الرحيم الرحمن الله بسم

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بسم الله الرحمن الرحيم

الجامعةغزة – اإلسالمية

التجارة كليةالمحاسبة قسم

Islamic University – GazaFaculty of CommerceDepartment 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 CommerceThe Islamic University of Gaza

By Dina Saher Al-Qura'an Randa Harara 220113166 220112376

Supervisor:Dr. Salah Shubair

2014-2015

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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 .

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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.

Table of Contents

Deduction. IV

IV

Abstract.V

Chapter.1 Research Proposal1Introduction.3statement of problem. 4Research objectives.4Significance of the project.4

Scope and limitations of the project. 5Methodology.5Research variable. 5Research Hypothesis.5Research tools.6Research parameter.6Data sources.6Previous studies.6Chapter .2 Internal Audit12Introduction.13Concept Of Internal Audit.13The objective of internal audit.14International Standards for the Professional. Practice of Internal Auditing.

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Types of audits.16

Work process of internal audit function.16The audit charter.19The working model.20Audit Competencies.24Training and Development of Audit Team.25The relation between internal auditors and external auditor26Audit Committee28Chapter .3 Gaza Electricity Distribution Company30Company Profile. 31The organizational chart.32Automated payment system.32Advantages of automated payment system33

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Disadvantages of automated payment system33GEDCO procedures in automated payment system34Chapter ….4 Methodology36Research methodology37Questionnaire content.37Data measurement38Test of normality38Validity of questionnaire39Structure validity of the questionnaire43Cronbach’s Coefficient Alpha44Chapter .5 Data Analysis and Discussion45General information46Testing Hypothesis, Discussion and interpretation50Chapter .6 Conclusion & Recommendation57Conclusion. 58Recommendation.58References list61Appendix I63

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7 Chapter OneProposal contents

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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

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Introduction 1.1

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, world-conquering 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

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system’s effectiveness as well as ensure compliance. These companies have progressed and understand the subtlety of continuous improvement..

Statement of the problem 1.2

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:

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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 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.

Research Variable: 1.7

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:

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Main hypotheses:

Null Hypotheses:- there's an inverse significant relationship between internal audit system and the effectiveness of internal audit services in electricity company.

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.

Data sources: 1.11 * 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)

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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 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 behelp 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.

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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.

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 improvingperformance 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 fromall 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 onthe data analysis and findings:1. 82.89% of the respondents agree that the technology and IS audit are available inthe bank, and that its availability affect on the performance.

2. There is a strong positive relation (0.417) between general controls of IS auditingand improving the quality of information provided by the systems.

3. The IS audit and its effect on performance in additional to the positive relationshipbetween IS and performance, the study conclude that IS audit has a positive role inimproving the IS performance.

4. 83.08% of the respondents agree that the internal auditing are important in theBanks.

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5. There is a strong positive relationship (0.902) between the internal audit and the ISperformance of banks.

6. The internal audit and its effect on the performance in additional to positiverelationship between internal audit and the IS performance, the study conclude thatinternal audit has a role in the IS performance.

7. 84.16% of the respondents agree that the quality of information is a great help inbank performance.

8. 84.44% of the respondents agree that the information systems contribute inachieving 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 betweengeneral controls of information systems auditing and information systemsperformance.

2- Banks at Gaza highly encouraged to develop a clear strategy allow them to increasethe role of general controls of information systems auditing in improvement qualityof information provided by systems, and the system's ability to adapt to the newchanges.

3- Reinforcing the role of general controls of information systems auditing in raisinginformation system contribution to achieve the objectives of the bank, and thesystem 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 anyinternal or external hacking attempts.

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6- The banks should improve the quality exchanging information among the differentusers 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 currentsystems in the bank.

9- The information systems should be updated and developed or acquiring, using astructured system development approach and should be completely tested prior toimplementation.

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 Jordanianprivate universities" (Khwaileh,2013)

This research focus on whether the private universities in Jordan apply theinternational standards for internal auditors, in the field of interior auditors whowork 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 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 auditingstandards in their work

2) The study showed the presence of autonomy and objectivity of internal auditorsworking in the private universities in Jordan , and it also means that they haveplaced plans in advance for the procedures to work thoughtfully .

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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 bythe internal audit group at private universities in Jordan .

4) There is holds a professional specializing in accounting , auditing , however, this isa very small percentage in the development of the internal auditing system inprivate 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 .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.

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8 Chapter Two9 Internal Audit

Chapter two : Internal audit

Introduction..........................................................................................13

Concept of internal audit…………………………………………….13

The objective of internal audit……………………………………………..14

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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

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.

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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.

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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 above- mentioned 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.

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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 value-

added 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

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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 auditThe 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 AuditThe 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 / ITThe 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 GeneralThe 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 upRecommendations.

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2.6.2 Audit planThe 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 programsFor 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.

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2.6.4 Audit proceduresAll 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 reportingA 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 proceduresThe audit director must establish a process to monitor and follow-up on thefindings that were communicated to ensure that corrective action has beeneffectively implemented or that senior management has acknowledged and

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accepted the risk of not taking action. If the audit director believes that seniormanagement 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;

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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 CharterThe 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.In addition, the objectives of audit department include advising and recommending senior management for improvements in internal control and risk management systems.

21

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.

3) Direct the activities of any Company employee not employed

by the audit department, except to the extent such employees

22

have been appropriately assigned to auditing teams or to

otherwise assist the internal auditors.

2.8.3 AuthorityThe 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.

Ensure that the department complies with sound internal auditing principles

and best practices; seek guidance from the standards issued by the Institute of

23

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.

Audit department shall exercise its assignment on its own initiative in all

departments, offices and functions of Company.

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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 CompetenciesOne 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.

2.10 What makes for Good Internal Auditors

25

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 SociologyFraud ,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.

2.12 Audit Ethics

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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 auditorThe 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 controlThe 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

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External auditing

Audit of Traditional Financial Statements

Implementation of Audit Risk Model

Internal Auditing

Internal Control - Financial

Expansion into Operational Auditing

Both Do a Better Job of Focusing on management Risks

Increase Offering of Specialty ServicesRisk and Value Added Become More Important:Service More Areas

Expanded Role – Both Professions

Convergence of Internal Audit and External Audit Functions

Source: Rittenberg, L.E. & Covaleski, M. (1997)

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.

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2.14 Audit CommitteeThe audit committee is a committee of the board. Its function is to promote theindependence 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 resolvedThe 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.

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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.

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10Chapter ThreeGaza 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

31

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.

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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 :

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a payment system whereby creditors are authorized to debit a customer's bank account directly at regular intervals.

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.

AdvantagesAutomatic payment plans have grown in popularity over the years as a result of many of the conveniences and advantages they offer.

It spreads the costsPaying 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 guaranteedDirect 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 moneyBusinesses find Direct Debit just as convenient and efficient as consumers. For this reason, many offer discounts in return for you paying by Direct Debit.

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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 mindDirect 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 timeModern 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.

35

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.

36

11 Chapter Four12Methodology

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

37

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 .

38

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

Field Kolmogorov-SmirnovStatistic P-value

There is a statistically significant relationship between internal audit system and the effectiveness of internal audit services in Gaza Electricity Distribution Company.

0.435 0.992

There is a statistically significant relationship between internal audit system and the financial and administrative performance.

0.624 0.830

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.

0.611 0.849

All paragraphs of the questionnaire 0.583 0.885

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.

39

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 Coefficient

P-Value(Sig.)

1. Internal auditor takes into account the beneficiary of the services audit. .815* 0.000*

2. The internal auditor meet the wishes of the beneficiaries of the audit reports. .803* 0.000*

3. The internal audit department takes notes and opinions of the beneficiaries. .688* 0.000*

4. The wishes of beneficiaries is converted to procedures to achieve it. .834* 0.000*

5. The quality of the Audit performance is measured by the satisfaction of the beneficiary.

.644* 0.001*

6. The internal audit department meet the need of the beneficiary. .595 0.001*

7. The main beneficiary of the internal audit services is workers of the company.

.690 0.000*

* Correlation is significant at the 0.05 level

40

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 fieldNo. Paragraph Pearson Correlation

CoefficientP-Value

(Sig.)1. 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 .

.568 0.002*

2. 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.

.524 0.004*

3. There are a standards of performance which measure the efficiency of the automated payment system in the Gaza Electricity Distribution company.

.863 0.000*

4. The internal auditors examine and assess the standards of performance supported by senior management. .840 0.000*

5. The internal auditor evaluate and audit the efficiency of individual employees of the company. .828 0.000*

6. 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.

.522 0.005*

7. The internal auditor match the correctness .568 0.002*

41

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. 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.

.839 0.000*

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.

.747 0.000*

10. The internal auditor audit the quality system to comply with the requirements applicable to the company, especially  (Automated payment system).

.760 0.000*

11. The internal auditors audit the financial viability of the system and its operations, efficiency and effectiveness. .689 0.000*

12. The internal auditor shall submit a report on the misuse of the automated system that can be done by its employees.

.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.

42

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. Paragraph Pearson Correlation Coefficient

P-Value(Sig.)

1. The evaluation process and risk management is an important component of the strategic management elements, and important of the competitive advantages between companies.

.778 0.000*

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.

.883 0.000*

3. 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.

.841 0.000*

4. Senior management is putting and formulate and deliver the strategic objectives of the company by developed systems to all levels of the company.

.817 0.000*

5. The department of internal audit propose ways and appropriate mechanisms to deal with different aspects of risk related to the system.

.819 0.000*

6. The existing level of risk in the company is considered an acceptable level and not prevent to achieve objectives of the company.

.646 0.000*

7. The internal auditor focus on the important risks and audit management processes risks inside the Gaza Electricity Distribution company.

.713 0.000*

8. Internal auditors are provided with skills and experience required to able them to identify, monitor and measure and manage risks.

.723 0.000*

9. The senior management response to the .754 0.000*

43

internal audit reports which related to 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 questionnaireNo.

Field Pearson Correlation Coefficient

P-Value(Sig.)

1. There is a statistically significant relationship between internal audit system and effectiveness of internal audit services in Gaza Electricity Distribution Company

.667 0.000*

2. There is a statistically significant relationship between internal audit system and Financial and administrative performance

.901 0.000*

3. 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

.900 0.000*

* Correlation is significant at the 0.05 level

44

Reliability of the ResearchThe 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 questionnaireNo. Field Cronbach's Alpha1. There is a statistically significant relationship

between internal audit system and effectiveness of internal audit services in Gaza Electricity Distribution Company

0.783

2. There is a statistically significant relationship between internal audit system and Financial and administrative performance

0.894

3. 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

0.915

All paragraphs of the questionnaire 0.934

45

The Thereby, it can be said that the researcher proved that the questionnaire was valid

and reliable.

Chapter FiveData Analysis and Discussion

General information ……………………………………… 46

Testing hypothesis, discussion and interpretation of each items……………………………….50

46

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): QualificationQualification Frequency Percent

Diploma 1 4.0Bachelor 20 80.0Master 4 16.0Total 25 100.0

Diploma4%

Bachelor80%

Master16%

Major

Table No.(2) shows that 88.0% of the sample are " accounting " and 12.0% of the

sample are " business administration . "

Table (?):MajorMajor Frequency Percent

accounting 22 88.0business administration 3 12.0

Banking and financial sciences - -

47

others - -Total 25 100.0

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 TitleJob Title Frequency Percent

Accountant 22 88.0financial manager - -general manager - -

others 3 12.0Total 25 100.0

tnatnuoccA%88

srehto%21

48

accounting88%

business adminis-tration

12%

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 ExperienceYears of Experience Frequency Percent

less than one 1 4.01-5 years 7 28.0

6-10 years 15 60.0more than 10 2 8.0

Total 25 100.0

less than one4%

1-5 years28%

6-10 years60%

more than 108%

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."

Table (?): Age Age Frequency Percent

Less than25 2 8.025 – less than 30 years 8 32.0

More than30 15 60.0

49

Total 25 100.0

Less than258%

25 – less than 30 years32%More than30

60%

GenderTable No.(?) shows that 60.0% of the sample are Males and 40.0% of the sample are

Females.

Table (?):GenderGender Frequency Percent

male 15 60.0female 10 40.0Total 25 100.0

male60%

female40%

50

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 . 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 P-

value = 0.465 which is greater than the level of significance . 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 . 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 ".

51

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.

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”

Item

Mea

n

Prop

ortio

nal m

ean

(%)

Tes

t val

ue

P-va

lue

(Sig

.)

Ran

k

1. Internal auditor takes into account the beneficiary of the services Audit

7.12 71.2 2.85 0.004

* 12. The internal auditor meet the wishes of the

beneficiaries of the audit reports.7.00 70.0 3.11 0.002

* 23. The Internal audit department takes notes

and opinions of the beneficiaries.6.96 69.6 2.41 0.012

* 34. The wishes of beneficiaries is converted to

procedures to achieve it6.48 64.8 1.12 0.137 5

5. The quality of the Audit performance is measured by the satisfaction of the beneficiary.

5.96 59.6 -

0.09 0.465 7

6. The internal audit department meets the need of the beneficiary.

6.76 67.6 1.86 0.038

* 47. The main beneficiary of the internal audit

services is workers of the company6.20 62.0 0.49 0.316 6

All paragraphs of the field6.64 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 . The sign of the test is positive, so the mean of this

52

paragraph is significantly greater than the hypothesized value 6 . We conclude that the

respondents agreed to this paragraph.

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 P-

value = 0.175 which is greater than the level of significance . 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 . 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.

Table (2): Means and Test values for “There is a statistically significant relationship between internal audit system and Financial and administrative

performance”

Item

Mea

n

Prop

ortio

nal m

ean

(%)

Tes

t val

ue

P-va

lue

(Sig

.)

Ran

k

1. 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 .

7.28 72.8 2.90 0.004* 1

2. Measuring the efficiency, effectiveness and 6.92 69.2 2.40 0.012 2

53

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.

*

3. There are a standards of performance which measure the efficiency of the automated payment system in the Gaza Electricity Distribution company.

5.72 57.2 -0.63 0.268 11

4. The internal auditors examine and assess the standards of performance supported by senior management. 6.32 63.2 0.63 0.266 4

5. The internal auditor evaluate and audit the efficiency of individual employees of the company. 6.48 64.8 1.15 0.130 3

6. 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.

6.24 62.4 0.83 0.208 5

7. 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.

6.04 60.4 0.09 0.465 9

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.

6.16 61.6 0.43 0.334 7

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.

6.20 62.0 0.52 0.303 6

10. The internal auditor audit the quality system to comply with the requirements applicable to the company, especially  (Automated payment system)

6.12 61.2 0.33 0.373 8

11. The internal auditors audit the financial viability of the system and its operations, efficiency and effectiveness. 5.92 59.2 -

0.20 0.422 10

54

12. The internal auditor shall submit a report on the misuse of the automated system that can be done by its employees.

5.64 56.4 -0.95 0.175 12

All paragraphs of the field 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 .

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 P-

value = 0.391 which is greater than the level of significance . 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

. 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

55

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

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.

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”

Item

Mea

n

Prop

ortio

nal m

ean

(%)

Tes

t val

ue

P-va

lue

(Sig

.)

Ran

k

1. The evaluation process and risk management is an important component of the strategic management elements, and important of the competitive advantages between companies.

6.76 67.6 1.38 0.047* 1

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.

5.84 58.4 -

0.28 0.391 9

3. 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.

6.24 62.4 0.46 0.326 6

4. Senior management is putting and formulate and deliver the strategic objectives of the company by developed systems to all levels of the company.

6.32 63.2 0.63 0.266 5

5. The department of internal audit propose ways and appropriate mechanisms to deal with different aspects of risk related to the system.

6.16 61.6 0.41 0.341 7

6. The existing level of risk in the company is considered an acceptable level and not

6.48

64.8 1.30 0.104 3

56

prevent to achieve objectives of the company.

7. The internal auditor focus on the important risks and audit management processes risks inside the Gaza Electricity Distribution company.

6.40 64.0 1.02 0.159 4

8. Internal auditors are provided with skills and experience required to able them to identify, monitor and measure and manage risks.

6.75 67.4 1.74 0.048* 2

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.

6.00 60.0 0.00 0.500 8

All paragraphs of the field6.33 63.3 0.88 0.193

* The mean is significantly different from 6

57

Chapter Six

Conclusion & Recommendation

Conclusion ………………………………………………58

Recommendation…………………………………………58

58

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 improveand 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.

59

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.

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.

60

References

61

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 .

62

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.

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

الكهرباء توزيع شركة . www.gedco.ps/main.php/ موقع

Institute of Internal Auditors IIA, 2004, available at:http://www.theiia.org/ .

California University Northridge http:// www-admn.csun.edu/audit/types.htm/

63

Appendix I

64

الجامعةغزة – اإلسالمية

التجارة كليةالمحاسبة قسم

Islamic University – Gaza

Faculty of Commerce

Department of Accounting

Dear all

Peace upon you , God's mercy and blessingsWe 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..

65

God bless you…

Researchers :Dina Saher Al-Quraan

Randa Ali Harara

Section I / General Information

personal information :1. degree □ Diploma □ Bachelor □ master

2 . major □ accounting □ business administration □ Banking and financial sciences □ others

3. Job Title□ Accountant □ financial manager □ general manager □ others

4. Years of experience□ less than one □ 1-5 years □ 6-10 years □ more than 10

5. Age □   Less than25 □ more than25     □    More than30

6. Gender:

□ male □ female

7. Undergraduate degrees

□ ACPA □ CPA □ NO

66

Please put appropriate degree from (1-10) in the answer1. There is a statistically significant relationship between internal audit system

and the effectiveness of internal audit services in Gaza Electricity Distribution Company.

Ref Statement Score

1 Internal auditor takes into account the beneficiary of the audit services .

2 The internal auditor is meet the wishes of the beneficiaries of the audit reports.

3 The internal audit department takes notes and opinions of the beneficiaries.

4 The wishes of beneficiaries is converted to procedures to achieve it.

5 The quality of the audit performance is measured by the satisfaction of the beneficiary.

6 The internal audit department meet the need of the beneficiary.

7 The main beneficiary of the internal audit services is the workers of the company.

2.There is a statistically significant relationship between internal audit system and the financial and administrative performance.

Ref Statement Score

1 The internal auditors has more experience and knowledge in the automated payment system goals and objectives in Gaza

67

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 internal audit and extending its reach beyond the financial and accounting aspects.

3 There are a standards of performance which measure the efficiency of the automated payment system in the Gaza Electricity Distribution company.

4 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.

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

68

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)

11The internal auditors audit the financial viability of the system and its operations, efficiency and effectiveness.

12The internal auditor shall submit a report on the misuse of the automated system that can be done by its employees.

69

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

3 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

4 Senior management is putting and formulate and deliver the strategic objectives of the company by developed systems to all levels of the company.

5 The department of internal audit propose ways and appropriate mechanisms to deal with different aspects of risk related to the system.

6 The existing level of risk in the company is considered an acceptable level and not prevent to achieve objectives of the company..

7 The internal auditor focus on the important risks and audit management processes risks inside the Gaza Electricity Distribution company

8 Internal auditors are provided with skills and experience required to able them to identify, monitor and measure and manage risks.

70

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.

71

الجامعةغزة – اإلسالمية

التجارة كليةالمحاسبة قسم

Islamic University – Gaza

Faculty of Commerce

Department of Accounting

..... / ة / الفاضل الأخت الأخوبركاته الله ورحمة عليكم السلام

بعنوان ... التي و الميدانية الدراسة هذه لإنجاح تعاونكم حسن راجين التقدير و الشكر بجزيل إليكم نتوجه

األخطاء " حدوث تقليل في الداخلي التدقيق نظام فعاليةدراسة – الفلسطينية الخدمات شركات في واالختالسات

كهرباء توزيع لشركة التابع اآللي السداد نظام على تطبيقيةغزة "

أثر من لذلك لما األسئلة جميع علي الدقيقة واإلجابة االستبانة تعبئة منكم نأمل وعليها الحصول سيتم التي المعلومات جميع بأن العلم مع دقيقة لنتائج الوصول في

تامة . بسرية ستحظي و فقط العلمي البحث ألغراض

تعاونكم .... حسن لكم شاكرينفيكم الله وبارك

الباحثتانحرارة على رندا

قرعــــان ساهر دينا

72

الشخصية / :- المعلومات أولاالعلمي : .1 المؤهل

عليا دراسات بكالوريوس دبلوم

التخصص : .2

مصرفية و مالية علوم أعمال إدارة محاسبةأخرى

الوظيفي :.3 المسمي

عام مدير مالي مدير محاسبأخرى

الخبرة :.4 سنوات عدد

من سنة من سنوات 5-1أقلمن 10-6من أكثر سنوات 10سنوات

العمر.5من من 25أقل 25أكثر

من 30أكثر

الجنس .6

أنثى ذكر

الجامعية. 7 الشهاداتACPA CPA

يوجد ال

73

من / ( رقم وضع الرجاء الثاني رقم ) 10 - 1 القسم يدل أو 10 بحيث الموافقة ضعف على واحد والرقم الموفقة شدة علىالرفض . شدة

نظام : .1 بين إحصائية داللة ذات عالقة هناك األولى الفرضيةفي وتأثيرها الداخلية المراجعة خدمات وفعالية الداخلي التدقيق

.شر الكهرباء كة

الرالفقرةالدرجةقم

الجهة اعتباره في الداخلي المدقق يأخذ. التدقيق خدمات من المستفيدة

1

تطلعات بتحقيق الداخلي المدقق يقومالتدقيق . تقارير من المستفيدين ورغبات

2

مالحظات بأخذ الداخلي التدقيق إدارة تقوم. المستفيدين وآراء

3

إلى المستفيدين رغبات ترجمة يتمتحقيقها . أجل من ومتطلبات إجراءات

4

خالل من الداخلي التدقيق أداء جودة تقاس. المستفيد رضا

5

احتياجات الداخلي التدقيق إدارة يلبيالمستفيد.

6

خدمات من الرئيسي المستفيد يعتبرالشركة .تدقيقال في العاملين الداخلي

7

نظام : .2 بين إحصائية داللة ذات عالقة هناك الثانية الفرضيةاألداء وفعالية الداخلي يعنى التدقيق الذي واإلداري المالي

الشركة في المطبق اآللي السداد نظام بجودة

الرالفقرةالدرجةقم

74

الدائم تواجده وبسبب الداخلي المدققفهو ، غزة محافظات كهرباء توزيع بشركة

بنظام الخاصة باألمور ومعرفة خبرة أكثرالمتبع . اآللي السداد

1

األداء وتقييم والفاعلية الكفاءة قياس إنوهو حديث اآللي السداد بنظام الخاص

وتوسيع الداخلي للتدقيق طبيعي تطورالمالية النواحي وراء ما إلى عمله نطاق

والمحاسبية.

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شرك في محافظات يوجد كهرباء توزيع ةقياس غزة أساسها على يمكن لألداء معايير

اآللي . السداد نظام كفاءة

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وجود وتقييم بفحص الداخلي المدقق يقوماإلدارة قبل من معتمدة مقرة أداء معايير

العليا.

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األفراد كفاءة بتدقيق الداخلي المدقق يقوم. عنها والتقرير النظام في العاملين

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العمل حجم بتدقيق الداخلي المدقق يقوماآللي لسداد الالزمة الفترة خالل المنجز

. منها وتأكد الشركة من الصادرة للفواتير

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صحة من بتأكد الداخلي المدقق يقومحيث من النظام في المتبعة اإلجراءاتحساب في الموجود للرصيد األدنى الحد

في , اإلجراءات هذه فعالية ومدى العميلالعمالء . ورضا الشركة أهداف تحقيق

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واإلفصاح بكشف الداخلي المدقق يقومالنظام على حدثت التي االنحرافات عن

تصحيح إلي تؤدي التي الحلول واقتراح. مستقبال األوضاع

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عن الداخلي المدقق عمل نطاق توسيع يتمالخطط تنفيذ في المشاركة طريق

النظام . في األداء لتحسين والبرامج

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االلتزام بتدقيق الداخلي المدقق يقومبالشركة المطبق الجودة نظام بمتطلبات

السداد . بنظام والخاص

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الجدوى بتدقيق الداخلي المدقق يقوم. وفعاليته للنظام المالية

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سوء عن تقرير برفع الداخلي المدقق 12 يقوم

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قبل من اآللي السداد لنظام االستخدامفيه . العاملين

نظام. : 3 بين إحصائية داللة ذات عالقة هناك الثالثة الفرضيةالسداد بنظام الخاصة المخاطر وإدارة وتقييم الداخلي التدقيق

الكهرباء توزيع شركة في المطبق اآللي

الرالفقرةالدرجةقم

تعتبر المخاطر وإدارة تقييم عملية إناإلدارة عناصر من هاما عنصرا

للمزايا هامة ورافعة اإلستراتيجية،. الشركات بين التنافسية

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كبير بشكل يساهم الداخلي المدقق إنالمخاطر تقليل في استشاري وبدور

تقييم في يساعد كما ، باألنظمة الخاصةتوزيع شركة لها تتعرض التي المخاطر

. غزة محافظات كهرباء

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بنظام الخاصة المخاطر وإدارة تقييم عمليةتأكيدات زيادة على تعمل اآللي السداد

إلي الوصول باتجاه معقولة وضمانات. غزة محافظات كهرباء توزيع شركة أهداف

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األهداف وتوصيل بصياغة العليا اإلدارة تقومأنظمة طريق عن للشركة اإلستراتيجية

. بالشركة المستويات جميع إلى متطورة

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باقتراح الداخلي التدقيق قسم يقومللتعامل المناسبة واآلليات والسبل الوسائل

تحيط التي المختلفة المخاطر أوجه مع. اآللي السداد بنظام

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السداد نظام في الموجود المخاطر مستوىتحقيق يعيق وال مقبول مستوى يعتبر

. الشركة أهداف

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علي بالتركيز الداخلي المدقق يقومإدارة عمليات تدقيق و الهامة المخاطر

كهرباء توزيع شركة داخل المخاطرالالعبثية. غزة محافظات

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بالمهارات الداخلي المدقق تزويد يتمالكافية والمعلومات المطلوبة والخبرات

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ومراقبة تحديد علي والقادرة النظام على. المخاطر وإدارة وقياس

التدقيق لتقارير العليا اإلدارة استجابةبالنظام المحيطة المخاطر بشأن الداخلي

إلى المخاطر تخفيض إلى وتؤدي كافية. مقبولة مستويات

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