2. 2
TABLE OF CONTENTS
1.0. List of Abbreviation.................................................................…...1
1.1 INTRODUCTION ......................................................................................2
1.2 PROBLEM STATEMENT.........................................................................4
1.3 RESEARCH OBJECTIVES, QUESTIONS AND HYPOTHESES
1.3.3 Main objectives ...........................................................................4
1.3.2 Specific objective and other objectives........................................4
1.3.2 Research questions.......................................................................5
1.3.3 Research hypotheses....................................................................5
1.4 SIGNIFICANCE OF THE STUDY............................................................5
1.5 SCOPE OF THE STUDY...........................................................................
2.1 LITERATURE REVIEW ...........................................................................5
2.1.1Overview…………………………………………………….…5
2.1.2. Definition of key terms……………………………………....6
2.1.3. Theoretical Literature review.......................................................8
3.0 Methodology...............................................................................................
3.1 Research Design…………………………………………..……………. 11
3.1.1 Research type and approach.......................................................... 11
3.1.2 Sampling design……………..……………………………….. 11
3.1.3. Methods of data collection…………………………………... 11
3.1.4. Data Analysis …………………………………………………. 12
3.2. Study Area .....................................................................................….13
3.3 Limitation 0o0f the study..........................................................13
4.0. Conclusion and Recommendation ………………………………………..13
5.0. References…………………………………………………………………..15
6.0. Appendices.................................................................................................… .16
6.1. Work plan…………………………………………………………………..16
6.2. Budget…………………………………………………………………….. 16
6.3. Questionnaires…………………………………………………………… .17
3. 3
1.0 LIST OF ABREVATION
COSO-Committee of Sponsoring Organisation of the Treadway Commission
TRA-Tanzania Revenue Authority
ISA-International Accounting Standards
DRD-Domestic Revenue Department
TID-Tax Investigation Department
PFA-Pubic Finance Act
GAAP-General Acceptable Accounting Principles
VAT-Value Added Tax
4. 4
1. Introduction
According to the International Standard on Auditing (ISA 400), the term internal control
system means that all the policies and procedures adopted by the management of an
entity to assist in achieving management objectives of insuring as far as practicable, the
orderly and efficient conduct of its business including adherence to management policies.
The accuracy and completeness of accounting records of timely preparations of reliable
financial information. It can be fathomed from these defination that the internal control
system extends beyond those matters which relate directly to the function of the
accounting system.
Therefore, internal control system provides assurance to the management of the
dependability of accounting data used in making decision. Decisions made by
management becomes company policies and to be effective, these policies must be
communicated throughout the organisation and consistently followed. However policies
are not adequately followed in the public sector and to the extent that good governance is
only imagined inTanzania Revenue Authority. The research study will seek to examine
the preparation and implementation of budget, the level of transparency and
accountability and the extent fiscal discipline in inTanzania Revenue Authority
Historical Background of Tanzania Revenue Authority (TRA) organization:
The Tanzania Revenue Authority (TRA) was established by Act No. 11 of 1995 and
commenced operation in 1996 and by July 2015 it will be making its 18th
anniversary
since its establishment. The Authority is a semi-autonomous agency of government
mainly responsible with the collection of the Central Government taxes as well as other
several non-tax revenues.
Tanzania Revenue Authority in its effort to ensure the achievements of its objectives as
required by the Government of the United Republic of Tanzania has been establishing
Corporate Plan of five years each, which normally show the roadmap of what is to be
achieved and provide key performance indicators which helps in monitoring and
assessing the level of achievement and possibly assisting in establishing the corrective
action or the way to improve the situation that is likely to hinder the achievement of the
desired results.
Vision
TRA aims to be “a modern tax administration” by the end of the five year period of the
implementation of the third Corporate Plan, as stipulated in the TRAs Vision which considers a
modernized tax administration as one that has a strong enforcement capacity delivered by highly
qualified, motivated and committed staff. The Vision aimed at becoming a Tax Administrator
that is computerized and uses modern practices and processes.
5. 5
MISSION STATEMENT
“To be an effective and efficient Tax administration, this promotes Voluntary tax
compliance by providing high quality Customer service with fairness and Integrity
through competent and motivated staff”
Basic function of TRA organization.
(a)To asses, collect and account for all central government revenue.
(b)To administer efficiently and effectively all the revenue law of the control
government.
(c) To advise the government on all matters relating to fiscal policy.
(d) To promote voluntary tax compliance.
(e)To improve the quality of services provided to taxpayers.
(f) To counteract fraud and other forms of tax and fiscal evasion.
(g)To produce trade statistics and publications
Significance of the of internal control
COMPLIANCE: Compliance with the organization law and the accounting practice
followed in the country is important objective of this internal control over computer
environment.
The compliance to this practice helps the organization to make a sound invest5ment and
to make a good of the organization money.
Also compliance with the laws helps organization to avoid any legal issues
RELIABILITY: when talk about the money of organization we talk of huge sums,
chance of fraud where so much money is evolved, cannot be ruled out .reliance of
internal control system on the people and on the accounting practices followed by the
organization is important.
With an internal control in place, reliability increases.
SAFETY: Safety of the organization 8is the one of the important objective of the internal
control system .even the employees and the customers of the organization need to fill safe
in the organization .Hence safe never be ignored.
SECURITY: Although related to safety, security is totally different issue which needs to
be handled differently.
6. 6
Security will involve the safety of not only customers and employees of the organization
but also the property of the organization security can be physical with security guard,
locks and antitheft devices used for providing protection.
EFFICIENCY: which organization can survive without efficiency? Efficiency is another
important objective of a system of internal control .the internal control system need to be
aware of how efficiency of organization and the employee of the organization working.
FINANCIAL REPORTING; accounting is related with financial aspects of the
organization
Also complying with accounting concepts and principles and the law governing the
organization.
RESOURCES UTILIZATION; Complete utilization of resources is necessary
1.2 STATEMENT OF PROBLEM
It has been established that public sector organization (TRA) form an important part of
the economy, Public Finance Act (PFA CAP 348). Currently, there is a general fall in the
operational performance of these organisations forcing the government to achieve less
than its target objectives. Research will be conducted to find out the causes of TRA
failure to achieve their objectives point to ineffective internal control system. TRA
(2012), found that internal control was primary to the achievement of objectives in public
organisations and the indications of effective internal control system that enhance
performance. The problem here is to find out whether there are effective control
mechanisms with regards to the budgeting, expenditure, tracking, transparency and
accountability, risk management, fraud prevention and detection in the Tanzania Revenue
Authority.
1.3 OBJECTIVES OF THE STUDY
1.3.1 Main Objective
The study is aimed at examining the Effectiveness of internal control on the Tanzania
Revenue Authority.
1.3.2 Specific Objective
The study has the following specific objectives:
1. To determine whether it’s cost to implement appropriate internal control.
2. To examine whether adequate expenditure tracking exist to ensure fiscal
discipline.
3. To determine the level of transparency, accountability in the Tanzania Revenue
Authority
4. To investigate whether internal control system minimize embezzlement and
fraudulent practice.
7. 7
1.4 RESEARCH QUESTIONS
The following are the research questions this study intends to address
1. Are annual budget promptly prepared by the Tanzania Revenue Authority?
2. Does Tanzania Revenue Authority have adequate expenditure tracking and
authorisation procedure for fiscal discipline?
3. What is the level of transparency and accountability in the Tanzania Revenue
Authority?
4. Does effective internal control system minimizes fraudulent practices in the
Tanzania Revenue Authority?
1.5RESEARCH HYPOTHESES
The main objective of this study is “Assessment of the effectiveness of internal control
system in Tanzania Revenue Authority.: The case of Tanzania Revenue Authority”. To
address the issues raised, the following null hypotheses will be tested to validate or reject
the research questions.
Ho1: Tanzania Revenue Authority? does not promptly prepare annual budget
Ho2: Tanzania Revenue Authority does not have adequate expenditure tracking to
prevent financial recklessness.
Ho3: The level transparency and accountability in Tanzania Revenue Authority is not
adequately to check fraud and embezzlement.
1.6 SIGNIFICANCE OF THE STUDY
Internal control system promotes efficiency, reduce risk of assets loss and help ensure the
reliability of financial statements and compliance with rules and regulations.
This study will bring the awareness to the need for effective internal control system in
Tanzania Revenue Authority in general and the ministry of finance.
Beside designing the study show the importance of a proper and effective internal control
system in government ministries. It will be of imense benefit to academics, researchers,
and students who are interested in internal control and financial management. The study
therefore provides informative reference materia as well as add to existing body of
literature.
2.LITERATURE REVIEW.
2.1.1Overview.
This part deals with the resources already available concerning with issues intended to be
researched.
The literature review is divided into two parts which are empirical and theoretical part,
the theoretical review will introduce definition of important terms, relevant theories of
Internal Auditing, advantages challenges and solutions of the Internal Control.
The empirical review concerns few studies already conducted by other researchers on
subject matter.
8. 8
2.1.2Definitions of important terms
The word “effectiveness” have been defined by different researchers, for instance Arena
and Azzone(2009) defined effectiveness “as the capacity to obtain results that are
consistent with targets objective, “while, Dittenhofer (2014) view effectiveness as the
ability toward the achievement of the objectives and goals. In the same context, a
program can be seen as effective if its outcome goes along with its objectives (Ahmad,
Othman, & Jusoff, 2009;Mihret et al, 2010). Therefore, it’s quiet interesting that audit
effectiveness is the outcome of the auditors ‘activities, duties, professional practices and
responsibilities through a high commitment with audit standards, goals, objectives,
policies and procedures(Ussahawanitchakit & Intakhan,2011). In the same vein,
Ussahawanitchakit (2009) provided that audit effectiveness refers to “achieving audit’s
objective by gathering of sufficient and appropriate audit evidence in order to reasonable
opinion regarding the financial statements compliance with generally accepted
accounting principles(GAAP’s)”. Similarly, (ISA 400) also considered audit
effectiveness as “the joint probability that the audit will be reliable, available, suitable,
maintainable and valuable”.
Therefore, going by the above definitions of effectiveness and audit effectiveness, it’s
clear that that audit effectiveness or internal audit effectiveness is means the same thing
because they all
have central target which is ‘the ability of achieving established objective.
Effective internal controls systems are essential to the effectiveness of government’s
organization (TRA) operation because it deals with the activities or procedures that are
designed to provide reasonable assurance that operations are performing according to
plan and these can also influence the effectiveness of internal audit.
COSO (ISA 315) also provides the basic principles representing the fundamental
concepts of effective internal control in five components of the framework (Candreva,
2006; Sudsomboon & Ussahawanitchakit, 2009). Though Amudo and Inanga (2009)
argued that the weakness of the COSO mechanism is failure to recognize Information
Technology as one of the major control components of internal control system and
Information Technology is very crucial to internal control framework. That is why most
organizations today used Information Technology for authorization, initiation, recording
and processing of transactions, because its ensures effectiveness of internal controls
system and thereby making it six.
9. 9
At the same time advancements in technological have increased the importance placed on
internal controls system (Rezaee et al, 2011). These components must be present and
functioning effectively for any internal control system to achieve organizational
objectives (COSO):
Control environment: Is the major aspect of managing an organization this is
because is a reflection of the attitude and the policies of management in regard
with the importance of internal audit in the economic unit (Theofanis, et al 2011).
It has influence over organization goals achievement (Aldridge & Colbert, 2006).
However, it is the foundation for the other components of internal control and
providing structure a(Sudsomboon & Ussahawanitchakit, 2009). Control
environment assist toward reducing the level fraudulent activities within
organizational operation also the quality of an entity’s internal controls system
depend on the function and quality of their control environment (Amudo &
Inanga, 2009). Therefore, providing a proper control environment for a
government organization (TRA) is very essential to the effectiveness of their
operation.
Risk assessment: This is the identification and analysis of relevant risks
associated with the achievement of the management objectives (Theofanis, et al
2011), similary (Sudsomboon & Ussahawanitchakit,2009) view risk assessment
as the process of identifying and analyzing management relevant risks to the
preparation of financial statements that would be presented fairly in conformity
with general accepted accounting principleGAAP’s). In this situation,
management must determine the level of risk carefully to be accepted, and should
try to maintain such risk within determined levels. Therefore, government’s
organizations (TRA) are required to frequently assess the level of risk their
experiencing in order to take necessary actions.
Control activities: These are policies, procedures and mechanisms that ensure
management’s directives are properly carry out (Aikins, 2011; Rezaee, Elam &
Sharbatoghlie, 2010). Proper documentation of policies and procedural guidelines
in these aspects help to determine not only how the control activities are to be
executed but also provide adequate information for auditors examination of the
overall adequacy of control design over financial management practices (Aikins,
2011). This control activities ensure that all necessary actions should be taken
with the aim to address risks so that organizational objectives are achieves.
Example of control activities include; segregation of duties, daily deposit of cash
receipts, bank reconciliations and limiting access to check stock
Information and communication: refers to the process of identifying, capturing,
and communicating of relevant information in an appropriate manner and within
10. 10
timeframe in order to accomplish the financial reporting objectives (Aldridre &
Colbert, 2007).
Although, effective communications should occur in a wider sense with
information within the various sections of the organization (Theofanis et al,
2011). Most of the recent literature on internal control system frameworks gave
concerned on information and communication as one of the internal control
system components, because of their importance in influencing the working
relationship within the organization at all levels (Amudo & Inanga, 2009). Hence,
such information must be communicated throughout the entire organization
(TRA) in order to permit personnel to carry out their responsibilities with regard
to objective achievement.
Monitoring: it is usually accepted that internal control systems need to be
adequate monitored in order to assess the quality and the effectiveness of the
system’s performance over time. Monitoring provides assurance that the findings
of audits and other reviews are promptly determined (Theofanis et al, 2011), also
monitoring of operations ensures effective functioning of internal controls system
(Amudo & Inanga, 2009). Hence, monitoring determines whether or not policies
and procedures designed and implemented by management are being carried out
effectively by employees.
2.1.3Theoretical review
Contingency theory is not a new theory in an organizational research because it has a
well established concepts in organizational literature (Donaldson, 2007; Sauser, Reilly &
Shenhar, 2009) meanwhile, for the past three decades, contingency theory has been the
subject of wider research area but yet it is still developing (Ayman, Chemers & Fiedler,
2005), even though the early researchers on contingency theory in organization design
mainly focuses on the effects of uncertainty on the organizational structure (Chenhall,
2007; Drazin & Van de Ven, 2010; Reid & Smith, 2009). However, contingency theory is
known as one of those theory that are usually been used recently in management
accounting and auditing research (Abushaiba & Zainuddin, 2012; Reid & Smith, 2006;
Sudsomboon & Ussahawanitchakit, 2009; Valanciene & Gimzauskiene, 2009) though the
utilization of the theory may have different effect, and equally it effectiveness depend
upon the stage or field that is been proposed (Chenhall, 2008; Drazin & Van de Ven,
2009) additionally, the relevant of any given factor should be contingent upon other
factors (Krishnamoorthy, 2012) but then contingency theory enables a researcher to
systematically introduce factors to explain or predict expected phenomena (Umanath,
2008). This is because it does depend on one’s interpretation of the theory, and such
theory has the capability of producing accurate hypotheses and consistent functions
(Schoonhoven, 2006). Therefore, indicate the possibility of applying contingency
framework in the public sectors (Wood, 2009). Meanwhile a contingency theory also
differs with other theories in the form of their specific propositions, this is because it’s
11. 11
hypothesize a conditional relationship between two or more independent variables with a
dependent variable and subject it to an empirical test (Drazin & Van de Ven, 2005).
Therefore, this study proposes that internal control effectiveness at Tanzania Revenue
Authority (TRA) level is contingent upon those components of effective internal control
system.
2.1.4Advantages of Internal Control
As a result of implementing Internal Control System .Tanzania Revenue Authority have
succeeded to promotes efficiency, reduce risk of assets loss and help ensure the reliability
of financial statements and compliance with rules and regulations to large extent.
2.15Challenges of Internal Control
The control effectiveness should not be measured based on achievement of the audit
objectives or on the number of findings of the internal auditor alone, but also more
important is to determine the quality and suitability of the audit plan, execution and
follow up.
Researchers has also indicate some of the reasons behind the ineffectiveness of internal
control include; ineffective management controls, non clear definition of objectives by
some organizations and inadequate support from top management (Ahmad et al, 2009;
Dittenhofer 2009; Unegbu & Kida, 2011). Therefore, in line with this, the implications of
an ineffective internal control in a public sector management can lead to; the possibility
of the emergence of fraud; low or non compliance with internal policies and procedures;
ineffective financial decision for successful operation (Unegbu & Kida, 2011). Hence, the
effective internal audits carry out an independent evaluation of the financial and
operating information and systems and procedures with a view to provide good
recommendations for improvements (Mihret & Yismaw, 2007; New Delhi, 2006). That is
why proper internal organization is also essential factor that lead to the achievement of
internal control effectiveness. Similarly, internal control effectiveness can also be
enhance by ensuring consistency in the documentation of audit work, quality of reporting
and proper implementation of their recommendation (Mihret & Yismaw, 2007).
Therefore, having such effective internal audit within organization, will automatically
helps to achieve performance and profitability and prevents in loss of revenues
particularly in public sectors (Vijayakumar & Nagaraja, 2012) even though Pilcher
Gilchrist and Singh (2011) observed that efficiency and effectiveness of audit in a public
sectors context is more complex than in the private sectors. But then consideration must
be given to the effectiveness of internal control particularly at local level so as to improve
their standard.
12. 12
2.1.6Empirical review
Several studies have been conducted research on internal control system but none of them
study the impact of effective internal control system on internal audit effectiveness,
particularly at local government level (Aikins 2011; Baltaci & Yilmaz, 2006; Eko &
Hariyanto,2011; Feng et al, 2009; Kwanbo, 2009; Nilniyom & Chanthinok, 2011) for
instance a study carried out by Eko and Hariyanto(2011) on the relationship between
internal control system, internal audit, and organization commitment with good
governance: Indonesian Case. The study consider local government of Central Java
province, Indonesia, consist of 35 districts with questionnaires and found that internal
control system,internal audit, and organization commitment have positive significant
relationship with the good governance.
Also the study carried out by Baltaci and Yilmaz (2006) on keeping an eye on sub
national governments: Internal control and audit at local levels. Though the study is
conceptual and found that internal control system and audit are the key components of
public financial management systems for increasing efficiency and effectiveness in local
government operations. In a related study carried out by Nilniyom and Chanthinok
(2011) on accounting system innovation and stakeholder acceptance of Thai listed firms:
Mediating internal control effectiveness used mailed survey and questionnaires for
methodology. The result of the study reveals that internal control effectiveness has a
positive relationship with stakeholder acceptance. Feng et al (2009) alsocarried out a
study on internal control and management guidance used questionnaire and finally found
that internal control quality has an economically significant effect on the accuracy of
management guidance. Similarly, Aikins (2011) under take a research on an examination
of government internal audits’ role in improving financial performance, in which he used
the local government financial performance as dependent variable and independent
variables of; the effects of years between audits, internal control adequacy, internal
control system effectiveness, and evaluation of financial performance monitoring, used
online survey, 387 audit department head and questionnaire for methodology. The
research results indicate significant relationships between years between audits, internal
control adequacy, internal control effectiveness and evaluation of financial performance
monitoring on local government financial performance.
However, looking at the above studies that has been conducted on effective internal
control system, none of the above studies examined the relationship between effective
internal control system with internal audit effectiveness particularly at local government
level, therefore this research extend the previous research through examining the
relationship between effective internal control system and internal audit effectiveness at
local government level.
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2.1.7Research gap
Despite the fact that many studies have been done regarding to effectiveness of internal
control, but it is very rare to get the research done in internal control in Tanzania
especially TRA.
3.0 METHODOLOGY:
3.1 Research Design:-
My study is more concerning to know how effectiveness of internal control Tanzania
Revenue Authority specifically in Kinondoni District Dare salaam.
3.1.1 Research Approaches/Strategies:
Both Qualitative and Quantitative approaches will be used in conducting our research
whereby in a qualitative approach we will be much concerning with subjective
assessment of effectiveness, efficiency and reliability of both internal control system and
both users and designer through our insights and impressions. In quantitative approaches
we will much basing in generating data in a quantitative form hence ending up with
quantitative analysis.
3.1.2Sampling Design:-
In this study the application of probability sampling will be used specifically random
sampling, so as each element will have an equal chance of being selected. Where by two
different samples from TRA organization and a sample of users who use system will be
involved with our study.
3.1.3 Methods of data collection:-
Both primary and secondary sources of data are required in our study. Primary data will
be collected directly from origin; data will be obtained using questionnaire, interview and
observation from our clients specifically in Tanzania Revenue Authority Kinondoni
District. Secondary data will obtained from various reports which were already done the
study, newspapers, books and different official statistics including internal auditors report
also external auditor report.
The following are the techniques of data collection that may be applied in my study:-
Interview
Data will be collected using interview in both TRA organization in Kinondon District.
For the case of interview we are expecting to ask direct questions to the respondent(
Management, Employees and customers from TRA), respondent should be sampled in a
way that they will be the one with high knowledge about the subject matter so as to
provide us with accuracy and reliable information that we are in need of
Moreover indirect interview and telephone interview will be helpful to us as long as it
will save time and we will be able to collect enormous information at a given time
example through emails
14. 14
Observations
Again observation of how system of internal control work and users use it together with
supervision and authoritarian of both TRA information, property and how error and fraud
are detected will help us to get evidence on how effectiveness of internal control system
and cost benefits through users and supervisor and this will also be helpful to our study
rather than relying on words of mouth
Questionnaires
Questionnaires will also be targeted to TRA and this will be both open and closed ended
question. The reason of using this is to enable us to research large number of respondent
at a given time and explore wide information from our respondent as they will be free
However the targeted information about internal control of TRA is as follows
What
What cost do they incur to implement effective internal control
What are the difficulties user faces during use internal control system
Targeted information to TRA
How do benefited from internal control system
How many times do they detect error through control system
What
3.1.4 Data analysis:-
Since two different approaches have been used in conducting our research, then both
quantitative analysis methods will be used to analyze data obtained from a quantitative
research and qualitative analysis methods has to be used to analyze data from a
qualitative research. In a qualitative research data will be analyzed using the following
approaches:-
a) Explanation building which entails attempting to build relationship and
implications from observed phenomenon.
b) Using comparisons that may be achieved by observing patterns of data
specifically when analyzing case studies.
c) Theory fitting meaning that tries to fit to observed behavior into an existing
theory to be able to draw some conclusions.
Analyzing different scenarios developed by other researchers from which we will
come up with opinions, suggestions, and or recommendations.
15. 15
3.2 Study area:-
The study is to be conducted in Tanzania Revenue Authority particularly in Kinondoni
District; Dare salaam. The rationale for conducting the study is to analyses effectiveness
of internal control of TRA in kinondoni district and get to know whether the Internal
control helping the organization to archive the purpose intended including reliability of
Financial reporting and detection, prevention of errors and fraud with in organization.
3.3. Limitations of the study
1. Inadequate literature to refer to online with my topic of research hence limiting
the level of accuracy.
2. Failure to carry out fieldwork outside the university with several TRA officers
which could provide relevant information based on my Research study.
3. Inadequate time of conducting the research study.
4. Cost of conducting the study.
5. Reluctant of management to some internal control information because they are
confidential.
Conclusion, Recommendation and suggestion for further studies
4.0 Introduction
This part intends to have an intensive discussion with regard to the research problem,
research objectives, and the reviewed literatures and draw up the conclusion, adding up
recommendation and suggestion which could be used for the further research.
4.1 Discussion of findings in term of research problem
The main concern my study aimed at looking on the effectiveness of internal control in
Tanzania Revenue Authority. The results obtained in this part have shown that internal
control play crucial part in operation of TRA. By saying so i can conclude that internal
control when it’s effectively implemented prevent organization from errors and fraud.
4.2 Discussion of finding in terms of objectives
Analysis of the effectiveness of internal control in Tanzania Revenue Authority is the
main or general objective. While the other objective which were specific are; assessing
whether is cost to implement internal control, fiscal discipline transparency and
accountability, embezzlement and fraudulent practice,. The literature review showed that
effectiveness of internal control are main contribution to the financial reporting and were
found. Also the ineffectiveness of internal control include; ineffective management or
noncompliance with internal policies and procedures; ineffective financial decision for
successful operation low or noncompliance with internal policies and procedures.
16. 16
4.3 Discussion in terms of Literature research and Conceptual Framework
The review was done in different literatures which had shown the effectiveness of
internal control. Both theoretical and empirical literature review were employed.
Different internal control theories were analyze to assess the effectiveness of internal
control the empirical findings like reports, journals and other researches which were
previously conducted were reviewed, most of the finding revealed that the effective of
internal control thereof, has effectively contribution to the operation and reliability of
financial reporting of Tanzania Revenue Authority.
4.4 Conclusion
The Tanzania Revenue Authority have gained a great benefits from effectiveness of
internal control for their contribution to the reliability of operation and custody of
organizations properties and financial reporting .All these benefit help TRA to become an
effective and efficient Tax administration, this promotes Voluntary tax compliance by
providing high quality Customer service with fairness and Integrity through competent
and motivated staff
Therefore this shows that the effectiveness internal controls have a great impact in the
reliability and daily operations of TRA.
4.5RECOMMENDATIONS
Based on the finding of this study, it is recommended that:
TRA should employ competent professional accountants to take charge of their internal
controls functions;
TRA management should always review and evaluate, on timely basis, the internal
control systems with a view to discovering loopholes and immediately rectify them;
TRA staffers should not be kept in a particular section for long. Supervisory control
should also be seriously invigorated to ensure a continuous check on abuse that can lead
to distress in the system;
TRA should always keep records of past events in case of future purpose; this can be
done using he back-up files. The current records should also have dual files, with the
duplicate files kept outside the domiciled branch to avoid loss of information in case of
accident;
Employees should be encouraged to develop themselves by becoming professionals in
their chosen career, this will affect the bank to grow positively and eliminate the
incidence of knowledge gap;
Access to assets should be limited to authorised personnel only;
Regular meeting with staff should be organised to disseminate information about the
Organization and also elicit feedback that help to improve the TRA
17. 17
References
1.Ahmad, N., Othman, R. & Jusoff, K. (2009). The effectiveness of internal audit in
Malaysian public sector. Journal of Modern Accounting and Auditing, 5(9), 784-790.
2.Arena, M. & Azzone, G. (2009). Identifying organizational drivers of internal audit
effectiveness. International Journal of Auditing, 13, 43–60.
3Arena, M. & Azzone. G. (2010). Internal audit effectiveness: Relevant drivers of
auditee’s satisfaction1-35.
4. Church, B. K. & Schneider, A. (2008).The effect of auditors’ internal control opinions
on loan decisions. Journal of Accounting and Public Policy, 27, 1–18.
5.Dittenhofer, M. (2001). Internal auditing effectiveness: An expansion of present
methods. Managerial Auditing Journal, 16(8), 443 – 450.
6.Drazin, R. & Van de Ven, A. H.( 2006). Alternative forms of fit in contingency Theory.
Administrative Science Quarterly, 30, 514-539.
7.Feng, M., Li, C. & McVay, S. (2009). Internal control and management guidance.
Journal of Accounting and Economics, 48, 190–209
8.Feizizadeh, A. (2012). Strengthening internal audit effectiveness. Indian Journal of
Science and Technology, 5(5), 2777- 2778
9.Sauser, B. J., Reilly, R . R. & Shenhar, A. J. (2009). Why projects fail? How
contingency theory can provide new insights – A comparative analysis of NASA’s Mars
Climate Orbiter loss. International Journal of Project Management, 27, 665–679
10.Ussahawanitchakit, A. & Intakhan, A. (2011). Audit professionalism, audit
independence and audit effectiveness of CPAs in Thailand. International Journal of
Business Research, 11(2), 1-1
18. 18
5.0Appendices
5.1 Work plan
Research proposal 2nd
week of May
Literature review 3rd
& 4th
week of May
Data collection and analysis 1st
week of June
Report preparation 2nd
& 3rd
June
5.2 Budget
Duplicating paper 1 ream 15000
Printing and stationary Pens, pencils ,notebook and
others
60000
Transport expenses 8 days to TRA kinondoni 100000
Field report Printing for copies 20000
19. 19
5.3 Questionnaires.
Interview questions for TRA Staffs
QUESTIONNAIRE:
UNIVERSITY OF DAR ES SALAAM BUSINESS SCHOOL
TOPIC: EFFECTIVENESS OF INTERNAL CONTROLS TRA
This study is purely academic and respondents are assured that whatever information is
provided will be highly confidential. Instructions: Please kindly tick the box that clearly
expresses your view about a question.
A. PERSONAL DATA 1.Sex: Male [ ] Female [ ]
2. Age: 19 or less [ ] 20─29 [ ] 30─39 [ ] 40─49 [ ] 50 or more [ ] 3. Which Department
do you belong? Domestic Revenue [ ] Auditing. [ ] Legal services [ ] Internal Control [ ]
Tax payer services and education [ ] Finance [ ] Large Tax Payer [ ] 4. Which staff
category do you belong? Junior staff [ ] senior staff [ ] Management [ ]
B. CONTROL ENVIRONMENT
5. Management decisions are made collectively and not controlled by one dominant
individual. Strongly agree [ ] Agree [ ] Not Sure [ ] Disagree [ ] Strongly Disagree [ ] 6.
6. Codes of conduct or ethics policies exist in the company strongly agree [ ] Agree [ ]
Not Sure [ ] Disagree [ ] Strongly Disagree [ ] 7. Policies regarding the importance of
7.internal controls and appropriate conduct are communicated to all staff. Strongly agree
[ ] Agree [ ] Not Sure [ ] Disagree [ ] Strongly Disagree [ ]
8. Audit or other control systems exist to periodically test for compliance with codes of
conduct or policies. Strongly agree [ ] Agree [ ] Not Sure [ ] Disagree [ ] Strongly
Disagree [ ]
9. Management periodically reviews policies and procedures to ensure that proper
controls are in place. Strongly agree [ ] Agree [ ] Not Sure [ ] Disagree [ ] Strongly
Disagree[]
C. RISK ASSESSMENT
10. The company has clear objectives and these have been communicated so as to
provide effective direction to employees on risk assessment and control issues. Strongly
agree [ ] Agree [ ] Not Sure [ ] Disagree [ ] Strongly Disagree [ ]
11. Management appropriately evaluates risk when planning for new control or activity.
Strongly agree [ ] Agree [ ] Not Sure [ ] Disagree [ ] Strongly Disagree [ ]
12. There are sufficient staff members who are competent and knowledgeable to manage
organizational activities and these have been provided with adequate resources. Strongly
agree [ ] Agree [ ] Not Sure [ ] Disagree [ ] Strongly Disagree [ ]
20. 20
13. Technology issues are considered and appropriately addressed. Strongly agree [ ]
Agree [ ] Not Sure [ ] Disagree [ ] Strongly Disagree [ ]
14. Significant internal and external operational, financial, compliance and other risks are
identified and assessed on an ongoing basis. Strongly agree [ ] Agree [ ] Not Sure [ ]
Disagree [ ] Strongly Disagree [ ]
D. CONTROL ACTIVITY
15. Policies and procedures exist to ensure critical decisions are made with appropriate
approval. Strongly agree [ ] Agree [ ] Not Sure [ ] Disagree [ ] Strongly Disagree [ ]
16. Processes exist for independent verification of transaction (to ensure integrity)
Strongly agree [ ] Agree [ ] Not Sure [ ] Disagree [ ] Strongly Disagree [ ]
17. There is a system in place to ensure that duties are rotated periodically. Strongly
agree [ ] Agree [ ] Not Sure [ ] Disagree [ ] Strongly Disagree [ ]
18. Processes are in place to ensure that policy overrides are minimal and exceptions are
reported to management Strongly agree [ ] Agree [ ] Not Sure [ ] Disagree [ ] Strongly
Disagree [ ]
19. People in the TRA have the knowledge, skill and tools to support them in their duties
in order to effectively manage risk and achieve company objectives. Strongly agree [ ]
Agree [ ] Not Sure [ ] Disagree [ ] Strongly Disagree [ ]
20. The company has employed security guards. Strongly agree [ ] Agree [ ] Not Sure [ ]
Disagree [ ] Strongly Disagree [ ]
E. INFORMATION AND COMMUNICATION SYSTEMS
21.There are effective reporting procedures in communicating a balanced and
understandable account of the organisation position and procedures. Strongly agree [ ]
Agree [ ] Not Sure [ ] Disagree [ ] Strongly Disagree [ ]
22. There are established channels of communication for individuals to report suspected
breaches of laws or regulation or other improprieties. Strongly agree [ ] Agree [ ] Not
Sure [ ] Disagree [ ] Strongly Disagree [ ]
23. All staff understands their role in the control system. Strongly agree [ ] Agree [ ] Not
Sure [ ] Disagree [ ] Strongly Disagree [ ]
F. MONITORING
24. There are ongoing processes within the TRA overall Organisation operations and
these are addressed by senior management to monitor the effective application of the
policies, processes and activities related to internal control and risk management Strongly
agree [ ] Agree [ ] Not Sure [ ] Disagree [ ] Strongly Disagree [ ]
25. There are effective follow-up procedures to ensure that appropriate change or action
occurs in response to changes in risks and control assessments. Strongly agree [ ] Agree [
] Not Sure [ ] Disagree [ ] Strongly Disagree [ ]
26. Reports on significant failings or weaknesses are reported to management on a timely
basis. Strongly agree [ ] Agree [ ] Not Sure [ ] Disagree [ ] Strongly Disagree [ ]
21. 21
(B) Interview questions for the Effectiveness of internal control in TRA:
1. What are the compliance and/or ethics related challenges you face most frequently in
your current role?
2. How can the TRA compliance policies be improved and/or better applied,
communicated and enforced?
3. How can employees report concerns, issues, or potential violations of laws, regulations
and/or the code of conduct and/or compliance policies?
4. Are you aware of anyone who has not complied with or is not complying with the
TRA’s code of conduct and/or compliance policies?
5. What should happen to someone who violates the TRA’s code of conduct and/or
compliance policies?
6. If you were to be promoted or leave the organization and someone took over your role
who lacked the same level of integrity that you do, how could that person violate a policy
or break the law and not be detected?
