CHAPTER ONE

INTRODUCTION

1.1              Background to the study

The subject of impact of audit on accountability in refining and petrochemical companies in modern day corporate organization has continued to receive attention as never before. This is because audit test and report the true and fair nature of accounting records as well as and the honesty or otherwise of the stewardship of the management to the owners of the organization and many others who have dealings with or interested in the activities of the organization.  Auditing and accountability has become a subject of discussion and empirical research both in developed and developing countries of the world because of recent financial crises and corporate scandals, more especially now that it involves of billions of dollars. Greater transparency and accountability are argued to improve the performance of corporate organization through better resource allocation, enhanced efficiency and increased growth prospect Chipwa (2005)

The impact of audit on accountability is centered on the improvement of refining petrochemical products as well as efficient management of resources in the company. Basically transparence is a vital means of enhancing the performance and accountability of firms (katera 2003) Transparency is seen as critical for the culture of accountability especially where market competition thrives. This implies that those with stake in corporate organization must have all relevant and material information regarding its affairs in order to make proper judgment and if very necessary take remedies. This become possible only if those charged with the day to day management of the corporate organization are transparent and accountable enough, this is premised on the fact that the task of managing the refining and petrochemical company affairs is fact moving in the ever-changing market or business environment .the essence of transparency and accountability especially in Nigeria as a developing country cannot be over emphasized. In this regard, (Katera 2003).

Organizations lies primary on systems of accountability built into governance structure of such corporations. There is therefore the need of enhancing audit transparency and accountability so as to ensure shareholders ’wealth maximization and overall performance of refining and petrochemical companies.

                                                                                                                                                                                                                                                     

1.2           Statement of problem

Organizations whether public or private are set up to provide services for the well being of the people for which they set for and for the benefit of the owners. Accountability has to largely do with ensuring that the resources involve in running the organization are managed well and what is earned is accounted for correctly and in the most appropriate manner. Considering the amount of funds involve in running a Petrochemical Companies, there is the need for accountability if the companies most succeed and meet the objectives for which they are set up. In Nigeria for example a lot of scandals have been witnessed in the oil sectors which include massive corruption and oil theft with billions of dollars missing and millions barrel of crude oil stolen calls for more effort to ensure accountability if the majority of Nigerian are to benefit from this gift of nature and to guarantee economic growth and development. In fact, with oil as the major source of earning,   accountability in this sector in Nigeria is necessary now more than ever more especially with the recent drop in oil prices around the world. In view of this the importance cannot be overemphasized. This is because audit test and report the true and fair nature of accounting records as well as and the honesty or otherwise of the stewardship of the management to the owners of an organization and many others who have dealings with or interested in the activities of the organization. This is in totality is make sure that the management are accountable in their stewardship. Impact of audit on accountability are increasingly becoming more topical, broadly relevant, but also more under research in enterprises. According to James (2006), in spite of existing company regulations encompassing legislative   framework and guidelines which govern corporate activities the lack of inadequate accountability encapsulated into sound corporate governance practice   has partly led to organizations failure. The factors enhancing accountability in corporate organization in Nigeria have also received little empirical research. This study so relevant at this point in time drawing from present day financial cries rocking firms in developed countries and developing countries such as Nigeria.  It in the light of the above that study assessed the impact of audit on accountability in kaduna Refining and Petrochemical Company. In order to fill the existing gap, the following problems are raised.

i.    Does audit committee enhance accountability in refining and petrochemical companies?

ii.   Does board independence enhance audit transparency and accountability in refining and petrochemical companies?

iii.  How does board ownership concentration enhance audit accountability?

1.3       objectives of the study

The main objective is of the study is to assessed the Impact of Audit on Accountability in Kaduna Refining and Petrochemical Company, Kaduna.  Other specific objectives are to:

a)   Find out if audit committees enhance audit transparency and accountability in refining and petrochemical companies.

b)  Determine if board independence enhance audit transparency and accountability in refining and petrochemical companies.

c)  Ascertain if ownership concentration enhance audit accountability in refining and petrochemical companies.

1.4       Research Questions

In order to achieve the above objectives, the following research questions are formulated and answered.

a.       How does audit committee enhance accountability in refining and petrochemical companies?

b.      To what extent  does board independence enhance transparency and accountability in refining and petrochemical companies

c.       How can ownership concentration enhance accountability

1.5       Research Hypotheses

The following hypotheses were formulated in line with the objectives and tested in this study:

Ho1: Auditing has no significant Impact on Accountability in Kaduna Refining and Petrochemical Company, Kaduna.

Ha1:  Auditing has a significant Impact on Accountability in Kaduna Refining and Petrochemical Company, Kaduna.

1.6       Significance of the study

The subject matter of this study is even more relevant drawing from present day financial cries rocking firms in developed countries and developing countries such as Nigeria the result of this study will be of use  to;

a.   Corporate regulator. It will serve as tool for knowing the impact audit have on the accountability of Refining and Petro chemical companies

b. Student: this research work will sever as basis through which student can broaden their knowledge on the subject matter

c. Future researchers: it can also serve as a basis for further study

1.7       Scope of the study

The study is restricted to Impact of Audit on Accountability in Refining and Petrochemical Company Kaduna.

 

1.8       Definition of key term

Auditing: An audit is an independent examination and expression of opinion on the financial statement and the underline records of an enterprise by an appointed auditor in order that this opinion may authoritative and thus of value to those who rely on it.

Auditor: An auditor is an independence that duty is to very on behalf of the shareholder the account of the directors, and report accordingly to be shareholder.

Balance sheet: A balance sheet is a financial statement showing the asset and liability of an organization.

External Auditor: also known as statutory audit is an audit carried out because the law requires it

Internal Audit: An internal audit is one conducted by an employee of a business into any aspect of it affairs.

Internal Control system: is the whole system of control, financial or otherwise establish in an orderly manner

True and fair view: this is the phase used in giving an opinion on account

Profit and loss Account: it is an account in which all losses and expenses and all profit and revenues are calculated.

Share holders: A shareholder is the right which a member has to certain proportion of the capital.

 

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