Internal Auditing Efficiency As A Tool For Improving The Companies Performance

Project and Seminar Material for Accountancy / Accounting

Internal Auditing Efficiency As A Tool For Improving The Companies Performance


Abstract


The purpose of this study is to assess the efficacy of internal auditing as a tool for improving the company’s performance. Internal audit is regarded as the key element in the application of accounting systems which in turn, helps in evaluating the work of the department. The internal audit is considered as the backbone of the business accounting as it is the section that records all businesses related to the sector, it is in view of this that the researcher intend to investigate the efficacy of internal audit in improving organizational performance.


Chapter One


Introduction

1.1 Background of the Study

Since the creation of Enugu state on the 17 of august 1991 till date, many of the government owned company e.g. Niger gas limited, Emene flour mill limited Emene, Anambra vegetable refinery oil Nachi, Nigeria cement company Nkalagu located at Eboyi state which is jointly owned by Enugu Eboyi and other state – Imo are at the point of collapse. Many of the company if they are working are performing below 40% as optimum utilization as statistic on that will reveal latter. The above issue is not peculiar with Enugu state alone. Recently, there has been a drastic change in the business trends in Nigeria. Many reasons has been giving for the anomalies in the business which has resulted in many companies down – fall, ranging from lack of accountability, company crisis, misappropriation of funds, fraud, excess expenditure that are usually not compactable with the real budget. In this maiden broadcast to the state government, Dr, Chimeroke Nnamani raveled that the account of Enugu state public service has not been audited since the state was created while chief Egbogu, the chairman of the panel constituted (among other things) find the best way of making the civil service more functional to increase the in the state. In the interim report submitted to the deputy governor of Enugu state on Wednesday, 28 July 1999, that the fraud, overbroad wage bill, ghost workers syndrome were the factor militating against the efficient performance of the civil service and reported that the civil service will not be having above twelve thousand workers (12,000) while here has Ben speculation that payment \re been made to up to thirty thousand worker in Enugu state.

The above shows categorically in all ramifications that of the state civil service and their minitry – extra minitry department and other parastatals have been audited efficiently, such anomalies could not have crept up.

In a related development it has been believed that efficiency in discovering the management inefficiency has been the root cause of many companies poor performance. Both companies in private and public limited sector in Nigeria. Improvement can only follow when what is honestly followed in been recognized and how such wrong could be remedied. In view of this point effort will be made to painstakingly highlight the improvement however taking auditing efficiency in respect of private companies, volume of transaction may not be substantial and hence a book keeper can record transaction more effectively with ease. On the contrary, the case of the public enterprise and transaction show that there are numerous of transaction and so each companies may have subsidiaries and investor investing in a companies having a control investment of the 20 – 50% share in associate company and as such, the service of a qualified accountant who is knowledgeable in accounting to be able to record business transaction of such greater magnitude are needed.


1.2 Statement of Problem

A company may be classified under small medium or large depending on the size, feature of number share authorized calls issue and fully paid etc. many companies face the problem of auditing efficiency such as non-compliance with the accounting standard that the auditing guidelines non- disclosure of some which will enable either the external; auditor to form opinion. Other cooperate crime may pose a problem in the auditing efficiency. This cooperate crime may be a serious issue, for example in the news watch 5thJuly 1999, Lucky Igbenedion governor of Edo state reported that cheque were flying up and down as formal governor Onearugbulem awarded indiscriminately and Igbenedion reported that there is an inherent debt of 5 million. There is many more looting in all the state in government offices, companies etc. the research work will attempt to highlight on these problem areas that basically undermine auditing efficiency in a company and give a possible solution.


1.3 Purpose of the Study

The work was fundamentally undertaking to study internal auditing efficiency as a tool to improve cosmogonies performance (using Emenite Enugu as a case of study). The main purpose of this study is find out some of the reason for deficiency and inefficiency in the company which is usually believed as not existing but in fact they exist and to find some way of eradicating it using auditing efficiency. Findings will be don to know the extent to which the management has appraised their own operation and how competent they have been in determining operational ills and weak points.


1.4 Significant of the Study

The research work is aimed at having many important to the readers and to those who may be using the study for a reference purpose. Beside the above, it will also form part of the external examination. For me, the researcher, it is a major preliquisite for the actual completion of the course of study. Apart from being necessary for the award of national higher diploma (H.N.D.) in accountancy, it is significant to undertake this study because a thorough and fuller comprehension of the subject matter which is tested; INTERNAL AUDITING EFFICEINCY AS A TOOL FOR IMPROVING COMPANIES PERFORMANCE. Moreover, other future readers will find the research work more beneficial.


1.5 Statement of Hypothesis

The efficiency of companies auditing:

  1. Ho; the company (Emenite Enugu) auditing process is not efficient
    Hi: the companies auditing process is efficient
  2. Ho: The internal auditing indolence is efficient to embark on the internal auditing work.
    Hi: The internal auditing indecency is not efficient to embark on effective and efficient audit work.

1.6 Scope and Limitation of the Study

For the purpose of the research work, the researcher will focus his attention to the internal; auditing effeminacy as a tool for improving the company’s performance using Emenite Enugu as a case of study.

The researcher in carrying out the research work encountered many problems, ranging from time constraint, poor response, financial constraint etc.

Financial constraint: the researcher having considered the financial involvement and other problems and bearing in mind that the work was singled handedly sponsored plus the need to meet up with the standard set for the working to its logically and exhaustive conclusion, he faced a lot of financial predicament with the merger financial resources. The researcher virtualized the fear that the study will be adversely constrained due to financial transport involved in running around to get the needed information and other incidental express.

Poor response: most of the research work are characterized with poor response from various respondent and having taking into consideration some of the misguided beliefs and expression by many respondent, they are usually faced with problem like;

  1. Fear of been exposed and fear of been retrenched or dismissed for revealing official information
  2. General apathy, indifference towards the question being put to the potential respondent

Time constraint: other factors like the time factor militates against the progress of the project. The time allocated to carry out this research was too short plus other logistics problems. The time for work done, compilation, completing, and submission for assessment irrespective of the fact that there are other academic engagement were too small.

Furthermore, as the interview necessary to carry out this research have to be conducted during the official working hours and days of the weeks with a view t get the respondent in the office, the researcher has occasionally forfeited his lectures in order to get the researcher successfully executed.


1.7 Definition of Term

Audit:

In general is the mechanism within the process of accountability whereby the performer of those in control of the research of the organization is check or monitored by or on the behalf of the interested persons. The statutory audit of limited companies is the commonest example.

Internal Audited:

An element of the internal control system set up by the management of an enterprise in order to review accounting, financial, and operating and determine whether the prescribe policies are being adhered to. External auditors take account of the work done by an eternal auditor letters independence, staff resource, test mode, and influence by the management action.

Efficiency:

The is referred to the ability to perform a duty well and produce a statistical result

Tool:

it is an instrument used in doing a certain work or producing a certain result especially such that require accountancy or precision

Company:

An association of persons for a business purpose in particular which incorporated in the united kingdom under the companies Act or by the Act of parliament or by royal charter. In Nigeria, company is registered by a cooperate affairs commission Abuja and regulated by the companies and allied matter decree 1990. There are companies limited by share and those limited by guarantee.

Companies can be divided into

  1. Private limited companies
  2. Public company
Improvement:

This means to make or become better or addition or alteration, form of repaired to better the face of an asset or to enhance the value of anything.

Diagnosis:

Ascertaining, analyzing, or determine the cause of nature of problem, situation from observation.

Performance Evaluation:

The easement by a superior or a subordinate and an important part of any management control system. To evaluate performance is necessary to decide which measure are to represent organizational goal, how qualify, what standard is to be used, what step back is to be taking.


1.8 Organization of the Study

This research work is organized in five chapters, for easy understanding, as follows.

  • Chapter one is concern with the introduction, which consist of the (background of the study), statement of the problem, objectives of the study, research questions, research hypotheses, significance of the study, scope of the study etc.
  • Chapter two being the review of the related literature presents the theoretical framework, conceptual framework and other areas concerning the subject matter.
  • Chapter three is a research methodology covers deals on the research design and methods adopted in the study.
  • Chapter four concentrate on the data collection and analysis and presentation of finding.
  • Chapter five gives summary, conclusion, and recommendations made of the study.

Chapter Five


Summary Conclusion and Recommendation

5.1 Introduction

It is pertinent to note that this research was aimed at assessing internal audit efficiency as a tool for improving the company’s performance.

In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations were made which in the opinion of the researcher will be of benefits in addressing the challenges associated with fraud prevention in companies in Nigeria.


5.2 Summary

The absence of a relationship arose from possible underemphasis on internal auditing by these enterprises. Where the internal audit function is de-emphasised (as the present study shows), clearly, it cannot impact positively on financial performance. Consequently, we strongly recommend the creation of an Internal Audit Department in those enterprises where there is none. Existing Departments then should be strengthened by according them the necessary professional independence and employing adequate number of experienced and qualified staff to enable the Department extend coverage of the audit to all significant activities of these organization.


5.3 Conclusion

The internal audit department is very important inside a firm where the internal audit is regarded as the key element in the application of accounting systems and this in turn, helps in evaluating the work of the department.

The internal audit is considered as the backbone of the business accounting as it is the section that records all businesses related to the sector. The efficiency of internal audit helps develop the work of the company because the financial reports reflect the internal audit department’s quality. In addition, an internal audit is considered as a significant part of the corporate governance(CG) structure in the organization and CG covers the activities of oversight by the board of directors and audit committees to ensure credible financial reporting process (Public Oversight Board, 1994).


5.4 Recommendations

Haven completed the study, the researcher recommends that; first, the future researchers to empirically examine the effect of factors of internal audit on firm performance. Second, the future authors should employ this study in the developing countries considering the necessity of this type of research in this environment. More importantly, future studies could compare between two or more countries in the same economy and culture; for example in the Middle East or exactly in the gulf countries. Third, with respect to the importance of audit quality, the present research considers audit quality as a moderator between the association of audit characteristics and firm performance. This study reviews internal audit studies and found that only a few studies investigated the relationship between internal audit, firm performance and earning management. Last but not least, in consistent to the value of the integration between accounting-based measure and market-based measure together to enhance performance of firms to provide a clearer picture to investors, future studies should look into the how this integration should take place.


Internal Auditing Efficiency As A Tool For Improving The Companies Performance


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