FUNCTIONS OF INTERNAL
AUDIT AND INSPECTION IN A FINANCIAL INSTITUTION
INTRODUCTION
The functions of Internal
Audit and Inspection department, depend on the management of each Financial
Institution, and Central Bank guidelines and regulation relating to Banking
Operations. Before I go to the specific functions which I consider diagnosis
inevitable, it might be expedient to attempt to reproduce the factors which
make the Inspection/Audit department very potent to every profit-oriented
Organization where accountability is emphasized.
The Charted Institute of Public Finance Accountants of U.K
1979 has defined Internal Audit as “An Independent appraisal function within an
organization for the review of activities as a service to all levels of
management. It is a control mechanism which measures, evaluates and reports
upon the effectiveness of Internal Controls, Financial and otherwise, as a
contribution to the efficient use of resources within an organization”
Going by this definition it will be appreciated that the
degree of expectation on the Inspection/Audit departments are very enormous,
and to be able to remain afloat there is the need to be abreast with the realities
of the departments.
THE STATUS OF THE CHIEF INSPECTOR
People often say that Inspection is a thankless job. Others
call them sweat merchants of Banks. It therefore follows that as enforcers of
Banks Policies, rules and procedures.
Operatives here deserve management protection. The Central
Bank of Nigeria in recognition of the value of rank has recommended that Chief
Inspectors of Banks should not be below the rank of AGM. It does not augur well
for people of junior rank to audit superiors.
USE OF INSPECTION REPORTS
This entirely depends on the integrity of Inspectors. If no
regard is placed on the Inspectors their report may be neglected too. But any
management will ignore its inspection reports at its own peril. In order that
inspection exercises may not become mere routine and ritual, reports must be
decisive, without fear or favor.
After these preambles, it is pertinent to highlight the functions of
Inspection/Audit department/Inspectors/auditors. As earlier mentioned,
Inspection/Audit departments are departments set up by the management of the
Bank to ensure that Branches/departments are being run in accordance with the
laid down rules/regulations. It monitors compliance of management policies,
rules/procedures and provide reasonable assurance that all assets are
safeguarded, information timely, reliable and errors and irregularities are
reduced/discovered promptly and frauds/losses reduced. It comments on the
health of the branch/department-visited truthfully/factually. The above are the
broad functions of the Inspection/audit department cum Inspectors/Auditors.
The purpose of the Inspection/Audit function is to achieve
the objectives of the management. To do this it becomes paramount that the two
parties the Inspector and the branch/department/management should play some
positive complementary roles. It is this and the desire to get better result
from your visits to branches that I want to talk on your “Human relationship
handling” and “Obtaining job satisfaction”. Both phrases are related to each
other and to other secondary issues.
Inspectors/Auditors have important relationship with general management, other
management services, and with external auditors including those from CBN and
other Inspectors but it is our relationship with branches/departments being inspected
that are most crucial. They may perceive the Inspector to be a policeman
whereas the Inspector may emphasis an advisory role. In actual fact the
Inspector does have at least two conflicting roles police and advisory. Whilst
a policeman uses coercion which tends to alienate, an advisor uses persuasion.The
truth though is that the Inspector is both a policeman and advisor.
The Banks expect you to fill a policing role while the branch/Line operators
are inclined to see you in this light ,hence the saying” Inspectors/auditors
merely comes in after the battle is over and shoots the survivors”
You as Inspectors need good working relationship with the
Line Bankers/Departments in order to do the job effectively and in order to
have the job satisfaction you need. The manager who feels threatened by an
Inspector’s visit is less likely to co-operate whole heatedly, in the
Inspection process. Experienced Inspectors/Auditors will agree with the fact
that many of their most useful Inspection/Audit points and recommendations were
suggested to them by forthcoming line staff. One of the most priced aspect of Inspection/auditing
comes when the Inspector offers constructive advice rather than when he merely
highlight defects and some cases using impolite expressions and verbosity. The
Inspectors/auditors recommendations to manager are less likely to be accepted or
be implemented if his relationship with such a manager is not good. Nothing
would have been achieved in this case.
Therefore the solutions to your role conflict, is to develop
effective ways of working both roles in harness. Generally this means you should
tone down the police role, whenever possible, without actually failing in the
Inspectoral/Auditing side of your work. The blowing hot and cold tactics are to
me considered a useful tool in this direction.
You should be aware of certain behavioral qualities of
Managers/Line Bankers. Not all branch Managers see “Control” as being their
principal priority and so they are likely to feel the Inspector/auditor is
addressing the wrong issues. Again few people like to be dominated; the
inspector armed with the Chief Inspector’s authority has to be very careful not
to “throw his weight around” but have always at the back of his mind that every
staff should be treated/approached politely and exhibit a higher degree of
calmness/patience even when every other person has lost his cool.
You will surely continue to encounter a variety of attitudes
in the course of your Inspection/audit work-attitudes to work, resource
stewardship, risk, equal rights, innovations etc. These attitudes need to be right;
consistent with each other, understood and applied at all levels. Too often
they are left to chance. Often the greatest weaknesses of most banks are
matters of attitude and the Inspector/auditor should never overlook these. In
bringing about change in getting things done, rather than in just writing
reports, raising queries, the importance of “selling” must not be
under-estimated.
On job satisfaction it is obvious that you as
Inspectors/auditors enjoy less job satisfaction than your colleagues in line
banking. Perhaps this could be as a result of your “Checking” work. The
policing approach will surely bring less job satisfaction than a consultative
approach, which also attempts to make constructive recommendations for
improving efficiency, effectiveness and economy in all operational areas. The
team leader can help improve their staff job satisfaction by allocating their
staff, to Inspection assignments which present a high degree of challenge and gives
job variety, provide effective supervision and fairly spread the less popular
assignments and not narrowing them to specific departments, year to year.
CONCLUSION
From the functions being performed by the Inspection/audit
departments/Inspectors/auditors, the department should be equipped with
knowledgeable and versatile personnel so as to sustain the pride of the
department. It is a known fact that however difficult a manager is, he bows
down his head in salute when an Inspector/auditor unearths serious lapses,
frauds/losses eschewing insinuations and attack on his person. It is only a
versatile and knowledgeable Inspector/auditor that can do this. You are to
perform your duties diligently, truthfully, with fairness and lack of bias and
I am sure when you do this your management will surely give you your reward
here on earth.
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