EVALUATION OF VALUE FOR MONEY AUDIT, AS A TOOL FOR FRAUD CONTROL IN THE PUBLIC SECTOR (A STUDY OF POWER HOLDING COMPANY OF NIGERIA ABUJA)

CHAPTER ONE

1.1 BACKGROUND OF THE STUDY

Every sector of the economy both the private and the public sector has its own objectives and goals to achieve. For the public sector of the economy, their goal is to satisfy the social needs of the citizens and in the effort to achieve these purposes, auditing more often, play a vital role.

The size and scope of these sectors have sometimes made it clear for the executor to exercise personal and first hand supervision of operation. It is in this light that value for money audit established by management is initiated, for any organization to carry out its business efficiently and effectively, there must be some factors that must be put in place for the smooth running of the organization like materials, machines, human labor and money e. t. c.

Auditing is seen to play an intermediary function in between management and the resources of the organization. It is also fundamental to any business either the public or private sector, which will help the business to keep its adequate financial records. These financial records are kept in response to the demand by a system control which requires that the business enterprise must be carried out in an orderly manner, ensure adherence to management policies, safe guard the assets and secure possibly the completeness and accuracy of the records. Irrespective of these facts of system of control established by the management of the organization, fraud still thrives.

In the early 1970s, the role of the state auditors began to change dramatically. Changes began in USA, Canada, and in several European countries. The representative of the people started demanding information on the efficiency and effectiveness of public expenditure.

In Nigeria no specific legislation has been put in place to empower auditors to carryout value for money audit. However, the 1999 constitution section 88 (2) empowered both the two federal house and the state house of assembly to conduct investigation to expose corruption, inefficiency or waste on the execution or administration of law within the legislative competence and in the disbursement or administration of fraud appropriated by it.

(BRIEF REVIEW OF THE FIRM, POWER HOLDING COMPANY OF NIGERIA, P H C N)

The history of electricity in Nigeria can be dated back to the end of the 19th century when the first generating plant was installed in Lagos in 1898. From then until the 1950, the platform of electricity development was in the form of individual electricity power undertaking scattered all over the towns, some of the few undertaking were federal government bodies under the public works department, some by the native authorities and others by the municipal authorities.

1.2 STATEMENT OF THE PROBLEM

Fraud is a complex phenomenon. It is rampant in both private and public sectors of Nigerian economy. In the public sector, value for money audit reports are mostly unqualified even in a glaring situation or cases of corrupt practice by the managers that means that auditors especially those in public establishment compromise their duties or their duties are influenced and threatened in the performance of their statutory functions.

Therefore these studies tend to find out why there are:

1). Improper methods of appointment of auditors

2).Inadequate internal control

3). Lack of independence of auditors

4). Untimely and unreliable financial statements

5). Lack of transparency and inadequate method of accountability

1.3 OBJECTIVES OF THE STUDY

This study tends to find out some of the objectives which will include:

1. To find out the effect of value for money audit in fraud detection and control in the public sector.

2. To find out the relationship between internal control and fraud detection.

3. To determine what extent is the value for money audit relevant to the effectiveness and control of an organization.

4. To find out why there is lack of transparency and inadequate method of accountability.

5. To find out why there is inadequate internal control system.