

1.2 Organizational profile

Electric power introduced in Ethiopia in the late 19th c during the region of emperor menelike
the second. The first generator was installed at the place in 1989 EC. In 1912 EC the emperor lead
the construction of hydro electric power on river akaki aimed at supplying power to small
factories established in Addis Ababa.

However, the effort of the government to extend the power supply to the public was hinder by
the Italian invasion, after the defeat Italy an organization called energy property administration
was established and took over the work of generating and distribution of power to the public. In
the year 1948 the organization that had been given the power administration job was an
organization called showa electric power. The new organization although with limited capacity
had managed to increase the power supply not only in showa but also administrative region and
in light of its function, its name changed to “Ethiopian Electric Light and Power Authority”

At its establishment the capital of authorities was ten million birr divided into one thousand
shares of birr to each. At that time the annual electricity production capacity of the authority was
35 GWH while the numbers of customers were 12,500.

In order to, accommodate the new change in the environment the Ethiopian electric light and
power authority was transformed to the Ethiopian electric power corporation in the year 1997
E.C by recognizing its function on bases of principle of commercialization and centralization.
The purpose of the organization is to engage in the business of producing, transmitting,
distributing and solving electric energy and to carry on other related activities that would enable
achieve its purpose. It was determined by the establishment regulation branch office are opened
elsewhere as required.

1.3 Statement of the problem

Internal audit is an independent management function, involving continuous and critical

appraisal of the function of the entity to suggest certain improvement and value additions to
strengthen the governance mechanism of the entity including strategic risk management and
internal control system, ensure transparency on reporting(mandawewala, 2006)

This research show that assessing the performance of internal audit is very important in that it
benefits organizations in several aspects such as, ensuring optimum resource utilization,
identification of areas for system improvement, understanding and assessment of risks, ensuring
timely identifications of liability accrued, contingent and potential ensuring adequacy of
management information system.

However, despite all its benefits some organization don’t pay enough attention to the internal
audit activities, although failing to asses internal audit activities will result in fraud and misuse of
resources. Thus it is difficult for the organization to achieve its objective without sound internal
audit performance. Hence, organizations should regularly evaluate their internal audit practice
but it is believed that the organization under consideration doesn’t asses its internal audit
activities. Therefore, it is imperative that a research should be undertaken.

1.4Research question

How effective is the performance standard used by the organization?

How effective is the attribute standard used by the organization?

What problem faced by the auditors while implementing internal audit activity?

1.5 Objective of the study

1.5.1 general objective

The general objective of the study is to examine the internal audit performance in EEPCO.

1.5.2 Specific objective

 To investigate the performance of internal audit in relation to internal audit standards.

 To assess the effectiveness of attribute standards used by the organization.
 To find out factors which as influence in internal audit practice.

1.6 Significance of the study

The major benefit of the study is the following

 Helps the corporation to build up on their strength and to take measures on their
weakness.
 It would help the organization auditors to know their performance.
 I would enable the customer of the corporation to be aware of the strength in internal
audit practice and builds public trust.
 The researchers would learn from the practice of carrying out a research.
 This research may also be used as reference for other researches in the area.

1.7 Scope of the Study

The scope of the study will be limited to the evaluation of internal audit performance of EEPCO
head office located in Addis.

The research will be conduct using performance standard restricted managing the internal audit
activity, engagement planning and communicating result and attribute standard limited to
purpose, authority and responsibility, independence, proficiencies and due care and quality
assurance.

1.8 limitation of the study

The researcher’s had the desire to conduct the research throughout EEPCO to increase the
reliability and validity the research. However, due to time and financial constraints it was only
manageable to carry out the research work at head quarter. Even though the research has some
limitations current situation in our country to distribute the questioner and collect the necessary
data. Some respondent were not resent that elongate data collection period more than expected
and finance constraints it was manageable to carry the work at hade quarter.
 CHAPTER TWO

LITERATURE REVIEW

2.1THEORETICAL LITRATURE

2.1.1Definition of Audit

Auditing is a systematic process of objectively obtaining and evaluating evidence regarding

assertions about economic action and event to ascertain the degree of correspondence between
those assertion and established criteria and communicating the result in interested users.

Audit is a systematic and independent examination of book account statutory records document
and vouchers of an organization to ascertain how for the financial statements as well a non
financial disclosures present a true and fair view of the concern (Michael, 1999)

2.1.2 Definition of internal audit

Internal audit is an independent, objective assurance and consulting activity. It helps an

organization accomplish its objective by bringing a systematic, disciplined approach to evaluate
and improve the effectiveness of risk management, control and governance process.( IIA, 2019)

Internal audit indicates that auditing activities are carried on within organizations. Today
employees of the organization may conduct internal audit activities or they may be out sourced
to other professionals outside the organization who serve the entity. Independent and object
makes it clear that the auditor’s judgment has value when it is free of bias. (pony, 2018)

Help an organizational accomplish its objectives indicates that internal auditing exists to aid or
benefit the entire organization and is guided by the organization’s goals and objectives. Some
specific ways in which internal auditors add value include a focus on the improvement of the
organization’s operations and the effectiveness of risk management, control, and governance
process.(plckett, 2019)
2.1.3 Evolution/historical development of internal audit

Internal audit began as a one person clerical function that consisted primarily of performing
independent verification of bills before payment over the years. Internal auditing has involved
into a highly professional activity that extends to the appraisal of the efficiency and effectiveness
of all phases of a company’s operation, both financial and non financial. these changes have led
to the director/manager of internal audit function, and reporting responsibility directly to the
board of director/manager of internal audit function, and reporting responsibility directly to the
board of directors or its audit committee (.IIA,2001)

The importance of internal auditing to a company has been accompanied by increased

professional recognition for the internal auditors. The internal auditor the IIA was formed in
1941. The criteria for internal audit experience include audit in public accounting (Raymond,
Johnson & kell, 2001).

It is normal for any activity to come in to existence as a result of emerging needs. Historical
evidences reveal that ancient kings and rich novel men were appointed some of their trusted
official to exercise checks on the people whom they put in charge of conflict resolution and
safeguarding collection of revenue from their estates and to report to them in the events of any
irregularities.

This practice can be said to have the nature of internal audit in the sense that those who were
appointed to check on the regularity of revenue collection and the safeguarding of the proceeds
were people from the same organization and in the service of the institution as people in charge
of the collection and recording functions. inspire of its earlier existence, internal audit did not
emerge as recognized field of professional practice until the 1940s when two factors influenced
its development as a distinguished profession. (IIA, 2001)

The other factor that contributed to the evolution of internal audit as a discipline is the rapid
development and sophistication of business, government service and strengthened demand on
management & board to ensure that assets are properly safeguarded. Moreover, the demand for
consistence of operations of business with established objectives, program, operation goals and
organizational plans (pony,2004).
2.1.4 Types of audit

Audit may be classified in various ways. These audit types are commonly referred to as;

 Operational audit
 financial audit
 compliance audit
 fraud audits
 information system audit

First operational audit is examines the use of unit resource or evaluate whether those resources
are used in the most effective and efficient. second financial audit is accounting and reporting of
financial transactions including commitments authorization and receipts and distribution of
funds. The purpose of this type of audit is to verify that there are sufficient control over the
acquisition and use of resources. Third compliance audit is an adherence to law, regulation,
policies and procedures. example include federal and state laws recommendations typically can
for improvement in process and controls intend to ensure compliance with regulations. fourth
fraud audits is where fraudulent activity is present to suspected, specialized audit activity may be
performed to assist management in detecting or conforming the presence and extent of the fraud
and in providing necessary evidence of legal purpose. The last information system audit is
internal control environment of automated information processing system and how people use
those system is audits typically evaluate system input, output and processing control ; backup
and recovery plan, system security, and computer facility review is auditing project can focus on
existing system, as well as systems in the development stage.(audit manual,2005)

2.1.5Characteristics Of Internal Audit

 Have direct influence on the scope of external auditor’s activity.

 Review of company activities is continuous.
 Auditors are company employee.
 Primary concern is in serving the needs of the organization.
  Direct concerned with the detection and prevention of fraud.
 Audit all types of activities not limited to financial matter.

2.1.6 Objectives Of Internal Audit

 To strength governance.
 To enhance internal control system.
 To assist strategic risk management.
 To assure transparency in reporting both for internal purpose and statutory purposes.

2.1.7 internal auditing standards

The standard for the professional practice of internal auditing are issued by the institute of
internal auditors (IIA). The IIA also issued statement of internal auditing standards (SIAS) to
provide authorities interpretation of the standards.

The IIA standard are classified in three major categories

 Attribute standards
 Performance standards
 Implementation standards

2.1.7.1 Attribute standards

Attribute standards address the characteristics of internal auditors (independence, objectivity)

and organizations performing internal audit activities (IIA, 2001). Attribute standards include;

 Purpose, authority and responsibility

 Independence and objectivity
 Organizational independence
 Individual objectivity
 Impairments to independence or objectivity
 Proficiency and due professional care
 Proficiency
 Due professional care
  Continuing professional development
 Quality assurance and improvement program
 Quality program assessments

A Purpose, authority, responsibility of internal audit activity should be formally defined in a

charter, consistent with the standards, and approved by the board

B Independence and objectivity is the internal audit activity should be objective in performing
their work.

C Organizational independence is the chief audit executive should report to a level with in the
organization that allows the internal audit activity to fulfill its responsibility. The internal audit
activity should be free from interference in determining the scope of internal auditing,
performing work, and communicating results

D individual objectivity is internal auditors should have an impartial, unbiased attitude and
avoid conflicts of interest.

E impairments to independence or objectivity is impaired in fact or appearance, the details of

the impairment should be disclosed to appropriate parties. The nature of disclosure will depend
upon the impairment.

F Proficiency and due professional care Engagements should be performed with proficiency
and due professional care

G Proficiency Internal auditors should possess the knowledge, skills, and other competencies
needed to perform their individual responsibilities. The internal audit activity collectively should
possess or obtain the knowledge, skills, and other competencies needed to perform its
responsibilities.

The internal auditor should have sufficient knowledge to identify the indicators or fraud but is
not expected to have the expertise of a person whose primary responsibility is detecting and
investigating fraud.
H Due professional care Internal auditors should apply the care and skill expected of a
reasonably prudent and competent internal auditor. Due professional care does not imply
infalliability.

The internal auditor should exercise due professional care by considering the;

 Extent of work needed to achieve the engagement’s objectives.

 Relative complexity, materiality, or significance of matters to which assurance procedures
are applied.
 Adequacy and effectiveness of risk management, control, and governance processes.
 Probability of significant errors, irregularities, or noncompliance.
 Cost of assurance in relation to potential benefits.

I Continuing professional development Internal auditors should enhance their knowledge,

skills, and other competencies through continuing professional development.

J Quality assurance and improvement program The chief audit executive should develop and
maintain a quality assurance and improvement program that covers all aspects of the internal
audit activity and continuously monitors its effectiveness. This program includes periodic
internal and external quality assessments and ongoing internal monitoring. Each part of the
program should designed to help the internal auditing activity add value and improve the
organization’s operations and to provide assurance that the internal audit activity is in conformity
with the standards and the code of ethics.

K Quality program assessments The internal audit activity should adopt a process to monitor
and assess the overall effectiveness of the quality program. The process should include both
internal and external assessments.

Internal assessments should include;

 on going reviews of the performance of the internal audit activity; and

 periodic reviews performed through self-assessments or by other persons within the
organization, with knowledge of internal audit practices and the standards.
External assessments

Such as quality assurance reviews, should be conducted at least once every five years by a
qualified, independent reviewer or review team from out side the organization. (PICKETT,2005)

2.1.7.2 PERFORMANCE STANDARD

A Managing the internal audit activity

The chief audit executive should effectively manage the internal audit activity to ensure it adds
value to the organization.

The internal audit activity’s plan of engagement should on a risk assessment, undertaken at least
annually. The input of senior management and the board should be considered in this process.

The chief audit executive should consider accepting proposed consulting engagement based on
the engagement’s potential to improve management of risk, add value, and improve the
organization’s operational. Those engagements that have been accepted should be included in the
plan

B Resource management

The chief audit executive should ensure that internal audit resources are appropriate, sufficient,
and effectively deployed to achieve the approved plan

C Nature of work

The internal audit activity should evaluate and contribute to the improvement of risk management control,
and governance processes using a systematic and disciplined approach.

D risk management

the internal audit activity should assist the organization by identifying and evaluating significant
exposures to risk and contributing to the improvement of risk management and control systems.

The internal audit activity should monitor and evaluate the effectiveness of the organization’s
risk management system.
The internal audit activity should evaluate risk exposures relating to the organization’s
governance, operations, and information systems regarding the

 Reliability and integrity of financial and operational information.

 Effectiveness and efficiency of operations.
 Safeguarding of assets.
 Compliance with laws. Regulations, and contracts.

Internal auditors should review operations and programs to assertion the extent to which
results are consistent with established goals and objectives to determine whether operations
and programs are being implemented or performed as intended.

Adequate criteria are needed to evaluate controls. Internal auditors should ascertain the
extent to which management has established adequate criteria to determine whether
objectives and goals have been accomplished .if adequate, internal auditors should use such
criteria in their evaluation. If inadequate, internal auditors should work with management to
develop appropriate evaluation criteria.

During consulting engagements, internal auditors should address controls consistent with the
engagement’s objectives and be alert to the existence of any significant control weaknesses.

Internal auditors should incorporate knowledge of controls gained from consulting

engagements into the process of identifying and evaluating significant risk exposures of the
organization.

The internal audit activity should evaluate the design, implementation, and effectiveness of
the organization’s ethics-related objectives, programs and activities.

Consulting engagements objectives should be consistent with the overall values and goals of
the organization.
E Engagement planning

Internal auditors should develop and record a plan for each engagement, including the scope,
objectives, timing and resource allocation.

When planning an engagement for parties outside the organization, internal auditors should
establish a written understanding with them about objective, scope, respective responsibilities
and other expectations, including restrictions on distribution of the results of the engagement
and access to engagement records.

Internal auditors should establish an understanding with consulting engagement clients about
objective, scope, respective responsibilities, and other client expectations. For significant.
Engagements, this understanding should be documented.

Consulting engagement objectives should address risks, controls, and governance processes
to the extent agreed upon with the client.

F Engagement scope

The established scope should be sufficient to satisfy the objectives of the engagement.

The scope of the engagement should include consideration of relevant systems, records,
personnel, and physical properties, including those under the control of third parties.

If significant consulting opportunity arise during an assurance engagement, specific written

understanding as to the objective, scope, respective responsibilities and other expectations
should be reached and the results of the consulting engagement communicated in accordance
with consulting standards.

In performing consulting engagements, internal auditors should ensure that the scope of the
engagement is sufficient to address the agreed-upon objectives. If internal auditors develop
reservations about the scope during the engagement, these reservations should be discussed
with the client to determine whether to continue with the engagement.

G Performing the engagement

 Internal auditors should identify, analyze, evaluate, and record sufficient information to
achieve the engagement’s objectives.

H Identifying information

Internal auditors should identify sufficient, reliable, relevant, and useful information to
achieve the engagement’s objectives.

I Analysis and evaluation

Internal auditors should base conclusions and engagement results on appropriate analyses
and evaluation.

J Engagement supervision

Engagement should base be properly supervised to ensure objectives are achieved, quality is
assured, and staff is develop.

K Communicating results

Internal auditors should communicate the engagement results.

L Criteria for communicating

Communications should include the engagement’s objectives and scope as well as applicable
conclusions, recommendations, and action plans.

Final communication of engagement result should, where appropriate, contain the internal
auditor’s overall opinion and conclusion.

Internal auditors are encouraged to acknowledge satisfactory performance in engagement

communications

limitation on distribution and use of results (plckett, 2005)

2.1.7.3 Implementation standards

Implementation standards; on the other hand specific application of attribute and performance
standard to specific types of engagement (robrtson and lawers, 2002)

2.2 Empirical Literature

2.2.1 Management Support

Internal audit have a close relationship with organization’s management in their day to day
activities. They need good support and perception from their management to more effective and
to achieve the audit objectives. Management support is expressed in item of supporting the audit
process by fulfilling the necessary resources, finance, transport if required, providing training,
introducing auditors with new technology and procedures, budgeting funds for certification and
other facilitates the internal auditing works (mihret and yismaw, 2007).

Management support has a for reaching consequence on internal audit effectiveness in

organization.

The management support almost crucial to the operation and internal audit; because all other
determinants of internal audit effectiveness drive from the support of top management, given
that hiring proficient internal audit staff, developing carrer channels for internal audit staff, and
providing organizational independence for internal audit work are the results of decision made
by top management (cohen and sayag, 2010). This means it is the interest of management to
maintain strong internal audit department (adams,1994; mihret and yismaw,2007)

In addition implementation of audit recommendations is highly relevant to internal audit

effectiveness ( sarens and beelde, 2006; van gansberghe, 2005) which is the component of
management of an organization is viewed as the customer receiving internal audit service. As a
result, management’s commitment to use audit recommendations and its support in
strengthening internal audit is vital to internal audit effectiveness.
2.2.2 Management’s Perception Of Internal Audit’s Value

Perception is the process of attaining awareness or understanding of sensory information or it is

the mental image intuitive recognition of experience when aware of the elements of the
environment ( wood and III,2002 ). To function effectively, internal auditors and the customers
of audit services should possess a similar understanding of what makes internal auditing a value
added activity. The failure to reach this understanding could resulting. The perception that
internal audit is simply an obstacle to achieving production objectives this can result in under
utilized audit services and ignored audit recommendations (flesher and zanzig, 2000) which
adversely influence the effectiveness of internal audit (arena and azzone, 2009).

When employees at all levels perceive that the top management assigns importance to the
function of internal audit, they will cooperate and support this processes (cohen and sayag, 2010
). This implies that internal audit staffs are more motivated and encouraged to perform audit
activities given good management’s awareness of internal audit values. ( sarens and beelde,
2006 ) used a case study approach of five Belgians firms to explore the expectations and
perception of both senior management and internal audit operates primarily in a management
support role, there is a lack of perceived objectivity and the relationship the audit committee is
week. However, senior management’s expectations significantly influence internal audit and
that the perception of senior management is crtical to the acceptance and appreciation, to
promote value added and to the maturity of internal audit function with the organization.

2.2.3 Organizational Independence

Independence has no single meaning and interpretation across the people : hence the concept is
subject to ambiguity and uncertainty (wines, 2012).however ,for the purpose of the case study
independent refers to the concept of being free from any management influence while internal
auditors perform audit activities and issue audit report (ahmad and
taylor,2009;belay,2007;mofed.2004). independence is fundamental to the reliability of auditor’s
reports ,those reports would not be credible in them ,if auditors were not independent both in fact
and appearance. the assurance service provided by auditors derive their value and credibility
from the fundamental assumption of independence of mind and independence in appearance
(wines,2012; Stewart and Subramani an ,2010 ).while the internal audit typically the whole
management process ,to maintain objectively to increase the reliability of information to be free
from un acceptable risk of material bias ,and to issue reasonable and creditable audit opinion ,it
is required to be independent (IIA,2001 ).however ,due to an often strong direct or indirect
relationship b/n IA and the chief executive officer (CEO) and/or chief finance officer (CFO).it is
reasonable to expect the senior management is in opposition to exert a significant influence over
IA (sirens and beelde,2006: van peursem,2005).auditors should be sufficiently independent from
those they are required to audit in order to conduct their work without interference .coupled with
objectivity ,organizational independence contributes to the accuracy of the auditors work and
gives employers confidence that they can rely on the results and the reports (Cohen and
saysg,2010).

2.2.4 adequate and competent internal audit staff

Adequate staffingessential for a system to its full capability.Weakness in staffing can lead to
miss management, error and abuse, which can negate the effect of other controls
(MOFED,2004).the size of IA staff and the competency of internal audit are the critical
characteristics of quality that can’t be separated. this means at the absence of one dimension the
other cannot contribute to the quality of internal audit. Appropriate staffing of an internal audit
department good management of the staff are keys to the effective operation to an internal audit
an audits requires a professional staff that collectively has the necessary education, training.
experience and professional qualification to conduct the full range of audit required by its
mandate (AI-TWAIGRYETAL,2004) auditors must comply with minimum continuing education
requirement and professional standards published by their relevant professional organizations
 CHAPTER THREE

Research Methodology

3.1Introduction

This refers to the variable over which the data for the study will collect is the method that will be
use in the data collection analysis and inter relations the study will use descriptive research
design in order to achieve the research objective the study will be examining situation as it is.

3.2 Source of Data

The data required for the study Will be obtained from primary and secondary source gathered
through question.

3.3 research approach

We use both qualitative and quantitative research approach. the data we have is concerned thus
approaches.

3.4 Method of Data Collection

the research will use primary and secondary data collection. Primary data using observation
method, interview, questioner. Secondary data also collected from different and already existed
materials like document review, by referring preliminary studies on which was conducted related
issue etc.

3.4 Sample Size

According to human resources manager there are about 35 employees in finance department.
sample size is determination developed by (carvalho,2010) indicate that for a range population
between 30 to 75, low level sample size is 5, medium level sample size is 13 and high level
sample size is up to 20 based on this theory a medium level 15 samples were used therefore
sample size selection for the study under consideration is 15 employees .For the second target
group of respondents simple random sampling technique is used and sample is drawn from
auditors.

3.5 Sampling Technique

Among sampling technique simple random sampling will be used. Simple random sampling will
selected because it gives equal chance for the members of the population under study.

3.6 Data Analysis

The data is gathered through primary and secondary method and analyzed by using quantitative
data forms by converting in to a percentage ratio and tables in addition this the researcher
interprets the result in a statement out forms. Finally the result will be communicate.

TIME BUDGET

Activity Month

1 Research topic selection Apr

2 Preparation of paper proposal Apr-may

3 Submission of paper proposal may

4 Data collection

5 Submission of final paper draft -

6 Submission of final paper -

Cost budget

Item Quantity Price Total

Paper 100 50

Internet 200 100

Photo copy 80 200

Print 80 200

Transportation - -