AUDITING AS A TOOL FOR ENSURING ACCOUNTABILITY (A CASE STUDY OF EFFIMA PETROLEUM NIGERIAN LIMITED, EKET AND E. OKON VENTURE, IKOT EKPENE)

AUDITING AS A TOOL FOR ENSURING ACCOUNTABILITY (A CASE STUDY OF EFFIMA PETROLEUM NIGERIAN LIMITED, EKET AND E. OKON VENTURE, IKOT EKPENE)

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ABSTRACT

This study sought to assess Auditing as a Tool for Ensuring Accountability in Effima Petroleum Nigeria Limited, Eket and E. Okon Ventures, Ikot Ekpene. Specifically, the work was carried out to examine the impact of auditing on the performance of the companies in the State and the establish the relationship between the structure of auditing system and cost operations in Effima Petroleum Nigeria Limited, Eket and E. Okon Ventures, Ikot Ekpene. A survey research designed was used in the study and simple percentage and correlation models were used in analyzing the data. It was discovered that auditing is a life wire and inevitable for the successful performance of Effima Petroleum Nigeria Limited, Eket and E. Okon Ventures, Ikot Ekpene. It is also found out that auditing enhances accountability in their firms. Therefore, it is recommended that proper orientation should be given to them in order to ensure that they adhere to the auditing standards and guideline so as to upgrade and update their auditing system for improve performance.

CHAPTER ONE

INTRODUCTION

1.1  BACKGROUND OF THE STUDY

A logical consequence of the inception of company form of business in the 17th century for trading and other purposes was the unprecedented need for accountability in business (Afoakwa, 2003). Auditing is a logical appendage of the process of accountability in businesses. The agency problem gives rise to accountability which is incomplete without an audit. An audit assures accountability through the deterrent effect, the detection of existing malpractices, errors, fraudulent practices and tendencies. In a period of economic crisis, the need for accountability becomes more pronounced.

The position of any establishment hangs on the structure put in place to ensure that the objective of the entity is maximally attained. Such attempt by the business entity is rather described as one of great importance because it goes a long extent in ascertaining the performance of the establishment.

Auditing is one of the instruments for effectiveness of controls established by management which generally comprises the entire framework or outlook of the business entity. Auditing improves the information management report thus enhancing the accountability of the prepares of the financial statement.

It behaves the management to put necessary efforts in ensuring that the overall objectives of the establishment is attained and accountability the watch word. For any establishment to fully attained its objective it must see to it that its proper attention is on the financial statement. It is expected that such the workforce in achieving better result and also in the long run promote accountability.

According to Sharafa (2014), accountability is the ability and preparedness to render stewardship in respect of the resources placed under the care or management of another person or group of persons. The discharge of responsibility rests squarely on human beings and companies. People do not like to be held accountable for positions of trusts, because they revel in corruption, fraudulent manipulation of accounts, records and other forms of malpractices. Accountability also relates to making official to be responsive to public wishes and holding democratic dialogue between the companies and the stakeholders. 

Accountability calls for proper utilization and allocation of company’s resources to appropriate unit which will assist in ensuring that the firm achieves its established goal. It is in the wake of this to point out there are some loopholes that has been created and has masqueraded itself as a cankerworm with its long defects on the entire establishment.

The researcher aims at ascertaining the impact of auditing as tool for ensuring accountability. It is against this back-drop that this research is embarked upon.

1.2  STATEMENT OF THE PROBLEMS 

Auditing is a logical appendage of the process of accountability in businesses. The process of accountability is not complete without an audit. An audit assures accountability through the deterrent effect, the detection of existing malpractices, errors and fraudulent practices.

Therefore, the importance of effective audit in both companies (Effima Petroleum Nigeria Limited, Eket and E. Okon Ventures, Ikot Ekpene) cannot be over emphasized because it also helps the two companies to overcome any doubt against managers of the funds.

In Nigeria today, weak controls coupled with corruption, fraudulent manipulation of accounts, records and other forms of malpractices has been of growing concern among corporate entities. It is therefore to determine to what extent corporate entities appreciate the use of auditing as a tool for ensuing accountability.

In more specific terms, the problem is lack of effective audit to ensure accountability, proper measurement of its activities and achievement of stated objectives.

1.3  OBJECTIVES OF THE STUDY

The objectives of the study are:

i)     To examine the impact of auditing on the performance of the company.

ii)    To determine whether auditing enhance accountability in an organization.

iii)   To identify the problem associated with auditing process.

iv)   To make useful recommendation based on research findings.

1.4  RESEARCH QUESTIONS

In this work, the following research questions were applied:

i)     What are the impact of auditing on the performance of the company?

ii)    Does auditing enhances accountability in an organization?

iii)   What are the problems associated with auditing process?

iv)   Does the independence of auditors ensure accountability in a company?

1.5  RESEARCH HYPOTHESES

In this study, two sets of hypotheses were formulated:

i)    H0: There is no significant relationship between the structure of auditing system and cost of operations in Effima Petroleum Nigeria Limited, Eket and E. Okon Ventures, Ikot Ekpente.

H1:  There is a significant relationship between the structure of auditing system and cost of operations in Effima Petroleum Nigeria Limited, Eket and E. Okon Ventures, Ikot Ekpene.

ii)   H0:  There is no significant relationship between the cost of maintaining auditing system and profits declared by Effima Petroleum Nigeria Limited, Eket and E. Okon Ventures, Ikot Ekpene.

H1:  There is a significant relationship between the cost of maintaining auditing system and profits declared by Effima Petroleum Nigeria Limited, Eket and E. Okon Ventures, Ikot Ekpene.

1.6  SIGNIFICANCE OF THE STUDY

In the first instance, this work sought to establish a link between auditing system and the performance of Effima Petroleum Nigeria Limited, Eket and E. Okon Ventures, Ikot Ekpene. Hence, it has the potentials for providing on insight into how auditing system could be used in improving the performance of both companies. Such orientation is needed by business operators, managers, investors and employees in their quest for effective and efficient decisions. Effective and efficient decisions improve corporate performance.

Secondly, this research provides additional stock of secondary data needed for other researchers. Above all, this study lays the foundation for further studies. The results of such further researches could be used to further improve the performance of companies in the State and Nigeria as a whole.

1.7  SCOPE OF THE STUDY

The study is limited to Effima Petroleum Nigeria Limited, Eket and E. Okon Ventures, Ikot Ekpene and is based on the auditing as a tool for ensuring accountability.

The various systems of recording and methods of recording transactions by these companies were incorporated in the study. Above all, the performance trend of the firms studies in terms of their assets, costs of operations, outputs, sales and profits were traced for a period of five (5) years (i.e. 2010 – 2014).

1.8  LIMITATION OF THE STUDY

The inability of management to divulge certain information which they consider sensitive, the publication of which might be detrimental to their operations proved to be a limitation on the study.

Distance and its attendant cost of travel in order to obtain information with which to write this study was also a major limitation.

Hence, the project has not been able to cover all areas which it should have covered if one were to write freely. And this called for the streamline of the scope of study to allow for successful handling of these hindrances without bias.

1.9  DEFINITION OF TERMS AND ACRONYMS

In order to enhance quicker conception, the following terms used in the study have been defined.

Auditing: According to Okezie (2004), auditing is defined as the independent examination of the financial statement by an independent person called auditor to form an opinion and make a report to the financial statements based on the findings.

Accountability: Accountability is the ability and preparedness to render stewardship in respect of the resources placed under the care or management of another person or group of persons, Sharafa (2014).

Steward: In accountancy, the term ‘steward’ refers to the agent who keeps or manages the resources, usually money, on behalf another person, his principal, Sharafa (2014).

Malpractice: A malpractice has been defined as “unprofessional or improper conduct which may or may not involves the use of deception with a view to make unlawful gain”, Sharafa (2014).

Financial Statements: Financial Statements refer to the financial data or reports concerning an organization, Akpakpan (2002).

Fraud: This is the use of criminal deception to obtain an unjust illegal advantage, Adeniji (2010).

Auditor: According to Nwabueze (2000), an auditor may be defined as an accountant who has undergone recognized professional course and is a member of one of the recognized accountancy bodies resident in Nigeria and who is carrying out a professional accountancy practice.


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