AN ASSESSMENT OF INTERNAL AUDIT OPERATION IN A GOVERNMENT PRASTATAL

AN ASSESSMENT OF INTERNAL AUDIT OPERATION IN A GOVERNMENT PRASTATAL: A CASE STUDY OF PIPELINES AND PRODUCT MARKETING COMPANY (PPMC)

ABSTRACT

The main objective of the study was to assess the Internal Audit mechanisms put in place by the management of Pipelines and Product Marketing Company, determine its efficiency and effectiveness of also to ascertain degree of autonomy of the corporation’s Internal Audit Department. Data were gathered through questionnaires administered to the staff in Finance & Account Department and Internal Audit Department PPMC. Chi- square and Statistical tool were used to analyse the data. Findings from the study indicated that PPMC has effective internal control system, which have enhanced the company’s level of performance. The study also showed internal audit can effectively detect fraud and financial irregularities in PPMC. The study recommends that PPMC should recruit more competent personnel as auditors, institute audit committee and resource their internal audit departments. The study reveals that no organisation can operate effectively and efficiently without an Internal Audit Department alongside with a good internal control system. The study thus concludes that internal audit department must exhibit a high degree of autonomy in order to achieve operational efficiency.

CHAPTER ONE

INTRODUCTION

1.1 Background Information

Risk is inherent in every business decisions and in the business process established to assist in the achievement of organisation objectives. Changes in the way organisations carry out their normal activities resulting from expansion of the business, can place extra-ordinary quality on the organisation’s control mechanism and become major source of risk. That is why establishing and implementing effective risk and control elements of the overall corporate governance framework is essential to all organisations. ICAEW, (2004).

Internal audit is established by management as an independent appraisal function to review the internal control system as a service to the organisation. The primary role of internal audit is to help the Board and Executive Management to protect the assets, reputation and sustainability of the organisation. It does this by assessing whether all significant risks are identified and appropriately reported by management and the risk function to the Board of Directors: assessing whether they are adequately controlled; and by challenging Executive Management to improve the effectiveness of governance, risk management and internal control. Internal audit department is responsible for evaluating the adequacy and effectiveness of system of risk management and internal controls operated within the company. Its responsibilities are defined and monitored by the Audit committee, on behalf of the Board. Internal auditors are employees of the organisation; they are guided by principles such as independence, objectivity, integrity, confidentially and competency to their functions. The role of internal auditors is receiving recognition rapidly. This is evident in the establishment of Institute of Internal Auditors (IIA) in countries like U.S and U.K. as noted by Nagy and Cenker. (2002). Internal auditors are seen as part of top management team involved in the creation of organisational wealth and values through effectiveness of risk management, control and governance processes.

This study therefore seeks to carry out an assessment of internal audit operation in Pipelines and Product Marketing Company (PPMC), a subsidiary of NNPC. Government parastatals like NNPC (Nigerian National petroleum Corporation) would use operational audit to carry out an inquiry into the business processes of the corporation. Operational audit is a systematic review of effectiveness, efficiency and economy of operation.

1.1.1 Background of the case study - Pipelines and Product Marketing Company (PPMC)

Pipelines and Product Marketing Company (PPMC) is responsible for transporting crude oil to local refineries established by Nigerian National Petroleum Corporation (NNPC). The company also markets other petroleum products to industries, automobiles, and domestic cooking; refined petroleum products in domestic markets, as well as exports primarily in the ECOWAS sub-region; and products, such as fuel oils, base oil solvents, waxes bitumen, and sulphur. It operates a network of pipelines and depots. The company was founded in 1988 and is based in Abuja, Nigeria. -PPMC is a subsidiary of NNPC. PPMC was set up with the objective of providing excellent customer services by transporting crude oil to functioning refineries and moving white petroleum products to the existing and future markets efficiently and at low cost through a safe and well maintained network of pipelines and depots. It is also part of the objectives of the company to profitably and efficiently market refined petroleum products in the domestic as well as export markets especially in the ECOWAS sub-region while providing marine services and maintaining uninterrupted movement of refined petroleum products from the local refineries. The Vision of PPMC is to be the dominant supplier of all refined petroleum products to the existing domestic and growing export markets within the West African sub-region. Its mission is thus to ensure security of supply of petroleum products to the domestic market at low operating costs, marketing special products competitively in the domestic and international markets, providing excellent customer service by effectively, and efficiently transporting crude oil to the refineries.

1.2 Statement of Research Problem

PPMC was established to transport crude oil to NNPC local refineries and to markets other petroleum products to industries, automobiles and domestic cooking, as well as exports primarily in ECOWAS sub-region. It is often adjudged that officers of government parastatals entrusted with the management of both material and human resources of their establishment are not brought under thorough control. The ultimate consequence of this is that much of the resources allocated to the parastatals are indiscriminately mismanaged. In most parastatals, there is little or no resistance to the temptation of colliding with other workers to embezzle allocated fund to the detriment of the government and society as a whole.

Again, there is the problem of non-utilization or in some cases under-utilization of allocated resources, which pose great risk associated with the misuse of organisation funds and resources. Do internal audit department exist in the company? What is the degree of autonomy of internal audit operations? Do the management really understand the guidelines and standards of internal audit in PPMC? These are some of the questions that prompted the researcher to evaluate the internal audit mechanism in PPMC.

1.3 Objective of the Study

The primary objective of the study is to assess the internal audit operations of Pipeline Product and Marketing Company (PPMC) - a subsidiary of Nigerian National Petroleum Corporation (NNPC).

The specific objectives of the study are to:

i. Assess the Internal Audit mechanisms put in place by the management of PPMC

ii. Determine the efficiency and effectiveness of Internal Audit mechanism in PPMC

iii. Ascertain degree of autonomy of the corporation’s Internal Audit Department.

TOPIC: AN ASSESSMENT OF INTERNAL AUDIT OPERATION IN A GOVERNMENT PRASTATAL: A CASE STUDY OF PIPELINES AND PRODUCT MARKETING COMPANY (PPMC)

Format: MS Word

Chapters: 1 - 5
Delivery: Email

Number of Pages: 80

Price: 3000 NGN

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