THE EFFECT OF INTERNAL AUDITING IN PRIVATE ENTERPRISE (A CASE STUDY OF CHAMPION BREWERIES)
1.1 BACKGROUND OF THE STUDY
Auditing can be said to originate alongside trade and accounting as far back the earliest civilization era of the medieval period. Back then, there were no records kept and thus auditing and accounting took place orally and owner of private employed the services of care takers to whom they entrusted their assets and money to. At a certain period of the year, the owner of the private may call open the care taker to make account of what the company or the private has gain and expenses it’s incurred on the course of operation up to the date of inquiry. This was one of the accounting and auditing method use in private transaction back then in the middle era of civilization.
From the medieval era through industrial revolution, audits were made to determine whether persons in position of financial and fiscal responsibilities in government and in government trading were carrying of their tasks of management and financial reporting with integrity and Honesty (Gyasil, 2002). As industrial revolution of private increase in size and diversities, private owners attempt to employ managers to manage their private for them, For proper accountability, the private owners employed the service of a third party who is completely independent in carrying out its own task, thereby, aiding the private owner not to liquidate by carrying out investigations into the managers activities and private transactions of the entity.
However, before the 20th century, the objective of the auditing activities was to check out for fraud and now in the current era, it’s for fraud detection and determining whether financial statement give a true and fair view of financial position of enterprise.
However, internal auditing emerges later in enterprises as a result of extended span of control the management faced in employing thousands of people and maintaining a perfect private operation from widespread location and parastatals with the aim of:
- Detecting fraud, embezzlements among other forms of financial misappropriation there curbing with corruption, bankruptcy and insolvency of government private units.
- To provide the true and fair view of financial position of government ministries, so has to provide share holders & government at all levels the confidence that & money worth vested are properly utilized.
Also, in the current economic situation, enterprise seeks the services of auditor either internal or external to make an independent examination of their books of account. For example, if the management of Breweries looks at the books of account of its enterprise and assigns the internal auditor to conduct investigations, the accountant of the enterprise will be at fear and it’s the general reason why auditors are seen as enemies officers who prepared account & record (Asukwo, 2003).
The discovery of possible fraud and embezzlement in most books of account and records are bye product of a well planned and properly conducted audit, its is therefore the responsibility of the Breweries management to ensure that the operation of the Breweries are constantly check by the internal audit unit to ensure that the whole system of operation are error free.
1.2 STATEMENT OF THE PROBLEM
What gives a way for this research to be carry are the frequent fraudulent activities in several enterprises especially profit making enterprise like, manufacturing companies and other service enterprise in which fraud ,embezzlement and other criminal activities took place. This research work is carryout to find solution to this problems and their cause in which privates are faced daily.
Secondly, one of the factors that aid in carrying out this research work is the poor internal control system put in place by some enterprise, in which its gives way for theft in several enterprise. This research work is to find solution on how to solve some internal control problem faced by many enterprises today.
1.3 OBJECTIVE OF THE STUDY
The objectives of this study are as follows:
- To ascertain the role of internal auditing in enhancing the performance of private enterprise.
- To identify the cause of poor internal auditing in many enterprise
- To determine whether proper internal auditing has good influence on private of enterprises.
- To ascertain the audit practices and techniques employed to check if they have direct bearing on the efficiency of audit.
- To recommend ways that will help private enterprises; champion Breweries PLG, particular on how to improve on its internal audit practices.
1.4 RESEARCH QUESTIONS
- What role does internal auditing plays in enhancing performance of private enterprise?
- What are the cause of poor internal auditing in many enterprise?
- Doses proper internal auditing has good inference on performance of private enterprise?
- What are the various auditing practices and techniques employed to achieve efficiency during an audit exercise?
- What are the recommendations that will help improve internal auditing in the enterprise?
1.5 HYPOTHESIS OF THE STUDY
The hypothesis are therefore formulated to provide answer to the research questions. There are:
Ho: Lack of auditing in private cannot lead to fraud
Hi: Lack of auditing in private can lead to fraud
Ho: Poor internal auditing cannot lead to enterprises windup
Hi: Poor internal auditing can lead to enterprises windup
Ho: An enterprise cannot experience low profit without the effect of internal auditing.
Hi: An enterprise can experience low profit without the effect of internal auditing.
1.6 SIGNIFICANCE OF THE STUDY
This research would be useful to different enterprise in the implementation of some of the recommendation of this study in improving their internal audit practice.
This study will help management of enterprise in designing what will be effective enough to detect & prevent fraud
This study will no doubt add to the body of existing knowledge on the area of auditing as the basic function & activities of internal audit will be made to be understanding well in providing the basis for setting of standard as for the required kind of skills necessary for an internal audit assignment.
This research will be of immense importance to future researcher, such as students etc. in the area of auditing as this could serve as a reference material.
1.7 SCOPE OF THE STUDY
The research is limited to champion Breweries plc, Uyo, audits focuses on its internal auditing. The finding of this study many not be necessarily generalized, due to the different management strategies reviling in various breweries industries.
The analysis, when made, would involve a review of the exiting system, identification of problems, critical analysis of the system modification of the existing system through recommendation and comments.
They study will not create a theoretical system nor avocation for a non-practical approach to problem solving. However, the researcher would tap on her personal experience when solving practical problem presented by the research.
1.8 LIMITATION OF THE STUDY
The inability of management to divulge certain information which considered sensitive, the publication of which might be determined to their operations proved to the limitation on the study. Distance and its attendant cost of traveling in order to obtain information with which to write this Research was also a major limitation.
1.9 DEFINITION OF TERM AND ACRONYMS
AUDIT: it is said to be an examination of books of account and voucher of private as well as to enable the auditors to know that the balance sheet (now statement of financial position) is properly prepared so has to give a true and fair view of the state of the affairs of the private for the financial period, accounting to the best of the information & the explanation given to him and as shown by the books and its not what the suggested to be.
AUDITING: Auditing is defined as the independent & documents and relevant books of account of affirm with a view to express opinion, on such financial statements, document & books of account.
INTERNAL AUDITING: Ojo Obasi (2003) defines internal audit as independent appraisal activities within an enterprise for the review of operation as a service to management, it is a management of their control.
INTERNAL AUDITING: S. Bassey (2015) defines as an independent objective assurance and consisting, activity designed to add value and implore an enterprise’s operations. It helps an enterprise accomplish its objectives by bringing a systematic, disciplined approach to evolution and implore the effectiveness of risk management, control & government processes. Internal may also involve conducting proactive fraud audit to identify control breakdown & establish financial loss.
INTERNAL CONTROL: This is the independent examination, cheek and balance that have to be carryout in an enterprise to safeguard against errors & internal frauds. It can be seen as processes of assorting achievement of an enterprise’s objectives in and compliance with laws, regulation and policies, a board concept, internal controls of risks to an enterprise.
AUDITOR: An auditor is an independent expert who has the sufficient professional quality to express on opinion as to the true and fairness of financial statement that he is an individual or firm carrying out an audit work.
ERRORS: This is an un-intentional statement or mission in financial statement. Error could be inform of mathematical or mistakes understanding records & accounting data.
FRAUD: Fraud can be defined as wrongful or criminal deception intended to result in financial or personal gain. Fraud is an act of deception to gain personal gain or less top another party. it’s a false representation of a matter of act whether by concealment of what should have been disclosed that deceives and is intended to deceive another so that the individual will act upon if to his /her legal injury.
EMBEZZLEMENT: This is a type of fraud involving employee or non-employee, wrongfully taking of money or properly entrusted to their care, custody and control, often and cover up.
THE EFFECT OF INTERNAL AUDITING IN PRIVATE ENTREPRISE (A CASE STUDY OF CHAMPION BREWERIES)