The Effectiveness of Internal Audit Department in Metropolitans, Municipals & Districts Assemblies (Mmda’s).

CHAPTER ONE

INTRODUCTION

1.0 Introduction

This chapter consists of background of the study, statement of the problem, objectives of the study, research questions, significance of the study, scope and limitation of the study, definition of terms, and organization of the study.

1.1 Background of the Study

Over the years there have been increased reported cases of mismanagement and misappropriation of public funds and other resources. For instance according to the 31st December, 2006 Auditor General Report on Public Accounts indicated that Ministries, Departments and Agencies failed to provide periodic returns on Departmental Advances (DA) and Departmental Revolving Fund (DRF). As stipulated by the Financial Administration Act (FAA), section 9 (1) requires Accountants to keep proper books of accounts in their various departments and organizations. These Accountants are supposed to make corrections sometimes turn to misappropriate funds and accounts under their custody knowing well auditors will examine their records.

It must be emphasized that it is the responsibility of management to keep proper books of account in accordance with International Financial Reporting Standards (IFRS) and International Financial Accounting Standards (IAS). Realizing this important role, it did not come by surprise that on 31st December, 2003, the Internal Audit Agency Act(IAAA), 2003 (Act 658) was pass by Parliament to co-ordinate, facilitate and provide quality assurance for internal audit activities within the Metropolitan, Municipal, and District Assemblies(MMDA’s).

The globalization of economy, technological advancements, and complexity of business and allegations of fraudulent financial reporting have recently sharpened the ever-increasing attention to internal controls and internal auditing (Karagiorgos et al., 2009). This developing role of the internal auditing is also reflected in its current definition, thus, “internal auditing is an independent, objective assurance and...