Internal Audit Practice And Corporate Goal Attainment In The Manufacturing Industry (A Survey Of Selected Manufacturing Firm In Rivers State)

Internal Audit Practice And Corporate Goal Attainment In The Manufacturing Industry (A Survey Of Selected Manufacturing Firm In Rivers State)

Abstract

This study was carried out to examine the internal audit practice and corporate goal attainment in the manufacturing industry using marshal paint and chemical industry, Rivers State as case study. Specifically, the study examine the effectiveness of the internal audit in selected manufacturing firms in Rivers state. The study also ascertain the relationship between internal audit practice and corporate goal attainment in the manufacturing industry. Lastly, the study determine the factors militating against corporate goal attainment in manufacturing companies. The study employed the survey descriptive research design. A total of 77 responses were validated from the survey. From the responses obtained and analyzed, the findings revealed that the effectiveness of the internal audit in manufacturing firms in Rivers state is high. Also, there is a positive relationship between internal audit practice and corporate goal attainment in the manufacturing industry. Furthermore, training and development is one of the factors affecting corporate attainment. Tools and equipment is another factor affecting corporate attainment. The study hereby recommend that the internal audit unit of the manufacturing industry should keep ethical standard by keeping up to date internal audit manual and train its internal auditors in forensic accounting. Also, Internal audit units should always draw annual audit plan which is thefocus of the company as it will help in the goal attainment of the manufacturing industry.

Chapter One

Introduction

1.1 Background of the Study

An essential condition for the survival of a manufacturing industry or more generally of an organization lies on the ability of its members to act reliably and efficiently to achieve the objectives of the industry. The substantial coordination of behavior can be achieved in numerous ways. Supervision of managers and staffs of manufacturing industry is becoming ineffective. However it may be wished to maintain these ways of controlling but it would only be applied to the part of the industry (Brown, 1999). Therefore it is necessary that management put in place mechanisms to fill the gap in supervision.

The financial and corporate goal attainment of a manufacturing industry is underpinned by effective internal systems in which the practices of the internal audit has an important role, raising the reliability of the internal control system which is always aimed at improving the process of risk management, and, above all, satisfying the needs of internal users (Fama, 2008). The effective practice of internal audit also supports and enhances the system of responsibility that the executive directors and employees of manufacturing industry have towards the owners and other stakeholders. The Internal Audit Department provides a reliable, objective, and impartial service to the management, board of directors, and audit committee, while stakeholders are interested in return on investments, sustainable growth, strong leadership, and reliable reporting on the financial performance and business practices of a manufacturing industry.

Proper understanding of the role and importance of the internal audit is one of the preconditions for successful strategy implementation and attainment of corporate goals of a manufacturing industry. However, this research aims to examine the effect of internal audit practice on corporate goal attainment of some selected manufacturing firms in Port Harcourt, Rivers State.

Corporate goal attainment by manufacturing industries is a major concern these days due to importance of the global competition. One factor of this corporate goal attainment lies on the ethical and responsible behavior of its managers and employees. But at the end of the 20th century, the Enron and WorldCom scandals show that there was a lack of control in companies (Bertin, 2007). Following these financial scandals, actions were taken. It has become essential to provide an ethical control in the interest of leading to better take into account the content of internal control practice, in order to overcome the weaknesses of economic and legal support. In a common interest, ways to measure the impact of moral decisions have been found and the manufacturing industry must be able to justify its activities (Ethical norms and values), and this control may be performed by the internal audit (Mercier 2000).

Corporate goal attainment of manufacturing industry can also be “the ability of an organization to identify and implement appropriate strategies within the framework of the aims it pursues in other maintains good reputation” (Bouquin, 1997). The corporate goal are vary from one manufacturing industry to another for example a manufacturing company may want to become the largest industry in the world or to remain a successful specialized firm, or even be best able to achieve the goals it has set. Once the purposes have been defined, success in the attainment of these corporate goals depends on the ability to define appropriate strategies and to implement them. Firm arrangements must ensure the level of transparency and accountability in both economic and strategic scopes and we call internal control the combination of such devices. It is necessary to periodically test the effectiveness and suitability of a particular aspect of internal control mostly importantly the mode of practice. Auditing is the process of studying and evaluating internal control and certain of its aspects, as well as its expected outcome. The ensuing result may help to determine the effectiveness of the industry. It is something important because the challenges of every work day are for the manufacturing industries to be competitive so as not to be forced out of the market.

1.2 Statement of the Problem

Internal audit practice involves the evaluation function available to a firm to examine and appreciate the proper functioning, consistency and effectiveness of its internal control. To this end, internal auditors should review the various activities of the industry, measure the risks and the arrangements put in place to control them, ensure performance in carrying out assigned responsibilities and make recommendations to improve its security and increase efficiency (IFACI, 1998).

Internal audit practice is one of the essential mechanisms of the internal control system. No manufacturing industry can disregard it, even partially, without losing at the same time control of a key to its survival. A vital member of firm management, the internal auditor is a party to an audit charter defining his independence. When the internal audit department does not meet the expectations of senior management, it should take adequate steps to upgrade it (IFACI, 1998).

In any event, the firm must maintain control of the implementation process of internal audits. As manufacturing industry is pursuing objectives in an economic environment, the firm is the meeting place of a wide range of stakeholders interested in its success. This complex situation has prompted the researcher to seek to understand more precisely the contribution of internal audit practice in attainment of corporate goals.

1.3 Purpose / Objectives of the Study

The following are the objectives of this study:

1. To examine the effectiveness of the internal audit in selected manufacturing firms in Rivers state.
2. To ascertain the relationship between internal audit practice and corporate goal attainment in the manufacturing industry.
3. To determine the factors militating against corporate goal attainment in manufacturing companies.

1.4 Research Questions

1. What is the effectiveness of the internal audit in selected manufacturing firms in Rivers state?
2. What is the relationship between internal audit practice and corporate goal attainment in the manufacturing industry?
3. What are the factors militating against corporate goal attainment in manufacturing companies?

1.5 Research Hypothesis

• HO: There is no significant relationship between internal audit practice and corporate goal attainment in the selected manufacturing industry in River State
• HA: There is significant relationship between internal audit practice and corporate goal attainment in the selected manufacturing industry in River State

1.6 Significance of the Study

Considering the importance of the internal audit practice towards the attainment of the corporate goal of the manufacturing industry, this study is coming at the right time as the outcome will educate the management and decision makers of manufacturing industry on how proper practice of internal audit can be used as a tool for the corporate goal attainment. This will also help in the realization of the industry’s long term objectives.

This research will also serve as a resource base to other scholars and researchers interested in carrying out further research in this field subsequently, if applied will go to an extent to provide new explanation to the topic.

1.7 Scope of the Study

This study will cover the activities of the internal audit department in the selected manufacturing industries in Port Harcourt, River State with a view of ascertaining the effectiveness of the internal control mechanism

1.8 Limitation of the study

1. Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
2. Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.
3. Due to confidential reasons we did not received the manufacturing industries internal audit reports on time.
4. The internal audit departments of the selected manufacturing industries were small in size and therefore various types of interviews were not collected.

1.9 Definition of Terms

Corporate goal:

Are statements that outline an overall company vision that includes an operating philosophy and specific objectives

Audit:

An official inspection of an individual’s or organization’s accounts, typically by an independent body

Ethics:

Moral principles that govern a person’s or group’s or industry’s behavior.

Accountability:

The obligation of an individual or organization to account for its activities, accept responsibility for them, and to disclose the results in a transparent manner.

Chapter Five

Summary, Conclusion and Recommendation

5.1 Summary

In this study, our focus was on the influence of pornography on youth using marshal paint and chemical industry as a case study. The study specifically was aimed at highlighting the effectiveness of the internal audit in selected manufacturing firms in Rivers state. The study also ascertain the relationship between internal audit practice and corporate goal attainment in the manufacturing industry and determine the factors militating against corporate goal attainment in manufacturing companies. A total of 77 responses were validated from the enrolled participants where all respondent are drawn from marshal paint and chemical industry.

5.2 Conclusion

Based on the finding of this study, the following conclusions were made:

1. The internal audit in manufacturing firms in Rivers state is effective.
2. There is a positive relationship between internal audit practice and corporate goal attainment in the manufacturing industry
3. Training and development is one of the factors affecting corporate attainment.
4. Tools and equipment is another factor affecting corporate attainment.

5.3 Recommendation

Based on the responses obtained, the researcher proffers the following recommendations:

1. The internal audit unit of the manufacturing industry should keep ethical standard bykeeping up to date internal audit manual and train its internal auditors inforensic accounting.
2. Internal audit units should always draw annual audit plan which is the focus of the company as it will help in the goal attainment of the manufacturing industry.
3. The internal audit unit of the organization should always submit their audit plan to the management who will have to be pro-active and take action according to findings of the plan.

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