‫بسم هللا الرحمن الرحيم‬
‫‪I‬‬
‫بسم هللا الرمحن الرحيم‬
‫الجامعة اإلسالمية – غزة‬
‫كلية التجارة‬
‫قسم المحاسبة‬
Islamic University – Gaza
Faculty of Commerce
Department of Accounting
The effectiveness of internal audit system in reducing the
occurrence of errors and frauds in Palestinian services
companies
(case study – The Automated Payment System
in Gaza electricity distribution company)
Faculty of Commerce
The Islamic University of Gaza
By
Dina Saher Al-Qura'an
220113166
Randa Harara
220112376
Supervisor:
Dr. Salah Shubair
2014-2015
II
Dedication
All praise to Allah, today we fold the days' tiredness and the errand summing up
between the cover of this humble work .
To the utmost knowledge lighthouse, to our greatest and most honored prophet
Mohamed - May peace and grace from Allah be upon him .
To the Spring that never stops giving, to my mother who weaves my happiness with
strings from her merciful heart... to my mother .
To whom he strives to bless comfort and welfare and never stints what he owns to
push me in the success way who taught me to promote life stairs wisely and
patiently,…. to my dearest father ,God bless his soul .
To whose love flows in my veins, and my heart always remembers them,… to my
brothers and sisters .
To those who taught us letters of gold and words of jewel of the utmost and sweetest
sentences in the whole knowledge. Who reworded to us their knowledge simply and
from their thoughts made a lighthouse guides us through the knowledge and
success path, ….To our honored teachers and professors .
III
Abstract
The study examine the impact of internal auditing function in assessing the size and
the amount of frauds , errors and its role to protect companies from them especially in
Palestinian services company , and because its importance among the companies as it
has several functions that mean to enhance the controlling and monitoring in these
companies for example, the major and significant role in designing and developing
the internal control system and support the corporate governance.
In addition to that it helps in measuring and evaluating competence and efficiency
performance, for this importance this study aims to identify The effectiveness of
internal audit in reducing the occurrence of errors and frauds in Palestinian services
companies(case study – Gaza electricity distribution company) .
The study population consists of some of employees in relation with internal auditing
function in Gaza Electricity Distribution company .
The Researcher used the descriptive analytical method , and utilize both primary and
secondary sources for data collection .
.
The results of statistical analysis show that (1) There is a statistically significant
relationship between internal audit system and the effectiveness of internal audit
services in Gaza Electricity Distribution Company, through these statistical results,
we can say that the system of internal audit in the Gaza electricity company has
possibilities, especially in the effectiveness side of the internal audit services and we
cannot deny its existence.
Also there is a statistically significant relationship between internal audit system and
the financial and administrative performance, and the researchers found that these
statistical results, indicate that the system of internal audit in the Gaza electricity
company is in relation but not very closely with the financial and administrative
performance in the company.
Moreover the analysis show statistically significant relationship between internal
audit system and the ability to assess and manage risks related to automated payment
system applicable in Gaza electricity distribution company, the study found that the
results which concerning the main task of the system of internal audit, does not give
an excellent impression but good one in terms of the system's ability to assess and
manage risks related to automated payment system.
IV
Table of Contents
Deduction .
V
Abstract.
Chapter.1 Research Proposal
V
Introduction.
statement of problem .
3
Research objectives.
4
Significance of the project.
4
Scope and limitations of the project .
5
Methodology.
5
Research variable .
5
Research Hypothesis.
5
Research tools.
6
Research parameter.
6
Data sources.
6
Previous studies.
6
Chapter .2 Internal Audit
12
Introduction.
13
Concept Of Internal Audit.
13
The objective of internal audit.
14
International Standards for the Professional. Practice of Internal
Auditing.
Types of audits.
15
Work process of internal audit function.
16
The audit charter.
19
The working model.
20
Audit Competencies.
24
Training and Development of Audit Team.
25
The relation between internal auditors and external auditor
26
Audit Committee
28
Chapter .3 Gaza Electricity Distribution Company
30
Company Profile .
31
The organizational chart.
32
1
4
V
16
Automated payment system.
32
Advantages of automated payment system
33
Disadvantages of automated payment system
33
GEDCO procedures in automated payment system
34
Chapter ….4 Methodology
36
Research methodology
37
Questionnaire content.
37
Data measurement
38
Test of normality
38
Validity of questionnaire
39
Structure validity of the questionnaire
43
Cronbach’s Coefficient Alpha
44
Chapter .5 Data Analysis and Discussion
45
General information
46
Testing Hypothesis, Discussion and interpretation
50
Chapter .6 Conclusion & Recommendation
57
Conclusion .
58
Recommendation.
58
References list
61
Appendix I
63
VI
1
2
3
4
5
6
7 Chapter One
Proposal contents
1
Chapter One : Research Proposal :
Introduction.....................................................................................3
statement of problem…………………………………….……………...4
Objectives.............................................................................................4
Significance of the project....................................................................4
Scope and limitations of the project………………………….……………5
Methodology ...............................................................................................5
Research variable..…………………………………..………………………………….….….…………5
Research hypothesis…………………...………………………………………………………......…..5
Research tools ……………………………………………………………………6
Research parameter …………………………………………………………..…6
Data sources ……………………………………………………………..……….6
Previous studies…………………………………………………………………..6
2
1.1 Introduction
The world is changing, and becoming faster. Have been and are producing massive
and major changes, converting it both economic and social activity, and one of the
important things that have contributed to this recent changes is an internal audit which
is an independent, objective assurance and consulting activity designed to add value
and improve an organization's operations. It helps an organization accomplish its
objectives by bringing a systematic, disciplined approach to evaluate and improve the
effectiveness of risk management, control, diminishing the possibilities of pilfering
and governance processes
Internal audit began in unsophisticated manner during the Second World War,
especially In 1939,when the Nazi Party were the first government to recognize the
importance of having a well-controlled mechanism for running an evil, worldconquering regime. The IIA were contracted to undertake a series of efficiency
reviews in the early weeks of World War II. At this time many organizations found it
difficult to maintain operational efficiency and control. So, Companies appointed
special staff (i.e. present day internal auditors) to review operations and report to
them. The task starting as an internal business function primarily focused on
protection against payroll fraud, loss of cash, and other assets, internal audit’s scope
was quickly extended to the verification of almost all financial transactions, and still
later, gradually moved from an “audit for management” emphasis to an “audit of
management” approach which is assigned to internal auditors. Internal audit activities
are performed in diverse legal and cultural environments; within organizations that
vary in purpose, size, complexity, and structure; and by persons within or outside the
organization. While differences may affect the practice of internal auditing in each
environment, compliance with the International Standards for the Professional
Practice of Internal Auditing is essential if the responsibilities of internal auditors are
to be met.
Through an audit, an organization can identify a system’s ineffectiveness, take
corrective action, and ultimately support continuous improvement. Unfortunately, a
poorly deployed internal auditing system can lead to increased, non value-added
costs, many hours of wasted resources, and an eventual, inevitable QMS breakdown.
Management must be aware into the fact that the internal audit process is just as
critical and important an activity as any other process within the QMS. An internal
auditing system must have the commitment of senior management. Without their
approval, support, and encouragement, the internal audit process is doomed for failure
and worse–time and money wasted.
When scheduled audits are routinely postponed, management is sending a clear
message, “Auditing is a low priority, and we only perform them because it’s a
necessary evil.”
Consequently, companies that understand and support their internal audit systems
sharpen their QMS edge. Their internal auditors have acquired the skill to identify a
system’s effectiveness as well as ensure compliance. These companies have
progressed and understand the subtlety of continuous improvement..
3
1.2 Statement of the problem
The financial scandals and claims of financial fraud and the financial crises that have
occurred in recent years, Prove the weak of internal audit systems in many companies,
this weaknesses can be clear in the most of organizations in Palestinian economy , and
for the importance of services companies in Palestine society, this research will
examine the internal audit system for one of the most important services companies
exactly in our recent time, which provide citizens with essential electricity to continue
their life correctly and to check if there is an impact of electricity company's internal
audit system in decreasing the possibilities of frauds and scandals that can affect the
quality of its services negatively .
The research Main Questions:
1- Is there a relationship between the quality of internal audit activities and the
type & amount of frauds and services mistakes?.
2- Are the qualifications, knowledge and experience of the internal auditors sufficient
enough to let them work in proper manner?
3-Are the auditors applying the standards for the internal auditing and generalize it on
their company in Gaza?
4-How can we improve the process model of internal auditing in the electricity
company?.
1.3 Objectives of this study:
This study aims to achieve the following objectives: Understand the concept and the types of internal audit.
 Recognize the importance of the objectives of the internal audit function.
 Identify internal control system in the electricity distribution company.
 Identify the internal auditing standards applied in the electricity distribution
company.
 Identify the obstacles and difficulties that prevent the application of internal
auditing standards in the electricity distribution company.
 Recognize the effects of internal audit on the effectiveness and efficiency of
services.
1.4 Importance of this study:
 Emphasize the significance of expansion in the application of internal audit
work in the Palestinian economic environment, the benefits from the
development of accounting practices and the development of the audit
4
profession and thus improve the efficiency and effectiveness of the
Palestinian services companies, which will impact on the environment of
Palestinian economy positively.
 the study examines the effects of the role of internal audit in improving the
efficiency and effectiveness From the viewpoint of the internal auditors.
1.5 Scope and limitations of the project:

Spatial borders: the study was applied for private services sector firms .

Time limits: research deals with the reality of internal auditing and its impact
in management practices in the period between 2010 and 2014,

The sample of the study : the internal auditors and accountants in the Gaza
Electricity Distribution Company in the Finance Management.
1.6 Study Methodology:
the research includes displaying the practical study design by using descriptive
analytical approach in collecting data through:


Primary resources: where we make interviews with officials, reports.
Secondary resources: Such as text books, Master and doctorate dissertations
,thesis and Journals.
and showing the variables , hypotheses, and research tools .
1.7 Research Variable:
Variables:
It represents the dependent variables and independent variables by introducing
theoretical analysis for each variable , this analysis shows the importance of the
variables and its role in assumed the relationship between internal audit and the
electricity service and how to measure those variables, this research is to study the
relationship between the effectiveness and efficiencies of internal audit services in
electricity company as dependent variable and the internal audit system for avoiding
frauds in GDECO as an independent variable, moreover this research will study the
relation with other dependent variables which are:
1.The ability to asses errors and management risk.
2.financial and administrative performance.
1.8 Research hypotheses:
 Main hypotheses:
Null Hypotheses:- there's an inverse significant relationship between internal audit
system and the effectiveness of internal audit services in electricity company.
5
Alternative hypotheses:- there's no inverse relationship between internal audit system
and the effectiveness of internal audit services in electricity company.
 Sub-hypotheses:
 There is a statistically significant relationship between internal audit system
and the financial and administrative performance.
 There is a statistically significant relationship between internal audit system
and the ability to assess errors and manage risks.
1.9 Research Tools:
1. Computer software, include: Microsoft word, SPSS.
2. Questionnaire .
3. Internet.
1.10 Research Parameters:

Time Frame : first semester 2014.

Language: English for publication, Arabic and English for questionnaire.

Geographical area: Gaza strip.
 The environment of the research(Scope):the internal auditors and
accountants in the Gaza Electricity Distribution Company in the Finance
Management.
1.11 Data sources:
*
Primary resources: where we make interviews with officials, also through
reports and questionnaires .
* Secondary resources: Such as text books, journals and internet.
1.12 Previous studies :
"The effect of the internal auditing on financial performance applied
study on Bank of Palestine " (Keshta , Hassan , Alghalayini ,2009)
This study aims to identify the role of the internal audit in controlling the financial
and managerial performance in the Palestinian corporations taking in considerations
all the aspects that would limit this purpose of the internal audit department.
These factors would be the business environment, the qualification of the auditor, the
laws and regulation, the extent to which the corporation are committed to these laws
and other factors ,it also identified the degree of independency granted to the internal
audit and the importance of this in increasing administrative and financial
6
performance in Palestine. Moreover this research focus on the current situation and
any amendments needed to be undertaken in the coming period so that the internal
audit function of controlling the performance on both sides the managerial and the
financial will be effective. The researchers used the analytical descriptive
methodology due to the nature of the research, also the researchers searched for a
previous work in the area of internal auditing by surfing the internet specially the
specialized sites that contain articles and other forms, the researchers will depend on
materials that will be took from the internal auditing departments and other related
departments in addition to organizing an interview with internal auditors for the
targeted company. And found the results about the role of internal audit in achieving
the objectives and enhancing bank's performance and summarizes the following
conclusions based on the created case study:
1-The existence of the audit department is vital and necessary, so that it’s being
provided with all the resources needed to achieve a high quality in this job.
2-There is a necessity to train and develop the skills of the employees working in this
area in the Palestinian companies so they can catch up with the development on this
job around the globe.
3-The internal auditing department is given the time and resources to hunt any
potential risks surrounding the working environment in the Palestinian companies as a
trust in the importance of this job to the achievement of the high quality in every task
being done.
4-the effectiveness and efficiency of the internaqqwqaaWAWawSawwwwal audit job
depends mainly on the degree of coordination between the different departments, the
more the coordination the better the outcomes.
5-The internal auditors work in an objective and independent manner from the
management to achieve the objectives of this job of providing fair and reliable
information to the different users and related parties.
Finally the research recommendations:
According to the findings of this study they provided some suggestions, might be
help the managers in the banks that listed in Gaza strip if they use them effectively.
1-It is necessary to teach internal audit, internal control and risk management in
university as separate course in bachelor degree.
2-The management of bank of Palestine should create communication channels with
Institute of Internal Auditors (IIA).
3-The role of internal auditor should be expanded to involve all the activities of the
bank not routine activities only.
4- Training courses for employees about update standards of internal auditing should
be created periodically.
5-Top management of bank have to create performance measurements which used by
internal auditor for evaluation of performance.
7
6-It is necessary to response by management to the internal audit report about risks
that will be reduced.
7-The planning of internal auditing should be discussed and evaluated by audit
committee.
"The impact of information systems audit on improving bank's performance
applied study at banks working in Gaza "(Rezeq Harb ,2012)
The study examines the impact of information systems audit on improving
performance of the working banks in Gaza Strip. The study population consists of
some of the banks‘ branches in Gaza Strip and the main management centers in Gaza
Strip. The research targets the banks managers, heads of sections, accountants, IS
auditors, internal controllers and internal auditors of the banks. The research results
show that information systems auditing play a central role in improving the
performance of banks and achieving the bank's strategic development aims, because
the banks have reliable technology that organizes the information gathered from
all sources and analyze the data to increase the quality of information provided
systems. Business operations in the banking has been increasingly dependent on the
computerized information systems. It has now become impossible to separate (IT)
from the business of the banks. The researcher analyzed data through using the
descriptive analytical approach by collecting data from secondary sources (books,
references, studies, websites, articles … etc.),and through the questionnaires as a
primary source that were prepared and distributed to a sample of a population under
consideration, so that the researcher conclude the following conclusions based on
the data analysis and findings:
1. 82.89% of the respondents agree that the technology and IS audit are available in
the bank, and that its availability affect on the performance.
2. There is a strong positive relation (0.417) between general controls of IS auditing
and improving the quality of information provided by the systems.
3. The IS audit and its effect on performance in additional to the positive relationship
between IS and performance, the study conclude that IS audit has a positive role in
improving the IS performance.
4. 83.08% of the respondents agree that the internal auditing are important in the
Banks.
5. There is a strong positive relationship (0.902) between the internal audit and the IS
performance of banks.
6. The internal audit and its effect on the performance in additional to positive
relationship between internal audit and the IS performance, the study conclude that
internal audit has a role in the IS performance.
7. 84.16% of the respondents agree that the quality of information is a great help in
bank performance.
8. 84.44% of the respondents agree that the information systems contribute in
8
achieving bank objective.
According to the researcher results of this research so the researcher gave some
suggestions, as following:
1- Banks at Gaza highly encouraged illustrating the strong relationship between
general controls of information systems auditing and information systems
performance.
2- Banks at Gaza highly encouraged to develop a clear strategy allow them to increase
the role of general controls of information systems auditing in improvement quality
of information provided by systems, and the system's ability to adapt to the new
changes.
3- Reinforcing the role of general controls of information systems auditing in raising
information system contribution to achieve the objectives of the bank, and the
system contribution to bank financial performances.
4- The management must spend more effort in protecting and safeguarding their
assets and to ensure the efficient and effectiveness of operation.
5- The management of bank should build strong systems of security to prevent any
internal or external hacking attempts.
6- The banks should improve the quality exchanging information among the different
users in the bank.
7- The banks have to train the employees on using the analytical programs available
to them.
8- More sophisticated programs and newer technology must be added to the current
systems in the bank.
9- The information systems should be updated and developed or acquiring, using a
structured system development approach and should be completely tested prior to
implementation.
10- The information systems should be fully documented including operation,
program and user documentation.
"The extent of the application of internal audit standard in the Jordanian
private universities" (Khwaileh,2013)
This research focus on whether the private universities in Jordan apply the
international standards for internal auditors, in the field of interior auditors who
work in these universities. The study attain to the internal employees auditors in the
Jordanian private universities who have the knowledge of the international interior
auditing standards and apply them in their daily work and put future plans to their
work. On the other hand, some of them develop themselves professionally, but
actually the private universities don't attract the qualified in accounting and auditing
9
for the work in these universities in the internal auditing sector department. and the
study was based on the design of the questionnaire scientific study distributed (23)
questionnaire to auditors working in universities ( auditors working in units of
Internal Auditing , and auditors working in the Department of Finance ) .
The researcher extracted (23) valid questionnaires for the study , with the percentage
of get back (100%) . In addition the researcher deals in the analysis of the raw data
extracted from the questionnaire by using statistical packages (SPSS), where the
descriptive and analytical statistical methods used in processing such data , like
frequencies and percentages and averages and standard deviations. And the researcher
conclude that the Jordanian private universities imply the IT standards in their work
by reaching some results :
1) The study showed that private universities in Jordan are applying internal auditing
standards in their work
2) The study showed the presence of autonomy and objectivity of internal auditors
working in the private universities in Jordan , and it also means that they have
placed plans in advance for the procedures to work thoughtfully .
3) study showed that comes from internal auditors working in the private universities
in Jordan, work with qualiy outputs, and could rely on reports and opinions issued by
the internal audit group at private universities in Jordan .
4) There is holds a professional specializing in accounting , auditing , however, this is
a very small percentage in the development of the internal auditing system in
private universities in Jordan .
"An improved process model for internal auditing"
( Elliott, Dawson , Edwards).
The goal of this study was to investigate and understand the reasons behind why
internal auditing is often perceived to not add value, and it described the development
of a new process model and approach that will improve the actual and perceived value
of auditing, by using process analysis, identified areas of potential inefficiency and
conflict, and using a questionnaire which was sent to auditors who were auditors at
AWE Plc., to know their views on audit effectiveness and quantify their perception of
value. questionnaire results show variations in the perceived value of internal
auditing, particularly of some key stages in the process. The management of internal
auditing is focused on programmed achievement, not the resulting value from
improvement action.
Internal quality audits – obstacles or opportunities (G. Beecroft)
Auditing is an old idea that has been used throughout history to examine finances ,
taxes , quality systems and other complex entities . an internal audit such as required
by ISO 9000 Quality system standard and its automotive counterpart QS 9000 is
conducted by a company on itself to determine if its quality system is being followed
and is effective , while the internal quality audit process has the potential to be highly
destructive, it can also stimulate huge improvements within an organization and help
create proactive environment .
10
Conclusion: Given our current reactive and negative oriented culture if auditing with
its many years of negative experience to overcome , creating a positive internal
review process presents a tremendous challenge , transforming the audit process into a
positive internal review is not a simple task and mush has yet to be learned.
The internal review process is a key to an effective quality system implementation for
successful organizations transform their internal reviews into positive experience , the
process is essential in moving their organization from their current reactive stare in
the more preventive proactive state to assure their future position among business
leader.
11
8 Chapter Two
9 Internal Audit
Chapter two : Internal audit
Introduction..........................................................................................13
Concept of internal audit…………………………………………….13
The objective of internal audit……………………………………………..14
International standards for the professional practice of internal auditing…..15
Types of audits…………………………………………………………………….16
Work process of internal and its function...............................................................16
The audit charter……………………………………………………………………19
The working model………………………………………………………………….20
Audit Competencies………………………………………………………………24
Training and Development of Audit Team………………………………………25
The relation between internal auditors and external auditors …………………26
Audit Committee……………………………………………………………………28
12
The definition and evolution of the concept of Internal Audit
2.1 Introduction:
There is a need for an internal audit to detect errors and fraud and manipulation, the
increased need and has evolved and increased effectiveness after World War II and
that because of the large sizes of companies, geographical expansion and increasing
complexity of the operations and the decentralization of management and the rapid
technological changes, also contributed to the increased need for this function the
adoption of the external auditor on the work of the internal auditor and adoption are
also on the statistical sampling instead of full examination, which limit its ability to
examine all aspects of financial and administrative facility, and this prompted the
International Federation of Accountants to single out a special audit standard for the
utilization of the external auditor of the internal auditor .
And also contributed to the development of the internal audit of financial scandals
that rocked a number of major companies in the West such as Enron in the United
States of America and the Italian company Parmalat and other companies.
Also contributed to the development of a considerable focus on the phenomenon of
cheating, fraud and manipulation in Companies, whether from individuals within the
company or the risk of external fraud because of gaps in control, where one study
suggests that more than 60% of U.S. companies exposed to fraud in recent years and
pointed out another study that the best companies suffer from a lack of returns of a
minimum of 5% of the revenues due to fraud and cheating.
That the audit profession, both at the level of internal audit or external audit is facing
a serious challenge given the widespread corruption of senior management and the
inability of external auditors for the discovery of their transgression and even
complicity of some of them.
The report recommended (Turnbull report) in the United Kingdom by the British
companies to conduct a review of the need to create an internal audit on an annual
basis how much and recommended law (Sarbanes Oxley) issued by the U.S. Congress
in the United States to establish independent function of internal audit in the project
belong to the Audit Committee.
2.2 Concept Of Internal Audit:
The Institute of Internal Auditors ( IIA ) define Internal auditing as an independent,
objective assurance and consulting activity designed to add value and improve an
organization's operations. It helps an organization accomplish its objectives by
bringing a systematic, disciplined approach to evaluate and improve the effectiveness
of risk management, control, and governance processes.
13
2.3 The objective of internal audit
The objectives of the internal audit profession has evolved dramatically, old,
designed to detect fraud and embezzlement, and errors in the books and records, and
then changed this theory has become the target of it, in addition to the abovementioned ensure the validity and appropriate financial position and to give a
technical opinion neutral about the fairness of the financial statements and the health
of their representation of the financial position, we can determine the objectives of
internal audit in many ways, the most important : Protect the assets and property of the facility from tampering, theft and
embezzlement.
 Supply management enterprise accounting and accurate data that can be relied
upon in planning and decision-making.
 Promote efficiency and productivity and the eradication of waste and exhaust
in the industry and production at the lowest cost possible.
 Make sure that all employees are committed to the implementation of facility
policies established by the management of the establishment.
14
2.4 International Standards for the Professional Practice of Internal
Auditing.
2.4.1 Introduction to the International Standards:
Internal auditing is conducted in diverse legal and cultural environments; within
organizations that vary in purpose, size, complexity, and structure; and by persons
within or outside the organization. While differences may affect the practice of
internal auditing in each environment, conformance with The IIA's International
Standards for the Professional Practice of Internal Auditing (Standards) is essential in
meeting the responsibilities of internal auditors and the internal audit activity( IIA ).
If internal auditors or the internal audit activity is prohibited by law or regulation
from conformance with certain parts of the Standards, conformance with all other
parts of the Standards and appropriate disclosures are needed ( IIA ).
If the Standards are used in conjunction with standards issued by other authoritative
bodies, internal audit communications may also cite the use of other standards, as
appropriate. In such a case, if inconsistencies exist between the Standards and other
standards, internal auditors and the internal audit activity must conform with the
Standards, and may conform with the other standards if they are more restrictive( IIA
).
The purpose of the Standards is to:
 Delineate basic principles that represent the practice of internal auditing.
 Provide a framework for performing and promoting a broad range of valueadded internal auditing.
 Establish the basis for the evaluation of internal audit performance.
 Foster improved organizational processes and operations.
The Standards are principles-focused, mandatory requirements consisting of:
 Statements of basic requirements for the professional practice of internal
auditing and for evaluating the effectiveness of performance, which are
internationally applicable at organizational and individual levels.
 Interpretations, which clarify terms or concepts within the Statements( IIA ).
2.4.2 the main standards which talk about Internal audit






Purpose, authority, and responsibility
Independence
Objectivity
Proficiency
Due Professional Care
Quality Assurance and Improvement Program
15






Managing the Internal Audit Activity
Nature of work
Engagement Planning
Performing the Engagement
Communicating Results
Monitoring Progress( IIA ).
2.5 Types of audits :
There are several types of internal audits. There are financial audit, operational audit,
management audit, compliance audit, IS audit and investigation audit. Each audit has
different purpose and characteristic.
2.5.1 Financial audit
The purpose is express opinion on financial condition based on analysis, comparisons
and test of accuracy. Its scope is on the financial records. The expected results from
this audit is to give opinion on the accuracy and reliability of the financial statements.
2.5.2 Operational audit
The purpose is to analyze and improve methods of operations and performance. Its
scope on the operational activities of a unit or department. The expected result from
this audit is to give recommendations to management for the improvement of
operations .
2.5.3 Management audit
The purpose is to review and evaluate business and management issues to enhance
profitability. Its scope is on the business support activities of a unit or the entire
organization. The expected results from this audit is to give opinion on strategic issues
and recommendations or solutions.
2.5.4 Compliance Audit
The purpose is to express opinion as to adherence to internal policies and regulatory
rules and requirements and applicable laws. Its scope on the specific aspects of
operations and business. The expected results from this audit to make immediate
rectification and compliance thereafter.
2.5.5 IS / IT
The purpose is to audit on the computer systems and the provision and management
of information. Its scope is on the technical reviews on computer systems and their
peripherals . The expected results from this audit is to give recommendations on
computerization and information systems related.
2.6 Work process of internal audit function:
2.6.1 General
The audit work process should include devising an audit plan, drawing up an audit
program for each assignment under the audit plan, performing and documenting audit
work procedures, reporting audit findings and following up
Recommendations.
16
2.6.2 Audit plan
The audit director should develop risk-based plans to determine the priorities of
internal audit, consistent with the organization’s goals. The annual audit plan should
be based on a risk assessment. The input of senior management and the board should
be considered in the process. The audit director should consider accepting proposed
consulting engagements based on the engagement’s potential to improve management
of risks, add value, and improve the organization’s operations. Those engagements
that have been accepted should be included in the plan.
The frequency of the audit should be determined by reference to factors affecting risk.
Specific examples include, but are not limited to identified weaknesses, organization
environment and change management oversight, adequacy of internal controls,
policies and procedures, significance to the balance and income statements,
transaction volume, adequacy of systems, regulatory requirements, change in
market/business environment, and the adequacy of business contingency plans.
Audit work schedules should include:
 What activities are to be audited;
 When they will be audited;
 The audit work planned, and the nature of audit work performed by other
 Reporting types and timeframes.
2.6.3 Audit programs
For each audit assignment, it should prepare an audit program to clearly set out
 the objectives that the assignment plans to achieve.
 the scope of the assignment in relation to which business or functional units
will be involved and the areas of their internal control procedures to be
examined.
 the audit methodologies to be adopted for the assignment. Common
methodologies include enquiries with management, analytical reviews,
walkthrough procedures,
 the parties to whom the audit report should be communicated.
 the schedule for field work and issuance of reports.
Particularly for larger assignments, it will be useful to develop a form of Gantt chart
illustrating the time span for various activities individually to facilitate planning and
monitoring of work; and the budget for manpower and other resources required for
the assignment.
17
2.6.4 Audit procedures
All audit work procedures performed should be documented in working papers. These
papers constitute the basis for drafting the audit report and should contain sufficient
evidence to support the opinion formed.
Internal audit staff should realize that their working papers are formal evidence of
their work and may be subject to strict review and queries by internal or external
parties. The working papers must therefore be :
 understandable, organized and readily available upon request, and only
information that is relevant to achieving the audit objective should be
included;
 drawn up according to a well-determined method (e.g. use of suitable indexes
and cross-references) to facilitate subsequent review; and
 able to reflect that the auditing work has been duly performed and provide an
audit trail for checking how the work has been performed.
2.6.5 Audit reporting
A draft report presenting the scope and purpose of the audit assignment, as well as the
preliminary audit findings and recommendations in respect of any internal control
weaknesses identified, should be issued to the management of the audited line of
business or operations for comments before the final report is prepared. This will
provide the internal auditors and the relevant management with an opportunity to
exchange views and comments on the audit findings so as to avoid any
misunderstanding or misinterpretation about the findings before the report is formally
issued.
In the case of disagreement between the management and the internal auditors in
respect of any important findings or recommendations included in the draft report that
cannot be resolved, the internal auditor should retain in the final report such findings
or recommendations, include reference to the different views presented by the
management, and submit the report to senior management and the Board (or the Audit
Committee) for their consideration and further action.
As quickly as practicable, a final report of the audit assignment should be issued to
the management of the audited line of business or operations, senior management and
the Board (or the Audit Committee), incorporating the responses from the relevant
management on the findings and recommendations, as well as the agreed action plan
which outlines the remedial measures to be taken to address the internal control
weaknesses identified, their target completion dates, and the responsible parties for
carrying out the remedial measures.
At any time during the audit assignment, the internal auditor should consider the
necessity of issuing an interim report to the relevant management, or if necessary also
to senior management and the Board (or the Audit Committee) where, for instance,
serious issues are identified that should be brought to their immediate attention, or the
audit assignment extends over a relatively long period.
2.6.6 Follow-up procedures
The audit director must establish a process to monitor and follow-up on the
findings that were communicated to ensure that corrective action has been
effectively implemented or that senior management has acknowledged and
18
accepted the risk of not taking action. If the audit director believes that senior
management has accepted a level of risk that is unacceptable to the organization, a
discussion must be held with senior management. If the decision regarding residual
risk is not resolved, the matter must be reported to the audit committee and the board
of directors .
2.7 Scope of Internal Audits
The internal audit function’s scope of operations is by its very nature quite expansive.
The internal audit function will assist the Company in fulfilling its vision, mission,
strategic initiatives, and objectives, while adhering to its core values, by bringing a
systematic, disciplined approach to evaluate and improve the effectiveness of
enterprise-wide risk management, internal control systems, and governance processes
Ultimately, the internal audit function will help ensure:
 Risks are appropriately identified and managed;
 Significant financial, managerial, and operating information is accurate,
reliable, and timely;
 Employees’ actions are in compliance with Company policies, standards,
procedures, and applicable laws and regulations;
 Company resources are acquired economically, used efficiently, and
adequately safeguarded;
 Company operations are transacted in accordance with sufficient internal
controls, good business judgment, and high ethical standards;
19
 Quality and continuous improvement are fostered in the Company’s
internal control processes; and
 Significant legislative or regulatory issues impacting the Company are
recognized and addressed appropriately.
Opportunities for improving the Company’s internal controls and operating efficiency
may be identified during internal audits; these opportunities will be shared with the
Finance Committee of the Board of Trustees and the appropriate level of
management.
2.8 The Audit Charter
The audit charter sets the agreed role and position of internal auditing in an
organization. IIA Attribute Standard 1000 says that the: ‘purpose, authority, and
responsibility of the internal audit activity should be formally defined in a charter,
consistent with the Standards, and approved by the board’. This also applies to all
types of internal audit work as per Attribute Standard 1000.A1 and 1000.C1
respectively which state that: ‘the nature of assurance services provided to the
organization should be defined in the audit charter. If assurances are to be provided to
parties outside the organization, the nature of these assurances should also be defined
in the charter.
It is important that all audit departments both develop and maintain a suitable charter.
The Institute of Internal Auditors has issued a statement of responsibilities that covers
the role of internal auditing and this document may be used to form the basis of such a
charter.
2.8.1 Role of the Audit Charter
This charter primarily aims to define and establish:
 The formal mission statement of audit department.
 The objectives and scope of audit department.
 The audit department’s position within Company, its access to
various records, departments and activities, its responsibility and
accountability .
2.8.2 Mission Statement
To provide independent appraisal of all the activities of Company aiming to add
value, improve operational efficiency, risk management and internal control systems.
The prime objective of audit department is to examine and evaluate whether the
Company frame work of risk management, control, and governance processes, is
adequate and functioning properly.
20
In addition, the objectives of audit department include advising and recommending
senior management for improvements in internal control and risk management
systems.
In order to fulfill its mission statement and objectives, audit department’s scope of
work includes:
 The examination and evaluation of the adequacy and effectiveness of
the internal control systems at various operations and activities of
Company
 The review of the application and effectiveness of risk management
procedures and risk assessment methodologies at various operations
and activities of Company.
 The review of the management and financial information systems,
including the electronic information system.
 The review of the accuracy and reliability of Company accounting
records and financial reports.
 The testing of both transactions and functioning of specific internal
control procedures at various Company departments and offices.
 The evaluation of adherence to legal and regulatory requirements and
approved policies and procedures.
 The evaluation of effectiveness of existing policies and procedures and
give recommendations for improvements.
 Identifying opportunities for cost savings and making
recommendations for improving cost efficiencies.
 Examining that resources are acquired economically, used efficiently
and safeguarded adequately.
 The carrying-out of special investigations assigned by the Audit
Committee and Managing Director.
 Precisely, every activity, department and office of Company fall within
the scope of the internal audit for independent appraisal. The Director
and staff of audit department are, however, not allowed to:
1) Perform any operational duties for Company outside audit
department function.
2) Initiate or approve accounting transactions external to audit
department.
21
3) Direct the activities of any Company employee not employed
by the audit department, except to the extent such employees
have been appropriately assigned to auditing teams or to
otherwise assist the internal auditors.
2.8.3 Authority
The Director and staff of audit department are authorized to:
 Have unrestricted access to all Company departments, offices, activities,
records, information, properties and personnel, relevant to the performance of
audit function.

Determine scope of work and apply the techniques required to accomplish
audit objectives.

Obtain the necessary assistance of personnel in various departments / offices
of Company where they perform audits.

Obtain assistance of specialists/ professionals where considered necessary
from within or outside Company.
2.8.4 Responsibility
The Director audit department has responsibility to:
 Formulate annual audit plan in consultation with Audit Committee and
Management.

Implement the annual audit plan, including as appropriate any special tasks or
projects requested by the Audit Committee and Managing Director.

Maintain a requisite professional audit staff strength with sufficient
knowledge, skills, experience, and professional qualifications to meet the
requirements of this Charter.

Issue periodic reports on a timely basis to the Audit Committee and Managing
Director summarizing results of audit activities.

Keep the Audit Committee informed of emerging trends and developments in
internal auditing practices and give recommendations for necessary revisions
in Internal Audit Charter and Internal Audit Manual. Provide a list of
significant measurement goals and results to the audit committee.

Assist in the investigation of significant suspected fraudulent activities and
notify the Audit Committee and Managing Director of the results.
22

Ensure that the department complies with sound internal auditing principles
and best practices; seek guidance from the standards issued by the Institute of
Internal Auditors and Information Systems Audit & Control Association,
(USA) .
The Director and staff of audit department have responsibility to:
1) Follow the guidelines and methodology given in the Internal Audit Manual.
2) Exercise due professional care in carrying out audit assignments.
3) Maintain integrity and objectivity.
The internal audit process, however, does not relieve departmental heads/ chief
managers of their responsibility for the maintenance and improvement of controls in
their respective areas.
2.8.5 Accountability
The Director audit department, in the discharge of his duties, shall be accountable to
the Audit Committee to:
 Submit an assessment on the adequacy and effectiveness of the Company
processes for controlling its activities and managing its risks in all the areas of
Company operations on annual basis.

Report significant issues related to the processes for controlling the activities
of Company together with recommendations for improvements to those
processes.

Provide information on the status and results of the annual audit plan on a
quarterly basis.

Coordinate with external auditors and provide oversight of other control and
monitoring functions e.g. security and legal etc.
The performance of the Director Audit will be evaluated by the Audit Committee.
2.8.6 Independence
 To maintain the independence of audit department from other Company
departments and offices, its personnel shall report to the Director audit
department, who shall report administratively to Managing Director and
functionally to the Audit Committee.

Audit department shall be independent of the activities audited. The
department must also be independent from the everyday internal control
process.
23

Audit department shall exercise its assignment on its own initiative in all
departments, offices and functions of Company.

Director audit department shall be authorized to communicate directly, and on
his own initiative, to the Board and the members of audit committee.

The internal audit function should be subject to an independent review as and
when required. This review can be carried out by independent professionals
e.g. practicing chartered accountants.
2.8.7 Continuity and Impartiality
 Internal audit within Company shall be a permanent function.

Audit department shall be objective and impartial in performing its
assignment.

Objectivity and impartiality entails that the internal audit department itself
seeks to avoid any conflict of interest. To this end, staff assignments within
audit department shall be rotated periodically. Internally recruited auditors
shall not audit activities or functions they performed in the past two years and
they will not be allowed to audit the work earlier performed by them.

Impartiality requires that audit department is not involved in the operations of
Company or in selecting or implementing internal control measures. However,
audit department may give recommendations for strengthening internal
controls and can also give opinions on specific matters related to internal
control procedures as per the request of senior management.
2.9 Audit Competencies
One aspect of these challenges that is often overlooked is the need to ensure the audit
staff are equipped to work at sub-board level, that is, right near the top of huge
international organizations. The new-look internal auditor has to be totally competent
or they will fail miserably. The IIA’s Practice Advisory 1200-1 deals with proficiency
and due professional care and argues that: ‘Professional proficiency is the
responsibility of the CAE and each internal auditor . Internal auditors should comply
with the professional standards of conduct i.e. the principles of integrity, objectivity,
confidentiality and competency and the Rules of Conduct.’ While Attribute Standard
1200 states quite clearly that: ‘engagements should be performed with proficiency and
due professional care’. And 1210 goes on to require that: ‘internal auditors should
possess the knowledge, skills, and other competencies needed to perform their
individual responsibilities. The internal audit activity collectively should possess or
obtain the knowledge, skills, and other competencies needed to perform its
responsibilities.
24
2.10 What makes for Good Internal Auditors
The first thing that needs to be in place to ensure good internal auditors is effective
human resource policies and practices. Here we are concerned with the attributes of
successful internal auditors. The IIA Practice Advisory 1210-1: deals with proficiency
and requires that each internal auditor should possess certain knowledge, skills, and
other competencies:




proficiencies in applying internal auditing standards and procedures ..
proficiency in accounting principles and techniques .
an understanding of management principles .
appreciation of accounting, economics, commercial law, taxation, finance,
quantitative methods and IT.
 skilled at dealing with people and communicating . . .
 skilled in oral and written communications
2.11 Training and Development of Audit Team
Training is an important aspect of developing internal auditors, and has to be carefully
planned in line with a career developmental program .Several issues should be noted.
The IIA has developed 20 disciplines in order of overall perceived importance:
Reasoning ,Communications , Auditing , Ethics , Organizations Sociology
Fraud ,Computers, Financial accounting ,Data gathering ,Managerial accounting ,
Government , Legal , Finance , Taxes , Quantitative methods , Marketing , Statistics
, Economics , International.
2.11.1 Benefits of Training
 Increase in the quantity of work done by auditors
 Better quality of work
 Cost savings in terms of better overall performance
 Better standard of report writing
 Better quality of working papers
 Less audit staff required in the long term
 Smaller training gap in terms of skills shortages
 Greater degree of professionalism
 Better motivated workforce with career development programs.
25
2.12 Audit Ethics
The auditing profession is charged with providing a high standard of audit services to
each employing organization and the audit charter forms a contract with the
organization in this respect. An extension of this concept is the view that audit
professionals are also charged with performing their work with the highest of moral
standards that one would expect from people in this position. Moreover the code of
ethics (or code of conduct) forms a contract to cover the auditor’s moral obligations.
The organization may therefore rely on this code for guiding the conduct of members
of the audit department. The IIA consider that the purpose of the IIA code of ethics is:
to promote an ethical culture in the global profession of internal auditing. A code of
ethics is necessary and appropriate for the profession of internal auditing, founded as
it is on the trust placed in its objective assurance about risk, control, and governance.
The Code of Ethics applies to both individuals and entities that provide internal audit
services.
2.13 The relation between internal auditors and external auditor
The coordination of internal audit activity with external audit activity is very
important from both points of view: from external audit’s point of view is important
because, in this way, external auditors have the possibility to raise the efficiency of
financial statements audit; the relevancy from internal audit’s point of view is assured
by the fact that this coordination assures for the internal audit a plus of essential
information in the assessment of risks control
The importance of the relationship from internal audit and external audit is reflected
also by International Standards of Audit which foresees, among others:
 The role of internal auditing is determined by management, and its objectives
differ from those of the external auditor who is appointed to report
independently on the financial statements. The internal audit function’s
objectives vary according to management’s requirements. The external
auditor’s primary concern is whether the financial statements are free of
material misstatements.
 The external auditor should obtain a sufficient understanding of internal audit
activities to identify and assess the risks of material misstatement of the
financial statements and to design and perform further audit procedures.
 The external auditor should perform an assessment of the internal audit
function, when internal auditing is relevant to the external auditor’s risk
assessments.
 link with internal auditing is more effective when meetings are held at
appropriate intervals during the period. The external auditor would need to be
advised of and have access to relevant internal auditing reports and kept
26
informed of any significant matter that comes to the internal auditor’s
attention which may affect the work of the external auditor. Similarly, the
external auditor would ordinarily inform the internal auditor of any significant
matters which may affect internal auditing.
Internal
Auditing
External
auditing
Internal Control
- Financial
Audit of Traditional
Financial Statements
Expansion into Operational
Auditing
Implementation of Audit
Risk Model
Both Do a Better Job of
Focusing on management
Risks
Risk and Value Added
Become More Important:
Service More Areas
Increase Offering of
Specialty Services
Expanded Role – Both
Professions
Convergence of Internal Audit and
External Audit Functions
Source: Rittenberg, L.E. & Covaleski, M.
(1997)
27
2.14 Audit Committee
The audit committee is a committee of the board. Its function is to promote the
independence of the external and internal auditors, and ensure that the directors
exercise due care.
The audit committee is responsible for monitoring, overseeing, and evaluating the
duties and responsibilities of management, internal audit, and the external auditors as
those duties and responsibilities relate to the organization’s processes for controlling
its operations, and that all issues reported by the internal audit department, the
external auditor, and other outside auditors have been satisfactorily resolved
The specific powers, duties and responsibilities of the audit committee are
 Direction of senior management to maintain the reliability and integrity of the
accounting policies and financial reporting and disclosure .
 Reviewing the financial statements and the external auditor’s opinion rendered
with respect to such financial statements .
 Conducting oversight of the internal audit function by:
 Selecting, evaluating and, where appropriate, replacing the audit
director and ensuring that the audit director be removed only with the
approval of the audit committee.
 Requiring that the audit director report directly to the audit committee
on substantive matters, and that the audit director shall be accountable
to the audit committee and board of directors.
 Requiring that both the internal and external auditors have unrestricted
access to the audit committee without the need for any prior
management knowledge or approval.
 Reviewing the scope of audit services required, significant accounting
policies, significant risks and exposures, audit activities, and findings.
 Monitoring the adequacy and timeliness of internal audit follow-up on
findings.
 Assessing the performance and determining the compensation of the
audit director; and Reviewing and approving the audit director’s work
plan.
 Conducting oversight of the external audit function by:
 Approving the external auditor’s annual engagement letter.
 Reviewing the performance of the external auditor.
28
 Making recommendations to the board of directors regarding the
appointment, renewal, or termination of the external auditor.
 Providing an independent, direct channel of communication between
the board of directors and the internal and external auditors.
 Evaluating responses by management to audit findings and reports, and
monitoring management implementation of audit recommendations.
 Monitoring of compliance with conflict of interest policy and oversight of
investigations of conflicts of interest and unethical conduct
 Providing reasonable assurance that senior management has established and is
maintaining an adequate internal control system by
 Reviewing the internal control system and the resolution of identified
material weaknesses and reportable conditions in the internal control
system, including the prevention or detection of management override
or compromise of the internal control system.
 Reviewing the programs and policies designed to provide reasonable
assurance of compliance with applicable laws, regulations, and policies
and monitoring the results of the compliance efforts.
 Review of the policies and procedures established by senior management to
assess and monitor implementation of the strategic business plan and the
operating goals and objectives.
 Periodic reporting of its findings to the board of directors.
29
10 Chapter Three
Gaza Electricity Distribution
Company
Chapter Three :
Company Profile………………………………………………………31
The organizational chart ………………………………………………..32
Automated payment system………………………………………………32
Advantages of automated payment system…………………………………33
Disadvantages of automated payment system……………………………….33
GEDCO procedures in automated payment system………………………..34
30
3.1 Company Profile
it’s a private company limited contribution to the partnership between the Palestinian
National Authority represented by the Palestinian Energy Authority and the Ministry
of Finance and the total number of municipalities and village councils in the
governorates of the Gaza Strip.
The company is working on the distribution of electrical energy in all areas that fall
under its authority and the Department of the Palestinian National Authority in the
provinces of Gaza and the subsequent acts of collection and the collection and
technical supervision, maintenance and development of networks of low-pressure (0.4
kV 9 and the pressure medium (22 kV) Origin and establishment.
Electricity distribution company established the provinces of Gaza after the arrival of
the Palestinian National Authority to the Palestinian territories and the establishment
of the Palestinian Energy Authority, where he was the establishment of a power
distribution company demands of mourning, which bore to support the development
of this important sector.
The company was founded in 1998 by ministerial decree number 11/99 to convey to
all the powers and functions related to distribution of the municipalities were issued to
the company's first bill on behalf of the company in August 1998.
And lead the company's functions in all parts of the provinces of Gaza and the cities
and villages and followed him branches of the distribution of electricity in each of the
province and the North Gaza governorate and the Central provinces and the province
of KhanYounis and Rafah, and thus the services cover about 360 square kilometers.
31
3.2 The organizational chart for Company Gaza Electricity
Distribution:
Automated Payment system :
The company has gone through a number of difficulties and threats as a result of
continuous attacks on its network by the Zionist occupation, however, the company
has remained steadfast in front of the obstacles, and it has been developed and created
many of the systems that have contributed to improve of its services well, with some
reservations, and the research will talk about the automated payment system .
The definition of automated payment system :
a payment system whereby creditors are authorized to debit a customer's bank account
directly at regular intervals.
32
Advantages of Automated Payment System:
Most of us are always on the lookout for ways to cut the amount of time we spend on
mundane chores. One of the ways online banking has helped free up our time is
through the advent of automatic bill pay. You can set up automatic payment plans for
utility, entertainment, household, and other bills. In fact, almost any vendor you
purchase goods or services from now offers automatic payment plans.
With an automatic payment plan, the monthly bill is recurrently charged to your credit
card or debited from your checking account on a pre-set date every month without
you having to do a thing. It makes life easier knowing that bills are paid on time and
in full each month. But while there are definite advantages to signing up for automatic
payment plans, there are drawbacks as well. Thoroughly consider the pros and cons
and how they could affect your lifestyle before signing up.
Advantages
Automatic payment plans have grown in popularity over the years as a result of many
of the conveniences and advantages they offer.
 It spreads the costs
Paying your regular bills by Direct Debit allows you to spread costs over a
period that you agree with the organization you are paying.
 It's guaranteed
Direct Debit payments come with a guarantee so you're automatically
protected by three important safeguards:

An immediate money back guarantee from your bank in the event of an
error in the payment of your Direct Debit
 Advance notice if the date or amount changes
 The right to cancel at any time.

It can save you money
Businesses find Direct Debit just as convenient and efficient as consumers.
For this reason, many offer discounts in return for you paying by Direct Debit.
33
Discounts vary, but overall Direct Debit savings on household bills can add up
to a substantial amount each year. It pays to check when you get a bill to see
how much you can save.

It gives you peace of mind
Direct Debit is one of the safest and most reassuring ways of paying your bills:

Payments are made automatically, so bills are never forgotten, lost in the
post or delayed by postal problems and there's no risk of late payment
charges
 Organizations using the Direct Debit scheme have to pass a careful vetting
process, and are closely monitored by the banking industry
 The Direct Debit Guarantee protects you and your money. It's offered by
all banks and building societies that take part in the scheme.

It saves you time
Modern life is hectic – but Direct Debit helps. It takes away much of the
hassle associated with paying bills, and puts an end to queuing at the bank
and filling out cheques. You’ll find it easier to stay on top of your bills,
and you’ll know exactly how much money is going out each month.
Disadvantages:
 It’s easy to lose track of your payments:
The convenience of paying bills automatically can make you lazy when it comes to
tracking your finances. Setting up a bunch of automatic payments may cause you
to spend more than you realize. Since you do not physically pay the bill, it may not
register with you in the same way it would if you were writing a check. It’s
important to note automatic payments in your budget just as you would any other
expenses. When using a credit card, make sure to check it each month to verify that
the charges are correct.
 Mistakes can be made:
Though it’s not common, it is possible that an electronic error can cause a mistake
with your bill payment. It’s important to make sure that payments are actually
made so that you don’t have to deal with the consequences of a late payment or
other potential problems.
34
 Bank accounts can be easily overdrawn:
If you are using a checking account for an automatic bill payment, you have to always
have enough money in that account to cover the automatic draws or you’ll end up
paying overdraft fees. That means keeping close tabs on your account and knowing
when to expect automatic payments to be withdrawn to prevent an overdraft. It’s
better to use a credit card with an automatic payment than a checking account or debit
card. With a credit card you know the funds will be there (if you’re not over your
limit), and it’s easier to challenge a mistaken bill that’s charged to a credit card than
get money taken from your account returned.
The Automated payment in Gaza Electricity Distribution Company:
Some procedures is implemented by GEDCO:

For the monthly bills which send for collection to the banks to pay , the audit
department verify them by checking the clients accounts and the amounts
collected from the accounts and make necessary adjustments.

Ensure about the effectiveness of bank accounts by making sure that the
customer's own bank accounts, and there was movements for 6 months that
should be periodic movements.
35
11 Chapter Four
12 Methodology
Chapter four:
Research methodology………………………………………………..37
Questionnaire content………………………………………………….37
Data measurement………………………………………………………38
Test of normality………………………………………………………….38
Validity of questionnaire……………………………………………………39
Structure validity of the questionnaire……………………………………..43
Cronbach’s Coefficient Alpha…………………………………………………44
36
4.1 Research methodology :
4.1.1 Data Collection Methodology :
In order to collect the needed data for this research , we use the secondary resources
in collecting data such as books, journals, statistics and web pages , in addition to
preliminary resources that not available in secondary resources through distribute
questionnaires on study population in order to get their opinions about the improving
process of internal audit Applicable study on Gaza Electricity Distribution Company
Research methodology depend on the analysis of data on the use of descriptive
analysis, which depends on the poll and use the main program (SPSS).
4.1.2 Population and sample size:
The population will include Employees in Gaza Electricity Distribution Company,
and we select random sample with size 25 employees, twenty five questionnaires
were distributed to the research population and twenty five questionnaires are
received.
4.1.3 Questionnaire content :
The questionnaire was provided with a covering letter explaining the purpose of the
study, and it included numerical scale 1-10 where "1" indicates a weak answer while
"10" indicates a strong answer , the variety in these questions aims first to meet the
research objectives, and to collect all the necessary data that can support the
discussion, results and recommendations in the research.
The sections in the questionnaire will verify the objectives in this research related to
The effectiveness of internal audit system in reducing the occurrence of errors and
frauds in Palestinian services companies applicable study on Gaza Electricity
Distribution Company.
as the following:
First field: The relation between internal audit system and Effectiveness of internal
audit services in Gaza Electricity Distribution Company consist from 7questions .
Second field: The relationship between internal audit system and the financial and
administrative performance consist from 12 questions .
third field: The relationship between internal audit system and the ability to assess and
manage risks related to automated payment system applicable in Gaza electricity
distribution company consist from 9 questions .
37
Data Measurement :
In order to be able to select the appropriate method of analysis, the level of
measurement must be understood. For each type of measurement, there is/are an
appropriate method /s that can be applied and not others. In this research, numerical
scale 1-10 is used, where "1" indicates a weak answer while "10" indicates a strong
answer.
Test of Normality:
Table (1) shows the results for Kolmogorov-Smirnov test of normality. From Table
(1), the p-value for each field is greater than 0.05 level of significance, then the
distribution for each field is normally distributed. Consequently, Parametric tests will
be used to perform the statistical data analysis. Person-Organization Fit
Table 1: Kolmogorov-Smirnov test
Kolmogorov-Smirnov
Field
Statistic
P-value
There is a statistically significant relationship
between internal audit system and the
0.435
0.992
effectiveness of internal audit services in Gaza
Electricity Distribution Company.
There is a statistically significant relationship
between internal audit system and the financial
0.624
0.830
and administrative performance.
There is a statistically significant relationship
between internal audit system and the ability
to assess and manage risks related to
0.611
0.849
automated payment system applicable in Gaza
electricity distribution company.
0.583
0.885
All paragraphs of the questionnaire
Statistical analysis Tools
The researcher would use data analysis both qualitative and quantitative data analysis
methods. The Data analysis will be made utilizing (SPSS 22). The researcher would
utilize the following statistical tools:
1) Kolmogorov-Smirnov test of normality.
2) Pearson correlation coefficient for Validity.
3) Cronbach's Alpha for Reliability Statistics.
4) Frequency and Descriptive analysis.
38
5) One-sample T test.
Validity of Questionnaire:
Validity refers to the degree to which an instrument measures what it is supposed to
be measuring. Validity has a number of different aspects and assessment approaches.
Statistical validity is used to evaluate instrument validity, which include internal
validity and structure validity.
Internal Validity:
Internal validity of the questionnaire is the first statistical test that used to test the
validity of the questionnaire. It is measuring the correlation coefficients between each
paragraph in one field and the whole field.
Table (2) clarifies the correlation coefficient for each paragraph of the " There is a
statistically significant relationship between internal audit system and effectiveness of
internal audit services in Gaza Electricity Distribution Company " and the total of the
field. The p-values (Sig.) are less than 0.05, so the correlation coefficients of this field
are significant at α = 0.05, so it can be said that the paragraphs of this field are
consistent and valid to be measure what it was set for.
Table 2: Correlation coefficient of each paragraph of " There is a statistically
significant relationship between internal audit system and the effectiveness of
internal audit services in Gaza Electricity Distribution Company " and the total
of this field
No.
Paragraph
Pearson Correlation
P-Value
Coefficient
(Sig.)
1.
Internal auditor takes into account the
.815*
0.000*
beneficiary of the services audit.
2.
The internal auditor meet the wishes of
.803*
0.000*
the beneficiaries of the audit reports.
3.
The internal audit department takes
.688*
0.000*
notes and opinions of the beneficiaries.
4.
The wishes of beneficiaries is converted
.834*
0.000*
to procedures to achieve it.
5.
The quality of the Audit performance is
measured by the satisfaction of the
.644*
0.001*
beneficiary.
6.
The internal audit department meet the
.595
0.001*
need of the beneficiary.
7.
The main beneficiary of the internal
audit services is workers of the
.690
0.000*
company.
* Correlation is significant at the 0.05 level
39
Table (3) clarifies the correlation coefficient for each paragraph of the " There is a
statistically significant relationship between internal audit system and the financial
and administrative performance " and the total of the field. The p-values (Sig.) are
less than 0.05, so the correlation coefficients of this field are significant at α = 0.05,
so it can be said that the paragraphs of this field are consistent and valid to be measure
what it was set for.
Table 3: Correlation coefficient of each paragraph of " There is a statistically
significant relationship between internal audit system and the financial and
administrative performance " and the total of this field
No.
Paragraph
Pearson Correlation
P-Value
Coefficient
(Sig.)
1.
The internal auditors has more experience
and knowledge in the automated payment
system goals and objectives in Gaza
.568
0.002*
Electricity Distribution company because
they consider as permanent employees in
the company .
2.
Measuring the efficiency, effectiveness and
performance appraisal that related to
automated payment system in its modern
concept is a natural progression of the
.524
0.004*
internal audit and extending its reach
beyond the financial and accounting
aspects.
3.
4.
5.
6.
7.
There are a standards of performance
which measure the efficiency of the
automated payment system in the Gaza
Electricity Distribution company.
The internal auditors examine and assess
the standards of performance supported
by senior management.
The internal auditor evaluate and audit the
efficiency of individual employees of the
company.
The internal auditor audit the size of the
work done during the period necessary for
automated payment of the bills issued by
the company and make sure of it.
The internal auditor match the correctness
40
.863
0.000*
.840
0.000*
.828
0.000*
.522
0.005*
.568
0.002*
of the procedures followed in the system in
terms of minimum balance in the
customer's account, and the effectiveness of
these procedures in achieving the
company's goals and customer satisfaction.
8.
9.
10.
11.
12.
The internal auditor is able to disclosure
the deviations that have occurred in the
system and propose solutions that lead to
correct situations in the future.
The expand of scope of internal audit can
be through participation in the
implementation of plans and programs
established by Gaza Electricity
Distribution company to benefit the system.
The internal auditor audit the quality
system to comply with the requirements
applicable to the company, especially
(Automated payment system).
The internal auditors audit the financial
viability of the system and its operations,
efficiency and effectiveness.
The internal auditor shall submit a report
on the misuse of the automated system that
can be done by its employees.
.839
0.000*
.747
0.000*
.760
0.000*
.689
0.000*
.623
0.000*
* Correlation is significant at the 0.05 level
Table (4) clarifies the correlation coefficient for each paragraph of the " There is a
statistically significant relationship between internal audit system and the ability to
assess and manage risks related to automated payment system applicable in Gaza
electricity distribution company " and the total of the field. The p-values (Sig.) are
less than 0.05, so the correlation coefficients of this field are significant at α = 0.05,
so it can be said that the paragraphs of this field are consistent and valid to be measure
what it was set for.
41
Table 4 : Correlation coefficient of each paragraph of " There is a statistically
significant relationship between internal audit system and Assess and manage
risks related to automated payment system applicable in Gaza electricity
distribution company "and the total of this field
No.
1.
2.
3.
4.
5.
6.
7.
8.
9.
Paragraph
The evaluation process and risk
management is an important component of
the strategic management elements, and
important of the competitive advantages
between companies.
The internal auditors
contribute
significantly to an advisory role in reducing
risk that related to the system , also helps in
assessing the risks face the Gaza Electricity
Distribution Company.
The process of assess and management risk
that related to the system is includes
identification, management and control
potential events and conditions in place to
provide assurances and guarantees
reasonable access to the direction of
corporate goals of
Gaza Electricity
Distribution Company.
Senior management is putting
and
formulate and deliver the strategic
objectives of the company by developed
systems to all levels of the company.
The department of internal audit propose
ways and appropriate mechanisms to deal
with different aspects of risk related to the
system.
The existing level of risk in the company is
considered an acceptable level and not
prevent to achieve objectives of the
company.
The internal auditor focus on the important
risks and audit management processes risks
inside the Gaza Electricity Distribution
company.
Internal auditors are provided with skills
and experience required to able them to
identify, monitor and measure and manage
risks.
The senior management response to the
internal audit reports which related to
42
Pearson Correlation
Coefficient
P-Value
(Sig.)
.778
0.000*
.883
0.000*
.841
0.000*
.817
0.000*
.819
0.000*
.646
0.000*
.713
0.000*
.723
0.000*
.754
0.000*
automated payment system on the risks
adequately, so leading to reduce the risks
to acceptable levels.
* Correlation is significant at the 0.05 level
Structure Validity of the Questionnaire
Structure validity is the second statistical test that used to test the validity of the
questionnaire structure by testing the validity of each field and the validity of the
whole questionnaire. It measures the correlation coefficient between one field and all
the fields of the questionnaire that have the same level of liker scale.
Table (5) clarifies the correlation coefficient for each field and the whole
questionnaire. The p-values (Sig.) are less than 0.05, so the correlation coefficients of
all the fields are significant at α = 0.05, so it can be said that the fields are valid to be
measured what it was set for to achieve the main aim of the study.
Table 5: Correlation coefficient of each field and the whole of questionnaire
No.
Field
Pearson Correlation
P-Value
Coefficient
(Sig.)
1.
There is a statistically significant
relationship between internal audit system
.667
0.000*
and effectiveness of internal audit services
in Gaza Electricity Distribution Company
2.
There is a statistically significant
relationship between internal audit system
.901
0.000*
and
Financial
and
administrative
performance
3.
There is a statistically significant
relationship between internal audit system
and Assess and manage risks related to
.900
0.000*
automated payment system applicable in
Gaza electricity distribution company
* Correlation is significant at the 0.05 level
43
Reliability of the Research
The reliability of an instrument is the degree of consistency which measures the
attribute; it is supposed to be measuring. The less variation an instrument produces in
repeated measurements of an attribute, the higher its reliability. Reliability can be
equated with the stability, consistency, or dependability of a measuring tool. The test
is repeated to the same sample of people on two occasions and then compares the
scores obtained by computing a reliability coefficient.
Cronbach’s Coefficient Alpha
This method is used to measure the reliability of the questionnaire between each field
and the mean of the whole fields of the questionnaire. The normal range of
Cronbach’s coefficient alpha value between 0.0 and + 1.0, and the higher values
reflects a higher degree of internal consistency. The Cronbach’s coefficient alpha was
calculated for each field of the questionnaire.
Table (6) shows the values of Cronbach's Alpha for each field of the questionnaire
and the entire questionnaire. For the fields, values of Cronbach's Alpha were in the
range from 0.783 and 0.915. This range is considered high; the result ensures the
reliability of each field of the questionnaire. Cronbach's Alpha equals 0.934 for the
entire questionnaire which indicates an excellent reliability of the entire questionnaire.
Table 6: Cronbach's Alpha for each field of the questionnaire
No.
Field
Cronbach's Alpha
1.
There is a statistically significant relationship
between
internal
audit
system
and
0.783
effectiveness of internal audit services in Gaza
Electricity Distribution Company
2.
There is a statistically significant relationship
between internal audit system and Financial
0.894
and administrative performance
3.
There is a statistically significant relationship
between internal audit system and Assess and
manage risks related to automated payment
0.915
system applicable in Gaza electricity
distribution company
All paragraphs of the questionnaire
0.934
The Thereby, it can be said that the researcher proved that the questionnaire was valid
and reliable.
44
Chapter Five
Data Analysis and Discussion
General information ……………………………………… 46
Testing hypothesis, discussion
and interpretation of each items……………………………….50
45
General information
Qualification
Table No.(?) shows that 4.0% of the sample are " Diploma " holders, 80.0% of the
sample are " Bachelor " holders and 16.0% of the sample are " Master " holders .
Table (1): Qualification
Qualification
Frequency
1
Diploma
Bachelor
20
Master
4
Total
25
Percent
4.0
80.0
16.0
100.0
Diplom
a
4%
Master
16%
Bachelo
r
80%
Major
Table No.(2) shows that 88.0% of the sample are " accounting " and 12.0% of the
sample are " business administration " .
Table (?):Major
Major
Frequency
accounting
business administration
Banking and financial sciences
others
Total
46
22
3
25
Percent
88.0
12.0
100.0
business
administr
ation
12%
others
0%
Banking
and
financial
sciences
0%
accountin
g
88%
Job Title
Table No.(?) shows that 88.0% of the sample are " Accountant " and 12.0% of the
sample are others job title.
Table (?):Job Title
Frequency
Job Title
Accountant
financial manager
general manager
others
22
3
25
Total
financial
manager
0%
others
12%
general
manager
0%
Accounta
nt
88%
47
Percent
88.0
12.0
100.0
Years of Experience
Table No.(?) shows that 4.0% of the sample have experience " less than one ", 28.0%
of the sample have experience "1-5 years ", 60.0% of the sample have experience "6-
10 years " and 8.0% of the sample have experience " more than 10" .
Table (?): Years of Experience
Years of Experience
Frequency
Percent
1
7
15
2
25
less than one
1-5 years
6-10 years
more than 10
Total
more
than 10
8%
4.0
28.0
60.0
8.0
100.0
less
than
one
4%
1-5
years
28%
6-10
years
60%
Age
Table No.(?) shows that 8.0% of the sample are " Less than25" , 32.0% of the
sample are of "25 – less than 30 years " and 60.0% of the sample are of " More
than30 ".
Age
Table (?): Age
Frequency
2
8
15
25
Less than25
25 – less than 30 years
More than30
Total
48
Percent
8.0
32.0
60.0
100.0
Less than25
8%
25 – less than 30
years
32%
More than30
60%
Gender
Table No.(?) shows that 60.0% of the sample are Males and 40.0% of the sample are
Females .
Table (?):Gender
Frequency
Gender
male
female
15
10
25
Total
female
40%
male
60%
49
Percent
60.0
40.0
100.0
Analysis for each field
1. There is a statistically significant relationship between internal audit
system and the effectiveness of internal audit services in Gaza Electricity
Distribution Company.
Table (1) shows the following results:
The mean of paragraph #1 “Internal auditor takes into account the beneficiary
of the services Audit” equals 7.12 (71.2%), Test-value = 2.85, and P-value = 0.004
which is smaller than the level of significance   0.05 . The sign of the test is
positive, so the mean of this paragraph is significantly greater than the hypothesized
value 6 . We conclude that the respondents agree to this paragraph.
The mean of paragraph #5 “the quality of the Audit performance is measured by
the satisfaction of the beneficiary” equals 5.96 (59.6%), Test-value = -0.09, and Pvalue = 0.465 which is greater than the level of significance   0.05 . Then the
mean of this paragraph is insignificantly different from the hypothesized value 6.
We conclude that the respondents (Do not know, neutral) to this paragraph.

The mean of the field “There is a statistically significant relationship between
internal audit system and effectiveness of internal audit services in Gaza Electricity
Distribution Company” equals 6.64 (66.4%), Test-value = 2.41, and P-value=0.012
which is smaller than the level of significance   0.05 . The sign of the test is
positive, so the mean of this field is significantly greater than the hypothesized value
6. We conclude that the respondents agreed to field of “There is a statistically
significant relationship between internal audit system and effectiveness of internal
audit services in Gaza Electricity Distribution Company ".
50
Through these statistical results, the system of internal audit in the Gaza
electricity company has possibilities, especially in the effectiveness of the internal
audit services and we cannot deny its existence.
3.
4.
5.
6.
7.
Internal auditor takes into account the
beneficiary of the services Audit
The internal auditor meet the wishes of the
beneficiaries of the audit reports.
The Internal audit department takes notes
and opinions of the beneficiaries.
The wishes of beneficiaries is converted to
procedures to achieve it
The quality of the Audit performance is
measured by the satisfaction of the
beneficiary.
The internal audit department meets the need
of the beneficiary.
The main beneficiary of the internal audit
services is workers of the company
All paragraphs of the field
2.85
0.004*
1
7.00
70.0
3.11
0.002*
2
6.96
69.6
2.41
0.012*
3
6.48
64.8
1.12
0.137
5
5.96
59.6
-0.09
0.465
7
6.76
67.6
1.86
0.038*
4
6.20
62.0
0.49
0.316
6
6.64
66.4
2.41
0.012*
* The mean is significantly different from 6
2. There is a statistically significant relationship between internal audit system
and Financial and administrative performance.
Table (2) shows the following results:
The mean of paragraph #1 “The internal auditors has more experience and
know the things in the company and its goals and objectives and has potential
problems because he is permanent on the Gaza Electricity Distribution company”
equals 7.28 (72.8%), Test-value = 2.90 and P-value = 0.004 which is smaller than the
level of significance   0.05 . The sign of the test is positive, so the mean of this
paragraph is significantly greater than the hypothesized value 6 . We conclude that the
respondents agreed to this paragraph.
51
Rank
71.2
(%)
P-value (Sig.)
2.
Test value
1.
7.12
Mean
Item
Proportional mean
Table (1): Means and Test values for “There is a statistically significant
relationship between internal audit system and effectiveness of internal audit
services in Gaza Electricity Distribution Company”
The mean of paragraph #12 “The Internal Auditor shall submit a report on the
misuse of resources and facilities” equals 5.64 (56.4%), Test-value = -0.95, and Pvalue = 0.175 which is greater than the level of significance   0.05 . Then the mean
of this paragraph is insignificantly different from the hypothesized value 6. We
conclude that the respondents (Do not know, neutral) to this paragraph.

The mean of the field “There is a statistically significant relationship between
internal audit system and Financial and administrative performance” equals 6.25
(62.5%), Test-value = 0.92, and P-value=0.184 which is greater than the level of
significance   0.05 . The mean of this field is insignificantly different from the
hypothesized value 6. We conclude that the respondents (Do not know, neutral) to
field of “There is a statistically significant relationship between internal audit system
and Financial and administrative performance ".
Through these statistical results, which indicate that the system of internal audit
in the Gaza electricity company is in relation but not very closely with the
financial and administrative performance in the company.
The internal auditors has more experience
and knowledge in the automated payment
system goals and objectives in
Gaza
Electricity Distribution company because
they consider as permanent employees in the
company .
Measuring the efficiency, effectiveness and
performance appraisal that related to
automated payment system in its modern
concept is a natural progression of the
internal audit and extending its reach beyond
2.90
0.004*
1
6.92
69.2
2.40
0.012*
2
52
Rank
72.8
(%)
P-value (Sig.)
2.
Test value
1.
7.28
Mean
Item
Proportional mean
Table (2): Means and Test values for “There is a statistically significant
relationship between internal audit system and Financial and administrative
performance”
the financial and accounting aspects.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
There are a standards of performance which
measure the efficiency of the automated
payment system in the Gaza Electricity
Distribution company.
The internal auditors examine and assess
the standards of performance supported by
senior management.
The internal auditor evaluate and audit the
efficiency of individual employees of the
company.
The internal auditors audit the size of the
work done during the period necessary for
automated payment of the bills issued by
the company and make sure of it.
The internal auditors match the correctness
of the procedures followed in the system in
terms of minimum balance in the customer's
account, and the effectiveness of these
procedures in achieving the company's goals
and customer satisfaction.
The internal auditor is able to disclosure
the deviations that have occurred in the
system and propose solutions that lead to
correct situations in the future.
The expand of scope of internal audit can
be through participation in the
implementation of plans and programs
established by Gaza Electricity Distribution
company to benefit the system.
The internal auditor audit the quality system
to comply with the requirements applicable
to
the
company,
especially
(Automated payment system)
The internal auditors audit the financial
viability of the system and its operations,
efficiency and effectiveness.
The internal auditor shall submit a report on
the misuse of the automated system that can
be done by its employees.
All paragraphs of the field
53
5.72
57.2
0.63
0.268
11
6.32
63.2
0.63
0.266
4
6.48
64.8
1.15
0.130
3
6.24
62.4
0.83
0.208
5
6.04
60.4
0.09
0.465
9
6.16
61.6
0.43
0.334
7
6.20
62.0
0.52
0.303
6
6.12
61.2
0.33
0.373
8
5.92
59.2
0.20
0.422
10
5.64
56.4
0.95
0.175
12
6.25
62.5
0.92
0.184
* The mean is significantly different from
3. There is a statistically significant relationship between internal audit system
and the ability to assess and manage risks related to automated payment system
applicable in Gaza electricity distribution company.
Table (3) shows the following results:
The mean of paragraph #1 “The evaluation process and risk management is an
important component of the strategic management elements, and important of the
competitive advantages between companies” equals 6.76 (67.6%), Test-value = 1.38,
and P-value = 0.047 which is smaller than the level of significance   0.05 . The sign
of the test is positive, so the mean of this paragraph is significantly greater than the
hypothesized value 6 . We conclude that the respondents agree to this paragraph.
The mean of paragraph #2 “The internal auditor and contribute significantly to
an advisory role in reducing risk, also helps in assessing the risks to the Gaza
Electricity Distribution Company” equals 5.84 (58.4%), Test-value = -0.28, and Pvalue = 0.391 which is greater than the level of significance   0.05 . Then the mean
of this paragraph is insignificantly different from the hypothesized value 6. We
conclude that the respondents (Do not know, neutral) to this paragraph.

The mean of the field “There is a statistically significant relationship between
internal audit system and Assess and manage risks related to automated payment
system applicable in Gaza electricity distribution company” equals 6.25 (62.5%),
Test-value = 6.33, and P-value=0.193 which is greater than the level of significance
  0.05 . The mean of this field is insignificantly different from the hypothesized
value 6. We conclude that the respondents (Do not know, neutral) to field of “There is
a statistically significant relationship between internal audit system and Assess and
manage risks related to automated payment system applicable in Gaza electricity
distribution company ". Through these statistical results concerning the main task
of the system of internal audit, the researchers found that the statistical result
54
does not give an excellent impression but good one in terms of the system's
ability to assess and manage risks related to automated payment system.
3.
4.
5.
6.
7.
The evaluation process and risk
management is an important component of
the strategic management elements, and
important of the competitive advantages
between companies.
1.38
0.047*
1
The internal auditors
contribute
significantly to an advisory role in
reducing risk that related to the system ,
also helps in assessing the risks face the
Gaza Electricity Distribution Company.
The process of assess and management risk
that related to the system is includes
identification, management and control
potential events and conditions in place to
provide assurances and guarantees
reasonable access to the direction of
corporate goals of
Gaza Electricity
Distribution Company.
Senior management is putting
and
formulate and deliver the strategic
objectives of the company by developed
systems to all levels of the company.
The department of internal audit propose
ways and appropriate mechanisms to deal
with different aspects of risk related to the
system.
5.84
58.4
-0.28
0.391
9
6.24
62.4
0.46
0.326
6
6.32
63.2
0.63
0.266
5
6.16
61.6
0.41
0.341
7
The existing level of risk in the company is
considered an acceptable level and not
prevent to achieve objectives of the
company.
6.48
64.8
1.30
0.104
3
The internal auditor focus on the important
risks and audit management processes risks
6.40
64.0
1.02
0.159
4
55
Rank
67.6
(%)
P-value (Sig.)
2.
Test value
1.
6.76
Mean
Item
Proportional mean
Table (3): Means and Test values for “There is a statistically significant
relationship between internal audit system and Assess and manage risks related
to automated payment system applicable in Gaza electricity distribution
company”
inside the Gaza Electricity Distribution
company.
8.
9.
Internal auditors are provided with skills
and experience required to able them to
identify, monitor and measure and manage
risks.
the senior management response to the
internal audit reports which related to
automated payment system on the risks
adequately, so leading to reduce the risks
to acceptable levels.
All paragraphs of the field
* The mean is significantly different from 6
56
6.75
67.4
1.74
0.048*
2
6.00
60.0
0.00
0.500
8
6.33
63.3
0.88
0.193
Chapter Six
Conclusion &
Recommendation
Conclusion ………………………………………………58
Recommendation…………………………………………58
57
6.1 Conclusion:
Through statistical analysis and the Field study , we found the following results :

There is a significant relationship between internal audit system and the
effectiveness of internal audit services in Gaza Electricity Distribution
Company.

There is a significant relationship internal audit system and the financial and
administrative performance and this is necessarily to improve
and control the administrative and financial functioning in the company.

There is a statistically significant relationship between internal audit system
and the ability to assess and manage risks related to automated payment system
applicable in Gaza electricity distribution company.
6.2 Recommendations:
Through the field study which carried out at the Gaza Electricity Distribution
Company we found that there is a lack in the internal auditing system which related
specially with the automated payment , so we recommend that company management
thus:

The need of the company to move from financial and routine internal audit to
process and operational internal audit which will benefit the company and
improve performance of company`s systems.

The internal auditor must communicate with the Audit Committee in order to
support its independence.

The internal audit function must follows with highest levels of
administrative unit in the company or the Board of Directors.

The internal auditors must take courses and training to internal audit to
acquire sufficient knowledge of internal auditing standards issued by the
Institute of Internal Auditors.

The need of company to have the financial and human resources team for the
Internal Audit Function.
58

Internal auditor must have skills and experience required and able to identify,
monitor and measure risks surrounding the automated payment system in the
company.

It is necessary to determine the minimum level of bank credit to the customer
so that the company can deduct the electricity bill if the bank account balance
is less than the monthly bill owed.

The company should setting standards of performance which can measure the
efficiency of the automated payment system in the Gaza Electricity
Distribution company.

The internal auditors must submit a report on the misuse of the automated
payment system that can be done by its employees.

The internal auditors should contribute significantly to the advisory role
specially in reducing risk that related to the system , also should help in
assessing the risks face the Gaza Electricity Distribution Company.
59
References
60
References
English Literature :
 "Internal audit charter" SBP Banking Services Corporation

Khwaileh.A , 2013 " The extent of the application of internal audit
standard in the Jordanian private universities " .
 Harb.R , 2012 " The impact of information systems audit on improving
bank`s performance applied study at banks working in Gaza ".
 Keshta.M , Hassan.T ,Alghalayini.S ,2009 "The effect of internal
auditing on financial performance applied study on Bank of Palestine " .
 Atanasiu , Cristina ,Florin "The relationship between internal and
external audit" University of Cluj-Napoca.
 FHFB Office of Supervision ,2007 "External and Internal Audit" .
 Australian Government Auditing & Assurance Standards Board
"Auditing standard ASA 610 considering the work of internal audit issued
by the Auditing and Assurance Standards Board" , 2006 .
 Hong Kong Monetary Authority, Supervisory Policy Manual "Internal
audit function" , 2004 .
 Goldstein, Michael ,2004 " PCAOB Issues Auditing Standard on
Internal Control over Financial Reporting" BANK ACCOUNTING &
FINANCE.
 Jansson, Anders, 2003" Improving internal audit in Nigeria Federal
Government " Abuja, Nigeria .
 Pickett.S, 2003 " The internal auditing handbook" Second edition.
61
 Ramamoorti.S , 2003 " Internal auditing : History , Evaluation and
Prospects "
 Beecroft.G , "Internal quality audit – Obstacles or Opportunities"
 Elliott , Dawson , Edwards "An improved process model for internal
auditing "
 http://www.Moneymatters360.com
 http://www.Directdebit.co.UK.com

‫موقع شركة توزيع الكهرباء‬/www.gedco.ps/main.php .
 Institute of Internal Auditors IIA, 2004, available at:
http://www.theiia.org/ .
 California University Northridge
http:// www-admn.csun.edu/audit/types.htm/
62
Appendix I
63
Islamic University – Gaza
‫الجامعة اإلسالمية – غزة‬
‫كلية التجارة‬
‫قسم المحاسبة‬
Faculty of Commerce
Department of Accounting
Dear all
Peace upon you , God's mercy and blessings
We thank you and appreciate you , hope you will help us to success this
field study, which is entitled:
The effectiveness of internal audit system in reducing the
occurrence of errors and frauds in Palestinian services
companies (case study – The Automated Payment System in
Gaza electricity distribution company)
So we hope from you to answer our questionnaire with the accurate
answers, For its effect on getting accurate results , With the knowledge
that all the information will be obtained for the scientific purposes of the
research , and it will be completely secret.
Thanks for your cooperation..
God bless you…
Researchers :
Dina Saher Al-Quraan
Randa Ali Harara
64
Section I / General Information
personal information :
1. degree
□ Diploma
□ Bachelor
□ master
2 . major
□ accounting
□ others
□ business administration
□ Banking and financial sciences
3. Job Title
□ Accountant
□ financial manager
□ general manager
4. Years of experience
□ less than one
□ 6-10 years
5. Age
□ Less than25
□ 1-5 years
□ more than 10
□ more than25
□ More than30
6. Gender:
□ male
□ female
7. Undergraduate degrees
□ ACPA
□ CPA
□ NO
65
□ others
Please put appropriate degree from (1-10) in the answer
1. There is a statistically significant relationship between internal audit system
and the effectiveness of internal audit services in Gaza Electricity Distribution
Company.
Ref
Statement
1
Internal auditor takes into account
the beneficiary of the audit services
.
The internal auditor is meet the
wishes of the beneficiaries of the
audit reports.
The internal audit department
takes notes and opinions of the
beneficiaries.
The wishes of beneficiaries is
converted to procedures to achieve
it.
The quality of the audit
performance is measured by the
satisfaction of the beneficiary.
The internal audit department meet
the need of the beneficiary.
The main beneficiary of the
internal audit services is the
workers of the company.
2
3
4
5
6
7
66
Score
2.There is a statistically significant relationship between internal audit system and
the financial and administrative performance.
Ref
Statement
Score
1
2
3
4
The internal auditors has more experience
and knowledge in the automated payment
system goals and objectives in Gaza
Electricity Distribution company because
they consider as permanent employees in the
company .
Measuring the efficiency, effectiveness and
performance appraisal that related to
automated payment system in its modern
concept is a natural progression of the
internal audit and extending its reach beyond
the financial and accounting aspects.
There are a standards of performance which
measure the efficiency of the automated
payment system in the Gaza Electricity
Distribution company.
The internal auditors examine and assess the
standards of performance supported by
senior management.
5
The internal auditor evaluate and audit the
efficiency of individual employees of the
company
6
The internal auditor audited the size of the
work done during the period necessary for
automated payment of the bills issued by the
company and make sure of it.
7
The internal auditor match the correctness of
the procedures followed in the system in
terms of minimum balance in the customer's
account, and the effectiveness of these
procedures in achieving the company's goals
and customer satisfaction.
67
8
The internal auditor is able to disclosure the
deviations that have occurred in the system
and propose solutions that lead to correct
situations in the future
9
The expand of scope of internal audit can
be through participation in the
implementation of plans and programs
established by Gaza Electricity Distribution
company to benefit the system.
10
The internal auditors audit the quality of the
systems to comply with the requirements
applicable to the company, especially
(Automated payment system)
11
The internal auditors audit the financial
viability of the system and its operations,
efficiency and effectiveness.
12
The internal auditor shall submit a report on
the misuse of the automated system that can
be done by its employees.
68
3.There is a statistically significant relationship between internal audit system and
the ability to assess and manage risks related to automated payment system
applicable in Gaza electricity distribution company .
Ref
Statement
Score
1
The evaluation process and risk management is
an important component of the strategic
management elements, and important of the
competitive advantages between companies.
2
The internal auditors contribute significantly to
an advisory role in reducing risk that related to
the system , also helps in assessing the risks face
the Gaza Electricity Distribution Company
The process of assess and management risk that
related to the system is includes identification,
management and control potential events and
conditions in place to provide assurances and
guarantees reasonable access to the direction of
corporate goals of Gaza Electricity Distribution
Company
Senior management is putting and formulate
and deliver the strategic objectives of the
company by developed systems to all levels of
the company.
The department of internal audit propose ways
and appropriate mechanisms to deal with
different aspects of risk related to the system.
3
4
5
6
7
8
The existing level of risk in the company is
considered an acceptable level and not prevent to
achieve objectives of the company.
.
The internal auditor focus on the important risks
and audit management processes risks inside the
Gaza Electricity Distribution company
Internal auditors are provided with skills and
experience required to able them to identify,
monitor and measure and manage risks.
69
9
the senior management response to the internal
audit reports which related to automated payment
system on the risks adequately, so leading to
reduce the risks to acceptable levels.
70
‫‪Islamic University – Gaza‬‬
‫الجامعة اإلسالمية – غزة‬
‫كلية التجارة‬
‫قسم المحاسبة‬
‫‪Faculty of Commerce‬‬
‫‪Department of Accounting‬‬
‫األخ ‪ /‬األخت الفاضل‪/‬ة ‪.....‬‬
‫السالم عليكم ورحمة هللا وبركاته‬
‫نتوجه إليكم بجزيل الشكر و التقدير راجين حسن تعاونكم إلنجاح هذه الدراسة الميدانية و التي بعنوان ‪...‬‬
‫"فعالية نظام التدقيق الداخلي في تقليل حدوث األخطاء واالختالسات في شركات الخدمات‬
‫الفلسطينية – دراسة تطبيقية على نظام السداد اآللي التابع لشركة توزيع كهرباء غزة "‬
‫و نأمل منكم تعبئة االستبانة واإلجابة الدقيقة علي جميع األسئلة لما لذلك من أثر في الوصول لنتائج دقيقة‬
‫مع العلم بأن جميع المعلومات التي سيتم الحصول عليها ألغراض البحث العلمي فقط و ستحظي بسرية‬
‫تامة ‪.‬‬
‫شاكرين لكم حسن تعاونكم ‪....‬‬
‫وبارك هللا فيكم‬
‫الباحثتان‬
‫رندا على حرارة‬
‫دينا ساهر قرعــــان‬
‫‪71‬‬
‫أوال ‪ /‬المعلومات الشخصية ‪-:‬‬
‫‪ .1‬المؤهل العلمي ‪:‬‬
‫دبلوم‬
‫دراسات عليا‬
‫بكالوريوس‬
‫‪ .2‬التخصص ‪:‬‬
‫محاسبة‬
‫علوم مالية و مصرفية‬
‫إدارة أعمال‬
‫أخرى‬
‫‪ .3‬المسمي الوظيفي ‪:‬‬
‫محاسب‬
‫مدير مالي‬
‫أخرى‬
‫مدير عام‬
‫‪ .4‬عدد سنوات الخبرة ‪:‬‬
‫من ‪ 5 -1‬سنوات‬
‫أكثر من ‪ 10‬سنوات‬
‫أقل من سنة‬
‫من ‪ 10 - 6‬سنوات‬
‫‪ .5‬العمر‬
‫أقل من ‪25‬‬
‫أكثر من ‪25‬‬
‫أكثر من ‪30‬‬
‫‪ .6‬الجنس‬
‫ذكر‬
‫أنثى‬
‫‪.7‬الشهادات الجامعية‬
‫‪ACPA‬‬
‫‪CPA‬‬
‫ال يوجد‬
‫‪72‬‬
‫القسم الثاني ‪ /‬الرجاء وضع رقم من ( ‪) 10-1‬بحيث يدل رقم ‪ 10‬على شدة الموفقة والرقم واحد على ضعف الموافقة أو‬
‫شدة الرفض ‪.‬‬
‫‪ .1‬الفرضية األولى ‪:‬هناك عالقة ذات داللة إحصائية بين نظام التدقيق الداخلي وفعالية خدمات‬
‫المراجعة الداخلية وتأثيرها في شركة الكهرباء‪.‬‬
‫الفقرة‬
‫الرقم‬
‫يأخذ المدقق الداخلي في اعتباره الجهة المستفيدة من‬
‫‪1‬‬
‫خدمات التدقيق‪.‬‬
‫‪2‬‬
‫يقوم المدقق الداخلي بتحقيق تطلعات ورغبات‬
‫المستفيدين من تقارير التدقيق ‪.‬‬
‫تقوم إدارة التدقيق الداخلي بأخذ مالحظات وآراء‬
‫المستفيدين‪.‬‬
‫‪4‬‬
‫يتم ترجمة رغبات المستفيدين إلى إجراءات ومتطلبات‬
‫من أجل تحقيقها ‪.‬‬
‫تقاس جودة أداء التدقيق الداخلي من خالل رضا‬
‫المستفيد‪.‬‬
‫‪6‬‬
‫يلبي إدارة التدقيق الداخلي احتياجات المستفيد‪.‬‬
‫‪7‬‬
‫يعتبر المستفيد الرئيسي من خدمات التدقيق الداخلي‬
‫العاملين في الشركة ‪.‬‬
‫‪3‬‬
‫‪5‬‬
‫الدرجة‬
‫‪ .2‬الفرضية الثانية ‪:‬هناك عالقة ذات داللة إحصائية بين نظام التدقيق الداخلي وفعالية األداء‬
‫المالي واإلداري الذي يعنى بجودة نظام السداد اآللي المطبق في الشركة‬
‫الفقرة‬
‫الرقم‬
‫‪ 1‬المدقق الداخلي وبسبب تواجده الدائم بشركة توزيع‬
‫كهرباء محافظات غزة ‪ ،‬فهو أكثر خبرة ومعرفة‬
‫باألمور الخاصة بنظام السداد اآللي المتبع ‪.‬‬
‫‪ 2‬إن قياس الكفاءة والفاعلية وتقييم األداء الخاص بنظام‬
‫السداد اآللي حديث وهو تطور طبيعي للتدقيق الداخلي‬
‫وتوسيع نطاق عمله إلى ما وراء النواحي المالية‬
‫والمحاسبية‪.‬‬
‫‪ 3‬يوجد في شركة توزيع كهرباء محافظات غزة معايير‬
‫لألداء يمكن على أساسها قياس كفاءة نظام السداد اآللي‬
‫‪.‬‬
‫‪ 4‬يقوم المدقق الداخلي بفحص وتقييم وجود معايير أداء‬
‫مقرة معتمدة من قبل اإلدارة العليا‪.‬‬
‫‪73‬‬
‫الدرجة‬
‫‪5‬‬
‫يقوم المدقق الداخلي بتدقيق كفاءة األفراد العاملين في‬
‫النظام والتقرير عنها‪.‬‬
‫يقوم المدقق الداخلي بتدقيق حجم العمل المنجز خالل‬
‫الفترة الالزمة لسداد اآللي للفواتير الصادرة من الشركة‬
‫وتأكد منها‪.‬‬
‫يقوم المدقق الداخلي بتأكد من صحة اإلجراءات المتبعة‬
‫في النظام من حيث الحد األدنى للرصيد الموجود في‬
‫حساب العميل ‪ ,‬ومدى فعالية هذه اإلجراءات في تحقيق‬
‫أهداف الشركة ورضا العمالء ‪.‬‬
‫يقوم المدقق الداخلي بكشف واإلفصاح عن االنحرافات‬
‫التي حدثت على النظام واقتراح الحلول التي تؤدي إلي‬
‫تصحيح األوضاع مستقبال‪.‬‬
‫يتم توسيع نطاق عمل المدقق الداخلي عن طريق‬
‫المشاركة في تنفيذ الخطط والبرامج لتحسين األداء في‬
‫النظام ‪.‬‬
‫‪10‬‬
‫يقوم المدقق الداخلي بتدقيق االلتزام بمتطلبات نظام‬
‫الجودة المطبق بالشركة والخاص بنظام السداد ‪.‬‬
‫‪11‬‬
‫يقوم المدقق الداخلي بتدقيق الجدوى المالية للنظام‬
‫وفعاليته‪.‬‬
‫‪12‬‬
‫يقوم المدقق الداخلي برفع تقرير عن سوء االستخدام‬
‫لنظام السداد اآللي من قبل العاملين فيه ‪.‬‬
‫‪6‬‬
‫‪7‬‬
‫‪8‬‬
‫‪9‬‬
‫‪.3‬الفرضية الثالثة ‪:‬هناك عالقة ذات داللة إحصائية بين نظام التدقيق الداخلي وتقييم وإدارة‬
‫المخاطر الخاصة بنظام السداد اآللي المطبق في شركة توزيع الكهرباء‬
‫الفقرة‬
‫الرقم‬
‫‪1‬‬
‫إن عملية تقييم وإدارة المخاطر تعتبر عنصرا هاما من‬
‫عناصر اإلدارة اإلستراتيجية‪ ،‬ورافعة هامة للمزايا‬
‫التنافسية بين الشركات‪.‬‬
‫‪2‬‬
‫إن المدقق الداخلي يساهم بشكل كبير وبدور استشاري‬
‫في تقليل المخاطر الخاصة باألنظمة ‪ ،‬كما يساعد في‬
‫تقييم المخاطر التي تتعرض لها شركة توزيع كهرباء‬
‫محافظات غزة‪.‬‬
‫‪3‬‬
‫عملية تقييم وإدارة المخاطر الخاصة بنظام السداد اآللي‬
‫تعمل على زيادة تأكيدات وضمانات معقولة باتجاه‬
‫الوصول إلي أهداف شركة توزيع كهرباء محافظات‬
‫غزة‪.‬‬
‫‪74‬‬
‫الدرجة‬
‫‪4‬‬
‫تقوم اإلدارة العليا بصياغة وتوصيل األهداف‬
‫اإلستراتيجية للشركة عن طريق أنظمة متطورة إلى‬
‫جميع المستويات بالشركة‪.‬‬
‫‪5‬‬
‫يقوم قسم التدقيق الداخلي باقتراح الوسائل والسبل‬
‫واآلليات المناسبة للتعامل مع أوجه المخاطر المختلفة‬
‫التي تحيط بنظام السداد اآللي‪.‬‬
‫‪6‬‬
‫مستوى المخاطر الموجود في نظام السداد يعتبر‬
‫مستوى مقبول وال يعيق تحقيق أهداف الشركة‪.‬‬
‫يقوم المدقق الداخلي بالتركيز علي المخاطر الهامة و‬
‫تدقيق عمليات إدارة المخاطرالالعبثية داخل شركة‬
‫توزيع كهرباء محافظات غزة‪.‬‬
‫‪8‬‬
‫يتم تزويد المدقق الداخلي بالمهارات والخبرات‬
‫المطلوبة والمعلومات الكافية على النظام والقادرة علي‬
‫تحديد ومراقبة وقياس وإدارة المخاطر‪.‬‬
‫استجابة اإلدارة العليا لتقارير التدقيق الداخلي بشأن‬
‫المخاطر المحيطة بالنظام كافية وتؤدي إلى تخفيض‬
‫المخاطر إلى مستويات مقبولة‪.‬‬
‫‪7‬‬
‫‪9‬‬
‫‪75‬‬