THE IMPACT AND CHALLENGES OF INTERNAL AND EXTERNAL AUDITORS IN MANUFACTURING COMPANIES
This work “THE IMPACT AND CHALLENGES OF INTERNAL AND EXTERNAL AUDITOR IN MANUFACTURING COMPANIES” was chosen by the researcher so as to enable and prove the essence why auditors are needed in companies. The study is aimed at investigating the behavior of both workers, auditors, employees, managers in the auditing of manufacturing companies. The study is divided into five (5) chapters. The first chapter is the introductory chapter which gave definitions of auditing, manufacturing companies, internal auditor and external auditor. Chapter two gave us more about auditors i.e their qualification, impact, problems and challenges, their work with the law and companies. While chapter three gave practical example with data collection and illustrations and also chapter four, finally chapter five gave concluding remarks.
TABLE OF CONTENTS
Title page i
Approval page ii
Table of contents vi
- Introduction 1
- Statement of research problem 3
- Research questions 5
- Objectives of the study 7
- Significance of the study 8
- Scope of the study 9
- Limitation of study 10
- Definition of terms 11
- Literature review 16
- Concept of auditing 16
- Nature of internal and external auditing 20
- Methods of audit approach 21
- The necessity of external and internal auditors 23
- Auditors and the law 24
- Audit report 32
- Auditors liability 39
- The importance of audit in manufacturing companies 44
- Role of an auditor in a manufacturing company 45
- Principles of auditing 46
- Methodology 49
- Introduction 49
- Research design 50
3.3 Rational for choice of variables 50
3.4 The methodology 52
3.5 Data selection of analysis 53
- Presentation and analysis of data 55
- Introduction 55
- Data presentation, classification and calculations 55
- Interpretation of result 61
- Summary, recommendation and conclusion 63
- Summary of findings 63
- Recommendation 64
- Conclusion 66
Manufacturing companies are companies that transform raw materials or semi finished goods into commodities, goods usable by humans. Manufacturing companies are companies that produce commercially. Their main aim is to produce goods and render services to members of the public at a minimum cost to maximize profit.
In manufacturing companies, some various items of expenditure are allocated to sub division of the final account in accordance with the principles which govern cost accounts. However, when a manufacturing company produces more than one particular product, different accounts are to be prepared by the different departments.
In manufacturing company, company established by law is treated as a separate legal entity different from shareholders or subscribers. The owners or shareholders of a manufacturing company present their account to the auditors who audit and report if the account shows a true and fair view before it is been presented to the directors of the company. Without the report of the auditor in a manufacturing company the shareholders i.e the owners of the company finds it hard to accept the account given to them by the directors.
The auditors both internal and external auditors at times have problem in computing accounts and giving reports because it involves the strenuous method of bringing together all accounts of the company and summary of these accounts and control system.
An auditor is said to be an accountant who undergo a recognized professional course and a member of one of the recognized account bodies resident in Nigeria and who is carrying out a professional accountancy practice. For an auditor to audit a company account he must not be an employee or a body corporate of the company been audited. An auditor should be recognized in the context of the institute of chartered accountants of Nigeria.
An external auditors are auditors that are independent of the organization that are auditing. External auditors can be government auditors or an independent public accounting firm. They report to the company’s shareholders. They provide their experienced opinion on the truthfulness of company’s financial statements and perform work on a test basis to monitor system in place.
Internal auditor is an auditor that work within an organization and report to its audit committee and directors. They help to design the company’s organizing systems and help develop specific management policies. They also ensure that all policies implemented for risk management are operating effectively the work of the internal auditors tends to be continuous and based on the internal control system of a business of any size.
1.1 STATEMENT OF RESEARCH PROBLEM
It has been a generalized fact and knowledge to all and sundry that businesses are unable to control their affairs and existence in the longrun. This is due to some of the attribute of the administrative weakness and misappropriate that are inherent in business resulting to the controversy of the reality of the audit work in manufacturing companies. Manufacturing companies have been beclouded with puzzling circumstances like financial impropriety, lack of auditing control, lack of independence of the internal control, incomplete recording of business transactions over blow expenses to reckless spending, non compliance to accounting standards, mismanagement of scarce funds.
It has not be proven that auditors and audit report are not needed in manufacturing companies and the importance and effect of these auditors cannot be ruled out.