WALLAGA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE

THE ASSESSMENT OF INTERNAL AUDITING PRACTICE (IN

CASE STUDY OF AWASH BANK DALO BRANCH)

THE ASSESSMENT OF INTERNAL AUDITING PRACTICE (IN CASE STUDY OF

AWASH BANK DALO BRANCH)
A SENIOR ESSAY RESEARCH PAPER SUBMITTED IN PARTIAL FULFILLMENT OF BACHLORS
ART ( BA) IN ACCOUNTING AND FINANCE

PREPARED BY GROUP 4
NAME ID NUMBER
1) TESFAYE SIME HORDOFA…………………….WU1202915
2) BIRTUKAN ADEBA MENGESHA……………..WU1208683
3) ERASA KUTE DOYAMOO…………………….WU1203165
4) HANA BEFIKADU DEGAFA……………………WU1202386
5) JOSEPH MALISH JUMA……………………..WU1205732

ADVISOR: ALEMI HABTE (MRS.)

July 2023
NEKEMTE, ETHIOPIA
Page ii of xix
 ABSTRACT
Safety and proper internal auditing practice is a base for preserving the stability of any
company. The overall objective of this study aimed at describing and analysing the prudential
control directive related to internal auditing practice, in light of recent development and to
see the existence and applicability of attribute and performance standard in Awash bank, and
internal auditor.

The study tries to assess the Factors strength and weakness with regard to internal audit data
are relevant to study the research would collected from both primary and secondary sources.
The primary data are to will be collects through unstructured interview, questionnaires, and
observation. The secondary data to be collected from published material and manuals, which
are available in the organization library and website. Regarding the sample, judgmental
sampling of non-probability is used.

Finally, on the collected data descriptive analysis had been made there analysis to supported
by tables and percentage used and the analyse data had been interpreted using inferential
analysis and the conclusion of the study to deducted from at he analysed data.

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ACRNOMY (ABBREVIATION)

AB Awash Bank
BA Bachelor
CPA Certified public accountants
GB Gigabyte
IIA Institution of the internal auditing

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 CHAPTER ONE

1.1 Background of The study

Auditing is a systematic process of objectively obtaining and evaluating evidence regarding
assertions about economic actions and events to ascertain the degree of correspondence
between those assertions and established criteria and communication the result to interested
user. (Saputra, W. (2015)

Internal auditing is an independent appraisal function established within an organization as a

service to the organization. The objective of internal auditing is to assist members of the
organization and the board in the effective discharge of their responsibilities. (Asare, T. (2009)

Internal auditors had to extend their area of actions, becoming more involved in risk
management, control and governance processes. In the case of these changes, new concepts
begins to be more and more in the centre of attention, the added value by internal audit to
organizations and its effectiveness. In order to determine the efficiency and effectiveness of
internal audit, it becomes more and more important to find relevant methods for measuring
and assessment the performances obtained in assuring a plus of value (Spencer, 2003).

When the properly designed and consistently enforced a good system of internal audit will
help the management safeguards the organization resources, products reliable financial
reports and complies with laws as regulations. It will also reduce the possibility of significant
errors and irregularities. Proper internal auditing practice is the base for reserving the stability
of any company.

The study focus on describing and analysing the important control directions that will be
related to internal Auditing practice.

In regard to see the existing and applicability of attributer and the standards in Ethiopian
national Culture centre performance to increase the quality of audit work raising awareness of
audit work significance of internal auditing to the achievement of specific objectives.

Internal audit reporting lines ideally classified in to administrative and functional, the chief
audit executive should report functionally to the board or audit committee and
administratively to the chief executive officer of the organization. (Roussy, M., & Rodrigue, M.
(2018)

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1.2 Statement of The problem
Internal auditing is examination of internal control system in which it functions by measuring
and evaluating effectiveness of other control on the other hand external auditor has
reasonability to report on the truth and fairness of the account of the company.

The absence of proper internal auditing in the organization leads many problems. The
absence of primarily internal auditing in the organization will result in lack of continuous
assurance service.

The second problem in achieving internal auditing practice is the degree of limited
independence of internal auditor since internal auditors are employees of company this serve,
they can’t achieved the certified public accountants (CPA) independence in fact. This limited
independence reduces their role with company to the lever of the more assistance to the top
management.

The other problem is that inadequate internal control can expose the company to various
identifiable risk, such as waste of company available resource, fraud by employees and lack
of control over asset. By not having adequate internal auditing activities, the company will
loss substantial amount of resource and have difficulty to achieve its intended objectives.

1.3. Objective of the Study

1.3.1. General Objective
The general objective of this study is to evaluate and determine whether the Awash Bank
internal auditing practice is effective and efficient or not.

1.3.2. Specific Objective

The specific objectives of this study are:
To examining the application of the internal audit practice in the company.
To identify the effects of internal control on efficiency of the organization.
To assess the internal auditing practice, affect external auditing function in Awash
bank.
To identify the quality of internal audit work in AB in terms of competence,
objectivity and independence

1.4. Significance of the Study

The major benefits and importance of this study are the following:-

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It will be enable the managers to be aware of the importance and use of internal audit in
achieving intended objective.
 It will be help the auditor in this organization to know their role in the organization.
 It will be allows the researcher to practice a larger similar study that could be
performed in other organizational sector.
 It will be uses as an additional reference to the existing restructure and can be use as
springboards for other research, who wishes to conduct a research in the same area.

1.5. Scope of the study

The study will emphasize on how internal auditing principle are applicable in practices and
the quality and applicability of the internal auditing in the Awash Bank and division of the
internal audit department and the function and responsibility of each division.
1.7. Organization of the study
This study has four chapters. Chapter one deals with the introduction part which containing,
the background of the study, statement of problem, research question, objective of the study,
significance of the study, significance of the study, of the study and limitation. Chapter 2
review of literature. Chapter three deals with research scope methodology. Chapter 4 deal
with the Financial and Time Budget.

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 CHAPTER TWO
LITERATURE REVIEW
This part of the study reviews the role internal auditing department needs for independence
and the scope and objective of the work performed by internal auditor.

2.1. Definition of Internal Auditing

Many schools and professional institution in the field of define auditing in different manner.
According to William and water perspective on modern auditing book, auditing is exercise
whose objective is to enable auditor to express and opinion about the fairness of the financial
statement. In addition auditing is as the accumulation and evaluation of evidence about the
quality of an economic entity to determine and regard the degree of correspondence between
the information and establish standard.(Salehi, M. (2011).Financial statement is based on an
examination of the statement regarding their quality, Fairness, and reliability compared to the
establish criteria. After verified by the independent auditor it is presented in the form of
written regard (Al-ahdal, W. M., & Hashim, H. A. (2022).

2.2. Historical Ddevelopment of Initial Auditing

It is a normal for any nativity to become into being because of emerging need. To understand
better the nature of the activity, which currently exist, some know something about changing
conditions in the past, which create the needs for that activity. The changes in the field of
internal auditing reflect the emergent changes in the concept and techniques of baseness and
government service delivery. New approach in global competition, business process re-
engineering security, advances in the technology have created the challenges of development
new and more relevant in approaches in the concept and practice of internal auditing.

In spite of its earlier existence the internal auditing did not emerged as recognized field of
professional practice until the 1940s, when the factors influenced its development as
distinguished profession. In the first place, the rapid development and sophistication of
business, government service and the development of statutory audit brought about
strengthened demand on management and board to ensure that assets properly safe guarded,
result are consistent with established objective, programs and operation goals are achieved as
planned. The second factor, which becomes potent force in the development internal auditing
profession, is establishment of the institution of the internal auditing (IIA) in 1941 in New

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York. Despite this, the first official pronouncement of internal auditor (IIA) was issued in
1947.

2.3. Internal Auditing in Ethiopia

The history of the development of internal auditing in Ethiopia dates back to about the middle
of the 1940s just about the time when internal auditing was evolving as an organized
profession in the United States. Internal audit in Ethiopia had its early legislative root in the
constitution of 1931s which authorized the establishment of an audit commission (Art.34)
and the audit commission itself was establish much rather by proclamation 69/1952 to audit
the account of the ministry of finance.

The period of 1950s marked the introduction of a budgetary system in government. The
announcement of an annual public budget in 1955 for the first tie mint history of the country
us a system of financial Administration based on the annual budget with all its attendant
requirement for strengthen internal control in budgetary agencies. This entailed the formation
of internal audit as an integral part of the budgetary internal control system. Presently,
government has taken the initiative to improve same enumerated weakness, recognize, and
strengthen the internal auditing practice both in private and public sector enterprise to this
effect only government did provide from necessary framework by the financial
administration profanation of federal government (proclamation 57/1997).

2.4. Objective of Internal Auditing

The objective of internal auditing is to axis member of organization in the effective discharge
of their responsibility. Internal auditing is an independent appraisal function established with
in an organization to examine and evaluate its activity as service to the organization. To this
end internal auditing furnished them with analyses appraises, recommendations coursed and
interruption concerning the activities reviewed.

The member of the organization assisted by internal auditing includes these in management
and the bound of an refer internal auditor a responsibility to both, providing them with
information about the adequacy and effectiveness of the organization system of internal
control and the quality of preference the information (Hailemariam, S. (2014).

2.5. Meaning of Iinternal Auditing

Different scholars and institute define internal auditing indifferent way. However, au
definitions are almost similar in senses. According to the institute of internal auditor (IIA),

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define in the following manner. Internal auditing is an independent, appraisal objective
assurance and consulting activity designed to add value and improved and organization
operate. 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. Internal auditing is helpful to assist member of the organization in the
effective discharge of their responsibilities (Hanim Fadzil, F., Haron, H., & Jantan, M. (2005)

2.6. Internal Audit Function

The internal audit function should have organizational independence and should operate
under a charter that grant the right carry out all activity necessary to accomplish the following
objective evaluation of the performance of various functional unit with the organization,
especially interim's of operating efficiency and the implementation of controls designed to
achieve optimum result. The verification of the reliability and integrity of the operating and
financial information on which the various controls that have management and other must
rely in performing their responsibility. A good practical list is that the internal audit activity
partially or completely achieved, the regular company operation would on for the time being
in the normal manner. To the extent that the internal auditing group is charged with, day-to-
day activity has simply taken place of regular accounting or other operational responsibility.
The base role of internal audit is to provide assurance about financial and non-financial
information and method for control. Therefore, internal audit should be kept distinct from
other function engaged in analysing and reporting on program is performance ( Krishnan, J.
(2005).

2.7. Characteristic of Internal Audit

Auditor are company employee
Review of company activities is continuous
Have a direct influence on the scope of external auditor activity
Primary concern is in serving the needs of the organization
Accountable for management and does not issue opinion to the public
Working is subdivided primary according to operating function and line management
responsibility.

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2.8. Internal Auditing Role in Control
Internal auditing often described as a control, which function by examining and evaluating
the adequacy and effectiveness of other control. It serves to explain much of internal auditing
to day and provides a central concept around which focus tract a vision of the professions
principal role in the future (MP Griffiths - 2012).

The concern of internal auditor with control grocers is both of immediate and long-term
interest. The auditor should respond to that interest by focusing his/her effect on great
understanding of control probably needs to be more clearly acknowledged by the profession
since it account so much work being done by internal editing to day (C hambers, A. D., & Odar,
M. (2015)

A major port of the management process has to do with control. This every manager has an
important responsibility to develop a program of control that will most effectively contribute
the kinds of performance of which he/she is in change. This control program consists of the
overall control effort covering the activities over which he/she is responsible and the
individual control effort, which together comprise the total control efforts ( Marginson, D. E.
(2002).

2.9. Independence, Objectivity and Compliance

Internal auditor should be independent of the activity they audit internal auditor are
independent when they can carry out their work freely and objectively, independence permits
internal auditor to render the logical and unbiased judgment essential to the proper conduct to
audits it is achieved through organizational status and objectivity. Objectivity is an
independent mental attitude which internal auditor should maintain in performing audit.
Internal auditor are not to subordinate their judgment on audits matters to that of others
(Răvaş, B. (2012) & Muqattash, R. S. (2017)

Objectivity requires internal auditor to perform audit in such a manner that they have all
honest belief in their work product and that no significant quality compromises are make
internal auditors or not to be place in situation in which they fell unable to make objective
processional judgment. The code of the institute of internal auditor set for standard of
conduct the code calls for high standard honest, objectivity, diligence and loyalty to which
internal auditor should conform (Reynolds, M. A. (2000)

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2.10. Responsibility of Internal Auditor
The same responsibilities of internal audit are as follow:-
Responsible for evaluating design and effectiveness of compliance function
Develop long-range audit plan for organization.
Audit of new management areas to evaluate internal control system.
Review internal administrative and accounting control to safeguard resource and
ensure compliance with laws and regulation.

2.11. Applicability of Internal Auditing

The development of internal auditing has to a major extent been cantered in the business
organization. The need for internal auditing exist in all type of organization when the
completeness of activities, the volume of transaction and dependence on large number of
people to exist in some combination to create operational problem (Unegbu, A. O., & Kida, M. I.
(2011)

2.12. Barriers to Successful Audit Result

The most common barriers for the some achieve successful audit result because of the
following.
Conflicting goals management and auditor
One of the most common barriers to successful audit results internal auditors face of
understanding of management goals and the ensuring conflicts that rise.
Absence of full range of technical competence
The absence of some form of legal requirement for technical competence has put internal
auditing in jeopardy.
Neglect of the most important phase of the study
Internal audit the title analysis found in the observations focuses on easily identifiable area
corn. This neglect have been the direct cause for audit failure.

Neglect of internal audit of fundamental communication

Neglect to communicate clearly with the entity audited poor communication of audit results
has coursed the down failed of some audit and led to a negative misconception about auditor
(Olojede, P., Erin, O., Asiriuwa, O., & Usman, M. (2020

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2.13. Audit Reports
Its objectives is to pursue management to take premedical action. Report must be written with
very great care after full consideration of the subject matter. Generally, reports can be divided
into four main categories based on the time report will be issue. First, the report prepared by
the internal audit staff after their visit to a function unit, second, periodical report prepared
which summarizes the main audit finding and recommendations for the period under
consideration, third, report on the results of special investigation, and enquires, fourth, an
annual audit report.

2.14. Contents of Report

Contents of report is impossible to be dogmatic as to the contents of internal audit reports it
suggested. However, that part form a brief general reference to the work to work perfumed.
Report should deal with matters a rising from the audit result of investigation. The types of
error disclosed the defects revealed in systems and the reason, which allowed afraid to be
perpetrated are the essential matter on which information is required ( Hamid, A., & Ginena, K.
(2015).

2.15. Format of Report

The format of the audit report is important and a well drafted will contribute in large to the
optimization of its usefulness. The report should be inserts in standard folder and should be
appropriately heads. To fully understand what is going on an audit report, one must analyse
the following varies components.
Introductory: The purpose of introductory paragraph is to provide the reader to understand
and accept what is contained in the conclusion. It includes letter of transmittal, report title
table of contents and background, objective and scope.
Main body: - refers to audit report selection where the finding are discusses and principal
work is perform.

Conclusion: - it refers to the auditor over all opinion of the area reviewed or judgment drawn
from the specific finding in the main body. The name and designation of the person singing
the report, together the date of issue should be typed at the foot there of (Bedard, J. C., Deis, D.
R., Curtis, M. B., & Jenkins, J. G. (2008).

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 CHAPTER THREE
RESEARCH DESIGN AND METHODOLOGY
3.1. STUDY AREA
This study would been conducted on Awash International Bank in Dalo Branch.

3.2. Types of Data and source

The researcher is used two types of data and source.
This are primary and secondary source of data.

3.3. Method of Data Collection

In the data collection, process different types of data collection method will be use in the
study. These methods vary according to the source of data that will be collects. To collect
primary data, two different types of data collection method will be use, such as unstructured
interview and questionnaires. The secondary data will be collects. from pamphlets bank
manual, reference books and others research material, which related with the topic.

3.4. The Sample Design

The sampling techniques that is going to be implements for the study is non-probability
judgmental sampling. This technique of sampling is selects because it enables to get accurate
and sufficient information. By using these techniques 30 individuals who are believes to have
sufficient knowledge and familiarity with the subject matter is selects. The total number of
sampling 20 who are currently working on the organization directly or indirectly related with
internal auditing.

3.5. Data analysis and presentation

The researcher used for data analysis editing, coding and tabulation. Editing is used to
involves the inspection of questionnaire on a raw data and necessary co-actions of each
questionnaires and defecting the most glaring omission in accuracy in detail. Coding is a
technical procedure by which data are categorize through coding the raw data to transfer into
symbols usually numerals. They may be tabulated and counted. This can be done by
specifying the categories in to which remains to be place. The number is depend up on the
number of question on the questionnaires. Coding open-ended questions. This is done
through developing consistent set of standard to each questions.

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Tabulation consists of simply counting the number faces that fall into varies categories. It
communicates the result of the study, can be used for several propose (i.e. to calculate
summary statistic).Tabulation can be done by hand. It is facilitate determining the empirical
distribution. Variables frequencies were numerated in each table for calculation of varies
statistics and communicative distribution function would be employed to observer with less
than or equal to specify quantity determined.

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 CHAPTER FOUR
FINANCIAL AND TIME BUDGET

4.1. Financial Budget

Every research project needs a budget. If you are applying for funding, you must say what
you are planning to spend that funding on. More than that, you need to show how spending
that money will help you to answer your research question. Therefore, developing the budget
is the perfect time to plan your project clearly. A good budget shows the assessors that you
have thought about your research in detail and, if it is do well, it can serve as a great,
convincing overview of the project.

For each item on your list, find a reasonable cost for it. If you are not going to do the work
yourself, work out how long you need a research assistant for be realistic. Work out what
level you want to employ them at, and find out how many that costs. How much is your
Thing atron going to cost? Sometimes, you can just look that stuff up on the web. Other
times, you will need to ring a supplier, particularly if there are delivery and installation costs.

Items Quantity Unit Cost Total Cost (Birr)

Transportation 20 50 1000

Typist 300 300

Printing 60 5 300

Paper 60 2 120

Pen 5 25 125

Flash 32GB(1) 530 530

Binding 60 20 1200

Miscellaneous 20 70 1400
expenses

Total 4975

Table 1Financial Budget

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4.2. Time Budget
Time budget is estimating and allocating time to high-priority tasks. Eventually, it helps you
sort out your priority tasks and utilize your time correctly. A proper work-life balance needs a
routine, and a time budget would help you maintain a well-disciplined way.
Activities Months
December January February March Apri May June
l
Title Selection 
Preparation of research 
proposal
Recommendations of 
comments to first draft
of the proposal
Typing of final 
proposal
Submission of proposal 
Data collection 
Data Analysis 

Submission of first 
draft of research report
comments
Typing of final report 

Submission of final 
research
Presentation 

Table 2Time Budget

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