The Impact Of Internal Audit In Nigeria Manufacturing Industries (A Case Study Of Heritage Pure Water Industries Ltd Ilorin Kwara State)

Project and Seminar Material for Accountancy / Accounting

The Impact Of Internal Audit In Nigeria Manufacturing Industries (A Case Study Of Heritage Pure Water Industries Ltd Ilorin Kwara State)

Table of Content

  • Title page
  • Certification
  • Dedication
  • Acknowledgement
  • Table of content

Chapter One


  • 1.0 Background of the study
  • 1.1 Statement of the study
  • 1.2 Justification of the study
  • 1.3 Objective of the study
  • 1.4 Statement of hypothesis
  • 1.5 Scope of the study
  • 1.6 Significances of the study
  • 1.7 Plan of the study
  • 1.8 Definition of the study

Chapter Two

Literature Review

  • 2.0 Introduction
  • 2.1 Concept of auditing
  • 2.2 Type of auditing
  • 2.3 Scope of audit in manufacturing companies
  • 2.4 Internal audit in manufacturing companies
  • 2.5 Impact of audit on the management of manufacturing company

Chapter Three

Research Methodology

  • 3.0 Historical background of heritage pure water
  • 3.1 Introduction
  • 3.2 Research design
  • 3.3 Types of data and method of data collection
  • 3.4 Research instrument
  • 3.5 Research instruction
  • 3.6 Method of data analysis

Chapter Four

Data Presentation and Analysis

  • 4.0 Introduction.
  • 4.1 Analysis of data
  • 4.2 Hypothesis testing
  • 4.3 Interpretation result

Chapter Five

Summary, Conclusion and Recommendation

  • 5.1 Summary
  • 5.2 Conclusion
  • Recommendation
  • Bibliography

Chapter One


1.0 background of the Study

Company or organizations take a unique position in an economic setting by virtue of their position in terms of goods and services. The growing complexities in the organizations have necessitated the need for a functional and effective internal audit before the ultimate statutory audit. This is because of the incessant reports of frauds and misappropriation of fund in manufacturing Companies.

The origin of auditing emanates from the separation ownership from control; in spite of this it become necessary for the manager entrusted with the financial and economics of business to present their financial report to the employers.

Auditing is viewed from one of the primary means by which accountability can be ensured to the financial statement.

Auditing, according to Walter (1970), is therefore said to be such an examination of books and accounts and vouchers of a business, as it will enable the auditor to express his opinion as to whether the balance sheet is properly drawn up, so as to give a true and fair view of the state of affairs of the business and that the profit and loss account give a true and fair view as the profit and loss for the financial period according to the best of information and explanation given to him and as shown by the books to report otherwise if not satisfied.

Professional auditing grow and developed in England, whose first organized accounting body was formed in Nigeria, the institute of chartered Accounting of Nigeria {ICAN} was established by the act of parliament number 15 of 1 September 1965. Then, the idea was sold by Mr. Herbart keeling a qualified accountant who was visiting Nigeria as a delegate sent by British council on a specific assignment. The vision comes into reality that an association known as accountants of Nigeria was formed. The association was incorporated on November 17,1960. There is the need for auditing in manufacturing companies so that financial control can be carried out.

Internal auditing therefore can be defined as an independent appraisal of activity within an organization, for the review of operation as services to management. It is a management controls which function by measuring and evaluating the effectiveness of other controls.

Hence, internal auditing as a process can thus, be seen as a review of the accounting and internal control system of an enterprises in order to highlight their weakness to management so that correction can be effected appropriately and promptly.

This research work is to contribute to the understanding that to ascertain whether internal auditing is appropriate as a management tool and to also promote the understanding that the primary objective of the internal auditor is not to detect frauds or error, but if in the process of audit the auditor detects any error or frauds he/she is to report to the appropriate authority usually the management as bound by the professionals.

1.1 Statement of Research Problem

In any organization, private or public the impact of internal auditing are desire, important as it can positively or negatively effect the effectiveness in any organization of company is the check and control issue so that fraud and irregularities can be at lost minimized.

In manufacturing industries case of fraud and mismanagement of frauds by the serving public official managers, e.t.c soon to have gone unnoticed despite the fact that periodic audit exercise is being carried out. So, to stop minimize fraud or mismanagement of fund in any manufacturing company, the service of an auditor is greatly needed. This will increase the strength of the company and also their level of productivity will increase.
Can audit be relied on as a check against fraudulent act? And if so, is the environment conductive for the performance of their duties i.e the auditor.

These questions are what brought about the issue of how effectively and efficiency is the internal auditor evaluating the internal control of the organization to ensure the efficient management of manufacturing companies.

1.2 Justification for the Study

This research work is justified as it provides answer for the evaluation of the role of national audit in the company to see and test its ability of compliance with policies, law, procedures and regulation.

To evaluate its effectiveness in checking the security and extent to which assist of the company is safeguarded.

In addition, this study will be useful to the following group: student, companies and educational setting would benefit from this study; in such a way that it serves as a basis in their related research topic, giving recommendation to companies especially manufacturing companies. It will also enable the audit department of an organization to detect the position lapses that must have existed in the system and for corrective actions to taken when and where necessary.

1.3 Objective of the Study

The main objective of this study is to access and evaluate the impact of internal auditing in the Nigeria manufacturing industries in achieving organization goals. The following sub objectives will also be pursued.

  1. To evaluate whether proper records are kept by the various department and serves as sources data for auditing.
  2. To evaluate the role played by the internal auditor or department in achieving organization goal.

1.4 Statement of Hypothesis

In order to provide solution to the research problems identified above, the following hypothesis would be tested.

  • Ho: effective internal control is a yardstick for measuring organization efficiency.
  • Hi: effective internal control is not a yardstick for measuring organization efficiency.

1.5 Scope of the Study

The project which talk about impact of internal audit in Nigeria manufacturing industries limit it scope to only manufacturing industries as the industrial scope so as to be able to carry out a compressive work and it will be practically in possible to cover all the industries in Nigeria. Heritage pure water industries is also choose as the case study the geographical scope is the Ilorin plant of the company and time scope for the work is limited to three to four month.

1.6 Significant of the Study

The project intends to show the impact of internal audit in Nigeria manufacturing industries. It will enable people to know more about the roles of internal auditing department.

This study will also expose the research to the real life solution of knowing the internal auditing of the organization.

The significance of this research to the researcher is for the award of High National Diploma in accountancy, also to the company, it helps them to detect any kind of fraud as early as possible. It is also significant to the general public as the know the financial history of any organization before having any transactions with them, and to the government, it help them to detect any fraudulent act or staff at any point in time and it help in the making of policy to regulate the activities of internal auditors. The place of accounting structure, the level control exercised by accounting, the cash line between accounting department and other department in an organization and the problem faced by the accountant in the periodically preparing their financial statement and offer possible solution to the problem.

Also, the study will be helpful to the management and scholars in accounting profession, who might be interested in carrying out further research on the topic and who do the update this knowledge with it.

1.7 Plan of the Study

This research work is organized into (5) five chapters:-

  • Chapter one covers the background to the study which include, introduction of the study, statement of the study, justification for the study, scope of the study significance of the study, statement of hypothesis and definition of the terms.
  • Chapter two covers the review and related literature with the aim of highlighting some of the major area of the subject matter.
  • Chapter three is the research methodology with the exposition of some theoretical frame work.
  • Finally, chapter four is used to illustrated data presentation and analysis
  • While chapter five covers the summary conclusion and recommendation bases on the findings of the study.

1.8 Definition of Terminologies

The term audit is derived from a latin word “Audit meaning to hear” Audit as defined by audits practical committee (APC) as the independent examination and expression of opinion of the financial statement of an enterprises by an appointed auditor in pursuance of that appointment and in compliance with statutory obligation.


An auditor is a person who audits the accounting record of a company or organization. He is also refers to as an independent third party who audit the financial statement of an organization reports to show the truth and fairness of the account.

Internal Audit

This is an independent appraisal of activity within an organization for the review of accounting financial and other operating as a basis of services to management.

Audit Report

This an end product of every audit exercises. It is a short statement expressing the view of the auditors that the accounts show a true and fair view and company with statutory role and regulation.

Internal Control

It is the whole system of control, both financial and otherwise which established by management to safeguard the asset and in adherence to policies and directions.

Audit Evidence

These are all the information obtained by the auditor during the course of this audit assignment and on which he base his opinion on the financial statement (Adams, 2002)

Internal Check

This method of organizing the entire operation of office factory and warehouse and the duties of the respective staff so that fraud and irregularities are almost impossible without conclusion.


An examination of the affair of a company or any organization for some special purpose


Errors are generally agreed in audit as an international misstates. It makes clients account unreliable and if it predominately occurs, it can affect the truth and fairness of the accounts.


It is one irregularity involving the use of criminal description to obtain an unjust advantage such as stating store value higher than normal.


These are practice contrary to the profession or ethical standards (Longman, 2002).


To ensure that mismanagement, misappropriate is reduced to their dearest minimum.


To confirm that policy expenses on is popular (safe association limited; 1999)

Chapter Five

Summary, Conclusion and Recommendation

5.1 Summary of Findings

This study was designed to ascertain the “impact of internal auditing on the Heritage pure water industrial limited, Ilorin).

The study revealed that it has impact on the performance and efficiency of manufacturing companies. Audit has become an instrument for improving the performance and efficiency of workers in organization.

Audit as a whole involved check on the work done so as to achieve the management goals and objective.

However, audit plays a very important role in an organization’s internal control system. In accuracy and reliability of its records, it brings into play internal check, internal audit and other forms of control established by the management.

In adopting an internal control system, the four management policy formulated need to be understood, duties should be well separated on achieving the same goals. The auditor should exercise more control in arrears which attract frauds. It should be noted that audit of a company is not the sole responsibility of the internal auditor alone but a collective responsibility of the internal auditor and staffs.

Finally, the nest means to minimized fraud is to install a sound system of internal audit to be managed by the audit department.

5.2 Conclusion

Audit is of high important to limited liability companies manufacturing companies as well as public companies and individual as a whole it helps the management to maintain a clear and clean accounting record, audit provide revenue for the organization by reducing fraud and monitoring of their assets.

5.3 Recommendation

For internal auditing to gain and maintain its prominence in the financial and efficient management of an organization and for auditors (internal auditor) to be seen as a performing their role of a watchdog, the following recommendation are made.

The management should ensure that the internal auditor is going a freehand to perform his functions; the department should be independent as the practices of independence will enable the internal auditor to perform their function at all levels in the organization.

Also, there should be adequate staffing of the department, the management must ensure that adequate, qualified, honest, intelligent dedicate and hard workings that can perform their duties without fear or favor are employed and trained.

In addition, their should be a new tread in internal auditing as we all know that computer technology is witnessing predominant growth and development in recent times especially hardware computer.

Recommendation also goes to the internal auditors, internal auditors should rebuild trust and confidence in their organization so as not to term up with people willing and rely to run the organizations.

The auditor should also undergo certain training so as to be more efficiency in the performance of his audit assignment.

Finally, adequate separation of duties should be properly and adequate organization and executed.

The Impact Of Internal Audit In Nigeria Manufacturing Industries (A Case Study Of Heritage Pure Water Industries Ltd Ilorin Kwara State)

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