THE IMPACT OF INTERNAL AUDIT IN AN ORGANISATION (A CASE STUDY OF P. A. TABLE WATER, UGHELLI)

THE IMPACT OF INTERNAL AUDIT IN AN ORGANISATION (A CASE STUDY OF P. A. TABLE WATER, UGHELLI)

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CHAPTER ONE

INTRODUCTION

1.1        Background of the Study

Internal audit is an independent review and appraisal of the accounting, financial and other operation of the organization by a special staff as a basis of effectiveness and efficiency services to management.

Therefore, the impact of internal auditing in organization is to help in the examination and inquiry into a statement of accounts, the underlying records, document, assets, and liabilities in other to measure and evaluate the adequacy, efficiency and effectiveness of the organization internal audit irregularities and also present fraud.

A good internal audit control in the organization will help the organization in the preparation of financial statement that will be devoid of financial misstatement.  Organization is a very important sector in the development of a nation’s economy which is responsible for safe keeping of money and performing of other auxiliary functions.  Some of the functions of organization include the following;

a.      Consulting services

b.      Acceptance of deposit

c.       Granting of loans to customers with interest on the loan granted.

According to Agbawe (2005) auditing is an examination and inquiry into a statement of account, the underlying records, documents, assets and liabilities by an independent person with a view to express an opinion as to compliance and correctness of the financial statement to relevant acts and regulations.

1.2        Statement of the Problem

The existence of internal audit sectors in organization does not necessarily portray the main idea of independence objective assurance and consulting activity design to add value and improve an organization’s operation because if internal audit section in the organization had been involved in the design of system, it is very doubtful that they can audit what they have recommended, and over familiarity as a result of working for the same organization, and being involved with the same issues.  Internal auditors may develop close professional or personal relationship with the managers and staff they are auditing.  This may well make it very difficult to achieve independence, more so, the principle that internal audit should be independent of the line management whose sphere of authority it audit ideally should extend to internal audit being independent of the finance director.  The audit department should report to the board or to a special internal audit committee and not to the finance director.  Therefore, this study terms to identify the impact installing effective internal audit department in the organization and what will happen when the reverse is the case that is internal audit department is assumed not installed.

1.3        Objectives of the Study

The objectives of the study are to know the importance of the internal audit in an organization and such objectives are as follows;

i.             To examine the prospect of auditing of organization’s account.

ii.            To proffer suggestion to the problem of auditing in the organization.

iii.          To investigate the impact of auditing in the organization.

iv.          To reveal the extent to which the impact of internal auditing in organization is adopted by Nigeria.

v.           To produce a resort of opinion on the true and fairness of the financial statement in the auditing of organization.

1.4        Research Questions

The major questions we need to ask and also investigate are:

a.           How does the internal auditor make test so as to form an opinion as to the reliability of the financial records and strength or internal control?

b.           What is the degree of relationship between the auditor and staff in the organization?

c.           How adequate and reliable or realistic are the records kept in the books?

d.           How independent is an auditor in performing audit activities?

1.5        Significance of the Study 

Base on the reason topic “The impact of internal auditing in an organization” it significance cannot be left outside because every work has an objective and possible means of bringing about solution. The significance of the study therefore it gives professional advice in the accounting records in the organization. It also helps in the early detection of frauds, errors and irregularities. The study may also act as a source of literature review for scholars who intend to do research on how effectively and efficiently the impact of auditing in an organization. Auditors report assures the arrivers of the business that their funds are honestly and prudently managed.

1.6        Scope of the Study

Scope of an audit refers to the subject matter. It includes its areas of operations, various aspects to the covered under the audit and the requirement of the relevant legislation. As the statement of standard auditing practices, the scope of audit is mention below. The audit should adequately cover all aspects of the enterprise which are relevant to the financial statement. The audit should be reasonably satisfied that the information contained in the accounting records is reliable and sufficient for the preparation of the financial statement he is to form opinion.  

1.7        Limitation of the Study

The following limitation were encountered during the process of writing this project. But however, they are not enough to stop the usefulness of the study.

1.           Lack of Finance

2.           Lack of useful Materials

3.           Transportation Problem

4.           Attitude of some Senior and Junior Staff of the organization towards the Research.

1.8        Definition of Terms

1.      Internal Auditing:   Internal Audit is an independent appraisal activity established within an organization as a service to it.

2.      Financial  Accounting:   Financial Accounting is the recording of transaction for a business enterprise or other economic units and the period preparation of various reports from such records. It is also systematic gathering, identify, Summarizing and reporting of business transaction in monetary terms, such that it provides reports which permit informed judgment by the users of such reports.

3.      Audit Reports:   Auditing Reports are short statements expressing the auditors views on the state of financial position of the organization.

4.      Audit Opinions:   Audit Opinion can be said to the conclusion reached by the auditors on the generals position and state of the financial statement he is reporting upon.

5.      Errors:   Errors are unintentional mistakes occurring at any sate of data or transaction processing and recording in the books of account and production of financial statement.

6.      Irregularities:   As defines and used by the auditing gridlines is intentional distortions of financial statement for whatever purpose and also misappropriation of assists.

7.      Fraud:   Frauds is used to mean the used of criminal method to obtain an unjust or illegal advantage.


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