The “Effectiveness of Audit Report on Improvement of Financial Management in Nigeria Federal Parastatals with emphasis on the educational system in Nigeria. The study aims at determining or examining the effectiveness of audit report in improvement of financial management in the Federal Parastatals particularly the Educational System in Nigeria. It is thus set out to achieve objectives among which are; (i) to identify the major challenges confronting auditors from giving effective audit reports (ii) to examine the extent to which auditors independence is infringed upon by the hospitality or public relation practices of some Parastatal of Federal Ministry of Education. It also set out to answer research questions including (i) what are the major challenges confronting auditor from giving effective reports to the Federal Parastatals in Education Sector in Nigeria (ii) what is the extent to which auditors independence is infringed upon by the hospitality or public relation. To properly guide the work, four research hypotheses were formulated: (i) wrong choice of audit firm, audit fees, lack of independence and registering of audit firms under different names constitute the major challenges confronting auditors in effective audit reports, (ii) non disclosures of classified information available to the auditors of Federal Parastatals in Education Sectors in Nigeria in their audit report significantly affects the effectiveness of this report among others. The survey research design was adopted in this study. The primary source of data was employed and the instrument of data collection was the questionnaire. The population of the study is made up accounting officers, internal audit staff and other staff of the studied parastatals. The Taro Yamane’s formula was used in selecting the sample size 476. The respondents was analysed using both descriptive and inferential statistics. Specifically, the hypothesis was tested using chi-square, multiple linear regressions, Pearson Product Moment Correlation Coefficient and Analysis of Variance (ANOVA). These were done through the application of the computer based statistical package for social sciences (SPSS) version 17.0 software. The major findings of this research includes normal or symmetrically distributed (Z = 1.250, p < 0.05) information from the Auditors of the federal parastatals that Wrong choice of audit firm, Audit Fees, Lack of Independence and Registering of Audit Firms Under Different Names, all constitute the major challenges confronting auditors in giving effective audit reports and normal or symmetrically distributed (Z = 1.869, p < 0.05) information from the Accounting Officers & other staff of the federal parastatals that Non-disclosure of classified information available to the auditors of federal parastatals in the education sector in Nigeria in their audit reports significantly affects the effectiveness of these reports, among others. The study concluded that management of public fund at the various Federal Parastatals in Education Sector in Nigeria is weak. It is therefore recommended that government of Nigeria should establish a supervisory body in auditing specially meant for monitoring and controlling the finances of its parastatals.

Proper financial management and accountability over public funds is a central component of good governance. Public funds are meant to be used effectively and efficiently to ensure that citizens are receiving the quality services for which the public funds have been allocated (Okoh and Ohwoyibo, 2010). The bane of public sector financial mismanagement in Nigeria since the oil boom years, (a period under which there existed structurally weak control mechanism), have created a variety of loopholes that have facilitated geometrically and sustained corrupt practices in the country up till date. The plague has diffused itself into all parts of the country: private and public business places.

As a watchdog for government throughout all its parastatals, departments for internal auditors whose primary concern is to critique the books of accounts of the parastatals and constantly report to the senate about the financial state of the corporations or parastatals were set up.

The main objectives of auditors of Ministries/Departments or parastatals are to ascertain whether: (a) All receipts of public money emanating from the operations of the period under review are collected and properly accounted for; (b) The accounting system in operation provides financial information that is reliable and free from material errors to facilitate the preparation of the accounting and financial statements required by law.