Auditing As An Instrument For Ensuring Accountability
(A case study of anamco ltd. Enugu)
Auditing serves as a fundamental instrument for ensuring accountability within organizations and institutions across various sectors. By systematically examining financial records, operational processes, and compliance with regulations and standards, audits provide a mechanism to verify the accuracy, integrity, and transparency of activities. Through independent scrutiny, auditors identify discrepancies, errors, or instances of non-compliance, which not only helps to mitigate risks but also fosters trust among stakeholders. Moreover, auditing establishes a framework for accountability by holding individuals and entities responsible for their actions and decisions. Ultimately, by promoting adherence to established protocols and best practices, auditing reinforces organizational integrity and bolsters public confidence in the reliability and credibility of the entities being audited.
Auditing is continually changing and developing to meet the needs of the business environment it serves. The role of auditing towards ensuring accountability have attracted comment on the front pages of national newspapers, rather than in just the financial pages have even led on occasion to question and statement in parliament.
This coverage has not always been good news for the auditing profession, but it does indicate a heightened awareness in society of the potential importance of what auditors do. It also reflects the way in which auditing practice and the activities of audit firms have developed and expanded business especially Anamco Ltd. Enugu.
While at one time auditing was generally regarded as a procedural activity involving the application of mechanical techniques, there is now greater realization that both the purpose an the execution of an audit are far from simple matters. In view of the above fact the study was designed to examine Auditing as an instrument for ensuring accountability in Anamco Ltd. Enugu. In the course of the research oral interview and questionnaire were adopted as the main instruments for collecting data for the study. The data collected were tabulated, analyzed and interpreted. From the analysis some revelations were made. Base on the revelations some recommendations were made to eliminate or ameliorate Audit department of the corporation.
Title Page
Approval Page
Dedication
Acknowledgement
Abstract
Table of Content
CHAPTER ONE
1.0 Introduction 1
1.1 Statement of Problem 4
1.2 Purpose of the Study 4
1.3 Significance of the Study 4
1.4 Statement of Hypotheses 5
1.5 Scope of the Study 6
1.6 Limitation of the Study 6
1.7 Definition of Terms 7
CHAPTER TWO
2.0 Definition of Auditing 8
2.1 Objective of Auditing 11
2.2 Types of Auditing 11
2.3 Reliance of Internal Auditing to External Auditors 17
2.4 Auditing as a measure for Controlling Fraud 19
2.5 The Future of Auditing 22
2.6 Auditors Liability 23
2.7 Audit Report 30
Reference 32
CHAPTER THREE
3.0 Research Design and Methodology 33
3.1 Selection of population 33
3.2 Sample Used 33
3.3 Method of Investigation 34
3.4 Techniques of data collection 35
CHAPTER FOUR
4.0 Data Presentation and Analysis 36
4.1 Questions, Presentation and Analysis 36
4.2 Test of Hypothesis 49
CHAPTER FIVE
5.0 Summary of Findings, Conclusion and Recommendations 52
5.1 Summary of Findings 52
5.2 Conclusion 55
5.3 Recommendations 56
5.4 Suggestion for further study 57
Bibliography 58
Appendix (Questionnaire) 60
INTRODUCTION
The practice of auditing in the primitive form can be traced back to ancient times where the receipts and payments of an estate or a manor were read to the head or proprietor, or the Lord of a manor. The word auditing originated fr4om the Latin word Audire (meaning to hear). The business of this period was characterised by sole proprietorship.
But with industrial revolution, there was an increase in business transactions and there emerge partnership and joint stock companies. The evolution of mechanised industries involved the provision of finance far in excess of what it used to be. Business become more complex and required more formal and improved accountability.
Under the company form of organisation, the shareholders as a body delegated the management of the undertaking to a board of directors and periodically the board submittes to the shareholders accounts of the company in order that the members might be able to see a true and fair view of the financial position and the profit or loss of the undertaking in which they were interested.
Because of these circumstances the need arose for some means by which the shareholders as a body might be satisfied that the accounts, presented to them by their board of directors, did in fact show a true and fair view of the financial position and earnings of the company. It was for this reason therefore that the practice developed of appointing auditors whose duty it was to verify on behalf of the shareholders the accounts of the directors and to report there on to the shareholders.
Under the early British companies Acts, the auditors appointed were one or two of the shareholders of the company. As however, the chosen auditors commonly had insufficient technical qualifications, there were probably not able to carry out a very effective audit nor were there paid anything for the work they did although a later Act did provide for them to employ a clerk to do some work, whose remuneration should be provided by the company.
It was the British companies Act, 1900, which first made it legally compulsory for every company to appoint independent auditors, as we now know them, and provided for their remuneration. It was undoubtedly the rapid increase in the number of joint – stock companies that took place at this time, and the compulsory professional audit thus provided for in the companies Act, 1900, that gave the great impetus to the development of the accountancy profession. In Nigeria today the accounts of every company and the majority of partnerships are audited by professional accountants and in recent years the accountancy profession has expanded greatly in many other directions.
1.1 STATEMENT OF PROBLEM
This study entitled “Auditing as an instrument for organisational accountability” attempts to determine the importance of auditing to an organisational growth.
It is also meant to discover the:
Objective of Auditing
Types of auditing
Relevance of internal auditing to external auditors
Auditing as a means for fraud control
The future of auditing, Auditors liability and report.
1.2 PURPOSE OF THE STUDY
The objective of this study is to identify the need for every organisation to know the importance of auditing in an organisation.
The researcher also wish to put across how auditing enhances organisational accountability and growth.
1.3 SIGNIFICANCE OF THE STUDY
The significance of the study is to highlight the importance of auditing to the growth and accountability of a manufacturing company.
This study will also add to the advancement of knowledge in the field of auditing in an organisation. Future researcher in this areas will also benefit from the study.
1.4 STATEMENT OF HYPOTHESES
This study is required to test among other things the following:
Ho: Internal auditing as a part of internal control system is not useful to external auditor.
Hi: Internal auditing as a part of internal control system is useful to external auditor.
Ho: Poor and inefficient internal control and Auditing does not encourage fraud.
Hi: Poor and inefficient internal control and Auditing encourages fraud and mismanagement.
Ho: Growth and survival of Anamco Ltd. does not depend on Auditing and internal control.
Hi: Growth and survival of Anamco Ltd. depends on Auditing and internal control.
Ho: Auditing and internal control does not contribute to the smooth implementation of management policies.
Ho: Auditing and internal control contributes to the smooth implementation of management policies.
1.5 SCOPE OF THE STUDY
This study concentrates solely on a manufacturing company in Enugu state, with special reference to the Anambra Motor Manufacturing Company (ANAMCO) Enugu. The organisation undertakes business in motor manufacturing especially Mercedes Benze products. Particular attention will be paid to the methods and procedures employed by the accounting department in performing its duties.
1.6 LIMITATION OF THE STUDY
Time factor imposes a big constraint on this study as a research of this scope can hardly be completed within the two months time limit set for it. This factor no doubt made some aspects that would have been included to be left out. Such aspects include inter-company comparison and the corporation to the industry.
Another big constraint on the research is finance. Financial problems to a great extent hampered the gathering of data (information) for the study. This is more so when are considers the cost of moving from the school to the site of the organisation used as a case study. One also had to face the difficulty of conviction of the officials taken as specimen, a lot of explanation and persecution to get the co-operation of such respondent.
1.7 DEFINITION OF TERMS
To ensure a proper understanding of what the study is all about some unfamiliar words to those who are not in the same field are explained as they appear in the project.
AUDIT – An independent examination of, and expression of an opinion on, the financial statements of an enterprise.
INTERNAL AUDIT – The act of ensuring that control measures set up by management are complied with.
Auditing As An Instrument For Ensuring Accountability:
Auditing is a critical instrument for ensuring accountability in various sectors, including government, business, nonprofit organizations, and more. It involves a systematic examination and evaluation of financial records, operational processes, and compliance with laws and regulations. Here’s how auditing serves as an instrument for ensuring accountability:
- Financial Accountability: Auditing verifies the accuracy and reliability of financial statements. This is crucial for shareholders, investors, and creditors who rely on these statements to make informed decisions about an organization’s financial health. By ensuring that financial records are accurate, auditors help prevent financial fraud and mismanagement.
- Operational Accountability: Auditors assess an organization’s internal controls and operational processes. This helps identify inefficiencies, weaknesses, and areas where improvements are needed. By holding management accountable for the efficiency and effectiveness of operations, auditing contributes to better organizational performance.
- Compliance Accountability: Auditing ensures that an organization complies with applicable laws, regulations, and industry standards. This is especially important in sectors like healthcare, finance, and government, where non-compliance can lead to severe legal and financial consequences. Auditors verify that an organization is adhering to the rules and regulations governing its operations.
- Transparency and Trust: When organizations undergo regular audits and make the results available to stakeholders, it fosters transparency. This transparency, in turn, builds trust among investors, customers, and the public. Stakeholders can have confidence that the organization is being held accountable for its actions and is committed to ethical conduct.
- Preventing Fraud and Mismanagement: Auditors are trained to detect signs of fraud and mismanagement. Through forensic audits and in-depth examinations, they can uncover irregularities and take corrective actions. This deters unethical behavior within an organization and prevents financial losses.
- Risk Mitigation: Auditing helps identify risks and weaknesses in an organization’s processes and controls. By addressing these issues, organizations can proactively mitigate risks before they escalate into larger problems. This proactive approach contributes to accountability by reducing the likelihood of crises.
- Benchmarking and Improvement: Auditors often compare an organization’s performance and financial results against industry benchmarks and best practices. This provides a basis for evaluating an organization’s performance relative to its peers and identifies areas for improvement, thereby promoting accountability for achieving and surpassing industry standards.
- Legal and Regulatory Compliance: Many regulatory bodies require audits for certain organizations or industries. Compliance with these requirements is a legal obligation, and failing to undergo audits can result in legal consequences. Auditing ensures that organizations fulfill their legal accountability.
- Board and Executive Oversight: Auditing reports are typically reviewed by a board of directors or an audit committee, which provides independent oversight of an organization’s financial and operational activities. This oversight ensures that management is held accountable for their decisions and actions.
In summary, auditing is a fundamental instrument for ensuring accountability across various domains. It helps maintain transparency, prevents fraud, identifies operational weaknesses, and ensures compliance with laws and regulations. By providing an independent assessment of an organization’s financial and operational activities, auditing plays a vital role in promoting trust and confidence among stakeholders.