CHAPTER ONE

INTRODUCTION

1.1 BACK GROUND OF THR STUDY

Throughout the world auditing is performed in divers environment and taking increase
importance in the day global organization. Auditing is a systematic process of objectively
obtaining and evaluating evidences requiring assertion about economic action and events to
ascertain the degree of correspondence between those assertion and established criteria and
communicating the result to increased users. The objectives of auditing is to ascertain the degree
of correspondence between the assertions and establish d criteria and also auditors undertake to
gather evidences and provide high level of assurance that the financial statement follows
appropriate basis of Accounting. Auditing can be internal auditing or external auditing. (Bradley
J, Larry E, 1994)

Internal auditing is an independent appraisal functions establish with in an organization to

examine and evaluate its activity as a service to the organization. The objective of internal audit
is to assist member of the organization in the effective discharge of their responsibility, one of
the task internal audit may be the evaluation of internal control and the determination of whether
they are function effectively. The internal audit used by management to bridge the gap by
serving as an independent check on the Accounting and other financial and non-financial areas of
the organization. In this research the researcher will be contribute to understanding on the nature
of the internal audit role from internal auditor themselves, how they receive this work and within
the organization perspective. (O,ray and Kurt Pany, 2001)

1.2 STATEMENT OF THE PROBLEM

Early large enterprise recognized that annual audit of financial statement by public
accountants were not sufficiency. A need existed for timely employee involvement beyond that
of Certified Public Accountants to ensure accurate timely financial record and to prevent fraud,
these organization internal auditors focused this effort of financial and accounting matter. The
internal auditing function a part of the monitory component of an organizations internal control.
The study will have been see how the role of internal audit unit in Ethiopia Electric Power

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Corporation (EEPCO) in Aksum district office, which is the sole providers of electric utility in
Aksum town. Some researcher in this work give emphasizes on the audit problem on the
organization one researchers conclude that due to the work of internal control and completely
nature of work audited problem are too much high and medium respectively. However in this
research differently the role of internal auditing in solve of organizational problem and it is
contribution for achieve of objective, internal auditors usually assist managements in ensuring
that there is a proper internal control system in place and the operation of the enterprise is
operated in effective and efficiency manner. It will be inadequate internal control can expose the
corporation to various identifiable risk such as waste of corporation a variable research fraud by
employees and lack of control over asset. By not having adequate internal auditing activity, the
corporation will loss substantial amount of resource and have difficult to achieve its intended
objectives. To this end, this paper will be making on attempt to assess the role being play by
internal audit in Ethiopia Electric Power Corporation (EEPCO) in Aksum district office, in
achieving organizational objectives. (Negasa Golissa, 2008)

1.3 OBJECTIVE OF THE STUDY

1.3.1 General objective

The general objective of the research would be to identify the role of internal audit in public
enterprise to achieve this intended organizational objective.

1.3.2 Specific objectives

The specific objectives of the studys are;

To know the degree of independence of the internal auditor from task they reviewing.
To examine the role of internal audit work from the perspective of organizational
objective in Ethiopia Electric Power Corporation (EEPCO) in Aksum district office.
To identify the scope, extent, timing of test make by internal auditors.

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1.4 Methodology of the study

1.4.1 Research design

The research would be used primary and secondary data. The secondary would be collected
from books, internets, organization manuals and other related materials to make a researcher
complete. The primary data would be collect using focus group discussion or interview because.
It provides quick in expensive and accurate means of assuring information of the population.

1.4.2 Methods of Sampling

The data would be collected from group discussion for internal auditors. Therefore, the sample
would be selected from the employees of the organization randomly select from the total
employees.

1.4.3 Data Analysis and Interpretation

The researcher would be used to analysis the data by using tabulation and other relevant
documents of the internal auditor. It also interpreted using observation of the prospection role of
internal audit in Ethiopia Electric power corporation (EEPCO) in Aksum district offices.

1.5 RESEARCH QUESTIONS

To achieve its objectives, the study will have the following research questions.

1. What role the internal audit division performs in Ethiopia Electric Power Corporation
(EEPCO) in Aksum district office?
2. Does the internal auditor be independent, compliance with the rule, policy and procedure
set in the standard?
3. What factor does influence in playing their role?
4. Does the internal audit unit have sufficient skilled staff?
1.6 SIGNIFICANCE OF THE STUDY

The major benefits of this study are the following;

It would be to help the manager, to be aware of the importance and use of internal audit in
achieving organization objectives or goals. It use to help to auditor in this organization to know

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their role in the organization help used as reference to the existing literatures and can be used for
other researchers who wish to conduct a research in the same area.

1.7 SCOPE OF THE STUDY

The scope of the study limit to emphasize only with the role of internal audit in public enterprise,
particularly in Ethiopia Electric Power Corporation (EEPCO) in Aksum district office, describe
the role internal audit as an assistant to management. The finding of this study become fruitful if
conduct widely, however, due to time and financial constraints for gathering of data and other
relevant information to success this study. It also provides to out of the research of the research
to incorporate most of public enterprise in the study

1.8 ORGANIZATION OF THE PAPER

The paper has four main chapters. The first chapter is providing general background of the study.
The second chapter is summarizing the related literature review of internal audit role. Chapter
three is presented the analyze and interpretation part of the study that would be gathered. The last
chapter is providing conclusion and recommendation on the finding.

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 CHAPTER TWO

LITERATURE REVIEW

This part of the study reviews the role of internal auditing department, the need for independence
and the scope and objective of work performed by internal auditors. It also reviews. The
professional proficiency required from internal audit staff in order to carry out its responsibility.
As soon as the study considering the comprehensive. Documentation and audit report to make
clear the functional role played by the internal auditors and their audited activities to achieve the
small organization objective.

2.1 DEFINATION AND CONCEPTUAL FRAME WORK

2.1.1 INTERNAL AUDITING DEFINATION

Many authors defines internal auditing differently internal audit is the audit of a company affairs
and to the institute of chartered Accountant of India define internal auditing an independent
appraisal involving specialized application of the techniques of auditing in accordance with the
specific need of the company. (D.P Jain, 1960)

According to the institute of internal auditors, internal audit is defined as on independent

appraisal activity established within an organization as a service to the organization. It is controls
which function by examining and evaluating adequacy and effectiveness of controls. The
objective of internal audit is to assists members of the organization in the effective discharge of
their responsibility. To this end internal audit furnishes them with analysis, appraisal,
recommendation counsel and information concerning the activities reviewed. The audit objective
includes promoting effective control of reasonable cost. (Johan Kinfu and Etal, 2009)

However in the standards for the professional practice, internal auditing. Internal auditing is
defined as an independent appraisal function established within an organization to examine and
evaluate its activities as a service to the organization in the organization in the effecting
discharge of responsibilities.

To this end internal auditing franking them with analysis, appraisal, recommend counsel and
information concerning the activity ravines. (Kurt pany, O, Pay Wittintion, 1997)

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 2.1.2 HISTORICAL DEVELOPMENT OF INTERNAL AUDIYING

The historical development of internal auditing is closely tied the advancement in internal
accounting and reporting mechanisms for better management decision making. This gave way to
the growth and development of management accounting. Traditionally the need for internal
auditing was based on internal need basis and mostly arising out at need to detect fraud
/irregularity and verify suspicion. To ascertain extent it is also true today through there are
attempts to make internal auditing more of formal modern management request. More recently
however especially since the 50s and 60s in particular with the development of management
theory and management controls (management accounting) the importance and scope of internal
auditing has been gaining momentum and not few literature is accumulating an its development
now. Internal auditing this come to be either financial or non financial(operational) in nature per
or past audit partial or complete audit investigation or spot check .Whatever vitas scope of
activity it was a service to management on continuous bases and as such the scope and extent 0f
its functions was and its determined by management. The critical importance and relevance of
internal auditing to business as well as raise ether for the establishment of the institute of internal
auditing in the USA is visible from the following visionary remarks by two of the all members.
The recessing created internal auditing and is making it an integral part of modern business; no
large business can scope it. If they dont have it now they will have to have it sooner (Arthur
E.Hald, 1994).

Although the roots of internal audit are in accountancy its key purpose lies in the area of
management control. It comprises a complete intra-company financial and operational review
(Robert B.witt, 1999).

Today many studies indicate that the attitude of management has a lot to do with delineating the
responsibility and authority of the internal auditor and the place in the organization hierarchy. In
all this it must be remembered that the internal auditor in an employee of the organization and as
such cannot rise above the organization sphere of influence. To understand better the nature of
the activities which currently exist, someone know something about changing, conditions in the
past which related needs for the acting. Historical evidences reseal that ancient kings and rich
Nobel man where. Appointed some of their used officials to exercise checks on the people
whom they put in charge of collecting safeguarding .revenue from thin states to report to they in

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the event of any regulates. This activity can be said to have the nature of internal auditing in the
sense. Internal auditing did not emerge as recognized filed on professional practice until 1940s.
Originally demand for internal auditing arise when money early large corporation recognized
that annual audit of financial statement be certified public accountant were not sufficient (CPAs).
In 1941 the institute of internal auditing (IIA) was established with 25 members in New York
City .It become a patent force in the development of internal auditing profession. Gradually the
role of internal auditing expanded to in composes sectional polices and procuress .Companies in
the defense industry were among the first to demand such service (O, Ray writing ton and kurt
pany 2001).

In today constrictive approach, alike any other involving function it reflects abroad
spectrum at operational activities and level of to add value. In many organizations internal
auditing as a formal staff activities. The overall situation, however, reflect major progress in
scope and level service in the individual areas. As a result senior management and the board
increased this reliance at the internal audit to improve the organizations control and governance
processes which are essential factor in the achievements of objective (Kurt puny, 1986).

2.2 FUNCTIONAL ROLE OF INTERNAL AUDIT

The role in internal auditing has increased dramatically in the past two decades primarily because
of the increased size and complexly of many corporations. The primary role of internal audit is to
provide assurance but, financial and non financial information and mechanism for control.
Internal auditors are powerful to help management by evaluating controlling system and point
out weaknesses with in internal control. It also review and appraises, soundness adequacy and
application of accounting, financial and other operating activities and recommending effective
control and ascertaining the extent of compliance with established price, low and procedures. In
order to does it in a professional and independent .Fashion internal audit unit should be kept
distinct from ether functional engaged in analyzing and reporting performance. The internal
auditors should participate in the de sign of the data processing system to ensure that the system
provides a proper audit trial and includes adequate internal auditors reviews all aspects of
system on attest basis, to determine that prescribed internal control are operation as planned.
Internal audit is assuring the management that the system of internal control is effective in design
and operation. Internal auditing a profession having in role, upholding basic standard of

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excellence nod adhering to a code of ethics. Certification as a professional internal auditors
requires one to have been mastered the common body of knowledge judged as essential for
satisfactory over areas enable broad area (Kurt pany o.ray, 1997).

The internal editing function includes verification, evaluation, and competence of reoperation.
Among anther the following are specifiable.

Review and appraise internal control procedure.

Ascertain effectiveness and efficiency of operations.
Verity compliance to established policies procedures and plans.
Ascertain the extent to which company assets are accounted for and safeguarded
from losses of any kind.
A certain reliability of data documents
Evaluate quality performance in carrying out assigned responsibliing
Recommend improvements in better management controls.

The internal auditor can perform the work through either functional approach operational
approach, or financial approach (Johannes Kinfu and Engida Bayou, 2009).

Internal auditing is a staff function therefore the auditor ideally is not in disposition of line
function. The position and place in the organization is determined by the scope of the function
performed and the extent of responsibility entrusted to internal auditor by management. It is
desirable that the she/he should be placed as high as possible in the organization structure if
she/he is truly to be of service to management without intimidation and be in position of several
once over all the organization activates. (Joh, 2009). The independence of the internal auditor
again depends on the place in the organization the extent of responsibility and authority regarded
for performing his/her function and the desire to enhance his/her competence and independence
in reporting to whom. Here it must be appreciated that the desire to have independence in the
internal auditing functions may not necessarily be attainable beas high as in the external auditing
function. The mater of qualification for the internal audiles is also dependent on the above
factors. Ofcource these factors are definitely much more clearly demarcated in a large
organization in small (Jon, 2009).

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 2.2 .1 INTERNAL AUDITINF ROLE IN CONTROL

A major part of the management process has to do with control. Control with in overall system of
internal control may be charities either administrative or accounting control administrative
controls. Relate primary to the internal control objectives of efficient operations and adherence to
managerial polices. Accounting controls, on the other hand, relate. Primarily to safe guarding at
assets and liability of financial information (David N.Rechive,1982).

Internal auditing is often described as control which functions by examining much of internal
auditing today and also provides a central around which to construct a vision of the professions
principal role in the future (G .Court menarche, 1985).

In internal auditor is committed to organizational services and management service. The internal
auditor is especially able to provide the board and management with instance in the control areas.
The internal auditors also possesses the capabilities or analysis and good business sense which
age necessary to appraise the effectiveness at control. The internal auditor additionally has the
distinct advantage of being able to approach the analyses problems through the basic financial
recorder. The concern with the control process on the part of internal audit is thus both at
immediate and long term interest. The auditor should respond to that interest by focusing his/her
effort on a great understanding at the control process and the means by which control can be
made most effective in every type of operational situation. In actual practices control are
developed and administrated in term of individual operational situations.

Internal auditors often participate in evaluating the adjutancy at control producers designed new
application development (Larry E and Brodley J, 1994).

2.2.2 ROLE OF INTERNAL AUDIT IN RISK MANAGEMENT

Risk management involves the application at generally management concept to a specialized

area. Risk management requires the drawing up of plans, the organization materials and
individual for the under taking the maintaining of activity among personal the objective involved
the binding together and unifying of all the activity and effect. Internally auditing is in addition
to other operation function they may have invalid in risk management. The rate at internal audit
is likely to differ from one organization to another.

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In practice internal audit role may include the following

1. Providing assurance on the management of risk.

2. Affiliating risk identification assessment and educating line staff in risk management and
internal control.
3. Providing active support and involvement in the risk management process.
4. Focusing the internal audit work on the significant risk as identified by management, and
auditing the risk management process cross an organization. (C.arthur Williams and
Richard .M 1976).
2.2.3 OBJECTIVE AND SCOPE

The objective at internal auditor is to assist member if organizations in the effective disc arch of
their responsibilities by sharing them analysis appraisals recommendations, and council. The
audit objective includes promoting effective control of reasonable cost. The scope of internal
auditing encompasses the examination and evolution of the adequacy and effectiveness of the
organizations system of internal control land the quality of performance in carrying out assigned
responsibilities. The scope internal audit includes.

1. Apprising the economy and efficiency with which resources are employed.
2. Reviewing the means of safeguarding assets and as appropriate verifying the existence of
such asset.
3. Reviewing the reliabilitys and inters of financial and operating information and the
meaning used to identity measure classify and report such international. (Whiytintion and
pany, 1998).
2.2.4 INDEPENDENCE AND OBJECTIVITY

Independence internal auditor should be independent of the complete activates they audit.
Internal auditors are independent when they can carry out they work freely and objectives.
Independence permits internal auditor to rend the impartial and unbiased judgment essential in
the proper conduct at audit. If achieve through organizational status and objectively the
organization status of the internal auditing department should sufficient to permit the
accomplishments of its audit responsibility. Objectivity also requires that internal auditor have an
independent mental attitude and honest belief in this work product. Internal auditors should have

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on impartial, unbiased attitude and avoid conflict of interest, in complying with standards or
evolution individual objectivity auditors should. Maintain an independent metal attitude in
performing this audit work and audit work is revised before audit reports are issued
inordertoprovideobjectivity(Whistingtonandpany1997}.
2.2.5 PROFESSIONAL PROFICIENCY

Internal auditors should be perform with proffering and due professional lager professional
proficiency is the responsibility of internal auditing department and each internal auditor. The
department should assigns so each audit those persons who collectively posses the necessary
knowledge, skill and disciplines to conduct the audit property.

Staffing:- The internal auditing department should provide assurance that the technical
proficiency and educational back ground of internal auditors are appropriate from the audit take
performer.

Knowledge skills and Disciplines:-The internal audit department and internal auditor should
possess or should obtain the knowledge, skills and disciplines needs to curly out its audit
responsibility proficiency in opposing the internal auditing standards in accounting principles
and technologies. An under standards of management principles and one appreciation is refused
of the functions of such subject, as accounting, fixation commercial, finance and quantitative
methods.

Continuing education:- Internal auditors should maintain their technical competence through
continuing education they should informed about improvements and current developments in
internal auditing standards procedure and techniques.

Due Professional care:-Internal auditor internal auditor should exercise due professional in
performing internal audit. It calls for the application of the case and skill expected of a
reasonable provident and competent internal auditor in the same or limiter circumstance
(Whittington and pany, 1998).

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2.3 Measuring the Internal audit function

Internal audit function is primarily evaluated on qualitative and quantaitve measures.

Qualitative Measure:- based on the quality of counsel and information provided to the top
management and the audit committee where there is the audit committee. In addition to this,
feedback collected from survey questionnaire sent to key managers offer each audit project can
also help measure the quality of the service provided. The questionnaire is expected to cover
dimension of the professionalism, quality of counsel time lines or output quality of status
updates. (Jon, 2009).

Quantitative Measure:- are used to measure the function level of exaction. Key measure
include plan completion, report issuance issue closure, staff qualification staff utilization, rate
and staffing level (Joh , 2009).

2.4 Internal auditing and external auditing

There are similarities as well as differences between internal auditing and external auditing. The
similarities could be interims of scope and functions, tools and procedures. The differences
mainly in selection and employment, remuneration, qualification and independence. There an are
argument that propagate that is there is external auditing why is there a need for internal;
auditing or vice versa. However an in depth understanding of the objectives and purpose of
internal and external auditing can show that they should be rather complementary and not
competitive. For it the internal auditing results of the operation of the organization can be the
external auditor and thus reduced the cost of extend audit fee. So it is also true vice versa. But
the purpose of audit of the external and internal auditor is quite distinct and cannot be substitute
for each others responsibility. In addition is must be remember that external auditioning a
stafcutory requirement, while internal audit is internal management governance and date (Ratl:ff
&Reding,2002).

2.5 CON TEMPARARY PRACTICE OF INTERNAL AUDITING

The business environment has experienced rapid and revolutionary changes with far
reaching consequences. Management responses to force global computation have included
improved quality and risk management insertions, reengineered structures and processes and

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greater accountably all requiting more family, reliable and relevant information for decision
making. In such climate it is no surprise that the internal audit function is viewed with the
requisite attribute to support the governance process. The new definition of internal auditing is
designed to accommodate the professions expanding role and responsibilities, internal auditing is
an independent objectives assurance and consulting activity designed to add value and improve
on organization operations. It helps on organization accomplish its objectives by bringing a
systematic disciplined approach to evaluate and improve effectiveness of risk management
control and governance process. To take advantage of the surge in demand for the service of
internal auditors, the internal auditors need to have reparative of skills, attribute and
competencies.

Analytical and critical thinking skill.

An efficient method to gain on adequate understanding of the audited.
New concepts principle and techniques of internal control.
An awareness and understanding of risk and opportunity related to both the audited and
the auditors,
Development of general and specific audit objective for any audit project including the
use of statistical and non-statistical induction.
Reporting audit results in a verity of format to a wide variety of recipients.
Professional ethics and audit technology applicable across a variety of types of audit
reports (Ratliff and Redding, 2002).

2.6 INTERNAL AUDIT REPORT

The end produce of any audit work culminates in writing at an audit report, but unlike the
externally auditors report, the internal audit report is not standardized short form in its content.
Consequently, the audit report of internal auditor requires a lot of imagination and creativity with
communication ability in its writing.

The audit report should basically contain the following

Detail of purpose and procedures audit
Description of tools and procedures of audit
Findings , suggestions and opinions and

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 Recommendation

The written report is the medium by which the comments, criticisms and recommendations at an
internal audit department are conveyed to the board, functional director, and management in
general. Report must be written with very great care offer full consideration of the subject
matter. Internal audit report will cover a wide verify of subjects reflecting ad they do the many
and over increasing ramifications of internal audit department. Generally report can be divided in
to four main categories based on time report will be issued. First the report prepared by the
internal audit staff offer their vast to functional unit, second , periodical reports with
summarized the main audit sanding and recommendation for the period under construction , third
reports on the results at special investigation and inquires and fourth, annual audit report (Joh,
2009).

Contents of report:-Its impossible to be dogmatic as the content of internal audit report. It

suggested, however that apart from a brief generally reference to work perfumed, reports should
deal with matters arising from the audit result of investigation , the type of errors disclosed , the
defects exists in system and the reasons which allowed a trend to be perpetuated are the
essential matter up on which information is required.

Format of reports:- The format to the audit report is important and well drafted report will
contribute in large to the optimization of its vesfulences. A wells structured and well executed
report is a deceptively simple looking document. To full understand what is on in an audit report
on must analyze the following various components.

Introductory: - the purpose of introduction paragraph is to provide the reader to understand and
accept what is contained in the main body and the conclusion. it in included letter of transmittal,
report title, table of contents and back ground objective and scope.

Main body: - refers to audit report section where the finding are discussed and principle work is
performed.

Conclusion: - it refers to the auditor own all opinion of the area reviewed or judgment drown
from the specific findings in the main body. The name and designation of the persons signing the
report, together the data of issue should be types at the fact there of.

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 CHAPTER THREE

DATA ANALYSIS AND DISCUSSION

Introduction

In this chapter deals with the data analysis of the study obtained from the Ethiopia Electric power
corporation (EEPCO) had been presented. Data is collected through interview to all internal
auditors in Ethiopia Electric Power Corporation and documentary analysis. The data is
summarizing to describe in the form of qualitative.

Back ground Information of Respondents

As to the educational status of the respondents all of the internal auditors are first degree holders
and all of them are qualified in accounting. Regarding the respondents year of service in the
current position served for more than five years and both the respondents are financial and
performance auditor.

3.1 Internal Audit Practice

Internal auditor need to begin one steep a head when there is predetermine responsibility and set
out formally, to be carried out by internal audit unit for the success of power corporation .As it
public enterprise, Ethiopia Electric power corporation need to have an independent internal audit
division. Internal audit unit must audit management practice and provide qualities as well as
quantitative evidence to convince there was a problem.

To obtain a high level of productivity and focus attentions in the result that lead to success full
internal audit objective. It is necessary to establish task responsibility for internal audit unit. The
respondents information gets from discussion with internal auditors and documentation analysis.
There is a clear established for internal audit unit in Ethiopia Electric Power Corporation to
guide and restrict the work of internal audit unites. The following activities is the responsibilities
that per for by the internal audit in Ethiopia Electric power corporation.

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Internal auditor have the responsibility to perform any activity within audit division, this includes
meeting at district field work, inaugurate bids and give necessary response for their audit report
when question rise from general audit inspection manager.

They internal auditors of Ethiopia Electric power corporation have obligation to maintain secrecy
of each audit activity per from within the audit division. They have the responsibility to perform
their work with good commitment and tolerance at the field work.

Internal auditors in Ethiopia Electric Power Corporation requires to use many type evidence to
per from audit test. Therefore auditors always use it inter changeably depending on the activity
they audit.

3.2 The Role of Internal Audit

As described in the previous chapter the primary role of internal audit is to provide quality
assurance and consultant about financial and non- financial information. Internal auditing is
practical subject and its successes depend on sound commonsense and observation. An activity
internal audit units of a large organization review, evaluate, apprise and produce numbers reports
each year. These roles tend to focused on administrative policies and procure, operation and
contain recommendation that usually tend to fighter internal control.

The operation audit scope indicated that the audit would cover the process for developing and
implementing system and mentoring management activity. The compliance audit would cover
whether the activity performed by management is compare with policy, procured rule and
regulation. Based on the response of internal auditors they are engaged in operation audit and
they are performed compliance audit.

Financial audit conducted to determine whether the overall financial statements are stated
accordance with specific criteria (GAAP). The operational audits have been conducted to review
any part of an organization procured method for the purpose of evaluating efficiency and
effectiveness compliance audit. It also conducted to determine whether the organization is
following specific procurers or rules set down some higher authority.

One of the major activates of internal auditors is testing internal control by using internal control
technique.

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Table 3.1:- the following technique of internal control per formed by Ethiopia Electric
power corporation (EEPCO) internal auditor for financial and operation report.

Element of control Internal control technique

Corporate ledger All transaction are property accumulated classified and summarize
in accounts accordance with established polices and proceed.
Adjustment and closing All adjustment and closing journals are initiated by authorized
personnel in accordance with established policies and procedures.
Consolidation or All necessary data for consolidations and /or combination is
combination obtained and processed in accordance with established policies and
procedures.
Consistency Check that the collection and reports of financial information is
synchronize with and, where appropriates, integrate with other
management information; so that the user receives consistent
information from all information on sources.
Check that the appropriate reconciliation occur with the source
system.
Independent Check that the information is a comprehensive and completions
free reporting bias as possible, so that the user is not misted and
the reporting process remains on effective element of internal
check.
Complete and reliable Check that all transaction are properly accumulated, classified and
information summarized in the appropriate accounts.
Check that the information reported in maintained to facilitate sub-
squint receive and verification and is based on appropriate
supporting detailed and proper documentation with a clear audit
trial.
Time line of reporting Check reporting schedule are maintained and adhered to, so that
each report is produced in time for its intended action or result in
accordance with established polices.
Preparation All internal and external financial reports are required on the basis
of approved before issuance.
Presentation In accordance with procedures, development reporting that focuses
management attention to significance events and exceptions.
Reference , review and Document and periodically update the users needs so the
Approval information reported is appropriate for its intended action or result.
Check that appropriate information, is reviewed and approved for
distribution.
(Source EECO Manual)

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According to the response of internal auditor they engage on financial activities audits and
operating activity by using the above mentioned internal control techniques.

The internal auditors should be involved in testing of intervene central effectiveness, quality of
performance and integrity of information to a secretion whether goals and objective have been
achieved.

3.3 Factor which may Influences Internal Auditor Role.

In internal audit practice , there are a lot of essential factor that contribute to the ultimate role
based on response from interview with internal auditors ,they explain developing audit program
is one of essence factor contribute to this role as internal auditors. Development audit program is
necessary for auditor role and they program should be contained distance set of information and
out lining low the auditor will be managed within the one all time manage.

The internal audit same times they should not testing of internal control with efficiency and
effectively.

An audit program is design accomplish audit objective with respect to each major account in the
financial statement (EEPCO).

The following data is the audit program development by internal auditors of Ethiopian Electric
Power Corporation to achieve its audit objective.

Ethiopia Electric power corporation work in progress audit program

Audit Program: - capital release work cauterizations program rests and job completion report.

Study the main and consciously use full details of function to be performed and accomplished as
they lay down on the contract and feasibility study deign.

Studies are practice of capital release and check that documentation requirement contains both
technical and financial evaluation. Check that the work authorizations denies scope of work
consistent with the release states estimated cost on supporting estimated detail sheet and provide
accounting distribution number. Check that the work authorization is authorized in accordance
with the organizational authority register. Review active work authorizations to determine status

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I.e. commented or concealed. Check that a report of equipment in service has been prepared by
controlling unit specifying values placed in service.

Review capital work in progress and obtained explanation for projects not completed within a
reasonable time and a certain that all completed project transformed to appropriate asset account.
Physically inspect major capital works completed during the year.

As maintain on the above developing audit programs is one of essential or auditor race, but there
is also other most essential internal auditor years that is:-

Developing operational procedures which are a list of activity to be performed during the field
work are important for auditor role. Documenting the system, which contain permanent
information needed at each audit as to provide evidential support for his/her recommendations,
are absolutely essential for internal auditor role. Testing to ensure whether there is compliance
with low, regulation, policy and procedures are absolutely essential for auditors role.

3.4.Independence
Internal auditors should be independent of the activity they audit. Internal audit should have the
support of general audit and inspection managers so they can perform their audit free from inter
fervency.

In Ethiopia Electric power corporation (EEPCO) the internal duties operate their activates
independently from the line management for whom activities performed because their audit
report is directly end for general audit and inspection manager. Based on response of internal
auditors and document analysis the audit actives are restricted by management policy rather the
internal audit division itself determined and set out their policies and procedures to carry out
their assigned responsibilities as internal auditor then influence by management policies.
Internal auditors have direct access to all department head and with deferent district office
management during filed work

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 CHAPTER FOUR

CONCLUSIONS AND RECOMMENDATION

4.1 Conclusion

This study has been made with the purpose of reviewing the role of internal audit in public
enterprise particularly Ethiopia Electric Power Corporation (EEPCO) , so as find out role and
then to suggest possible recommendation that could be useful in the effective understanding of
audit activity.

Depend on the Finding and Analysis concludes that:-

Internal audit play a significant role in evaluating the internal control system and
contribute to ongoing effectiveness. Because of organizational position an authorities in
Ethiopia Electric Power Corporation, an internal audit function often play significant
monitoring role.
The overall objectives at internal audit division are to achieve the values and goal of the
corporation by providing both quality assurance and consultants.
Internal audit are express in evaluating to testing internal controls, demonstrating
expertise in techniques skill and ensure that authority mechanisms and documents are
adapted.
Scope at internal audit activity encompasses through financial, operational performance
and compliance audit.
Policy and procedure manual especially in internal auditing are not amended with respect
to the company development and operational change.
One of the current issues at internal audit is striking the appropriate balance between
being independent from operation and providing greatest benefits to the corporation by
being on internal consultant.

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 4.2 Recommendations
Based on the finding of the study the following possible recommendations have been
given.
It is advisable to update and complete the policy and procedure manuals of internal audit
activity that take in to account recent rapid development and operation change.
Internal audit should be use written audit programs prepared in conforming appropriate
professional standards and practices and the internal auditor themselves keep in track
with the current change in internal auditor role.
The work of internal auditing should be independent from control and supervision by
managers responsible to the general audit and inspection manager.
The report prepared by internal auditing must reflect a clear understanding at the audit
tasks under taken and the expression of valid conclusion.

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