CHAPTER ONE

1.1. BACK GROUND OF THE ORGANIZATION

The introduction of telecommunication service in Ethiopia dates back to 1984. Ethiopia
Telecommunication Corporation is the oldest public telecommunication operator /PTO/ in Africa. in
those years, the technological schem was contributed to integration of Ethiopian society when the
extensive open wire line system was laid out linking the capital with all the important administrative
cities of the country.
The company was placed under government control at the beginning of the twentieth century,
and was later brought to operator under the minister of postal and communication. In 1952
telecommunication service were separated from postal administration and structured under minister
of transport and communication /today’s ministry of infrastructure/.
After telecommunication network destroyed during ethio-Italy War Ethiopia recognized the
telephone. Telegraph and postal service in 1941. It also establishes the imperial board of
telecommunication of Ethiopia /IBTE/ by proclamation n 131/52 in 1952. The board had full
financial and administrative autonomy was in charge he provision and the expansion of
telecommunication service in Ethiopia.
The imperial board of telecommunication of Ethiopia, which become the Ethiopia
telecommunication authority in 1981, was placed in charging of both the operation and regulation of
telecommunication services as in the market perform, by regulation no 10/1996 of the council of
ministers set up the Ethiopian telecommunication corporation. ETC then has taken a responsibility to
operate as public enterprise with the principal duty of maintaining and expanding telecommunication
services in the country and provision of ETA which is a separate regulatory body founded by
proclamation no 49/1996 establishing the Ethiopian telecommunication agency (ETA). This has
objective of promoting the development of “high quality, Efficient, reliable, and affordable
telecommunication service “.In this respect, it is currently deemed by the regulation that ETC in the
sole operator of any telecommunication related service including the provision of internet and public
phone??

After the company had started to operated under the ministry of post and communications. by
establishing. Imperial board of telecommunications of Ethiopia/ IBTE/, by proclamation no.131/52, in
1952, IBTE Started to expand communication services all over the country. Due to this reason the
company was established its agency as Finote selam town, IN 1962, to expand and facilitates
Communications services in Finote selam Ethiopia.

Finote selam currently been exerting extensive and comprehensive efforts to satisfy the ever
increasing demand of telecom services all over the region. In addition to these the project that enables
all woreda administration centers to be reached by providing integrated services of voice, data and
image in near completion , and connecting Ethiopian to the future.

1.2. BACKGROUND OF THE STUDY

Number of changes and forces are influenced the auditing profession in recent Year.

Advanced technology, greater stockholder awareness and actions of regulatory body are a few causes to
influence auditing profession. As a result the profession has progressed from transaction based on
approach to a risk based focus. Theses change are affected both the internal and external auditing
components of the profession.

Internal auditing usually assets management in insuring that there is a proper internal control
system in place and that the operation of the company carries out efficiency and economically
external auditor on the other hand, are interested in the truth fairness of the financial statement. In
order to achieve this objective, the internal auditor’s should perform their job independently without
management influence/ Moeller and witt, 1999/.

The internal audit function represented another invaluable resource for public financial
reporting ,external auditing and board of director’s audit committees. The institutes of internal
auditor / IIA/ offers the following divisions of internal auditing. Internal auditing is an in dependent,
objective assurance and activity designed what value and improves an organization operations. It helps an
origination accomplish its objective by bringing systematic, disciplined approach to evaluate and
improve the effectiveness of risk management, control, and governance process.

Through its professional standards (attribute Standard 1110) and practices, the IIA has been strong
advocate for the internal auditing group to report /functionally/ to the board of audit committee
(IIA2002d).

The functional reporting liner for the internal audit functions in the ultimate source of its independence
and authority. As such, the IIA .recommends that CAE report functionally to the audit committee board of
directors or other appropriate governing authority.

The presence of internal auditors will reduce control risk as; this audit will reduce weakness in the
accounting system and implementation. Poorness and reduce the risk of fraud and errors.

1.3 STEMENT OF THE PROBLEM

Internal auditors an increasing and important function; external auditors can carry out their external
audit duties on the work of internal auditors.

The quality the independency of auditors and standard of internal auditing practices in the organization
in mainly determined by the essence of its policies, procedures sand the process of its implementation.
 The us statement on auditing standards /SAS/65%”the auditors consideration of the internal function in
an audits of financial statements. It provide general guideline abut evaluating all internal auditor
competence objectively and work performance and using of an internal audit.

In this study the researches wanted to understand or specifying whether there is a problem
concerning with internal auditing practice in Ethiopia telecommunication corporation in Finote selam
town .

in this regard things which should observed or studied are structure, policies , procedures and
practices of the organization concerning the internal auditing.

Given the above and other benefits of internal auditing function following audit formally evaluated?

- does junior management respond positively to internal audit findings recommendations?

- is internal auditing used effective audit methodologies sand related information technology
based solution?

- is internal auditing formally evaluated?

1.4 OBJECTIVE OF THE STUDY

1.4.1 GENERAL OBJECTIVE

The principal objective of this study is to assets the internal auditing practices in Ethiopia
Telecommunication corporation Finote selam town.

1.4.2 SPECIFIC OBJECTIVES

i. To examine the current level of internal auditors independence in the Ethiopian
Telecommunication corporation Finote selam.
ii. To asset the quality of internal audits practice (competence, objectivity and work performance)
from the respective of internal audit independence and standards.
iii. To identify factors this may affect internal audit independence and practice.

1.5 SEGNIFICANCE OF THE STUDY

The study has the following benefits,

- It will help managers of the company and external auditors those identify the way by which it
would be economically advantages to involve the internal audit department and would have
implication for staff and restructure an internal audit department.
- It will be pick out the main factors that affect the internal audit independence by management of
the company.
 - To create awareness about the importance of internal audit assistance and advice on the main
business risk and controls today’s dynamic business environment management.
- It will create some awareness for other researchers, top conduct their research on similar field .

1.6. METHODOLOGY OF THE STUDY

Methodology of the study consists sampling method, data collection methods and data analysis .

1.6.1 SAMPLING METHOD

To achieve this research the researchers use sampling method. The target of this study is those
registered as a regular employee of the organizations in internal auditing and general accounting section.
The sample size is determined by the researcher’s judgment as following.

 From budget department(4) respondents

 From accounting department(4)respondents
 From internal audit department(2) respondents
 From ordinary workers (6) respondents
Therefore, the sampling sizes respondents are twenty .

1.6.2 METHOD OF DATA COLLECTIPN

In conducting this research, the researchers use both primary and secondary data, the primary data
collect through questionnaires with general accounting stuff, internal auditors and a manager of the
organization. In addition to primary data secondary data is collect from manuals of the organization and
other internal documents of the organization.

1.6.3 METHOD OF DATA ANALYSIS

After the collection of data it will be analyzed by using tables and ratio analysis methods.

Finally based on the analysis and interpretations conclusions are drawn and recommendations are
making.

1.7 SCOP AND LIMIT ATION OF THE STUY

1.7.1 SCOP OF THE STUDY

When researchers see the term auditing it can be broadly categorized in many areas studying about
the overall auditing practice is very difficult in a full time provided to study so, the concerning study of
our research is limited o the study assessment of internal auditing practice in Ethiopian
telecommunication corporation.

1.7.2. LIMITATOIN OF THE STUDY

 In conducting his study, there are a number of difficulties researcher’s faces.

 Absence of accounting manual, research papers and related documents on the organization
 In adequate time provided too full fill the study.
 In adequate financial budget projected to achieve the study.
 Carelessness of respondents.
 Unwillingness of concerned body in to give information about the organization.

1.8. ORGANIZAION OF THE STUDY

The papers are divided in to four chapters. The first chapter provides general introduction of and
approaches use to deal with the stud. The second chapter summarizes the theoretical discussion of
internal audit independence and corporate governance. Chapter three presents analysis and
interpretation of the data gathered.
The last chapter provides conclusion and recommendations based on the findings.
CHAPTER TWO
2. LETRTURE REVIEW

2.1 Definition and meaning of auditing

Different persons have defined auditing in different ways.

 According to arenas and loebecke

`”Auditing is the process by which a competent, independent person accumulates and evaluates evidence
about quantity able information related to a specific economic entity for the purpose o determining and
reporting on the degree of correspondence between the qualifiedly information and established criteria.”

(Arens A.A loobbeke, J,K, auditing an integrated approach, 1991.p.9)

According to Montgomery. Appoint American accountant

” Auditing is a systematic examination of the books and records of business or organization, in

order to ascertain or verify, and to report on the facts regarding its financial operations and the
results there of.`”
 According to the institute of character accountants of India, in its publication titled.

“General guide lines on internal auditing” has defined auditing as a systematic and independent
examination of data, statements records, operations and performances. (Financial of other wise) of
 an enterprise from a stated purpose. In any auditing situation, the auditor perceives, evaluates the
same and on this basis formats his judgments which is communication through his audit report.`”

 According to the international auditing practices committee (IAPC)

` “The objective of an audit of financial statements is to enable the auditor to express an opinion whether
the financial statements are prepared, in all material respects in accordance with an identified financial
reporting frame work. The phrases used to express the auditors opinion are “give a true fair view” or”
present fairly, in all material respects” a similar objective applies to the audit of financial or other
information prepared in accordance with appropriate criteria.(kamal gupta and ashok aropa fundamental
of auditing six reprint 2002).

2.2 NATURE OF INTERNAL AUDIT CONTROL

Internal auditing is a tool of managerial control which is aimed at measuring reviewing and evaluating
effectiveness of other activities, within an organization, for the review of operations as a service to all
levels management. The basic goal of internal auditing is to ensure the optimum use of all resources
human, material and financial in the most efficient way to accomplish the organizations objectives. It
strengthens the system of internal control and the way in which it operates the internal audit function was
mostly financial in nature concerned with verifying adherence to procedures and internal control.

(Walter B.Welgs and o.RAY Whittington principle of auditing 9 th p.149)

As suggest by this definition a system of internal control encompasses much more that an entity’s record
keeping process and should be designed with four separate but related to objective in mind.

1. Safe guarding of asset

2. Accurate and reliable accounting data

3. Efficient operation

4. Adherence to prescribed managerial policies

2.3 responsibility and authority of internal audit

The responsibly of internal auditing in the organization should be clearly established by management
policy. The related authority should provide the internal auditor full access to all the organizations records
provides properties, and pond personnel relevant to the subject under review.

The internal auditor’s responsibilities should be to inform and advise management and to discharge this
responsibility in a manner that is consistent with the code of ethics of the institute of internal auditors.

To coordinate his activities with others so as to best activities audit objectives and the objectives of the
organization. In performing his functions, an internal auditor has no direct responsibility for authority
over any of activities which he reviews. Therefore, the internal audit review and appraisal does not in any
way relieve other persons in the organization of the responsibilities assigned to them.
 (Howard F.Stettier: auditing principle, 1980, p.95)

2.4 MEANS OF ACHIEVING INTERNAL CONTROLS

Internal control structures significantly from one organization to the next. The specific control features
used depend up on such factors as the size, nature of operation, and objectives of the organization for
which the structure was designed yet certain features are essential to satisfactory internal control in
almost any large-scale organization. For purpose of financial statement audit, the relevant features are
generally those that pertain to the entity’s ability to record, process, summarize, and report financial data.
Theses futures may be divided to three elements.

1. The control environment

2. The accounting system and
3. Control procedures

2.4.1. THE CONTROL ENVIRONMENT\

The control environment consists of the overall set of factors designed to achieve the organization‘s
policies and procedures although you should recognize that external factors such as lows and regulatory
requirements are also a part of a company’s control environment. Internal environmental control factors
include management, Philosophy and operating style; a logical plan of organization; effective personnel
management methods; a fore casting and budgeting system; an internal audit function; and an effective
audit committee.

2.4.2 .THE ACCOUNTING SYSTEM

To achieve the objectives of internal control, the accounting system must function effectively to
properly records, process, summarize and report transactions. In addition to the typical system of journals
ledgers, and other record keeping devices, and accounting system should include.

1. Adequate internal documentation to focus responsibility

2. A chart of accounts

3. A manual of accounting policies and procedures, and flow charts depicting the established
methods of processing transaction.

2.4.2.1. ADUQUATE DOCUMENTATION

System well-designed forms and documents in necessary to create a recorded of the activities of all
department. In thermally created documents are used to create accountability for asset transferred from
one department to another. An internal control device of wide applicability is the use of serial number on
documents. Serial number provides control over the number of documents issued adequate safe keeping
and numerical control should be maintained at all times for issued per numbered documents.

2.4.2.2. Chart of accounts

 Chart of accounts is a classified listing of all accounts in use accompanied by a detailed description of
the purpose and content of each a chart of accounts helps companies to control the recoding of
transactions in a consistent properly classified manner.

2.4.2.3. MANUAL OF ACCOUNTING POLLCIES AND PROCEDURES

Every business organization large or small, has a body of established methods of initiating, recording
and summering transaction, these procedures should be stated in writing, and documented in the form of
flow charts in a loose leaf manual, and should be revised as the pattern of operating routines changes. If
accounting procedures are clearly stated in writing, the policies set by management can be endorsed
efficiently and consistently uniform handling of like transaction is essential to the production of reliable
accounting records and reports and uniformity in the handling of transaction in possible only when
definite patterns for processing routine transaction are made know to all employees.

2.4.3 CPONTROLING PROCEDURES

In addition to the control environment and the accounting system, management established other
control over particular types of transactions and assets while there are many specific control procedures
that may be specific control procedures that may be implemented by a company, they all are designed to
provide.

1. Proper authorization transaction of duties

2. Appropriate segregation of duties

3. Adequate documentation and recording of transaction

4. Effective accountability for asset and

5. Proper valuating of recorded amounts

2.4.4. INTERNAL AUDITING

Another basic component of the internal control environment is an internal auditing staff. The job of
internal auditors is to investigate and apprize the system of internal control and efficiency with which the
various units of the business are performing their assigned function, and to report their findings make
recommendation to management. as representatives of top management, the internal auditors are
interested in determining in of its assignment is adequately staffed, maintains good records, protects
cash and inventories and other assets properly, cooperates harmoniously with other departments and in
general carries out effectively the function provided for in the overall plan and organization of the
business.

Internal auditors are not responsible for routine control procedures, such as reconciling banks
statements, balancing subsidiary ledger, or verifying the mathematical accuracy of invoice theses
functions are usually performed by a separate unit within the accounting department, such as operations
control group.
 Internal auditors provide a higher level of internal control; they designed and carry out audit
procedures that test the efficiency of virtually all aspects of corporation operation (Walter B.Melgsand
th
o.RAY Whittington: principle of auditing; 9 ).

2.4.5. INTERNAL AUDITORS CONTRASTED WITH INDEPENDENT AUDITORS

Although there is considerable similarly between internal auditing and independent auditing, it is the
difference between the two activities that are most important. The following summary of the principal
differences should be help full in maintaining a clear destination between the two types of activities.

Internal auditing Independent auditing

Audit is performed by a company employee.
- Primarily concern in surveying the need of management.
- Review of operations and internal control is made primarily to
develop improvements and induce complain with established policies
and procedures not limited to financial matters.
- Work is sub divided primarily according to operating functions and
lined of management responsibility. auditors is directly concerned
with the detection and Prevention of fraud
- Auditor should be independent of treasure and chief account but
ready to respond to the needs and desires of all elements of
management review of company activities is continuous.
Audit is performed by a professional practitioner who is engaged as an
independent contractor.
- primary concern is in fulfilling the needs of third parties for reliable
financial data
- Review of operations and internal control is mad primarily to
determine scope of examination and reliability financial data.
- Work is sub –divided balance sheet and income statements accounts.
Auditor is incidentally concerned with detection and prevention of fraud
except as financial statement may be materially affected.
Auditor should be independent of management both in fact and in
mental attitude examination of supporting data to financial statement id
periodic usually once a year.

(Hiowward F.sterttier: Auditing Principle,1980)

2.5. TYOES OF INTERNAL AUDITING CONTROL

Two types of control

1. Administrative control

2. Accounting control

2.5.1. ADMINISTRATIVE CONTROL

Administrative control comprise of internal control other than accounting controls. Accounting controls have a
direct bearing on the reliability of financial information. An example of administrative control are the system of a
periodic review by special designed authorities of the adequacy of action taken on the customers complaints
specially as it pertains to improvement in system to minimize the recurrence of such complaints.

2.5.2. ACOUNTING CONTROL

accounting controls are the controls related to the accounting system. They are concerned with achieving the
following objectives

A/ transactions are executed in accordance with the management’s authorization, i.e., in accordance with laid
down policies procedures.

B/ transactions are promptly recorded in a proper manner. The purpose is to facilitate the timely preparation and
communication of reliable financial information.

C/ accountability for assets are maintained and assets are safe guarded from un authorizes access use of disposal.

Accounting controls include:

 Proper segregation of duties to accounting function

 Rotation of duties
 Periodic reconciliations
 Checking the arithmetical accuracy of the records
 Maintenance of control accounts and preparation of periodic trial balance.
 Approval and control of documents.
 Comparison of results a physical in section of fixed assets cash, investments and inventories with accounts.
 Limiting direct physical access to assets and records.
 Comparison actual figures with budgets.

(kamala Gupta and shook Aroma fundamental of auditing six reprint 2002 p.127-128)

2.6. GENERALLY ACCEPED AUDITING STANDARDS (GAAS)

The existence of generally accepted auditing standards is evidence that auditors are very
concerned with the maintenance of a uniformly high quality of audit work by all independent public
accountants. If every certified public accountant has adequate technical training and performs audits
with skill care and professional judgment, the prestige profession will rise and the public will attribute
more and more significance to the auditor’s opinion attached to financial statements’.

Generally accepted auditing standards are the backbone of the auditing profession in general
“standards” means a means of accepted by an authority or by general consent, to which a performance
can be judged.

But standards of auditing can be defined as the measures to which the auditor it expected to adhere in
the conduct of an audit a given auditing situation.

The auditing standards have been divided in to the following categories:-

  General standards
 Standards of field work
 Standards of reporting

2.6.1. GENERAL STANDARDS

A/ training and proficiency

How does the independent auditors achieve the “adequate technical training and proficiency” required
by the first general standards? This requirement is usually interpreted to mean college or University
education in accounting and auditing substantial public accounting experience ability to use procedures
suitable for computer based system and participation in continuing education program. A technical
knowledge of the industry in which the agent operates is also part of the personal qualifications of the
auditor it following that a CPA firm must not Accept an audit engagement without firs determining the
members of its staff have the technical training and proficiency needed to function effectively in the
particular industry

B/ Independence- the most important auditing standards

An opining by an independent public accountants is truly indent financial statements is no value unless
accountants is truly independent consequently, the auditing standard that stats” in to be maintained by the
assignment by the auditing “ is perhaps the most essential factor in the existence of a public accounting profession.

C/ Due professional care

The third general standards requires due professional care in the conduct of the audit and the preparation of the
audit report this standards requires the auditors to carry out every step of the audit engaging in an alert and
delinquent manner. Full compliance with this standard would run out only negligent act or material omission by the
auditors, of course auditor, as well as members of other professional inevitably make occasional errors in judgment,
but this human element does not justify in difference or in attention to professional responsibilities.

2.6.2 .standards of field work-accumulating evidence

A/ the work is to be adequately planned and assistants any one to be properly supervised

B/A sufficient understand of the internal control structure is to be obtained to plan the audit and to determine the
nature timing, and extent of tests to be performed,

C/ sufficient complete evidential matter is to be obtained through inspection, Observation, inquires and confirmation
to afford reasonable basis for an opinion regarding the financial statements under audit.

2.6.3 THE REPORTING STANDARDS

A/ the report shall state whether the financial statements are presented in accordance with general accepted
accounting principles.
B/ the report shall identify those circumstances in which such principles have not been consistently observed in the
current period in relation to the preceding period

C/ informative disclosure in the fanatical statements are to be regarded as reasonably adequate otherwise stated in
the report

D/the report shall either contain an expression of opinion regarding the financial stamens, taken as a whole/ or an
assertion to the effect that an opinion cannot be expressed. When an overall opinion cannot be expressed the reasons
therefore should be stated in all Cass where an auditor name is associated eighth the financial statements, the
auditor‘s examination, and the degree of responsibility he. Is taking.

(Walter B. melts and o. Ray Whittington: principle of auditing. 9th Ed. )

2.7 internal auditor’s interest on internal control

A key objective of the internal auditor is to review the corporation’s system of internal control and to
provide assurance that the corpora requirements are being met the internal audit function should be
objective and adequately resourced to provide the board with much of the assurance it requires regarding
the effectiveness of the system of internal control.

To provide assurance in tern t earns audit need to ensure that:

 the controls in place are adequate to safe guard ETC against identified risks
 The controls are operating effectively. Thus internal controls are fundamental to the work of
internal auditors.
2.8 Limitation of internal control
Internal control system should be designed and operated to provide reasonable assurance that
corporation’s objectives are being achieved. The concept of reasonable assurance recognize that the
cost of corporation’ internal control system should not expected benefits to be derived.

The necessity of balancing the cost of control with the related benefit requires considerable estimation
and judgment on the part of management. The effective of any internal control system is subjected to
certain inherent limitation. May be made in yes performance of control as result of miss understanding of
instructions, mistakes of judgment.Carelessness, detraction or fatigue. In addition without active
privation be the board of managements and effective internal audit, a unit department, top management
can easily award internal control. How eve

Activates are dependent up on serration of but is it may be circumvented collusion among employees.

2.9. Internal audit procedures

 Common approach to evaluate effectives is to compare costs and benefits after completion activities
the presumption is that any changes in costs or benefits attribute to introduction of actives such changes
thereby help measuring program or operating effectiveness.

To effectively evaluate affiance the primary requirements is collection of information related to costs
and benefits of selected approaches budgeted expectations and available in this manner bench marking
helps for assessing efficiency the following are audit procedures that should be followed during value for
money /VFM/ of performance audit

Review previous years audit working papers to see if there are useful points noted about value or money
auditor /VFMA/

Fill internal control untruly questionnaire for value for money

Examine books documents. Letters .minutes audit reports and other relevant documents that have
relation with VFM audit.

Evaluate each unit lecithin the corporation with regard to their contribution in the fulfillment of etc
objectives

Assertions the administrative control were exercised in accordance with corporation’s regulation and
low

Ensure that strategic business units properly:

Safe guard its assets

Compliance with existing procedures and regulation issued by corporation maintains economic efficient
system of management existing resources

Evaluate the work of projectors programs from the start to their end sate

Make physical observation to ensure information flow and work flow are incompliance with the
prescribed directives and manuals

Collect relevant internal and external information the users of services /customers/and measure their level
of satisfaction and compare with the year stick /bench mark prepare temporal file to keep relevant
working paper for audit working carried out prepare or up- date permanent file to keep basic documents
for audit

(Etc manual,2005,p.172-175)
 CHAPTER –THREE

3. COMPANY PROFILE, ANALYSIS AND PRESENTATION OF DATA

3.1. COMPANY OROFILE OF ETC WEST GOJJAM IN FINOTE SELAM TOWN

The introduction telecommunication service in Ethiopia dates back to1984 Ethiopia

Telecommunication Corporation is the oldest public telecommunication operator /POT/ in Africa in those
years. The technological schema was contributed to integration of the Ethiopia society when the
extensive open wire line system was laid out linking the capital with all the important administrative
cities of the country.

The company was placed under government control at the binging of twentieth century and was later
brought to operate under the minister of post and communication in 1952 telecommunication services
were separate from postal administration and structure under of transport and communication /today
ministry of transport and communication /today ministry of infrastructure/.

After the telecommunication net work destroyed during ethio-Italy war Ethiopia recognized the
telephone, telegraph and postal services 1941 it also establish the imperial board of telecommunication of
Ethiopia /IBTE/ by the proclamation No 13/52 in 1952 the board had full financial and administrative
autonomy and was In charge of the provision and the expansion of telecommunication services in
Ethiopia.

The imperial board of telecommunication of Ethiopia which became the Ethiopia telecommunication
authority in 1981, was placed in charge both the operation and regulation of telecommunication service as
in market reform by regulation number 10/1996 of the council of minister set up the Ethiopia
telecommunication corporation ETC then has taken responsibility of to operator a public enterprise with
the principal duty of maintaining and expanding telecommunication services in the country and prevision
of ETA which is a separate regulatory body founded by proclamation number 49/1996 establishing the
Ethiopia telecommunication agency /ETA/ which has objective of promoting the development of “high
quality efficient deemed by the regulation that ETC is the sole operator of any telecommunication related
services including the provision internet and public phone.

After the company had started operate under the ministry of postal and communication, by establishing
imperial board of telecommunication of Ethiopia /IBTE/, by proclamation no.131/52,in 1952,IBTE
started to expand communications services throughout the country. Due to this reason the company was
established its agency as west go jam Finote selam town in 1985,to expand and facilitate communication
services in the Finote selam of Ethiopia.

West Gojjam Finote selam currently been exerting extensive and compressive efforts to satisfy the ever
increasing demand of telecommunication services all over the region. In addition to these the project that
enables all woreda, administration center to be reached by providing integrated services of voice, data and
image in near completion, and connecting Ethiopian to the future. The west Go jam Finote selam town
performed and applies the ETC objectives as an agent. In order to accomplish the above objective
adequate coordination of human resources and internal control for efficient, effective and proper
utilization of corporation’s resources is needed. Before dealing with the central issues of this chapter, it is
better to have a short look of the next table, which shows the nature of the respondents.

3.2. OVERVIEW OF THE SAMPLE POPULATION

Table 1

Respondents Sample population Responses %

Employees’/internal auditors 20 18 90%
Total 20 18 90%
Sources: - implied form questionnaire

In the above table, there is a certain observation about respondents taken as vital sources of
information in this study.

These survey questionnaire were distributed to 20 employees out of those 15 questionnaires,13{86.6 %}

have been returned, and 2{13.33 %} have not been returned. Generally, about different facts of the study.
Moreover, the following table my help for further collaboration for the background information about the
respondents of the study.

3.3 BACKGROUND OF THE RESPONDENTS

TABEL 2:-

No Statement responses
No %
1 Age - -
Below 30 years------ 9 50%
30-40 years ---------- 5 28
41-50 years ---------- 3 16
Above 50 years ----- 1 6
Total 18 100%
2 Gender - -
Male 15 83
Female 3 17
Total 18 100%
3 Educational background - -
10+3 0 0
12+3 3 17
 10+1 0 0
MA or MSC 1 6
BA or BSC 14 77
Total 18 100%
As it can be seen in the above table 2, for question on the highest number which consists of 9{50%}
fall in the range below 30 years. These imply the majority of workers are younger age and they can serve
the corporation for long period for the future without near retirement. In the some table for question
number 2, indicate that 15{83%} of the respondents are males and only 3{17%} is female this may be an
indicator of the fact that the participation of women in the internal audit departments is much less than
men.

Regarding the educational background, out of 18 respondents, 14{77%} is BA and 3{17%} is at 12+3
level and 1{6%} is at MA level. The largest proportion of respondent’s qualification is BA level 3{7%}
diploma and 1 at MA level.

Concerning work experience, the majority of respondents 13{72%} have 5 years and above and the rest
of respondents have below 5 years. Therefore, this shows that the internal auditor in the corporation has
sufficient experience to perform their responsibility efficiently, effectively and properly.

3.4 ORGANIZATIONAL ISSUES AND POSSITIONS ASSIGNMENT

TABLE 3:

No Statements response
No %
1 Where is the internal audit department position in your
organization
Corporate level 13 72
Business unit 3 17
Consultant 2 11
Others - -
Total 18 100
Who approves the internal audit character?
Chief executive officer 5 28
2 Chief financial officer 0 -
Board audit committee 9 50
Others 4 22
Total 18 100
What is an internal audit job position ?
Chief executive officer 5 28
3 Manager 0 0
Staff 8 44
Consultant 4 22
Others 1 6
 Total 18 100
What is the scope of internal auditing ?
Financial activities 5 28
4 Operational activities 5 28
Strategic initiatives 4 22
Regulation complains 4 22
Others 0 0
Total 18 100
Who appoints the internal auditors in your organization 1 -
Administrator of corporation 9 50
5 The head of internal audit department 6 33
Ministry of infrastructure 0 0
Others 3 17
Total 18 100

Sources: complained from questionnaire

As it can be seen in the above table 3,or question number 1,out of 18 respondents, 13(72%) responded
that the internal audit department is positioned at corporate level,3(17%) and 2(11%) respondents were at
business unit and consult level respectively. The majority of the responses show that the internal audit
department has sufficient autonomy for implementation of their professional services.

In the same table for question number 2, about the statements who should approve the internal audit
character, the result support that the majority of the respondents have responses 9(50%) responded that
internal audit character approves the board audit committee,5(28%) and 4(22%) responses were at
approves chief executive officer and others respectively regarding the statements of who approves the
internal audit character. The desired preferences for internal audit character approval by the board of
audit committee would have greater.

In the same table for question number 3, about statement of what is the internal audit job position, out of
18 respondents 8(44%),5(28%),4(22%) and 1(6%) have responses of staff, chief executive officer,
consultant and others respectively. This result imply that, the majority of internal audit job position is
staff level and it shows that the internal audit has no sufficient authority to do something confidentially
out the willingness of the authorities body.

In the same table for question number 4,about the statement of what is the scope of internal auditing, out
of 18 respondents 5(28%) of the responses for both financial activities and 4(22%) have the responses for
both strategic initiative and regulation compliance.

In the same table for question number 5, about the statement of who appoints the internal auditors, out
of 18 respondents, 9(50%), 6(33%), and 3(17%) respondents for administration of the corporation, the
head of internal audit department and other respectively. The result support of significant preference for
the administrators of the corporation and decreased for the preference of the head of internal audit
department is not significant. The result shows that however appoint the internal auditors as far as they
perform their job properly without any interference, they can detect any miss leadings practice.
3.5. INTERNAL AUDIT INDEPENDECE AND MANAGEMENT RESPONSE

TABLE 4:

No Statement Response
No %
1 Are internal auditors free conflicting duties and able to investigate any
area?

Yes 12 77
No 2 11
Sometimes 4 22
Total 18 100
2 The majority risk facing internal auditors
lack of experience 5 28
Lack of management respect 4 22
Lack of opportunity for professional development 5 28
Domination by dishonesty management 4 22
Total 18 100
3 Dose senior management respond positively to internal auditor findings
and recommendations?
Yes 4 22
No 2 11
Sometimes 12 77
Total 18 100
4 Are internal auditors independent of operational management?
Yes 10
No 4
Sometimes 4
Total 18 100
5 Does line management routinely seek internal audit assistant and advice?
Yes 2 11
No 2 11
Sometimes 14 78
Total 18 100

As it can be seen in the above table number 4,for question number 1,about the question are internal
auditors free from conflicting duties and able to investigate any area Out of 18 respondents,12(77%) of
the respondents says that yes,2(11%)says no and 4(22%) says sometimes. According to the respondents
response the largest proportion of the responses shows that the internal auditors are free from conflicting
duties and are able to investigate any areas. Therefore, this result shows, the internal auditor could
investigate any miss leading conditions in unbiased and impartial manner.

In same table question number 2, about the question of what are the major of the respondent’s risks
facing internal auditors? Almost the majority of the respondents replied all lack expertise management
respect, opportunity for professional development and domination by dishonest management. This result
implies that the internal auditors have major bottle neck to perform their professional work in proper
manner.

In the same table question number3,about the question of does senior management responds positively
to internal audit findings and recommendation Out of 18 respondents 12(77%) says some times,4(22%)
says yes and 2(11%)sys no. This result shows that the relationship between senior, management and
internal audit department are not smooth and they are not accomplishing their work in a state of
corporation. Therefore, this affects the overall company operational performance and bottle neck for
development.

In the same table question number 4, about the question are internal auditor’s independents of
operational management? Out of 18 respondants,10(56%) says yes,42(22%) says no and 4(22%) also
says sometimes, this result shows that the majority of the respondents replied internal auditors are
independent of operational management and it implies they can perform their professional practice
without any intervention in the regular operational activities.

In the same table question number 5 about the question does line management routinely seek internal
audit assistant and advice the majority of the respondents 14(78%) indicate that the line management
seek internal audit assistant and advice sometimes. This result implies that the relationship between
internal audit department and line management are weak and could affect the company’s operational
efficiency and effectiveness.

3.6. INTERNAL AUDIT RESPONSIBILITY ASSINGMENT

Table 5:

No Statement Responses
 No %
1 To whom does the internal audit presently reports?
Chief executive officer 7 39
Chief financial officer 0
Board of audit committee 11 61
Others 0
Total 18 100
2 Internal audit department is responsible to
Chief executive officer 4 22
Chief financial officer 0
Board of audit committee 14 78
Others 0
Total 18 100

Sources: compiled from questionnaire

As it can be seen in the above tables, for question number 1 the question to whom does the internal audit
presently report, the preference for the chief executive officer had even though the differences for chief
financial officer extremely significant. The increased preference for functional reporting to the audit
committee was significance for senior management already was small.

In the same table question number 2, about the statement of the internal audit responsibility or to whom
responsible out of 18 respondants,14(78%) of the majority of respondents show that preference for chief
executive officer was not significant and the decreased preferences for chief financial official officer are
significant.

3.7. INTERNAL AUDIT CONTRIBUTION

Table 6

No Statements
Response
no %
1 The contribution internal audit
To facilitate work performances 5
28
Internal controlling purpose
4 22
Management advisory service
5 28
Other
 4 22
Total 18 100

Sources: compiled from questionnaire

As it can be seen in table 6, fir question number 1, about the statements of the contribution of
internal audit, the proportion for all preferences was almost the same, because from 1
respondents 5(28%) respond to facilitate work performances, 4(22%) for internal controlling
purpose, 5(28) for management advisory services, and 4(22%) for other different purposes.
Therefore this result show the contribution of internal audit was for all to facilitate work
performances, internal controlling purpose and management advisory services.

CHAPTER FOUR
4. CONCLUTION AND RECOMMENDATION

4.1 CONCLUTION

In previous chapters, the related literature review and analysis were presented conclusion of
the study recommendation made are presented to in this chapter. This research paper has used
survey questionnaires to examine audit internal audit independence and practice ETC in
addition the internal audit independence and practice , competence, objectivity ,and work
performance of internal auditors and possible factors that influence the internal audit efficiency,
effectiveness, and the overall performance.

1. Strength
- Educational background of the employees of thaw organization are all most all are BA and
BSC. This shows an organization has well educated man power.
- Work experience of the employees is more than those five years. This also shows the
organization has employees whose have good experience.
 -The organization can achieve its objectives effectively and effectively through
experienced employees.
- The internal audit is responsible and reports to audit committee and have relatively good
independence status form operational management.
2. Weakness
- The analysis of this study indicates that the internal audit is facing a risk of lack of
expertise lack of management respect lack of opportunity for professional development
and domination by dishonest management therefore these all factors hinder the internal
audit s to performs their professional work in a no manner.
- Moreover, the senior management did not respond positively to the internal audit findings
and recommendations, this result show that the relationship between management and
internal audit department was not good condition and they were not accomplishing their
work in collaborative way consequently, this affects the overall company’s operational
performance in general and internal audit effectiveness, efficiency, proper utilization of
company’s resource in particular.
- Although, the internal audit is responsible to audit committee and have relatively good
independence status from operational management, there is a risk that information.
- Over load could occur unless the operational reports are summarized with all options to obtain
more detail. The other serious problem would be the line management did not seek routinely the
internal audit assistant and advisor. This result implies that the line management would be ready to
work in cooperation with the internal audit department, and they are not ready to accept the
internal audit and recommendations. As a result all the above investigated problems would affect
the cooperation’s operational performance in general and the internal audit efficiency and
effectiveness in particular and therefore, this cumulative effect may paralyze the corporation’s
future and proper utilization of resources.

4.2. RECOMMENDATIONS

Internal auditors should enhance their knowledge, skills and other competencies through
continuing professional development, training and professional qualification by internal auditor
communicate senior in the line management, the responses on internal audit findings and
recommendations would be positive and also seeking for internal auditor assistant and advice would
increase and result in improved audit efficiency and effectiveness.

Good communication could insure both parties stay focused on improving audit coverage in the
organization. Internal auditors being a major stoke holder of the corporation under the audit, they should
take initiative to communicate with the management. It was found that there is lack of willingness by
company management to work in coordination with internal auditors.

Even though the regular task of internal audit, the internal audit should reassess the following
fundamental point that be the cause for unfavorable relation with the corporate management:

Internal audit should operate with a formal charter approved by the chief executive or by audit
committee.
Internal audit should regularly receive line management request and advice:
Internal audit should consult with executive and line management to identify critical business process and
key business risks:
Internal audit should computerize of qualified auditors from diverse background;
Internal auditors use the latest technology for planning, testing and reporting.
Internal audit should routinely capture and report information on performance effectiveness and
operational efficiency.

IN ORDER TO AVOID PROBLEMS AND MISSCOMMUNICATION WITH INTERNAL AUDIT, THE

CORPORATE MANAGEMENT SHOULD FOLLOW AND ACTION REQUIRED:

-Executive management should have a formal monitoring and career planning program for internal
audit stuff:
-The corporate management should arrange continuing professional development plan for internal
audit:
-The audit committee should monitor the skill and qualification mix of internet audit staff against
agreed competencies:
-Senior management should respond positively to internal audit findings and recommendations:
-Line management should routinely seek internal assistant and advice:

BIBLOGRAPHY

- ANVINA ARENS AND SEMESK. LOEBBCKE: Auditing 8TH ed, 1991.

- Howard F.stettier: Auditing principle 4th ed, 1980.

- Kamal Gupta and ashok Aropa Fundamental of auditing six reprint

2002,TATA Mc GrowHill publishes.

- WALTER B. MELGS AND O.RAY WHITTINGTON: principle of auditing

9TH ed.

- Internal audit training manual,(2005),federal audit general office

This questioner’s has been prepared to get information on internal audit independences and
corporate governance (a case study on west gojjam in Finote selam)

Promise you that all data will be kept confidential and use for academic purpose only.
Therefore, request you to respond to each questionnaire genuinely and honesty.
Remark: - A. please read questions and ticks your response that most reflected your answers.

B. no need of writing your name

PART 1: - RESPONDENTS PERSONAL DATA (OPTIONAL)

1. General information
A. Age below 30 years 41-50 years
30-40 years above 50 years

B. Gender male Female

C. Audit experiences (in year)
Below five years five years
Above five years

2. EDUCATIONAL BACK GROUND

10+3 12+3 10+1 MA MSC BA BSC

PAR 2:- ABOUT ORGANIZATIONAL ISSUES AND POSITIONS ASSIGNMENT

3. Where is the internal audit department position in your organization ?

Corporate level consultant Business unit others ……………………..
4. in your organization who approves the internal audit character ?
Chief executive officer chief financial officer Board of audit committee
Others …………..

5. What is an internal audit job position?

Chief executive officer management staff consultant
Others………….

6. What is the scope of internal auditing?

Financial activities strategic initiatives operational activities
Regulation complains others ……………..

7. Who appoints the internal auditors in your organization?

 Administrators of corporation Ministry of infrastructure
The head of internal audit department others …………………

PART 3:- ABOUT INTERNAL AUDIT INDEPENDENCY AND MANAGEMENT RESPONSE/

8. Internal auditor free from conflict duties and able to investigate any area?
Yes no sometimes

9. What are the major risk facing internal auditors?

Lack of experience
Lack of management respect
Demand only is dishonest management

10. Does senior management respond positively to internal auditor findings and
recommendations?
Yes no sometimes

11. Is internal auditor independent of operational management?

Yes no some times

12. Dose use manage meant routinely seek internal audit assistant and advice?
Yes no sometimes

PART 4:-ABOUT INTERNAL AUDITOR RESPONSIBILITY ASSIGNMENT

13. To who dose the internal audit presently report?

Chief of executive officer Board of audit committee
Chief financial officer other …………………..

14. To whom is internal audit responsible?

Chief executive officer Chief financial officer
Board of audit committee other…………………

PART 5:- CONTROL ABOUT INTERNAL AUDIT CONTRIBUTION?

15. What is the contribution of internal audit?

To facilitate work performance Management advisory services
Internal controlling purpose others …………………………….