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There is high record of business failure in the entire world today. This problem has ruined the economy of some country (both developed and developing) and is still eating deep in some till now. In most cases, business failure is usually traced to the non-functionality or the internal control system (lCS) put in place by the business management due to the absence/failure or the deficiencies in internal audit functions, which has even made most of the external auditors to lose confidence in the work of the internal auditors. As a result of this, this documented research work is centered on the role of internal auditors on the effectiveness of internal control system in order to look into internal audit role and significance, internal audit challenges and to provide the possible way out in addressing some of those challenges to ensure businesses managements’ success, efficiencies and effectiveness. To this effect, Nestle Nigeria PIc – Otta branch was chosen for consideration. Questionnaires were administered for the purpose of data collection and the proceeds from the respondents (Nestle Nigeria PIc employees) were duly analysed.

Also, interview was conducted at Gbeke Oyeniyi & Co (a firm providing internal audit services for companies in Lagos), for the purpose of determining the positions of other business organizations in relation internal auditors challenges. Some of those challenges were listed as part of the research findings for this work and recommendations were proffered on the possible way out to business managers. This research work was brought to conclusion by advising business managers on how to handle some of the controllable challenges businesses are opened to, in order to ensure business success, its continuity, the restoration of confidence on both immediate and prospective investors, and to assist in restoring confidence in external auditors as to placement of reliance on the work of the internal auditors and thereby contributing to the citizens’ standard of living by providing employments, the national Gross Domestic Product (GOP), the economic growth and development as a whole.




There has been a high record of business failure in the world today; and this usually is as a result of management inefficiency in the area of prevention and detection of fraud and other irregularities. Managements of businesses have taken several measures to combat this problem. Some of these measures among others include: the establishment of –

  • Internal Control System (ICS);
  • Internal Audit Unit (IAU);
  • Total Quality Management (TQM);
  • Team Building; and
  • Organizational Control processes such as policies and procedures

Internal control system is seen as a means of monitoring every other control system in a business organization and it is considered as the most important measure that needs to be strengthened in order to ensure business success.

Internal auditors as an instrument in the hand of the management, and through the Internal Audit Unit (IAU), have been making effort in ensuring the effectiveness of the Internal Control System (ICS), monitoring of every other control measure put in place by the management as well as the pursuance of the actualization of the organisational goals and objectives.

Internal auditors, in discharging their responsibilities, are facing some challenges which make their work so rigorous and contribute to the failure of the Internal Control system (lCS) objectives and the overall business organization) goals and objectives. The questions here are;

  • How are the internal auditors able to discharge their duties in ensuring Internal Control System effectiveness?
  • What are the challenges facing internal auditors in discharging their duties?
  • And, what must be done address the problems of internal auditors in ensuring business success?

Internal auditors· have been playing a very great role in contributing to management effectiveness and efficiencies; and therefore seen as the pillar upon which the Internal Control System rest.


Internal Control system’s failure is the key problem to most of the failing businesses. This usually is as a result of management failure in setting up a strong Internal Control System; ineffectiveness of the established Internal Control System or non-issuance of absolute power to internal auditor in ensuring its effectiveness. This has made several businesses to have records of low productivity; poor product quality; low sales record: false/unfair account statement; poor business performance as well as slow growth rate which in turn contribute to greatly to business failure. The following are some of the factors challenging the functionality of the internal auditors;

  • Incompetency/Negligence of internal auditors;
    • Failure to separate the Internal Audit Unit (IAU) from accounting department
    • Internal auditors involvement in fraud
    • Management involvement in fraud
    • The role of godfather/Abusive use of authority
    • Internal auditors independence level
    • Internal auditors’ motivations/remuneration.


In order to have a clear definition of direction, this research work will be aimed at identification of:

  • The role of internal auditors on the effectiveness of the Internal Control System in an organization;
  • Factors contributing to the challenges of internal auditors in discharging their duties;
  • And the possible way out of addressing the problems of internal auditors, ensuring the absolute functionality of the Internal Audit Unit (lAU) on Internal Control System effectiveness.


The following are the research questions formulated as a guide in the course of this research work;

i.      Are the services of internal auditors needed in an organization?

ii.   Would the absence of internal auditors have effect of the organisational Internal Control System?

iii.    Should the Internal Control System of an organization be          strengthened?

iv.   Should the internal audit department (Internal Audit Unit) be       separated from other department in the organization?

v.     Should internal auditors focus only on accounting records and leave every other business aspect?

vi.     Should internal auditors in an organization be independent?

vii.    Should Management ensure internal auditors’ independence?

viii.   What can you say about management effort in ensuring internal control system effectiveness?

ix.    Do internal auditors in an organization need to be well motivated and remunerated in ensuring their full commitment?

x.     Do internal auditors need to be employees of the organization?

xi.    Should internal auditors in an organization be professionally certified?


In effecting this study, the following statistical hypothesis are formulated as research hypothesis, to guide in the provision of tentative solutions to the highlighted problems and challenges facing internal auditors in ensuring the internal Control System effectiveness.

•       Null Hypothesis                        (Ho)

•       Alternative Hypothesis              (HI)

i.      Ho – That the services of internal auditors are not needed in an organization.

Hi – That the services of internal auditors are needed in an organization.

ii.     Ho – That the absence of internal auditors will not have effect on the Internal Control System (ICS) effectiveness.

Hi – That the absence of internal auditors will have effect on the Internal Control System (lCS) effectiveness.

iii.    Ho – That Internal Control System need not to be strengthened.

Hi – That Internal Control System need to be strengthened.

iv.     Ho – That internal auditors in an organization need not to be professionally certified.

Hi – That internal auditors 10 an organization need to be professionally certified.

v.     Ho – That the internal auditors should not be independent in an organization.

Hi – That the internal auditors should be independent in an organization.

vi.    Ho – That management should not intensify effort in ensuring Internal Control System effectiveness.

Hi – That management should intensify effort in ensuring Internal Control System effectiveness.

vii.   Ho – That management should not ensure internal auditors independence.

Hi – That management should ensure internal auditors independence.


Owners, who are the investors and the providers of capital of businesses, have suffered from different forms of problems as a result of management inefficiency (ices); and of which has been the reason for failure of some prospective investors from investing their resources on businesses today. Some of these problems include;

  • Loss of invested fund and request for fund (money) on liquidation, arising from total business failure upon which the investors may be called to provide more· fund in setting the business indebtedness to its creditors;
    • Non-declaration of/inconsistent dividend payment as a result of poor business performance; and
    • Poor growth on capital and continuous falling in market share due to management incompetence and other irregularities surrounding business operation.

External Auditors, whose work are concerned with investigating and formulating opinion on the true and fair view of the companies’ financial statement; find the scope of their work more widened in organizations where reliance cannot be placed on the work of internal auditors; as such case will requires very deep investigation as if the presence of the internal auditors are not felt.

In order to provide ways of preventing the occurrence of the above pose challenges, effort will be made on this research work to assist in restoring back confidence in both immediate and prospective investors’ mind on the securities on their investment on businesses, and also the external auditors in placing reliance on the work of internal.


This research work will be focused on the role of internal auditors on the effectiveness of Internal Control System (lCS), by considering how relevant are internal auditors in

Nestle Nigeria Plc Otta Branch.

Also, it will cover the scope of

  • Addressing the problems of internal auditors;
  • Providing external auditors with measures in placing reliance on the work of internal auditors and the Internal Control System (lCS):
  • Building the investors’ confidence in business managers (management).


Lack of enough data requirement is one of the major problems facing or confronting research work in the developing country like Nigeria. The data gathered in most cases, are not only inadequate but also, they are grossly unreliable.

Also, another problem that serves as limitation for this research work is the time constraints. The time required to carry out this research work is limited than ideal for the study, and will in tum not ensure deep investigation on the subject matter and thereby reducing the scope to what can be achieved within the time frame.

Finance, which is the most important recourse in any research work is another limitation of this study. A good and successful research work requires high financial commitment, so as to access larger aspect of the population under consideration and to be able to generalized findings on the entire population.


In the course of this research work, there are some terms and concept whose meanings are not obvious in the context of the study: the meaning of which are to be explained under this heading.

Various terms and their definitions:

  • Auditing: The independent examination and expression of opinion on, the financial statement of an enterprise by an appointed auditor in pursuance of that appointment and in compliance with the any relevant statutory obligation.
  • Adequate Control: Present if management has planned and organized (designed) in a manner that provides reasonable assurance that the organization’s risks have been managed effectively and that the organization’s goals and objectives will be achieved efficiently and economically.
  • Board: A board is an organization’s governing body, such as a board of directors, supervisory board, head of an agency or legislative body, board of governors or trustees of a contained within the risk tolerances established by the risk management process.
  • Engagement: A specific internal audit assignment task or review activity, such as an internal audit, control self-assessment review, fraud examination, or consultancy. An engagement may include multiple tasks or activities designed to accomplish a specific set of related objectives.
  • Finance: This is the activity that involves provision of fund or money to where and at when needed.
  • Fraud: Any illegal act characterized by deceit concealment or violation of trust. These acts are not dependent upon the threat of violence or physical force. Frauds are perpetrated by parties and organizations to obtain money property, or services; to avoid payment of loss of services; or to secure personal or business advantage.
  • Government: The combination of processes and structures implemented by the board to inform, direct manage and monitor the activities of the organization toward the achievement of its objectives.
  • Management: This is the process of the organizing and controlling of the affairs of a business or a sector of a business.

• Risk: The possibility of an event occurring that will have an impact on the achievement of objectives. Risk is measured in terms of impact and likelihood.

•   Standard: A professional pronouncement promulgated by the Internal Audit Standards Board that delineates the requirements for performing a broad range of internal audit activities, and for evaluating internal audit performance.

This material content is developed to serve as a GUIDE for students to conduct academic research

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