INTERNAL AUDITING AS AN AID TO MANAGEMENT (A STUDY OF HOUSEHOLD PRODUCTS COMPANY, ORLU, IMO STATE)

CHAPTER ONE

                                    INTROUCTION

1.1 BACKGROUND OF THE STUDY.

At the beginning of the century, most businesses are small and sole-operated.


The owners/managers are overly involved with most of the decision making. As


business grows in size and complexity, professional managers take position of


the owners and the operators. 



 Consequently,  they  rely  heavily  upon  streams  of  accounting  and


statistical report which summarizes current happenings and  conditions in the


enterprise.  The  information  carried  by  these  streams of  report enables


management  to  control  and  direct  the  enterprise in  order  to  assure


management  that  the  information  received  are  both  reliable  and  accurate.  A


system of internal audit is developed to monitor the activities of the company.


 The  need  for  maintaining  the  adequate  efficient  and  effective  internal


audit,  therefore  cannot  be  overemphasized  especially  in  days  when  Nigeria’s


economy still is witnessing depression and every company is  making effort in


ensuring  that  wastage,  pilferage,  misappropriation  are  checked  or  avoided,


and to ensure that assets are being secured.



 Some  problems  were  noticed  during  the  cause  of  this research;


problems  within  the  company,  these  problems  necessitate  this  work.  The researcher  noticed  that  there  was  ineffective  co-operation  between  the


internal audit and management, audit reports were sometimes ignored by the


management.  The  relationship  between  the  internal  auditor  and  external


auditor was strained making work harder for the external auditor. The lack of


internal  audit to  prevent  pilferage  and  fraud  within  the  company  thereby


preventing an error free working condition.



1.2 STATEMENT OF PROBLEM


Often,  management  and  internal  audit  department  function  were  seen  as


contradictory rather than complementary. Internal audit department is  setup


to  ensure  adherence  to  management  policy  but  this  objective  cannot  be


achieved  because  of  interference  and  undue  influence  by  the  top


management.



 More so, monthly or quarterly internal audit report as the case may be


in an organization is expected to provide information required by management


to determine how effective their policies and implementation are. It is on this


realization  that  this  study  will  attempt  to  determine  how  effective  are  those


information  to  aid  management  in  solving  day  to  day  problems.  It  signifies


defects or problems; the research will examine number of them namely:


      a) There  exists  no  relationship  between  the  internal  audit  and


            management.


      b)  Co-operation  does  not  exist  between  the  internal  auditor  and


            external auditor.


      c) Internal audit does not assist in detection and prevention of fraud.


1.3 OBJECTIVES OF THE STUDY.


Objectives of the study include: 



  Ø To  ascertain  if  the  duties  of  the  internal  auditor  assist  management  in


      taking informed decision. 


  Ø To ascertain if there exist co-operation between the internal auditor and


      external auditor.


  Ø To  find  out  if  internal  audit  assists  in  the  detection  and  prevention  of


      fraud.


1.4 RESEARCH QUESTIONS.

i) Is there any relationship between the internal audit and management?


ii) Does  co-operation exist between  the  internal  auditor  and  external


      auditor?


iii) Does  internal  audit  assist  in  the  detection  and  prevention  of  pilferage


      and fraud?


 
 
 

1.5 STATEMENT OF HYPOTHESIS


To  justify  the  research  topic,  internal  audit  as  an  aid  to  management  and  to


enable  the  researcher  to  draw  a  logical  conclusion,  there  is  need  to  make


guesses as solutions to the topic which are subject to acceptance and rejection


are based on the result of the test.



HYPOTHESIS ONE


ü H0: There is no relationship between the internal audit and management.


ü  H1: There is a relationship between the internal audit and management.



  HYPOTHESIS TWO


ü H0: There is  no  co-operation  between  internal  auditor  and  external


  auditor.


ü H1: There is co-operation between internal auditor and external auditor.



HYPOTHESIS THREE


ü H0: Internal audit  does  not assist in  the  defection  and prevention  of


    pilferage and fraud.


ü H1: Internal audit  assist  in  the  detection  and  prevention  of  pilferage  and


  fraud.

1.6 PURPOSE OF THE STUDY.


· The  purpose  of  the  study  is  to  determine  the  extent  of  co-operation


      between the internal audit and management.


· To  ascertain  the  extent  of  co-operation  between  the  internal  auditor


      and external auditor.


· To  evaluate  the  extent  to  which  internal  audit  helps  in  preventing


      pilferage and fraud.


· To find out if internal audit is equipped enough to prevent an error proof


      working condition.


1.7 SIGNIFICANCE OF THE STUDY.


The benefits of the study to:


The Internal Audit-


i) Internal audit within an organization is effective for efficient work of the


      general staff.


ii) The  internal audit  in  an  organization  will  help  detect,  minimize  or


      eliminate fraud in an organization.


iii) Internal  audit  assist  the  management  in  the  smooth  running  of  the


      organization by complying with the policies, laws and regulation.


iv) Internal  audit  in  an  organization  will  help  to  review  and  appraise  the


      effectiveness,  adequacy  and  application  of  accounting, financial and

 other  controls  in  order  to  promote  effective  control  at  the  lowest


      possible cost.


v) Whether  an  internal  audit  department  could  help  to  determine  the


      reliability and integrity of financial and other data produced  within the


      organization, thereby securing the jobs of employees.



The management of the organization-



i) Management  will  experience  an  error  free  working  environment


        maintained by internal audit.


ii) Management  will  enjoy  the  reduction  or  elimination  of  pilferage  and


      fraud within the organization.


iii) The general staff will be effective and dedicated.


iv) Management will enjoy a healthy relationship between it and internal


      auditors.



The External Auditors-


i) Good internal audit by the internal auditor will save time for the external


      auditor.


ii)  Co-operation will lead to easier and more efficient work.


iii) Assistance of internal auditor will lead to smooth investigation.


1.8 SCOPE AND LIMITATION OF THE STUDY 


      This  research  work  is  to  evaluate  internal  auditing  in  an  organization


using soap, detergent and  household products company as a  case study. The


research  work  particularly  focuses  on  the  internal  audit  as  an  aid  to


management in the chosen company.



                            LIMITATION OF THE STUDY


      There are constraints encountered in carrying out this research work,


this includes;



1. TIME FACTOR


      This research work was conducted simultaneously with normal academic


work within a short period of time in which some valuable information could


be obtained. 



2. FINANCIAL DIFFICULTY


  In  an  effort  to  have  a  sufficient  research  material  to  be  able  to  write


extensively  on  the  subject  matter,  the  researcher was  faced  with  some


financial  predicament considering  high  cost  of  not  only  education  materials


coupled with the high transport fare.