CHAPTER ONE
INTRODUCTION
1.1
BACKGROUND OF THE STUDY
Auditing has existed as long as
man has been required to account for their transactions. A famous example is in
St. Mathew’s Gospel (Chapter 25) when the rich man went on a journey and
delivered his goods to a servant to look after them while he was away. On his
return, he asked each of these servants to account for the goods with which he
had been entrusted.
In the ancient ages, great land
owners would not manage their own land, but would appoint stewards to manage
their own land for them. The account of these land owners were checked by
having them called out by those who gave them to those in authority (land
owners) for hearing otherwise called stewardship accounting.
Auditing can be defined as the
process of an independent examination of vouchers, internal control system and
financial statements of an organization by a person or a group of persons
called auditors so that the auditors can form and express opinion whether the
vouchers, internal control system and financial statement, give a true and fair
view of the organization.
Auditing is carried in both the
public and private sectors. In the case of public sector, there are two
foremost types of audit that are carried out namely: Regulatory audit and
financial audit and the third type is value for money (VFM) audit which is yet
to be fully integrated in most part of the world.
According to Bechberger (2007),
it is observed in the past decades that in order to fight global corruption and
strengthening transparency and accountability in public sector organization
across the world, public sector organizations are now under pressure from the
public to integrate value for money principles in their management practices.
Value for money according to
National Audit Office (2007) means providing a service or a product in a way
which is economical efficient and effective. Value for money audit is
therefore, the type of audit that is used to asses the value for money system
in any organization. It is an independent examination of the criteria (economy,
efficiency and effectiveness) for the value for money to confirm that the
organizations available resources are used wholly, necessarily, reasonably and
exclusively so as to maximize progress towards the chosen objective.
1.2
STATEMENT OF PROBLEM
The research work “The critical
analysis of value of money audit (VFM) and public sector performance in Enugu
State centers on the major problems facing value for money audit in Enugu which
includes:-
a.
Problem of inconsistency in public sector
objectives as a result of political and economic instability.
b.
Diversity in accounting records or lack of
uniformity in accounting records system among public sector organization.
c.
The problem of cash basis rather than actual
basis in public sector accounting.
d.
The problem of insufficient emphasis of
accounting and stewardship in public sector organization.
e. Inadequate implementation
of laws in Nigeria.
1.3 OBJECTIVE OF STUDY
The main objective of the study
is to analyze the effects of value for money
audit on public sector
organization while the specific objectives are:-
a.
To ascertain the problem of inconsistency in
public sector objectives which is as a result of political and economic
instability.
b.
To examine the problem of diversity in accounting
system in public sector organization in Enugu State.
c.
To determine the problem of using cash basis of
accounting in public sector organization.
d.
To ascertain the problem of insufficient emphasis
on accountability and stewardship in public sector organization.
e.
To investigate the problem of inadequate
implementation of laws in public sector organization in Enugu State.
1.4 RESEARCH HYPOTHESIS
In order to achieve the
objectives of this research study, the following
hypothesis was
formulated.
Hypothesis
One
Null
Hypothesis (Ho)
There is no significant relationship between economic and political
instability and performance of public sector organization in Enugu State.
Alternative Hypothesis
(Hi)
There is a significant
relationship between economic and political instability and performance of
public sector organization in Enugu State.
Hypothesis
Two
Null
Hypothesis (Ho)
There is no significant
relationship between cash basis of accounting and performance of public sector
organization in Enugu State.
Alternative
Hypothesis (Hi)
There is a significant
relationship between cash basis of accounting and performance of public sector
organization in Enugu State.
Hypothesis Three
Null hypothesis (Ho)
Inadequate implementation of law had no effect on performance of
public sector organization in Enugu State.
Alternative hypothesis
(Hi)
Inadequate implementation of
laws has been effect on performance of public sector organization in Enugu
State.
1.5 RESEARCH QUESTIONS
1.
To what extent does the inconsistency in public
sector objectives which is as a result of political and economic instability
affect performance of public sector organization in Enugu State?
2.
How does the diversity in accounting records or
lack of uniformity in accounting records affect the public sector organization
in Enugu State?
3.
Could the problem of the use of cash basis rather
than accrual basis accounting affect public sector organization in Enugu State?
4.
To what extent does the insufficient emphasis on
accountability and stewardship affect public sector organization?
1.6
SIGNIFICANCE OF STUDY
This research therefore aims
that value for money audit will be relevant in the public sector because of the
special needs for government organizations to demonstrate their accountability
and their regards for economy, effectively in the use of public funds and other
resources. Value for money auditing is particularly appropriate for any
organization whose activities cannot be judged solely by their contribution
profit.
a. Budgeting and budgeting
control
b.
The development of management information system
necessary to plan, cooperate and control an organization.
c.
Human resources management (that is planning
procurement appraisal) construction procurement and utilization of physical
asset such as property, plant and equipment.
1.7 SCOPE
OF STUDY
This work is restricted to Enugu
State Water Co-operation; this work will enlighten them on how to achieve their
goals with a minimum cost.
1.8
LIMITATION OF STUDY
The limitations involved in the
course of this research includes hostility and non co-operation on part of
executive respondent unwilling to disclose their necessary and vital
information or document which they felt it will be detrimental to their business.
Also the financial implication was very high and this imposed certain
restrictions. The constraint of time was also a limiting factor as one the
areas of interest were not covered as they would have been adequate.
1.9 DEFINITION OF TERMS
Value for
money: Providing a service for a product in way that is economical,
efficient and effective.
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