1.1 Introduction
Internal audit is defined as an independent, objective assurance and consulting activity designed to add value and improve an organisation's operations (Institute of Internal Auditors, 2017). Internal audit is a strategic tool that organisations use to monitor performance, identify areas of inefficiency, and recommend corrective measures. It is not limited to financial review but encompasses operational audits, compliance audits, and risk-based assessments that align with organisational goals. For financial institutions such as Mainstreet Bank of Nigeria Plc, internal audit is vital in ensuring that operational processes are effective, resources are safeguarded, and management decisions are informed by accurate and reliable information (Ene, 2014).
As a prelude to other parts of this study, this chapter will discuss the background upon which this study was initiated, the statement of problems that led to this study, the Aim and Objectives of the study. Others are significance of the study, scope of work, research hypothesis and questions, limitation of the study and definition of terms.
1.2 Background of Study
Internal audit has increasingly become a central mechanism for enhancing organisational performance, strengthening control systems, and ensuring that strategic objectives are achieved. According to the Institute of Internal Auditors (2017), internal audit is an independent, objective assurance and consulting activity designed to add value and improve an organisation's operations. This definition highlights that internal audit is not merely an accounting exercise but a comprehensive process that assesses the effectiveness of governance, risk management, and control processes. Modern organisations, particularly financial institutions, rely on internal audit to identify risks, prevent fraud, and ensure compliance with regulatory frameworks. As financial systems grow in complexity and regulatory scrutiny tightens, the role of internal audit in banks has become more significant (Sawyer, 1995).
Banks occupy a unique position in the economy because they serve as intermediaries for savings and investments, manage risks across various financial instruments, and are subject to strict regulatory oversight. In Nigeria, the banking sector has undergone significant reforms aimed at enhancing transparency, accountability, and financial stability. Researchers have assessed the impact of internal audit in this sector and reported that effective internal audit functions are associated with improved financial reporting quality, enhanced risk mitigation, and protection of stakeholders' interests (Ene, 2014). According to Adeyemi and Fagbemi (2010), internal audit is positioned as an institution's early warning system that alerts management to irregularities and operational inefficiencies before they escalate into systemic failures. In other words, internal audit is not only about compliance with standards but also about fostering a culture of accountability that supports organisational success.
Oghojafor (2016) affirmed that when internal audit is constrained by organisational politics or resource limitations, its capacity to serve as a proactive tool for achieving objectives is diminished. Mainstreet Bank of Nigeria Plc is among the commercial banks operating within this broader regulatory and economic environment. As a financial institution, it is subject to guidelines issued by the Central Bank of Nigeria (CBN) and other regulatory bodies, which require robust internal control and audit functions. According to Mansor and Bahar (2011), banks that integrate internal audit into their strategic planning processes are better positioned to anticipate challenges, manage risks, and achieve sustainable performance outcomes compared to those that treat internal audit as a routine compliance requirement.
According to Mutungi (2018), the success of internal audit activities is determined not only by formal structures and procedures but also by the extent to which management perceives and uses internal audit as a strategic partner in achieving objectives. This perspective implies that internal audit effectiveness is shaped by organisational attitudes, leadership support, and alignment with strategic priorities rather than merely technical compliance with audit standards. It is against this background of theoretical importance, practical challenges, and contextual complexities that this study focuses on Mainstreet Bank of Nigeria Plc.
1.3 Statement of Problems
Investigation revealed that organisations operate in increasingly competitive and complex environments where achieving strategic objectives requires not only effective planning but also reliable mechanisms for monitoring and control. Internal audit is widely acknowledged as a critical function that is expected to improve organisational performance, strengthen governance, and enhance accountability (Sawyer, 1995; Institute of Internal Auditors, 2017). However, in practice, many organisations including financial institutions experience gaps between planned objectives and actual outcomes. Mainstreet Bank of Nigeria Plc, like other banks, faces pressures from regulatory requirements, risks associated with loan portfolios, operational inefficiencies, and stakeholder expectations for sustainable performance.
Furthermore, there is limited locally grounded research that specifically explores how the internal audit function at Mainstreet Bank is integrated into the bank's strategic processes and how this integration influences organisational outcomes. Many studies focus broadly on banks in Nigeria without sufficiently addressing contextual factors unique to individual institutions such as organisational structure, management commitment, or cultural norms affecting audit practices (Adeyemi & Fagbemi, 2010; Agburu & Okoror, 2013). Therefore, there is a clear need to understand the specific problems that Mainstreet Bank of Nigeria Plc is facing with regard to the utilisation of its internal audit function and its contribution to achieving organisational objectives. It is against this backdrop that this study seeks to
1.4 Aim and Objectives of Study
The aim of this study is to investigate the role of internal audit in achieving the organisational objectives of Mainstreet Bank of Nigeria Plc.
The specific objectives of the study are:
- To evaluate the effectiveness of the current internal audit system in Mainstreet Bank of Nigeria Plc.
- To identify challenges and limitations affecting the internal audit function.
- To examine the extent to which internal audit contributes to risk management, compliance, and operational efficiency.
- To determine how internal audit findings are integrated into decision-making and organisational planning.
- To provide recommendations for enhancing the internal audit system to better achieve organisational objectives.
1.5 Research Questions
Based on the objectives, the following research questions are formulated:
- How effective is the current internal audit system in Mainstreet Bank of Nigeria Plc?
- What challenges and limitations affect the internal audit function in the bank?
- To what extent does internal audit contribute to risk management, compliance, and operational efficiency?
- How are internal audit findings integrated into management decision-making and organisational planning?
- What improvements are necessary to enhance the internal audit system for achieving organisational objectives?
1.6 Research Hypothesis
In order to pursue the objective of this study, the following generalized statements have been designed to guide and aids in obtaining the result for the experiment to be conducted. For this work, the null hypothesis will be represented with H0 while the alternative hypothesis will be represented with hypothesis H1.
Hypothesis One
- H0: Internal audit has no significant impact on the achievement of organisational objectives in Mainstreet Bank of Nigeria Plc.
- H1: Internal audit significantly impacts the achievement of organisational objectives in Mainstreet Bank of Nigeria Plc.
1.7 Significance of Study
The outcome of this research will guide management in improving audit practices, ensuring timely implementation of recommendations, and integrating audit outcomes into strategic decision-making. Also, the findings will encourage auditors to adopt a more integrated and value-driven approach, which will elevate their role from routine compliance monitoring to strategic partners in organisational development.
Furthermore, the study will serve as a resource for bank management by identifying factors that enhance the effectiveness of internal audit and areas that require improvement. In addition, this research will benefit internal auditors by emphasising the importance of aligning audit activities with organisational objectives.
Lastly, the research will inform regulatory bodies, including the Central Bank of Nigeria, on how internal audit contributes to sound banking operations and financial stability.
1.8 Scope of Study
The study focuses on Mainstreet Bank of Nigeria Plc, located in Lagos State. The research will examine the internal audit function within the bank, its processes, procedures, and impact on achieving organisational objectives. The scope is limited to the operational and compliance areas of internal audit in the bank and does not extend to external audits or other financial institutions in Nigeria.
1.9 Limitations of the Study
During the course of this study, there were some problems encountered which stood as limitations to the research work. Some of the limitations include:
- Time Constraint: The time frame given to accomplish this project was very short due to school academic calendar and it was carried out under pressure which made the researcher not to implement some necessary features.
- Financial Constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
- Initial Cooperation Delay from Respondents: A particular limitation of this work came as a result of the respondent refusal to offer their cooperation at the initial time they were contacted. This contributed in making the success of this research study difficult.
1.10 Definition of Terms
Internal Audit:
Internal audit is an independent, objective assurance and consulting activity designed to add value and improve an organisation's operations. According to the Institute of Internal Auditors (2017), it evaluates the effectiveness of risk management, control, and governance processes.
Organisational Objectives:
These refer to the strategic goals, targets, and desired outcomes that an organisation seeks to achieve within a given timeframe. According to Adeyemi and Fagbemi (2010), achieving organisational objectives requires alignment of resources, processes, and performance monitoring.
Risk Management:
Risk management involves identifying, assessing, and mitigating risks that may hinder an organisation from achieving its objectives. Ene (2014) stated that internal audit plays a critical role in evaluating the adequacy of risk management processes.
Compliance:
Compliance is the adherence to laws, regulations, and internal policies. According to Oghojafor (2016), internal audit is a tool that ensures organisations remain compliant while achieving efficiency and effectiveness.
Governance:
Governance refers to the system of rules, practices, and processes by which an organisation is directed and controlled. Sawyer (1995) affirmed that internal audit is central to strengthening governance by ensuring accountability, transparency, and responsible management practices.
…