The Effect Of Auditing And Investigating In Small Scale Business Organization

ABSTRACT

This study was carried out to examine the effect of auditing and investigating in small scale business organization in First Bank Abuja. Specifically, the study examined   the extent of substantial domination of the accounting and financial management function by one person affect the organization’s internal control system. The study also  ascertain the extent of limitation on the effectiveness of internal control owing to the small number of employees.the study further  find out if proper auditing and investigations were made by the auditors by all the information and explanations obtained to the best of their knowledge and belief were necessary for the purpose of their audit. More so the study determine to what extent the organization suffered from inadequate accounting records.

ascertain the extent of inadequate management support for internal auditing. The study employed the survey descriptive research design. A total of 30 responses were validated from the survey.  From the responses obtained and analyzed, the findings revealed that the extent of substantial domination of the accounting and financial management function by one person affect the organization’s internal control system is high. The study also reveal the extent of limitation on the effectiveness of internal control owing to the small number of employees is high. Lastly, the study revealed  auditing and investigations are made by the auditors by all the information and explanations obtained to the best of their knowledge and belief were necessary for the purpose of their audit.. The study hereby recommend that a qualified auditor should be employed in other to carry out a auditing for a small and medium organization. Also  that small and medium organization should be encouraged to adopt sound accounting system and the cost of installing and operating such systems should be minimized.

TABLE OF CONTENT

TITLE PAGE

APPROVAL PAGE

DEDICATION

ACKNOWLEDGEMENT

ABSTRACT.

TABLE OF CONTENT

CHAPTER ONE

INTRODUCTION

• BACKGROUND OF THE STUDY
• STATEMENT OF THE PROBLEM
• AIM AND OBJECTIVES OF THE STUDY
• RESEARCH QUESTION
• THE SCOPE OF THE STUDY
• SIGNIFICANCE OF THE STUDY
• LIMITATION OF THE STUDY

CHAPTER TWO

REVIEW OF RELATED LITERATURE

• INTRODUCTION
• CONCEPTUAL FRAMEWORK
  • HISTORICAL BACKGROUND OF AN AUDIT
  • AUDITING
  • FEATURES OF AN AUDIT
  • OBJECTIVE OF AUDITING
  • IMPORTANCE OF AUDITING
  • THE THREE DIFFERENT TYPES OF AUDITS
  • EFFECTIVE INTERNAL AUDIT
  • EXTERNAL AUDIT
  • OBJECTIVES OF EXTERNAL AUDIT
  • INDEPENDENCE OF EXTERNAL AUDITORS
  • AUDIT INVESTIGATION
  • DIFFERENCE BETWEEN FINANCIAL AUDIT AND INVESTIGATIVE AUDIT
  • THE PURPOSE OF THE INVESTIGATION
  • CONCEPT OF SMALL SCALE ORGANIZATION
  • FUNDING OF SMALL MEDIUM BUSINESS ORGANIZATION
• THEORETICAL FRAMEWORK

CHAPTER THREE

METHODOLOGY

• INTRODUCTION
• RESEARCH DESIGN
• POPULATION OF THE STUDY
• SAMPLE SIZE DETERMINATION
• SAMPLE SIZE SELECTION TECHNIQUE ANDPROCEDURE
• RESEARCH INSTRUMENT AND ADMINISTRATION
• METHOD OF DATA COLLECTION
• METHOD OF DATA ANALYSIS
• VALIDITY OF THE STUDY
• ETHICAL CONSIDERATION

CHAPTER FOUR

DATA PRESENTATION AND ANALYSIS

4.1.     INTRODUCTION

4.2      DATA PRESENTATION

4.3     DESCRIPTIVE ANALYSIS

CHPATER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATION

• SUMMARY
• CONCLUSION
• RECOMMENDATION

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND TO THE STUDY
The work of an auditor in any organization cannot be looked beyond or over emphasized. This is because in earlier years when there was no auditor to take proper care of the organizational financial statement, many organizations like small scale business organization, manufacturing companies and even private companies suffered frauds and errors in their business.The enterprises that existed at the time were mostly joint ventures with a limited life. In such cases, the ascertainment of profit was simple. It was equal to the surplus of cash in hand at the end of the venture. One should also remember that where audits were conducted at this time, it was not because of any statutory provisions, and that responsibilities and duties of an auditor had not been clearly defined. Most of fraud is being committed by the staff of those organizations especially small-scale business organization because of this, there is need for auditing and investigation in small scale business organization.Since small scale business is a business that has little fund and materials. It is very crucial to employ the service of an auditor. The auditor is concern merely to ascertain the correctness of sums of money received and disbursed, checking the accuracy of individual entries in a cash record and verifying the balance of cash in hand at a particular point in time. In so doing, frauds, and errors can be easily detect and prevent.An auditor is the only person authorized by law to conduct auditing and investigate on any financial matter concern organization (including small scale business).

Investigation is a special inquiry into the financial affairs of a business. An auditor need proper investigation to help him carryout his auditing duties.Finally, the major important need for auditing and investigation in small scale business organization is to make sure that the business grow with its little financial back up coupled with total minimum of frauds and errors. Auditing help in ensuring that o material, financial or otherwise is misused.

1.2 STATEMENT OF THE PROBLEM
Problem arise in the application of normal auditing principles and procedures to audits of small scale business organization employing a smaller number of administrative staff.Substantial domination of the accounting and financial management functional by one person is also one of the major problem that the organization is suffering from.Limitations on the effectiveness of internal control owing to the small number of employees. Thus, the provision of check whereby the work of one person is proved independently (or is complementary to the work of another) be absent to a considerable extent. Whilst internal control including internal check may be effective for it’s primary purpose as a check on management itself.Inadequate management support for internal auditing is also one of the major problem the organization is encountering. We had to assume that the management and auditor were in conflict then the task of the auditor would not be able to rely in any way on the explanations and information given to him by management. He was likely to be false and the audit process would become both costly and detailed.

The organization is also suffering from inadequate accounting records since one person is handling the financial management function, we find out that frauds and errors can be easily committed by that person.

1.3 PURPOSE OF THE STUDY

The purpose of this study is:

1. To find out the extent of substantial domination of the accounting and financial management function by one person affect the organization’s internal control system.
2. To ascertain the extent of limitation on the effectiveness of internal control owing to the small number of employees.
3. To find out if proper auditing and investigations were made by the auditors by all the information and explanations obtained to the best of their knowledge and belief were necessary for the purpose of their audit.
4. To determine to what extent the organization suffered from inadequate accounting records.
5. To ascertain the extent of inadequate management support for internal auditing.

1.4     RESEARCH QUESTION

The following questions have been prepared for this study

• To what extent does substantial domination of the accounting and financial management function by one person affect the organization’s internal control system?
• To what extent is the limitation on the effectiveness of internal control owing to the small number of employees?
• Is proper auditing and investigations made by the auditors by all the information and explanations obtained to the best of their knowledge and belief?
• To what extent does the organization suffered from inadequate accounting records?
• To what extent does inadequate management support for internal auditing?

1.5 THE SCOPE OF THE STUDY

Considering the circumstance and predicaments of business, it is apparently obvious that there is no business that can survive without encountering one kind of problem especially in small-scale business organization. According to James Bades, all firms’ faces risk but they are proportionally greater in the small firm.The failure of a production batch in small firms may spell disaster while a similar failure or problem in a large organization.Causes of frauds and errors by the management staff are one of the major problems that the organization is encountering.

Financial problem is a major problem for small-scale business organization in Nigeria sources of fund for this category of business. Inability to borrow is difficult because of the small amount of asset they have.The organization is also seriously suffering from marketing problems due to lack of experience in the field, poor human relations, unable to meet customer’s demand.Since the organization is operating with small amount of fund and asset they are suffering from production problem due to lack of production facilities, insufficient of raw materials for production, poor product planning, lack of purchasing policy and sources of supply and also lack of ware housing.The organization is seriously suffering from research problems such as illiteracy and human behaviour.Major weaknesses in the system of internal control is minor errors which is caused by the management staff of the organization by not keeping the appropriate financial statement due to false manner of entering accounting transaction.

1.6 THE SIGNIFICANCE OF THE STUDY

The relevance of the study cannot be over emphasized as a successful completion of this study.

The need for auditing and investigation in small scale business organization help the organization to employed a qualified auditor to enable the management staff of the organization to keep adequate accounting record. So that the financial statements prepared by the management can only be accurate and reasonable. If the organization employed a qualified auditors it will help the organization to detect and prevent errors and frauds easier.

Finally, the need for auditing and investigation will help for survival and substantial growth of the organization.

1.7     LIMITATION OF THE STUDY

This study was constrained by a number of factors which are as follows:

Just like any other research, ranging from unavailability of needed accurate materials on the topic under study, inability to get data

Financial constraint , was faced by  the researcher ,in getting relevant materials  and  in printing and collation of questionnaires

Time factor: time factor pose another constraint since having to shuttle between writing of the research and also engaging in other academic work making it uneasy for the researcher.

CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATION

5.1     SUMMARY

In this study, our focus was on the effect of auditing and investigating in small scale business organization  using First Bank Nigeria as a case study.The study specifically was aimed at highlighting the extent of substantial domination of the accounting and financial management function by one person affect the organization’s internal control system. The study also  ascertain the extent of limitation on the effectiveness of internal control owing to the small number of employees. The study further  find out if proper auditing and investigations were made by the auditors by all the information and explanations obtained to the best of their knowledge and belief were necessary for the purpose of their audit. More so the study determine to what extent the organization suffered from inadequate accounting records. Lastly , the study ascertain the extent of inadequate management support for internal auditing.  A total of 30 responses were validated from the enrolled participants where all respondent are drawn from staff of First Bank Nigeria.

5.2     CONCLUSION

Based on the finding of this study, the following conclusions were made:

1. The extent of substantial domination of the accounting and financial management function by one person affect the organization’s internal control system is high.
2. The extent of limitation on the effectiveness of internal control owing to the small number of employees is high.
3. Auditing and investigations are made by the auditors by all the information and explanations obtained to the best of their knowledge and belief were necessary for the purpose of their audit.
4. The extent at which organization suffered from inadequate accounting records is high.
5. The extent of inadequate management support for internal auditing is high.

5.3     RECOMMENDATION

Based on the responses obtained, the researcher proffers the following recommendations:

• That a qualified auditor should be employed in other to carry out a auditing for a small and medium organization.
• That small and medium organization should be encouraged to adopt sound accounting system and the cost of installing and operating such systems should be minimized.