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GODLOVE MMARI +2551712166612University of dar es salaam business school(2013-2016)

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TABLE OF CONTENTS1.0. List of Abbreviation.................................................................…...11.1 INTRODUCTION ......................................................................................21.2 PROBLEM STATEMENT.........................................................................41.3 RESEARCH OBJECTIVES, QUESTIONS AND HYPOTHESES

1.3.3 Main objectives ...........................................................................41.3.2 Specific objective and other objectives........................................41.3.2 Research questions.......................................................................51.3.3 Research hypotheses ....................................................................5

1.4 SIGNIFICANCE OF THE STUDY............................................................51.5 SCOPE OF THE STUDY...........................................................................

2.1 LITERATURE REVIEW ...........................................................................52.1.1Overview…………………………………………………….…52.1.2. Definition of key terms……………………………………....62.1.3. Theoretical Literature review.......................................................8

3.0 Methodology...............................................................................................3.1 Research Design…………………………………………..……………. 11

3.1.1 Research type and approach.......................................................... 113.1.2 Sampling design……………..……………………………….. 113.1.3. Methods of data collection…………………………………... 113.1.4. Data Analysis …………………………………………………. 123.2. Study Area .....................................................................................….133.3 Limitation 0o0f the study..........................................................13

4.0. Conclusion and Recommendation ………………………………………..135.0. References…………………………………………………………………..156.0. Appendices.................................................................................................… .16

6.1. Work plan…………………………………………………………………..16

6.2. Budget…………………………………………………………………….. 16

6.3. Questionnaires…………………………………………………………… .17

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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

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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 anniversarysince 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 correctiveaction or the way to improve the situation that is likely to hinder the achievement of thedesired 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.

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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 issuesRELIABILITY: 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.

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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 TRAfailure to achieve their objectives point to ineffective internal control system. TRA (2012), found that internal control was primary to the achievement of objectives in publicorganisations 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 STUDY1.3.1 Main Objective

The study is aimed at examining the Effectiveness of internal control on the Tanzania Revenue Authority. 1.3.2 Specific ObjectiveThe 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

Authority4. To investigate whether internal control system minimize embezzlement and

fraudulent practice.

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1.4 RESEARCH QUESTIONSThe 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 HYPOTHESESThe 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 budgetHo2: Tanzania Revenue Authority does not have adequate expenditure tracking toprevent 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 STUDYInternal 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 beresearched.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.

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2.1.2Definitions of important termsThe 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 allhave 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.

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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

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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 reviewContingency 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

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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 ControlAs 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 ControlThe 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.

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2.1.6Empirical reviewSeveral 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 gapDespite 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 timeexample through emails

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ObservationsAgain 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 QuestionnairesQuestionnaires 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 freeHowever 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.

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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 officerswhich 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 studies4.0 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 problemThe 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 objectivesAnalysis 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 ornoncompliance with internal policies and procedures; ineffective financial decision for successful operation low or noncompliance with internal policies and procedures.

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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 ConclusionThe Tanzania Revenue Authority have gained a great benefits from effectiveness ofinternal 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 staffTherefore this shows that the effectiveness internal controls have a great impact in the reliability and daily operations of TRA.

4.5RECOMMENDATIONSBased 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

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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- 27789.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, 665–67910.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

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5.0Appendices5.1 Work planResearch proposal 2nd week of MayLiterature review 3rd & 4th week of MayData collection and analysis 1st week of JuneReport preparation 2nd & 3rd June

5.2 BudgetDuplicating paper 1 ream 15000

Printing and stationary Pens, pencils ,notebook and others

60000

Transport expenses 8 days to TRA kinondoni 100000Field report Printing for copies 20000

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5.3 Questionnaires.Interview questions for TRA Staffs QUESTIONNAIRE:UNIVERSITY OF DAR ES SALAAM BUSINESS SCHOOLTOPIC: EFFECTIVENESS OF INTERNAL CONTROLS TRAThis 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 ENVIRONMENT5. 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 ASSESSMENT10. 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 [ ]

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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 ACTIVITY15. 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 SYSTEMS21.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. MONITORING24. 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 [ ]

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(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 rolewho lacked the same level of integrity that you do, how could that person violate a policyor break the law and not be detected?