ENHANCING CORPORATE ACCOUNTABILITY THROUGH EFFECTIVE AUDIT SYSTEM (A Case Study of Sheffeild 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.


    Accountability  as  explained  above  has  suffered  some  misconceptions,

surprisingly in the hands of those who should have understood it better. Most of

the  lay men  conceptual  understanding  of  accountability  relates  it  to

„communicating about monetary matters (Odon, 1999:7) but accountability goes

beyond  that.  According  to  the  Webster encyclopaedia dictionary  of  English

language  (1995:110),  accountability  is  defined  as  “the  state  of  being

accountable, answerable, liable or responsible” the same dictionary goes further

to define accountable as “liable to pay or make good in case of loss; responsible

to  a  trust,  liable  to  be  called  to  account,  put  in  another  way  an  much  more
                                                                                
 
related  to  the  context  in  the  articles  Aba  times  of  fourth  September  1999

captioned “accountability in the third republic” it says

      Accountability connotes answerability and stewardship, by

      answerability is meant answering for one?s actions and

      decisions (odon1999:7)   

      Stewardship according to the article means service; it means

      that every leader should be responsible to the people who

      reposed trust in him. 


For accountability to be accorded its rightful place in an organization the writer

believes that  there  is  a high  need  for  proper  internal  control  measure  and  in

addition, efforts should be made to ensure that company accounts are subjected

to external and independent audits after each financial period. 

 The bible also records in chapter 25 verse 14-30 of saint Matthew gospel,

the story of a rich man who went on a far journey entrusting the affairs to his

servants  and  who  when  he  returned,  required  the  servants  to  answer

individually, for their stewardship to the business while he was away. It in the

same  manner  that  it  is  required  of  the  chief  executives  and  directors  of  a

company who are quite different from the real owners of the business to answer

for  their  stewardship  of  the  funds  and  property  entrusted  to  them  by  the

shareholders. It is desire for accountability that gave rise to what we know today

as audit- a mechanism through which the shareholders are made abreast of the

true and fair picture of the activities of the directors and chief executive of the

company