Jimma University: College of Business and Economics Department of Accounting Internal Auditing Practice

JIMMA UNIVERSITY
COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING
INTERNAL AUDITING PRACTICE

(A CASE OF COMMERCIAL BANK OF ETHIOPIA AGARO BRANCH)
BY:
ABDULFETA REDI
A RESEARCH PAPER SUBMITED TO DEPARTMENT OF

ACCOUNTING IN PARTIAL FULFILLMENT OF THE
REQUIRMENTS FOR BACHLOR OF ART (BA) DEGREE IN
ACCOUNTING
ADVISOR:
AMBAYE MERGA (MSc)
MAY, 2011
JIMMA, ETHIOPIA
Abstract
This study was conducted to assess the internal audit practice in commercial bank of Ethiopia
Agaro Branch. Internal auditing help an organization accomplish its objectives by brining a
systematic discipline to evaluate and improve the efficiencies of risk management, control
and governance process.
The study tries to assess the factors strength an weakness with regard to internal audit data
are relevant to study would be collected from both primary and secondary souse. Regarding
the sample judgmental sampling of non probability sampling would be used.
This paper incorporates five chapters which deals with the over all problems related to
internal audit practices.
The first chapter consists of the introduction part including background of the study,
statement of the study objectives of the study and important of the study. The second part of
the paper deals. With the literature review of internal audit role that obtained from different
reference materials like researches previously conducted by other researchers and books. In
third chapter deal the methodology of the study. The forth chapter of the paper, the data
collected through interview and secondary data gathered were presented, analyzed and
interpreted. Finally, after analyzing the stated problems the researches type to summarize the
findings, made conclusion, and forwards the possible suggestions based on the findings.
I
Acknowledgment
Sincere thanks to almighty Allah. Without his support nothing can be accomplished even
work done is impossible.
This research has drown on the talents, advice and encouragement of more people that the
researcher can possibly acknowledge. I wish to express my gratitude and appreciation to my
advisor Ambaye merga (MSc) whose dedication and support have made possible the
completion of the activities of this study. It is a great chance to express my deepest
appreciation and thanks to many peoples and friends whose unreseved guidance and
constructive ideas have brought about the successful completion of my paper. In addition, I
wish to say thanks to employees, internal auditors and manager of commercial Bank of
Ethiopia Agaro Branch, for providing the relevant data. I wish to say thanks to Jimma
University providing the necessary financial.
In addition my deepest gratitude goes to my families for their support in fulfilling the
necessary financial and other material support.
THANKS
II
Table of contents
Title Page
Abstract .................................................................................................................................I
Acknowledgment ..................................................................................................................II
List of table............................................................................................................................V
CHAPTER ONE, INTRODUCTION
1.1. Background of the organization .....................................................................................1

1.2. Background of the study ................................................................................................3
1.3. Statement of the problem ...............................................................................................4
1.4. The objectives (purpose) of the study ............................................................................5
1.4.1. General objective ................................................................................................5
1.4.2. Specific objective of the study area ....................................................................5
1.5. Significance of the study ................................................................................................6
1.6. Scope of the study ..........................................................................................................6
1.7. Limitation of the study ...................................................................................................6
1.8. Organization of the study ...............................................................................................7
CHAPTER TWO- LITRATURE REVIEW
2.1. Basic concepts of Auditing ............................................................................................8

2.2. Definition of Auditing ....................................................................................................8
2.3. Types of Auditors ..........................................................................................................8
2.3.1. Types of Auditing ................................................................................................8
2.3.2. Types of Auditors ................................................................................................9
2.4. Internal Auditing ............................................................................................................11
2.4.1. Definition of internal Auditing ............................................................................11
2.4.2. Objectives and scope of internal Audit ................................................................11
2.4.3. The reason for internal auditing ...........................................................................12
2.4.4. Responsibility of internal audit ............................................................................12
2.4.5. Code of Ethics for internal auditors .....................................................................12
2.5. The relation ship of internal and external auditors ........................................................14
2.5.1. Similarities ...........................................................................................................14
2.5.2. Difference ............................................................................................................15
2.6. Performance standards of internal auditing ...................................................................16
2.6.1. Managing the internal audit activity ....................................................................16
2.6.2. Applicability of internal auditing .........................................................................17
2.6.3. Quality of the internal audit personnel .................................................................17
2.6.4. Degree of independence of the internal auditors and the objectivity with which the
work is performed .....................................................................................................18
III
2.7. The nature of internal control ........................................................................................18
2.7.1. Importance of internal control ............................................................................18
2.7.2. Objectives and related internal control relevant to an audit.................................19
2.7.3. Reason for internal control evaluation .................................................................20
2.7.4. Inherent limitations of internal control systems ...................................................20
2.8. Evaluating internal control .............................................................................................21
CHAPTER THREE, METHODOLOGY

3.1. Study Area.............................................................................................................22
3.2. Types of Data and Source ......................................................................................22
3.3.Sampling method ...................................................................................................22
3.4. Sample size ............................................................................................................22
3.5 Data collection method ...........................................................................................23
3.6. Method of data analysis and presentation .............................................................23
CHAPTER FOUR, DATA PRESENTATION AND ANALYSIS
4.1. Introduction ............................................................................................................24

4.2. Analysis of personal profile of the interviews ......................................................24
4.3. Qualification of Internal Auditors ..........................................................................25
4.4. Man power .............................................................................................................25
4.5. Importance of Auditing ..........................................................................................26
4.5.1. Internal Audit report ....................................................................................26
4.5.2. Audit procedures ..........................................................................................27
4.5.3. Audit plan .....................................................................................................27
4.5.4. Internal Audit practices.................................................................................27
4.6. Attitudes of employees and management to ward Auditors ..........................................28
4.7. The applicability of internal auditing .............................................................................29
CHAPTER FIVE, SUMMARY, CONCLUSION AND RECOMMENDATION
5.1. Summary ........................................................................................................................31

5.2. Conclusion .....................................................................................................................31
5.3. Recommendation ...........................................................................................................33
Annex .........................................................................................................................34
Bibiography ................................................................................................................36
IV
LIST OF TABLES
Table page
Table 4.1. Personal Information of respondents ...................................................................24
Table 4.2. requirement of Audit Report ................................................................................26
Table 4.3. Duty, responsibility and the performance indicators of internal auditors in the
Commercial Bank of Ethiopia Agaro Branch .......................................................................29

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JIMMA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

INTERNAL AUDITING PRACTICE

A RESEARCH PAPER SUBMITED TO DEPARTMENT OF

CHAPTER ONE, INTRODUCTION

1.1. Background of the organization .....................................................................................1

CHAPTER TWO- LITRATURE REVIEW

2.1. Basic concepts of Auditing ............................................................................................8

CHAPTER THREE, METHODOLOGY

CHAPTER FOUR, DATA PRESENTATION AND ANALYSIS

4.1. Introduction ............................................................................................................24

CHAPTER FIVE, SUMMARY, CONCLUSION AND RECOMMENDATION

5.1. Summary ........................................................................................................................31

Table 4.1. Personal Information of respondents ...................................................................24

Table 4.2. requirement of Audit Report ................................................................................26

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