THE USE MANAGEMENT AUDIT AS A TOOL FOR ACHIEVING ORGANIZATIONAL OBJECTIVE (A STUDY OF EBONYI STATE TRANSPORT CORPORATION (EBOTRANS), ABAKALIKI)

ABSTRACT

Management audit is an audit that evaluates the efficiency of management at all levels throughout an organization with a view to recommend improvement in areas where effectiveness is not assured. The study sought to examine Management audit as a tool for achieving organizational objective, a study of Ebonyi State Transport Corporation (EBOTRANS), Abakaliki.Here in this study, focusing on 95 filled up survey questionnaires by both Management and Staff drawn from various Departments of Ebonyi Transport Corporation, Abakaliki Metropolis, in determining the following specific objectives, Management audit on the level of fraud and misuse of funds,income level and efficiency and transparency on accounts record keepingEbonyi State Transport Corporation (EBOTRANS). From the chi-square test conducted it has found that; Management audit significantly affects the level of fraud and misuse of funds, income leveland efficiency and transparency on account records, which was proven by the calculated values of 81.1, 188.7 and 182.7 being greater than the critical value of 9.488. the study The only sure way to ascertain whether the management is managing well, is by using the relevant tools for effective management in carrying out functions. The ascertainment of the degree of effective performance by management is not just through internal audit. Statutory audit should as well include the use of management audit process as a tool for improving managerial efficiency, this will go a long way to ensuring the achievement of the company’s overall or corporate objectives. And the following recommendations were made, that the organization controlling functions of management should be properly recognized and regularly appraised to detect the bottlenecks and remove the coy in the wheel of progress of the company and the powers and duties of the company’s internal audit department and external observers should be reinforced to facilitate its being more effective.

CHAPTER ONE

INTRODUCTION

1.1 Background of Study

Management audit aids the management of an organization by providing it with information and analysis useful for the process of control. A management audit is a systematic and comprehensive examination of an organization’s management processes, policies, and performance, aimed at evaluating the efficiency and effectiveness of managerial activities at all levels with a view to recommending improvements in areas where effectiveness is not assured (Eze, 2001; Al-Taee & Flayyih, 2023). Unlike financial audits that focus primarily on financial statements, management audit examines both financial and non-financial data to appraise how well management is operating the business of the organization (Johnsen, 2022).

For many years, stockholders, financial analysts, potential investors, and other interested parties have been concerned with the annual reports of major corporations. There has long been a need for an additional method through which outsiders can evaluate the performance of management, beyond the traditional financial audit. The theory of management audit parallels that of financial audit in that it seeks the attestation of management’s representations by an independent examiner. Auditing, broadly conceived, is a technique that gives management an overall picture of how the organization’s resources are utilized and how services within the organization are being provided (Al-Taee & Flayyih, 2023). On the basis of financial statements, shareholders or potential investors evaluate the performance of a company in financial terms net profit, earnings per share, and so forth. Likewise, management audit is a way of evaluating management performance in regard to the decisions made, the efficiency of operations, and the attainment of corporate goals.

The effective implementation of internal audit systems, including management audit, has been shown to improve the comprehensive performance level of enterprises and promote long-term stable organizational development (Alzeban & Gwilliam, 2014; Madawaki et al., 2022; Alqudah et al., 2023). Senior management plays a significant role in supporting and activating audit functions, which contributes to enhanced organizational performance (Madawaki et al., 2022). Recent empirical evidence further confirms that the presence of an internal audit function (IAF) can reduce median losses from fraud by as much as 33% (Association of Certified Fraud Examiners [ACFE], 2022), underscoring the pivotal role that audit mechanisms particularly management audit play in safeguarding organizational assets.

A major challenge in implementing a management audit is related to the selection of audit personnel. Auditors must be competent in background, experience, and professional ability, and must also demonstrate an ability to deal successfully with human relations problems. The natural feeling of someone being audited is one of defensiveness; therefore, better auditors will establish pre-audit conditions expressing their willingness to discuss evaluations with affected personnel before reporting to higher management. This negotiation-discussion process can evolve such that those concerned begin to view the audit as a mechanism through which weaknesses may be pinpointed and their performances improved.

Most management decisions are based on financial, quantitative, and qualitative information obtained from business records. For best decision-making, this information must be relevant, timely, and accurate. Strong internal control systems, incorporating human resources and information technology, are designed to help organizations meet specific objectives and play a critical role in guiding, supervising, and measuring organizational resources, as well as preventing and detecting irregularities (Sofyani et al., 2022). There must also be a clear structure of authority defining the responsibilities of each official or department, and special duties should be assigned to staff with relevant skill and experience. It is in this process and context that management audit assumes significance.

With the implementation of management audit, the management of organizations becomes more openly accountable for their actions to outside observers. This accountability is increasingly recognized as an instrument for reducing corruption at all levels of the public sector, as a lack of transparency and accountability presents a major risk to the efficiency of capital markets, financial stability, long-term economic sustainability, and economic growth (Appah et al., 2021). Public sector audits, which encompass management audit processes, are essential for identifying corruption risks, enforcing financial discipline, and informing evidence-based policy (Ahmed, 2022). This research investigates the extent to which management audit is applied by organizations in Nigeria for management performance evaluation, with a specific focus on Ebonyi State Transport Corporation (EBOTRANS), Abakaliki.

1.2 Statement of the Problem

In organizational systems, management audit is not only intended to maintain adequate methods of processing accounting data but also to safeguard organizations against possible financial loss due to fraud or errors. Despite this recognized importance, a significant gap persists in the consistent application of management audit tools, particularly in public sector corporations in Nigeria. The high level of corruption in the Nigerian public sector is frequently linked to failures in auditing, including the absence of value-for-money assessment and weak enforcement of audit findings (Odia, 2022).

Every management audit, no matter how efficiently implemented, is likely to generate human relations problems for the firm concerned. A generally receptive management attitude must exist throughout a firm if an audit is to prove effective. If an audit is imposed by a dictatorial management, the chances for success are slim. Line management must not fear the audit nor look upon it as a threat to job security. Where such attitudes exist, the audit is open to sabotage at numerous phases, and results will lack the needed credibility. Organizational politics, inadequate staffing, lack of training, and unclear reporting structures often limit the reach and impact of internal audits (Castellani & Nuralisa, 2022). Internal auditors sometimes face pressure from senior management, compromising their objectivity and ability to report fraudulent activities, while cultural resistance to fraud reporting and insufficient access to sensitive information further weaken audit effectiveness (Rustiarini & Merawati, 2024).

There are many problems affecting management audit in organizations. These include poor internal control systems, inadequate training and retraining of staff, bad management practices, staff negligence, inadequate knowledge and experience, and poor remuneration. Furthermore, when appropriate recognition is not accorded to the internal audit department, the status of its head becomes inferior to that of other departmental heads, undermining the department’s authority, power, and responsibility. A systemic commitment across all organizational levels is required to strengthen the internal audit function; only through coordinated efforts can internal auditors serve as a cornerstone of sustainable fraud prevention and financial management (Fathoni et al., 2022). It is against this backdrop that this study examines management audit as a tool for achieving organizational objectives in EBOTRANS, Abakaliki.

1.3 Objective of Study

The main aim of this research is to critically examine the use of management audit as a tool for achieving organizational objectives, using Ebonyi State Transport Corporation (EBOTRANS), Abakaliki as a case study. The specific objectives are as follows:

1. To ascertain the impact of management audit on the level of fraud and misuse of funds in Ebonyi State Transport Corporation (EBOTRANS) in Ebonyi State.

2. To find out if management audit significantly improves the income level of Ebonyi State Transport Corporation (EBOTRANS) in Ebonyi State.

3. To determine the impact of management audit on efficiency and transparency in accounts record keeping in Ebonyi State Transport Corporation (EBOTRANS).

1.4 Research Questions

4. How does management audit affect the level of fraud and misuse of funds in Ebonyi State Transport Corporation (EBOTRANS) in Ebonyi State?

5. Does management audit significantly improve the income level of Ebonyi State Transport Corporation (EBOTRANS) in Ebonyi State?

6. How can management audit be used to achieve efficiency and transparency in account records of Ebonyi State Transport Corporation (EBOTRANS)?

1.5 Research Hypotheses

H_o1: Management audit does not significantly affect the level of fraud and misuse of funds in Ebonyi State Transport Corporation (EBOTRANS) in Ebonyi State.

H_A1: Management audit significantly affects the level of fraud and misuse of funds in Ebonyi State Transport Corporation (EBOTRANS) in Ebonyi State.

H_o2: Management audit does not significantly improve the income level of Ebonyi State Transport Corporation (EBOTRANS) in Ebonyi State.

H_A2: Management audit significantly improves the income level of Ebonyi State Transport Corporation (EBOTRANS) in Ebonyi State.

H_o3: Management audit cannot be used to achieve efficiency and transparency on account records of Ebonyi State Transport Corporation (EBOTRANS) in Ebonyi State.

H_A3: Management audit can be used to achieve efficiency and transparency on account records of Ebonyi State Transport Corporation (EBOTRANS) in Ebonyi State.

1.6 Significance of the Study

This study explores management audit as a tool for achieving organizational objectives, using Ebonyi State Transport Corporation (EBOTRANS), Abakaliki as a case study. It will be of great benefit to the following groups:

• Government: The findings will be useful to government in adopting and implementing effective economic policies that boost the management of public corporations in Ebonyi State. Public sector audits are increasingly recognized as essential for identifying corruption risks and enforcing financial discipline (Ahmed, 2022).

• Management: The study will provide information for apex policymakers and management boards to fashion dynamic and reliable reforms that accelerate the performance of firms through management audit, with specific reference to EBOTRANS, Abakaliki.

• Investors: This study will serve as an eye-opener to foreign, local, private, and public investors in properly ascertaining which sectors of the economy yield better returns in order to maximize their return on investment in Ebonyi State.

• Academic Field: This study contributes to the body of literature on management audit as a tool for achieving organizational objectives and provides a reference point for future researchers in the field.

1.7 Scope of the Study

The study is designed to examine the use of management audit as a tool for achieving organizational objectives, using Ebonyi State Transport Corporation (EBOTRANS), Abakaliki, Ebonyi State as a case study. The study focuses on three key dimensions: the impact of management audit on fraud and misuse of funds, income level improvement, and efficiency and transparency in accounts record keeping, within EBOTRANS.

1.8 Limitation of the Study

Like many research projects of its kind, this study was constrained by several limiting factors. In terms of finance, the cost of transportation in search of data was exorbitant, and the overall financial landscape of the study was challenging given its nature as a degree research project. With respect to time, the study was carried out concurrently with school activities, and the relatively short period available for research meant that a more comprehensive analysis was not possible. Additionally, data collection presented difficulties, as some respondents were reluctant to provide information. Notwithstanding these limitations, the study remains a significant contribution to the understanding of management audit as a tool for achieving organizational objectives, using Ebonyi State Transport Corporation (EBOTRANS), Abakaliki as a case study.

1.9 Definition of Operational Terms

Appraisal (Performance Appraisal): The process during which the progress, performance, results, and sometimes the personality of an employee are reviewed and assessed by their immediate superior and, in many instances, by other senior managers.

Financial Statement: A necessary part of every business that shows the financial status and progress of a company. These statements are of interest to managers, owners, creditors, employees, and other stakeholders concerned with the organization.

Investment: Stocks, bonds, or other property that a company has purchased with the expectation of a financial return.

Investors: Prospective businessmen and businesswomen who are financially positioned with the intention of promoting the financial ability of a company.

Management Audit: A systematic examination of decisions and actions of management to analyze organizational performance, involving the review of managerial aspects including organizational objectives, policies, procedures, structure, controls, and systems in order to assess the efficiency or performance of management over the activities of the company (Al-Taee & Flayyih, 2023).

Transparency: The quality of being open and accountable in the conduct of financial affairs and organizational operations, ensuring that stakeholders have access to accurate and reliable information about the organization’s activities (Nwankwo & Chukwudozie, 2023).

Fraud: An intentional act involving the use of deception to obtain an unjust or illegal advantage, including misappropriation of assets, financial statement fraud, and corruption (ACFE, 2022).

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