Abstract

The main purpose of this study is to investigate on the cost and benefit of internal audit in the selected Cameroonian private firms. This investigation is focused on 15 purposely selected private firms that are expected to represent all other sectors. The main aim of this study is determine the importance and impact of both internal audit and internal audit outsourcing with in organizations. A 15 items perception of a financial and operational cost and benefit of internal audit usage survey was conduct to one organization of Oil and Gas Development Company Limited. The finding of the study shows that three variables were significant in the selection of internal audit but the two variables shows the negative results which indicate outsourcing is cheaper than in sourcing. A very common conclusion is that the internal facilities is more costly another choice to be used in outsourcing so that internal provider is less efficient than external providers as they developed the technological efficiencies, a study of this type would explain the factors dependable for the significance of in sourcing compare to outsourcing and to compare the cost and benefit of internal audit.

 

 

CHAPTER ONE

1.                 INTRODUCTION

1.1.           Background of the Study

This research is being made on internal auditing in order to improve and make more worth able accountability, ethical and professional practices as well as effective risk management, improved quality of output and helping and guiding in decision making and monitoring the performance. Internal auditing is not just to tackle the financial matters only but it also helps in analyzing cost and benefits, utilizing resources and its implementation and effectiveness of the management

According to Institute of Internal Auditors New York:” Internal audit is an independent, appraisal activity within an organization for the review of accounting, finance and other operations on the basis of service to the organization. It is a managerial control which functions by measuring and evaluating the effectiveness of other controls.” Internal auditing helps and organization accomplish its objective by bringing systematic, disciplined approach to evaluate and improve the effectiveness risk management, control and governance processes.

In past twenty years huge number of changes taken place and changed the faces of internal audit operating and managing activities. Other factors like environmental awareness and information technology explosions make huge impact on development of internal audit last but not least legislation play vital role in auditing.   Legislation has played vital role in these changes vital role in these changes, these changes makes stakeholders expect more from public treasure and significance perception of auditing. Internal auditors with in organizations get direct impact of these changes and influence of internal audit methodology and approaches. Internal audit as a function within organization increased more in profile then yester years.  Pressure increased on private firm organizations because of restricted funding ensuring good value for money with in local government. External auditor has been taken  credit for making accountability more ensured , in current years reports related to corporate governance highlighted the role and importance of internal auditor at forefront .Reports helps in identify the relevance of having secured control structure this is the best complimented  by the presence of an internal audit body

 

1.2.           Statement of the Problem

Many organizations familiar with internal audit view its value too narrowly. An astute use of in-house or outsourced internal audit is to maximize its importance and its role in organization’s   internal audit plays its role as bottom –line defender. Internal audit identify cost containment opportunities and enforce current and emerging cost-containment policies and procedures organizations. Internal audit plays its tradition role as an independent reviewer of the organization’s policies, procedures and internal controls. But there is so much more this function could and must help the organization thrive in today’s environment. Auditing results can help in suggestions for strengthening and improving the current policies

That’s not to say that an internal audit aimed at cost containment but it strictly focused on accounting issues and examining how money is handled throughout and organization. To the contrary, an internal audit also analyze systems and procedures to determine whether value is being achieved for the money spent and whether an organization’s resources are being used most efficiently. For example, an internal

Audit can evaluate the supply chain for cost effective management by ensuring that preferred vendors only are being used. Furthermore, internal audit’s  review can determine whether contracts are ripe for renegotiations or can identify improvement in the RFP”(request for proposal) process so an organization receives the most competitive vendor bids .Internal auditing can assess actual spending versus standard supply lists and order quantities to identify bottom line sapping deviations from organization’s economic ideal. In today’s tough economic times, organizations are quick to get back to those core values that made them successful in the past. They tighten their belts and scrutinize every activity. But as the economy improves and companies flourish. Internal audits can provide critical ongoing monitoring to help ensure those hard-won cost benefits which do not disappear in brighter times. There are pros and cons of outsourcing internal audit in an organization. Most of the companies are not willing to prefer outsourcing of internal audit because it impact directly to the external auditors and impair the quality of the firms internal control structure. Such concerns were echoed by the recently enacted according to” Sarbanes-Oxley Act, which proscribes outsourcing of any internal audit functions to the external auditor”. According to” in USA, Canada and Australia outsourcing is very common practice approved by the research”. Traditionally on core areas of outsourcing is management of HR, legal taxation is more widely spread in the internal audit and increase in internal is a very wider. In 1990 it is becoming more popular, according to” Corbett (1998in USA they buy services as in the house and 85%can do this”. Giving authentic the decision of outsourcing will motivate the accounting professionalize to improve the quality of the product which is the evidence of the transactional approach. The research problem of this study is to find out the factors dependable for significance of in sourcing compared to out sourcing.

1.3.           Objective of the Study

1.3.1       General Objective

The general purpose of this study is to investigate the cost and benefit of internal audit in the selected private firms.

1.3.2       Specific Objective

Research set two objectives to in order to examine the research problem:

• To explain the factors dependable for significance of in sourcing compared to out sourcing
• To compare cost and benefit of internal audit.

1.4.           Research Questions

Research set two research questions:

1. What are the factors dependable for significance of in sourcing compared to out sourcing?
2. What are the cost and benefits of internal audit

1.5 Significance of the Study

The internal auditors have a significant impact to control any non-compliance activity in line with the established policies, plans, procedures, laws and regulations, set by the government which could have a significant impact on the organization’s operations. The internal auditors are also essential to add or create value to the organizations, to avoid failure and to save the operating and administration costs in accordance with the organization’s policies and procedures.

Therefore, this research is very essential to show the effectiveness of the internal auditors by assessing the factors which determines the private firms internal audit. In addition this research is important for the empirical evidences for the private firms to examine their policies and procedures, and for the future researchers also important to develop a conceptual literature development.

1.6               Scope and limitation of the Study

The study, focus on the cost and benefit of internal audit would more successful if it is conducted in all private firms, and also on all privately owned organizations. But due to time and financial constraints it is out of the touch of the individual researcher, and due to this the private firms which are cover under this research work are limited to 15 purposively selected private firms which are expected to show the effects of all the rest untouched offices.

1.5.           Organization of the Study

In addition to the preliminary page, this research paper consists of five chapters. The first chapter with its sub topics was introductory parts incorporated the introduction, statement of the problem, research objectives, research questions, research hypotheses, significant of conducting the study, scope and limitation of the study, and the methodologies used to conduct this study. The second chapter describes the detail review of related literatures with regard to the internal audit and the variables which affect the internal audit. The third chapter expresses the information regarding the sampling techniques used to conduct the research. The fourth chapter is the analysis, discussions and presentation part of the research findings and finally, the last chapter describe about the conclusions and recommendations of the case study followed by the references and appendixes.