THE IMPACT OF INTERNAL AUDITING IN THE GROWTH AND DEVELOPMENT OF AN ORGANIZATION

THE IMPACT OF INTERNAL AUDITING IN THE GROWTH AND DEVELOPMENT OF AN ORGANIZATION

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CHAPTER ONE

INTRODUCTION

1.1   BACKGROUND OF THE STUDY

Auditing is an independent examination of an expression of opinion on the financial statement of an enterprise or organization by an appointed auditor in pursuance of that appointment and in compliance with any relevant statutory obligation (Chamber, 2008). It aims at providing solution to the inevitable problem of credibility in report and accounts. It prevents and detects errors and frauds and also produces a report of the true and fairness of the financial statement (Coper, 2003). They also obtain full understanding of the operations under review. The role of internal audit has grown tremendously in most organizations in the recent past. This can be attributed partly to the growth of the organizations, which entails widely extended operations and the need to ensure that the organizations policies and basic accounting controls are observed at every facet of the organization. Again it can be observed as a measure by management to ensure that the government regulations concerning the operations of organizations, both public and private are duly complied with so as to guard against conflicts and inconsistence with the law.

As the organization expands and supervisory responsibility broadens, the head can no longer have personal knowledge of every aspect of the organization. It becomes impossible for him to control or monitor the continuing effectiveness of all controls. This calls for the delegation of this responsibility to a separate department called the internal audit department. Internal Audit Department is a department set up by management, usually manned by a chartered Accountant, as established in section 358 of the companies Act 1976, to receive the activities of other employees thereby enhancing controls in the organization.

1.2   STATEMENT OF THE PROBLEM

The problem in many organizations is that funds and properties are entrusted to certain individual employees in the organization and in most cases these individual workers are not brought under thorough surveillance. The result is that much of their funds and properties are directed to personal use. To arrest this ugly phenomenon, the management of the organization has to set up internal audit department. This department will be charged with the objective of monitoring the activities of these employees and effecting management control. The question however is if the internal audit improves bottom line result that is, plays its role effectively.

1.3   OBJECTIVES OF THE STUDY

i)       To examine the impact of internal auditing in the growth and development of an organization.

ii)      To determine whether internal auditing aid growth and development in an organization.

iii)    To determine the factors militating against audit report in an organization.

iv)    To determine the factors affecting the of audit report in an organization.

1.4   RESEARCH QUESTIONS

i)      Does internal auditing impacted growth and development in an organization?

ii)     Does internal auditing aid growth and development in an organization?

iii)    What are the factors militating against audit report in an organization?

iv)    What factors affecting the effect of audit report in an organization?

1.5   RESEARCH HYPOTHESES

Hypothesis 1

H0:   There is no significance difference between internal auditing and growth and development of an organization.

H1:   There is a significance difference between internal auditing and growth and development of an organization.

Hypothesis 2

H0:   There is no significance difference between the factors militating against internal audit and audit report of an organization.

H1:   There is a significance difference between the factors militating against internal audit and audit report of an organization.

1.6   SIGNIFICANCE OF THE STUDY

The study will be of immense benefit to the shareholders who have contributed the funds for the business and needs a reward in form of dividends.

This can be achieved if ineffectiveness and corrupt practices such as fraud, loss of revenue, sharp practices, and lack of transparency etc associated with the private and public sector are minimized or even eradicated.

Finally, future researches on auditing will find the study interesting in their research.

1.7   SCOPE OF THE STUDY

This study is limited to State Auditor General Office, Enugu and upon the research topic, which is centered on the impact of internal auditing in the growth and development of an organization. The researcher is of simply interest that internal auditing helps in control or monitor the effectiveness of an organization.

1.8   LIMITATION OF THE STUDY

The limitation of this study was inability of management divulge certain information which they consider sensitive and fear of publication which might be detrimental to their operation.

        Also, the outright inability of some respondents to complete and return the questionnaire to the researcher is one of the limitations of the study.

        Another limitation to the study was traffic congestion for the researcher to meet them in their offices and for possible return of the questionnaire.

        Finally, the researcher observed the non-cooperative attitude of some workers of the company to make information available for her.

1.9   DEFINITION OF TERMS

The following terms used in the research work are defined and explained thus:

IMPACT: Impact is a force exerted by one object against another strong impression or effect.

AUDIT: Audit can be define as the independent examination of a financial statement and expression of opinion on the financial statement of enterprise by an appointed auditor in pursuance of that appointed and in compliance with any relevant statutory obligation.

AUDITOR: Auditor is a qualified accountant who also passed a professional examination. Such a person must be of good conduct and have a vast knowledge and able to understand a practical business, endeavor always to grasp the technicalities and business, methods of any concern whose account he undertakes to audit.

INTERNAL AUDITING: According to Bright (1964) internal auditing has to do with the independent examination of the books of account so as to ascertain whether the books of accounts are in agreement with the organization transaction.

INTERNAL CONTROL: This is the collections of organization and policies, procedures rules and regulations, formulated by management to guide the performance of staff and secure compliance with health standards.

ACCOUNTING CONTROL: This is the nature of internal control that can directly affect the reliability of accounting records and financial statement.

FRAUD: Fraud is an act usually done by employee involving the theft, misappropriation or embezzlement of the company’s funds usually in the form of cash or its other assets.





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