ENHANCING CORPORATE ACCOUNTABILITY THROUGH EFFECTIVE AUDIT SYSTEM A CASE STUDY OF SHEEILD RISK MANAGEMENT LIMITED OWERRI IMO STATE

CHAPTER ONE

1.0 INTRODUCTION

Accountability in both public and private section has being an issue that is worth discussing due to its paramount and colossal impact to the overall performance of an organization. It (Accountability) has to do with reporting back action, task carried out by an individual to the authority who apportioned such function.

1.1 BACKGROUND OF THE STUDY

Accountability is the process or act of reporting back to a higher authority, body or individual the actions taken by a steward. It enables the person or persons reported to determine if the steward has acted or performed the assigned duties properly and satisfactory. It plays a major role in the success or failure of any business, particularly when the business is not managed by its owner. Initially most business set-ups were managed by their owners. The owners‟ manager was the sole financial contribution to the enterprise. But with the development in the scale and scope of business, a huge capital beyond that affordable by the sole individual or a family was needed. Consequently contributors (hereafter called shareholders) were required to raise the funds for the business. The emergence of these shareholders led to the divorce of the owner managers from the management of the business as all of them cannot be directors at the same time.

This the management of business was entrusted to the hands of people who have no financial claims to the business and the shareholders were sceptical about this particularly as the law does not permit them individually to go through the books of the company in their desire to keep abreast of the performance of the directors. This skepticism aroused the need for surveillance over the activities of the non-owner managing directors. This bid to fulfil the later led to the engagement of third-party (an Auditor) to perform an audit of the company‟s accounts. Audit has since them received a lot of definitions and/or then received a lot of definitions and/or interpretations both from accounting bodies and auditors and their non-the-like. Justifiable is to say that audit has suffered a lot of misinterpretations. Most of the misgiving interpretations see it as being armed at fraud and error detection. But audit essentially involves much more than that. One of the most involved and of course the most acceptable definitions so far is that issued by the consultative council of accountability bodies (CCAB) which sees audit as “the independent examination and expression of opinion on the financial statement of an enterprise by an appointed auditor in pursuance of statutory obligation (Howard 1982:1). Deductively, an audit is the objective scrutiny of someone‟s work or presentation by a third party (an auditor) who is different from the users and the preparing of the presentation. The general essence of audit is to ascertain compliance of the firm‟s records and operational policies with usefulness of acceptability of and the dependability on the firm‟s financial statements.