THE ROLE OF INTERNAL AND EXTERNAL AUDITORS IN BUSINESS ORGANISATION (A CASE STUDY OF OLORUNTOGBE INNOVATIVE LINK COMPANY LIMITED OWO, ONDO STATE)

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  • Department: Business Administration and Management
  • Project ID: BAM2248
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  • Chapters: 5 Chapters
  • Pages: 65 Pages
  • Methodology: Chi- square
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THE ROLE OF INTERNAL AND EXTERNAL AUDITORS IN BUSINESS ORGANISATION (A CASE STUDY OF OLORUNTOGBE INNOVATIVE LINK COMPANY LIMITED OWO, ONDO STATE)
ABSTRACT
The practice of auditing has its origin in the necessity for the institution of some system of check upon persons whose business it was to record the receipt and disbursement of' moneys on behalf of others. In the early stages of civilization the methods of account were so crude, and the number of transactions to be recorded so small, that each individual was no doubt able to check for himself all his transactions, but as soon as the ancient states and Empires acquired any coherent organization, records, are found of systems of check being applied to their public accounts, therefore, the ancient Egyptians, the Greeks, and the Romans, all having utilized systems of checks and counter-check as between the various financial officials.

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

The practice of auditing has its origin in the necessity for the institution of some system of check upon persons whose business it was to record the receipt and disbursement of' moneys on behalf of others. In the early stages of civilization the methods of account were so crude, and the number of transactions to be recorded so small, that each individual was no doubt able to check for himself all his transactions, but as soon as the ancient states and Empires acquired any coherent organization, records, are found of systems of check being applied to their public accounts, therefore, the ancient Egyptians, the Greeks, and the Romans, all having utilized systems of checks and counter-check as between the various financial officials.

Walter (2010) states that the ancient records of auditing are confined principally to public accounts, but there is clear indication that from an early date it was customary for an audit of the accounts of manors and estates to be performed.

The person whose duty it was to make such an examination of accounts becomes known as the AUDITOR. The word being derived from the Latin Audire to hear. Originally, the accounting parties were required to attend before the auditor who heard their accounts.

It was not until 15th Century that the great impetus given to trade and commerce generally by the Renaissance. In Italy led to the evolution of a system of accounts which was capable of recording completely all kinds of mercantile transactions, and the principles of double entry were first Published in 1494 at Venice by Luca Pacioli, although the system had been more or less utilized during the preceding century.

Beeton (2009) maintains that the increase in volume of trading operations, necessitating the use of more capital than was at the disposals of the average trader, Induced them to combine in partnership with others for the purpose of obtaining the requisite capital and this tendency was a patent factor in the evolution of a more perfect system, of accounts.

The system of Auditing in Nigeria are classified into the type of establishment being audited and the timing of audit. The status of the auditor in respect of their appointment and also the approach adopted on the basis of types of establishment being audited, it is possible to classify audits into statutory and non-statutory audits:-

The statutory audit Olu-Ola (2009) maintains that statutory audit is also called a public audit, this is the audit of limited liability companies. In this class of audit the duties of the auditors are clearly spelt out in section 360 and schedule 6 of the Companies and Allied Matters Act 1990, such duties can be greatly extended by additional instructions from the client but cannot in any way be reduced.

Focus group discovered that for statutory audits, it is essential for the auditor to exercise absolute independent that the procedure for the appointment removal and remuneration must conform with the provisions of section 357, 362 and 361 respectively of the Companies and Allied Matters Act, 1990.

Adegboyewa (2010) states that a non-statutory audit is the private audit of sole traders, partnerships trusts and other organizations that are not limited liability companies. Under this class of audits, the duties of the auditors are limited to the instructions of the clients.

Businesses under this class are not required of law to publish their accounts, hence the appointment and removal of the auditors are at that discretion of the owners of the business. The system of audit in the case study are classified into (3) three

(a) Interim Audit

(b) Final audit

(c) Continuous Audit

The above classes of audit are majorly in practice Peter – Ayo (2011) was the auditor 1 who was interviewed thus

An Interim Audit

This is usually carried out during the financial year this will usually not included the full verification of the assets and liabilities, but will involve ascertaining and evaluating the system of internal control for reliability and effectiveness as a basis for preparing the financial statements. An interim audit is indispensable in very large organizations with tight deadlines for the presentation of the financial statements.

A final Audit Final audit is carried out at the end of the financial year and it will involve the following as explained by Chief Internal Audit of the organization:

- A comparison of the financial statements with the underlying records

- Verifying the validity and accuracy of the assets and liabilities appearing in the financial statement.

- A critical review of the financial statements in order to confirm the truth and fairness of the statements and their compliance with the statutory and other requirements.

A continuous Audit

In Nigeria context, continuous audit is another system of audit, it is a common

practice to separate audits into the interim and final stages. However, some establishments are so large that audit staff may be in the client’s premises all the year round. This is termed a continuous staff and the interim and final audits are merged.

Sylvester (2011) was curious in his explanation that the continuous audit review of the records and the validation of transactions are carried out throughout the year. This prevents long delays in the presentation of the financial statements.

Boluwaji (2012) postulates that other auditing system carried out in the organization are tagged internal and external audit. Audits that are classified on the basis of the status are the modality for auditors appointment more so that other classes of the audit include procedural and vouching audit which are the major elements of audit by approach. Focus group discussion also compliments the above thus:-

 - Procedural audit

It is the modern audit approach which requires a test of procedures, analytical review and comparison of the items appearing in the financial statements but Adefela 2009 also antagonize the above that “it rarely involves the test of individual transactions and even when this is the case, the level of test is very low and only material transactions are significantly considered”.

- Vouching Audits

The study of an audit approach which involves an indepth examination of the transactions of the business together with the documentary evidence of sufficient validity to satisfy the auditor that the transactions are in order, properly authorized and accurately recorded.

1.2 Statement of the Problem

Ignorance is not an excuse to economic and financial business development and growth. In Nigeria, the business owner either with partnership are disturbed by the non-compliance to auditing of business in Nigeria.

The financial consequence of non-auditing made both the public and private enterprises to intensified efforts towards the compliance of auditing their book of accounts. An audit which is the examination of books, accounts and voucher of a business must reflect check and balance.

 Secondly, there must be verification of accounts and statement prepared by a client or his staff although, of great significant the detection of fraud and error which must be regarded as incidental to such main object.

Thirdly, the presentation of fraud and errors by reason of the deterrent and moral check imposed is also an advantage of considerable importance which is derived from an audit, therefore, previous research have shown that these is an overwhelming evidence globally that auditing involve a more or less complete examination of the whole of the transactions of the business.

The fraudulent manipulation of accounts involving defalcation must be detected because to the public at large, this is a principal function of the auditor. In the light of the above it was necessary to evaluate the influence of auditing accounts for economic and financial development.

1.3 Research Questions

The research study considered the following for the purpose of this study.

(a) To what extent do administrative policy influence active auditing of book of accounts in both public and private enterprises?

(b) What are the factors promoting auditing of accounts among Public and Private

Enterprises in Nigeria?

(c) To what extent are accountant/managers aware of the consequences of not auditing their accounts?

 (d) How adequate are the existing government regulations in reducing

fraudulent habit among workers?

1.4 Objectives of the Study

There are broad objective of the study, among these me to eradicate the impact of

auditing account to the utmost benefit to the society. The specifics of the objective are:

a) To evaluate the effects of auditing Ministries, Departments and  Agencies

including private organization.

b) To assess the effectiveness of government regulations to reduce

fraudulent habit amount among the private workers.

(c) To find out the extent of defalcations, involving either misappropriation   of

public fund or goods.

(d) To investigate the leverage of development as anchored by auditing of accounts in the Private Service.

(e) To examine the extent of the detection of errors either errors of omission,

errors of commission, clerical errors, errors of principle and error of compensation.

1.5 Hypothesis

Based on the problems and objectives of the study, the following hypothesis are formulated for this research work.

Hypothesis I

HO - there is no professional audit performance on financial audit in business organizations.

 H1 - there is professional audit performance on financial audit in business organizations.

Hypothesis II

HO - auditor do not enjoy any degree of independence in the course of the duty.

H1 - auditor enjoy degree of independence in the course of their duty.

1.6 Significant of the Study

It is expected that the study will fill the gap created by previous research studies by providing clear understanding of the relationship between the behavoural, environment, personnel and social factors in the evaluation of the causes and effect, of habit to defraud in their business organization.

From these analogy, the amount of detail checking which auditor must perform before he can satisfy' himself that no fraud exist will depend to a great extent on the system of internal check in operation.

1.6(b) The significance of the study is also to ensure the competence of the auditor by requiring a professional qualification and those to benefit from the auditing are

- stakeholders

- customers

- management

- Government

 - Public

1.7 Limitation of the study

The research study have major limitations particularly using only reactive collection methods is that a variety of sources of error arise which may make the results of such research are less variable and plausible. Among these limitations are:

- Respondent error

- Investigator error

- Sampling error

Others are limitations of time with the following elements

- Interviewer effect

- Instrument effect

- Recording error etc.

1.8 Definition of Terms

(a) Internal Audit: This the activities of a selected workers appointed to set internal

account of a business organization

(b) External Audit: External Auditors are statutory officers who audited

accounts with professional knowledge and skills.

(c) Business organization: is a personal effort from individuals who aspired to set

up a business either as individual or partnership business to sustain a living by creating job opportunity.


THE ROLE OF INTERNAL AND EXTERNAL AUDITORS IN BUSINESS ORGANISATION (A CASE STUDY OF OLORUNTOGBE INNOVATIVE LINK COMPANY LIMITED OWO, ONDO STATE)
For more Info, call us on
+234 8130 686 500
or
+234 8093 423 853

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  • Type: Project
  • Department: Business Administration and Management
  • Project ID: BAM2248
  • Access Fee: ₦5,000 ($14)
  • Chapters: 5 Chapters
  • Pages: 65 Pages
  • Methodology: Chi- square
  • Reference: YES
  • Format: Microsoft Word
  • Views: 600
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    Details

    Type Project
    Department Business Administration and Management
    Project ID BAM2248
    Fee ₦5,000 ($14)
    Chapters 5 Chapters
    No of Pages 65 Pages
    Methodology Chi- square
    Reference YES
    Format Microsoft Word

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