INTERNAL AUDIT PRACTICE AND CORPORATE GOAL ATTAINMENT IN THE MANUFACTURING INDUSTRY

CHAPTER ONE

INTRODUCTION

1.1  Background of the Study

An essential condition for the survival of a manufacturing industry or more generally of an organization lies on the ability of its members to act reliably and efficiently to achieve the objectives of the industry. The substantial coordination of behavior can be achieved in numerous ways. Supervision of managers and staffs of manufacturing industry is becoming ineffective. However it may be wished to maintain these ways of controlling but it would only be applied to the part of the industry (Brown, 1999). Therefore it is necessary that management put in place mechanisms to fill the gap in supervision. The financial and corporate goal attainment of a manufacturing industry is underpinned by effective internal systems in which the practices of the internal audit has an important role, raising the reliability of the internal control system which is always aimed at improving the process of risk management, and, above all, satisfying the needs of internal users (Fama, 2008). The eective practice of internal audit also supports and enhances the system of responsibility that the executive directors and employees of manufacturing industry have towards the owners and other stakeholders. The Internal Audit Department provides a reliable, objective, and impartial service to the management, board of directors, and audit committee, while stakeholders are interested in return on investments, sustainable growth, strong leadership, and reliable reporting on the financial performance and business practices of a manufacturing industry. Proper understanding of the role and importance of the internal audit is one of the preconditions for successful strategy implementation and attainment of corporate goals of a manufacturing industry.

However, this research aims to examine the effect of internal audit practice on corporate goal attainment of some selected manufacturing firms in Port Harcourt, Rivers State. Corporate goal attainment by manufacturing industries is a major concern these days due to importance of the global competition. One factor of this corporate goal attainment lies on the ethical and responsible behavior of its managers and employees. But at the end of the 20th century, the Enron and World Com scandals show that there was a lack of control in companies (Bertin, 2007). Following these financial scandals, actions were taken. It has become essential to provide an ethical control in the interest of leading to better take into account the content of internal control practice, in order to overcome the weaknesses of economic and legal support. In a common interest, ways to measure the impact of moral decisions have been found and the manufacturing industry must be able to justify its activities (Ethical norms and values), and this control may be performed by the internal audit (Mercier 2000). Corporate goal attainment of manufacturing industry can also be “the ability of an organization to identify and implement appropriate strategies within the framework of the aims it pursues in other maintains good reputation” (Bouquin, 1997). The corporate goal are vary from one manufacturing industry to another for example a manufacturing company may want to become the largest industry in the world or to remain a successful specialized firm, or even be best able to achieve the goals it has set. Once the purposes have been defined, success in the attainment of these corporate goals depends on the ability to define appropriate strategies and to implement them. Firm arrangements must ensure the level of transparency and accountability in both economic and strategic scopes and we call internal control the combination of such devices. It is necessary to periodically test the effectiveness and suitability of a particular aspect of internal control mostly importantly the mode of practice. Auditing is the process of studying and evaluating internal control and certain of its aspects, as well as its expected outcome. The ensuing result may help to determine the effectiveness of the industry. It is something important because the challenges of every work day are for the manufacturing industries to be competitive so as not to be forced out of the market.