Evaluating the performance of an internal control system to enhance the quality of auditing Applied research in Al-Muthanna Governorate

The research aims to evaluate the internal control system's performance to enhance the quality of auditing in economic units. Accordingly, the province of Muthanna was chosen as a sample for the research and the period (2014, 2015. 2016, 2017). The researcher relied on a group of published sources, books, and research on the theoretical side. As for the applied side, a group of methods was relied upon, such as collecting data required from the provincial office and the Financial Supervision Bureau's reports for the years of study. Field observations and visits. As well as personal interviews. The research concluded that no plans had been prepared to draw up the general policy of the governorate and define its priorities in all areas in a way that does not contradict the national development plans, as well as the absence of plans in the field of supervision and control over the functioning of public facilities in the governorate and inspecting them.Consequently, it is necessary to prepare plans to draw up the governorate's general policy and define its priorities in all fields and object to the local council decisions that violate the constitution and laws.


Introduction
To verify the effectiveness and correctness of accounting procedures applied in (Where) it is necessary to follow the most important systems, the internal control system. In recent times, internal control has witnessed a remarkable and essential development because it is an important tool to detect manipulation of public money, fraud, and errors. Internal control is a tool to ensure the application of the accounting procedures used and the best application of general budget. Interest in this system has increased in government units due to a large number of services performed by these units and huge funds that these institutions need in order to achieve the goals set for them through the role that adequate internal control and audit body plays in managing them with the highest level of efficiency and effectiveness and monitoring good management of money used In those offices.
The development in concept of internal control and broadening of its scope and objectives exceeded limits of supervising jobs in accounting and finance departments in service units to include all procedures, means, and methods used in internal organization of these units to achieve the desired goals. The evaluation was conducted in Al-Muthanna Governorate according to rules, standards, and norms adopted in this field, based on explanations, information, and data obtained from the governorate and the information and indicators provided during field visits to departments the governorate.

(Topic One) Research methodology
First: research problem: research problem can be posed in the form of an unanswered question or several questions, as in the following: 1. Are there deficiencies in the performance of the Muthanna Governorate?
2. Does the internal control system in Al-Muthanna governorate suffer from deficiencies due to a lack of interest in evaluating the internal control system?
Second: the objective of the research: The main objective of research is to evaluate the performance of the Muthanna Governorate and to clarify control problems in this system and what are elements of strength and weakness in it, along with finding suggesting appropriate treatments, as it aims to reach internal control bodies for complete freedom in carrying out their work and following laws and instructions and making decisions.
Third: the importance of research: Because of enormity of funds that the Muthanna Governorate deals with, to preserve these funds, and because of the governorate's need for detailed and www.psychologyandeducation.net accurate data, also to facilitate its task in identifying the negative aspects of the internal control system, the importance of need to study and evaluate performance of internal control system emerges.
Fourth: research hypothesis: Based on the research problem, the hypothesis was developed. It is possible to identify strengths and weaknesses, which are as follows: There are deficiencies and weaknesses in performance of the governorate and the performance of internal control system in governorate.
Fifth: Research boundaries: The research is determined spatially over the Muthanna Governorate. As for temporal, the study period is for years (2014, 2015. 2016, 2017).
Sixth: method of study: The researcher relied on a theoretical side on a group of sources, books, and published research. As for applied side, the researcher relied on a set of methods, including: - • Collecting required data from the Governorate Office and reports of the Financial Supervision Bureau for study years.
• Field observations and visits.
Seventh: research structure: The research included an introduction and four topics. The first topic dealt with research methodology. The second topic dealt with theoretical aspect. The third topic was devoted to the applied aspect (an applied study in Al-Muthanna Governorate). The fourth topic dealt with conclusions, recommendations, and a list of sources.

Second topic: Theoretical side
First: The concept of internal control system: Internal control is the organizational plan and all means, measures, and procedures prepared by administration to preserve its assets, ensure accuracy of accounting data and degree of reliance on them, and achieving the most significant degree of production efficiency in its operations and commitment to implementing administrative policies set out (Curriculum Design and Development, pg. 45). The system of internal control was defined by the American Institute of Accounting in 1936 as a set of methods and measures adopted by units to protect cash and assets to ensure accuracy of accounting operations documented in books. Internal procedures are carried out by a board of directors of a unit or department and all employees. They are designed to provide reasonable assurance to achieve the following objectives: (Pany, 1998: 218 & Whittington)  Reliance on financial statements.  Efficiency and effectiveness of operations.  Commitment to implementing laws and legislations. Second -the importance of internal control system: The great expansion of economic activities and increase in the size of establishments and their geographical spread led to need for higher management to delegate its powers and responsibilities to different levels within units, which led to needing to provide adequate control to ensure that different administrative levels carry out their duties in accordance with instructions laid down, and thus need for a system appeared internal control aims to assist administration with its functions efficiently and effectively (Curriculum design and development: 45). As well as technological and advanced developments and the emergence of large enterprises with multiple branches and need for the administration to delegate powers and responsibilities to some sub-departments, also need for government agencies to accurate and reliable data and different scope of auditing when transforming from an audit profession to a comprehensive or optional audit. From the previous definitions of the internal control system, several objectives emerge. An internal control system imposes physical and accounting protection for all assets from unlawful exploitation, misuse, loss, and embezzlement, whether in bad or good faith. (Zahir, 2005: 90), the objectives of internal control can be clarified as follows (Al-Aajibi, 2016: 2): 1. Supervision: that is, the economic unit administration should establish adequate internal control. Internal auditing exists for a specific responsibility by administration to control and supervise their operations and provide the necessary recommendations.
2. Discovery of intentional or unintentional errors that may be found in books and records.
3. Testing financial, operating, and non-operating information: reviewing means used to define, measure, classify, and report on this financial and non-financial information.
www.psychologyandeducation.net 4. Reducing chances of committing error and fraud, as executor feels that what he is doing will be subject to control and scrutiny.
5. Review compliance with laws, legislation, and other external requirements, administrative policies, directives, and other internal requirements. As internal control system is subject to obsolescence, it may become with the passage of time and change of circumstances not appropriate, the information needed to conduct evaluation and update comes from various sources, including studying reality of internal control system, internal auditor reports, special reports on monitoring activities and reports by organizations such as agencies concerned with environmental protection and number of cases lost by unit as a result of failure to fulfill its duties towards the environment (Wiley & Sons, 1997: 249).

Fourth -Elements of internal control system:
To have an efficient and effective internal control system, it is necessary to prepare components on which this system is based, namely: -(Al-Baaj, 2011: 79).
1. An administrative structure that takes into account in its description sequence of competencies.
2. Detailed procedures for carrying out duties. 3. A sound accounting system that depends on a set of books and records.
4. Selection of competent employees.

5.
Monitor performance in project management and its various phases.

Fifth: Types of internal control:
According to standard (400), the internal control system is divided into the following types: -(Tho-elnon, 2018: 30) 1-Accounting Control: It is a set of control procedures and measures to prevent errors in data, accounting procedures, and regulations. The Audit Standards Committee defined it as the organizational plan and associated procedures and methods to protect assets and ensure accuracy of accounting data used in accounting records.
2. Administrative Control: It includes organizational policies, plans, and records related to administrative decision-making by changing financial operations. These methods aim to increase operating efficiency and develop a spirit of commitment to planning policies, processes, and administrative procedures in the facility. It is concerned with decision-making processes that lead administration to impose its control, authority, and control over these processes.

Sixth -the difference between internal audit and internal control:
Internal audit is considered a tool of internal control that aims to ensure the accuracy and effectiveness of systems and procedures used and report to management on weaknesses and deviations. The purpose of internal audit is to measure adequacy of internal control systems. (Curriculum design and development: 47).

Seventh -the responsibility of external auditor towards internal control system:
Establishing an internal control system and maintaining it is the administration's responsibility; the external auditor has nothing to do with its position. An external auditor's function is to study and evaluate the system and determine its strengths and weaknesses. The stronger internal control system, the more the auditor will rely on it, and vice versa.

Eighth-concept and definition of internal audit quality:
Quality has been defined as the extent of conformity with requirements, as organizations seek to monitor performance, activities, and daily work to reach the highest degree of quality by reducing errors and detecting deviations that lead to meeting management needs. Internal audit quality is based on a good performance of internal control system and extent Adequacy of applied accounting system to reach appropriate effectiveness and efficiency in operations and restrictions, and on an ongoing basis within the organization to serve its objectives and protecting assets. (Al-Abdali, 2012: 34).
Ninth: Audit Quality Objectives: Auditing quality objectives can be divided into two main groups: (Al-Attar, 2016: 70) 1. The traditional goals and divided into two types A. Main goals: Verifying the correctness and accuracy of data recorded in books and the extent of reliance on them. Express a neutral technical opinion based on strong evidence on extent to which financial statements match financial position. B. Secondary goals  It was discovering errors or fraud that may exist in books and records.  It is reducing the chances of committing mistakes and fraud by establishing controls and procedures that prevent this.  Management relies on it to determine and draw administrative policies and make decisions, now and in the future.
www.psychologyandeducation.net  3. A sound accounting system that depends on a set of books and records.  4. Selection of competent employees.5.
Monitor performance in project management and its various phases.  Fifth: Types of internal control  According to standard (400), the internal control system is divided into the following types: -(Tho-elnon, 2018: 30) Accounting Control: It is a set of control procedures and measures to prevent errors in data, accounting procedures, and regulations. The Audit Standards Committee defined it as the organizational plan and associated procedures and methods to protect assets and ensure accuracy of accounting data used in accounting records. Administrative Control: It includes organizational policies, plans, and records related to administrative decision-making by changing financial operations. These methods aim to increase operating efficiency and develop a spirit of commitment to planning policies, processes, and administrative procedures in the facility. It is concerned with decision-making processes that lead administration to impose its control, authority, and control over these processes. Sixth -the difference between internal audit and internal control: Internal audit is considered a tool of internal control that aims to ensure the accuracy and effectiveness of systems and procedures used and report to management on weaknesses and deviations. The purpose of internal audit is to measure adequacy of internal control systems. (Curriculum design and development: 47). Seventh -the responsibility of external auditor towards internal control system: Establishing an internal control system and maintaining it is the administration's responsibility; the external auditor has nothing to do with its position. An external auditor's function is to study and evaluate the system and determine its strengths and weaknesses. The stronger internal control system, the more the auditor will rely on it, and vice versa. Eighth-concept and definition of internal audit quality: Quality has been defined as the extent of conformity with requirements, as organizations seek to monitor performance, activities, and daily work to reach the highest degree of quality by reducing errors and detecting deviations that lead to meeting management needs. Internal audit quality is based on a good performance of internal control system and extent Adequacy of applied accounting system to reach appropriate effectiveness and efficiency in operations and restrictions, and on an ongoing basis within the organization to serve its objectives and protecting assets. (Al-Abdali, 2012: 34). Ninth: Audit Quality Objectives: Auditing quality objectives can be divided into two main groups: (Al-Attar, 2016: 70) 1. The traditional goals and divided into two types A. Main goals: Verifying the correctness and accuracy of data recorded in books and the extent of reliance on them. Express a neutral technical opinion based on strong evidence on extent to which financial statements match financial position. B. Secondary goals  It was discovering errors or fraud that may exist in books and records.  It is reducing the chances of committing mistakes and fraud by establishing controls and procedures that prevent this.  Management relies on it to determine and draw administrative policies and make decisions, now and in the future.2. Modern or developing goalsA. Present business results according to set objectives. B. Monitor plan, follow up on its implementation, the extent of achieving goals, identify deviations, their causes, ways to address them. C. Achieving maximum possible production efficiency by preventing wastage in all aspects of the activity. D. Achieving maximum possible well-being for members of society. Tenth: Elements of Quality Control The internal audit profession rises to achieve the highest desired goals. The important thing is that quality is achieved during audit work, as international standards regulating auditing profession in standard (220) recommended the need for institutions to audit according to quality control to ensure the internal audit department serves relevant parties appropriately according to auditing standards. Standard indicated that quality control procedures differ according to the size of institution, nature of its work, or geographical location. Standard indicated that elements of quality control include the following (Al-Tamimi, 2013: 205).
1. Professional requirements: The audit department employees must adhere to rules of professional conduct such as independence, integrity, objectivity, and confidentiality, as well as exert necessary professional care. 2. Efficiency and merit: The audit staff must have a high level of technology and professional competence to fulfill their responsibilities, take the www.psychologyandeducation.net necessary care and maintain this high level by continuing education and training. 3. Supervision: There must be adequate direction and supervision and a continuous review of work at all levels to obtain reasonable assurance that all work is carried out to an acceptable level of quality. 4. Inspection: There must be continuous monitoring of the internal audit system's efficiency and effectiveness. The department should inform its employees about those procedures and policies and ensure that they are reasonably aware and understand them. Eleven: Factors Affecting Internal Audit Quality: The factors related to the quality of auditing profession are summarized in factors related to audit process, factors related to audit office, and factors related to external parties (Hanan, 2016: 31) 1. Factors related to audit process: These factors include planning audit work, studying and examining internal control system, adequacy of evidence, and report and disclosure. 2. Planning audit work: Planning is necessary to ensure that task is carried out effectively and efficiently and that risks are reduced to an acceptable level. 3. Study and examination of the internal control system and risk assessment: Understanding accounts portfolios for an accounting system and internal control of client is considered to be positively reflected in the audit profession's quality through good planning, controlling audit risks and correcting imbalances to the maximum extent possible.    (1) Ways and methodology for preparing plan: The study shows it was found that there are no plans to draw general policy of governorate and define its priorities in all areas in a way that does not conflict with national development, supervision and monitoring of operation of public facilities in the governorate and inspecting them, and that drawing up general policies for the governorate and supervising functioning of public utilities are implemented without setting plans.
(1) Data analysis and results: • Table (4) shows number of decisions taken by the provincial council and notified to governorate, number of decisions that were objected to by governorate, and number of decisions implemented during evaluation www.psychologyandeducation.net years, from it appears that implementation rates for decisions of governorate council notified to governorate and in conformity with constitution and laws in force ranged between (59% -95%) for years 2015 and 2016 respectively, while percentages of decisions objected to by governorate ranged between (28% -5%) for years 2015 and 2016 respectively, rates of implementation of decisions violating constitution and laws ranged between (6% -13%) for years 2014, 2015 respectively.    (7), certified permanent staff is occupied during evaluation years, we notice in it there is a shortage of the occupied permanent staff from certified staff during evaluation years, as a percentage of unfilled staff to certified ranged between (7% -22%) during evaluation years. The governorate trained its affiliates and involved them in several training courses inside and outside Iraq. Table  (8) shows the number of courses held and preparing associates participating in those courses during evaluation years in the governorate as follows: - The governorate did not prepare a plan to train and develop the employees indicating the titles of the required courses and specializations and the number of employees whose training required inside and outside Iraq for all the evaluation years.
 Decrease in the participation rate in training courses inside Iraq during evaluation years, as it reached (22%, 17%, 6%), except for year 2015, which increased to (32%) of total permanent staff.
 The decrease in rates of change in numbers of training courses and the number of participants inside and outside Iraq during years 2016 and 2017.   • Actual expenditures of investment projects for governorate exceeded amounts funded to them (2014, 2016, and 2017). As implementation ratios reached (117%, 108%, and 125%), the revolved cash balance was used to cover expenditures above the amounts funded.  An increasing percentage of implemented projects to many planned projects during evaluation years, reaching (87%, 90%, 90%, and 95%) respectively.  A decrease in the financial completion percentage of investment projects for years (2015 and 2016), as percentages reached (73% and 74%) respectively.  The low percentage of total projects' material achievement during evaluation years reached (65%, 39%, 36%, and 76%) for evaluation years, respectively.  (14), it is clear that percentage of number of lagging projects has increased to total number of continuous projects during evaluation years, reaching (56%, 52%, 72%, and 32%) respectively, as follows: - Table ( A number of projects were implemented on petrodollar allocations during evaluation years, while data were obtained about amounts disbursed only since these allocations are added to regional development projects plan. There is no independent plan for it; therefore, there is no statistic about amounts allocated and number of projects implemented. Table (   The governorate did not make the necessary efforts to collect amounts of debts owed by tenants and follow-up and control their properties' revenues. Table (    organizational structure according to governorate law variables, but it has not been approved by governorate. 5. The governorate did not maintain its properties and took necessary measures to determine damage to shops, apartments, and residential homes belonging to them. 6. There is no complete database of quarries or places that can be invested as quarries. 7. The governorate uses cars attributed to it from some departments to increase the number of governorate's cars related to work to other departments. 8. A decrease in the number of employees from the drivers in relation to the number of cars. 9. The percentage of completed projects to planned decreases, reaching (46%, 45%, 62%, and 74%) for years (2014, 2015, 2016, and 2017). 10. Increase in the percentage of stalled projects to the total number of continuing projects, reaching (56%, 52%, 72%, and 32%) for years (2014,2015,2016, and 2017) respectively. 11. Absence of a plan for appointment to vacant ranks within a business strategy and in accordance with specific principles and standards. 12. A staff training and development plan has not been prepared, indicating titles of required courses and specializations and the number of employees whose training is required inside and outside Iraq.
www.psychologyandeducation.net 13. There is no written and clear mechanism for dividing work among employees and specifying each employee's duties and responsibilities to organize work and avoid obstacles facing implementation and contribute to raising efficiency, economic, and effectiveness. 14. Failure to use modern technology in storing, classifying, and displaying data for various governorate activities. 15. Low implementation rates for actual revenues to estimate during evaluation years. 16. Rounded cash balance covers expenditures that exceed amounts funded for investment projects during years (2014, 2016, and 2017). 17. Low percentage of change in revenues generated from governorate's property rent during evaluation years. 18. The weakness of governorate's procedures in collecting debts owed by tenants for their properties and necessary measures have not been taken regarding overrun property and the use of new properties. Second: Recommendations 1-Necessity to prepare plans to draw up the governorate's general policy and define its priorities in all areas. 2-Objection to local council decisions that violate the constitution and laws. 3-Necessity to provide libraries in administrative units is not available and increases books in available libraries. 4-Work to approve the governorate's updated organizational structure according to changes in the (amended) Governorates Law. 5-The necessity of working on the maintenance of the property and limiting and remedying damages that affect shops, apartments, and houses 6-Working on preparing an integrated database of quarries or places that could be invested as quarries. 7-Terminate the placement of governorate cars that are related to work with other departments and vice versa. 8-Work to increase the number of employees from drivers in proportion to number of cars. 9-Necessity of working to increase the number of completed projects to plan. 10-Necessity to take necessary measures regarding delayed projects. 11-Preparing a plan for appointment to vacant ranks within a business strategy and in accordance with specific principles and standards. 12-Preparing a staff training and development plan indicating titles of required courses and specializations and number of employees whose training is required inside and outside Iraq. 13-Preparing a written and clear mechanism for dividing work among employees and defining each employee's duties and responsibilities. 14-Making use of modern technology in storing, classifying, and displaying data for the governorate's various activities. 15-Necessity to work on increasing the revenue realization ratio of actual revenues to estimated. 16-Work to provide the necessary financing for investment projects and not use revolving cash balance to cover expenditures that exceed amounts funded. 17-Work to increase revenues generated from the governorate's property rent. 18-Working on collecting debts owed by tenants of governorate's properties, using unused properties, and taking necessary measures regarding the overrun property.