INTERNAL AUDITING EFFICIENCY AS A TOOL FOR IMPROVING THE COMPANY’S PERFORMANCE

Abstract

The purpose of this study is to assess the efficacy of internal auditing as a tool for improving the company’s performance.  Internal audit is regarded as the key element in the application of accounting systems which in turn, helps in evaluating the work of the department. The internal audit is considered as the backbone of the business accounting as it is the section that records all businesses related to the sector, it is in view of this that the researcher intend to investigate the efficacy of internal audit in improving organizational performance.

CHAPTER ONE

INTRODUCTION

• Background of the study

Since the creation of Enugu state on the 17 of august 1991 till date, many of the government owned company e.g. Niger gas limited, Emene flour mill limited Emene, Anambra vegetable refinery oil Nachi, Nigeria cement company Nkalagu located at Eboyi state which is jointly owned by Enugu Eboyi and other state – Imo are at the point of collapse. Many of the company if they are working are performing below 40% as optimum utilization as statistic on that will reveal latter. The above issue is not peculiar with Enugu state alone. Company performance is very important if such a company want to achieve its purpose of starting its business without positive impact of any organization, it means that the way of achieving the objectives when the business has commenced will be a difficult situation for that organization.  It is obvious that the performances of companies sis not unto expectation. That is why the researcher wants to know the impact auditing create in improving companies’ performances.

Since companies have been encountering some problems like fraud, misappropriation of funds and properties, lack of effective management and others that made people to be asking whether auditing plays any significant role towards ensuring efficiency and judicious use of funds set aside for various purposes.

Some activities and programmes organized by people as re- assumed to be done on behalf of the people.  They are deserved to be assured that eh resources which they put at the disposal of these programmes are effectively, efficiently and economically managed since it is known that not all are judicious in public affairs entrusted to them.

Therefore, for proper and efficient accountability, it is obvious that auditors will manifest their principles to be able to arrive at what is expected of them in order to be convinced that the financial position of the organization as presented show a clear and fair view of the organization.

Consequently, because of biased nature of the organization as a result of poor investigation of the organization position, past rulers have pledged to introduce a more responsible system of government with accountability but their subsequent conduct has shown that they have little or no understanding definition and application of efficiency in the improvement of companies’ performances. During the middle Ages, however, the interest to control financial documents and accounts and to verify the use or misuse of funds increased in Western Europe. The main objective was to discover those who eluded payment, appropriated funds, or misused money and property, and to defer them to justice. Recently, there has been a drastic change in the business trends in Nigeria. Many reasons has been giving for the anomalies in the business which has resulted in many companies down – fall, ranging from lack of accountability, company crisis, misappropriation of funds, fraud, excess expenditure that are usually not compactable with the real budget. In this maiden broadcast to the state government, Dr, Chimeroke Nnamani raveled that the account of Enugu state public service has not been audited since the state was created while chief Egbogu, the chairman of the panel constituted (among other things) find the best way of making the civil service more functional to increase the in the state. In the interim report submitted to the deputy governor of Enugu state on Wednesday, 28 July 1999, that the fraud, overbroad wage bill, ghost workers syndrome were the factor militating against the efficient performance of the civil service and reported that the civil service will not be having above twelve thousand workers (12,000) while here has Ben speculation that payment \re been made to up to thirty thousand worker in Enugu state.

The above shows categorically in all ramifications that of the state civil service and their minitry – extra minitry department and other parastatals have been audited efficiently; such anomalies could not have crept up. The three institutions that introduced as early as the 13th-14th centuries the idea of verifying accounts and hold the wrongdoers accountable were the state (represented by the reigning monarch), the Catholic Church, and the universities (especially those from Northern Italy), and employed functionaries or monks to keep the accounting of their respective structure (LeGoff, 1990).

From the mid-19th century, the professional category of accountants and auditors emerged as a specialized group of people involved in preventing and detecting real or possible frauds and errors in the financial situations within the state or an economic entity. Their role was not only to investigate, but also to assess possible risks and to guarantee the responsibility of internal control mechanisms. At the end of the 20th century and the beginning of the 21st century, auditors have become a necessity for the good-functioning and efficiency of an economic entity’s management that can prevent and deter possible scenarios of trickery, funds embezzlement, or theft. Auditing which is regarded as one of the recently established professions turn out of the complexity of modern business world.  It becomes relevant so as to discourage people from erring and to expose those that gave wrong account of how they managed the funds and properties under their custody.  In a related development it has been believed that efficiency in discovering the management inefficiency has been the root cause of many companies poor performance. Both companies in private and public limited sector in Nigeria. Improvement can only follow when what is honestly followed in been recognized and how such wrong could be remedied. In view of this point effort will be made to painstakingly highlight the improvement however taking auditing efficiency in respect of private companies, volume of transaction may not be substantial and hence a book keeper can record transaction more effectively with ease. On the contrary, the case of the public enterprise and transaction show that there are numerous of transaction and so each companies may have subsidiaries and investor investing in a company’s having a control investment of the 20 – 50% share in associate company and as such, the service of a qualified accountant who is knowledgeable in accounting to be able to record business transaction of such greater magnitude are needed

 1.2 STATEMENT OF PROBLEM

A company may be classified under small medium or large depending on the size, feature of number share authorized calls issue and fully paid etc. many companies face the problem of auditing efficiency such as non-compliance with the accounting standard that the auditing guidelines non- disclosure of some which will enable either the external; auditor to form opinion. Other cooperate crime may pose a problem in the auditing efficiency. This cooperate crime may be a serious issue, for example in the news watch 5thJuly 1999, Lucky Igbenedion governor of Edo state reported that cheque were flying up and down as formal governor Onearugbulem awarded indiscriminately and Igbenedion reported that there is an inherent debt of 5 million. There is many more looting in all the state in government offices, companies etc. the research work will attempt to highlight on these problem areas that basically undermine auditing efficiency in a company and give a possible solution.

1.3 PURPOSE OF THE STUDY

The work was fundamentally undertaking to study internal auditing efficiency as a tool to improve cosmogonies performance (using Emenite Enugu as a case of study). The main purpose of this study is find out some of the reason for deficiency and inefficiency in the company which is usually believed as not existing but in fact they exist and to find some way of eradicating it using auditing efficiency. Findings will be don to know the extent to which the management has appraised their own operation and how competent they have been in determining operational ills and weak points.

1.4 SIGNIFICANT OF THE STUDY

The research work is aimed at having many important to the readers and to those who may be using the study for a reference purpose. Beside the above, it will also form part of the external examination. For me, the researcher, it is a major preliquisite for the actual completion of the course of study. Apart from being necessary for the award of national higher diploma (H.N.D.) in accountancy, it is significant to undertake this study because a thorough and fuller comprehension of the subject matter which is tested; INTERNAL AUDITING EFFICEINCY AS A TOOL FOR IMPROVING COMPANIES PERFORMANCE. Moreover, other future readers will find the research work more beneficial.

1.5 STATEMENT OF HYPOTHESIS

The efficiency of companies auditing:

Ho; the company (Emenite Enugu) auditing process is not efficient

Hi: the companies auditing process is efficient

Ho: The internal auditing indolence is efficient to embark on the internal auditing work.

Hi: The internal auditing indecency is not efficient to embark on effective and efficient audit work.

1.6 SCOPE AND LIMITATION OF THE STUDY

For the purpose of the research work, the researcher will focus his attention to the internal; auditing effeminacy as a tool for improving the company’s performance using Emenite Enugu as a case of study.

The researcher in carrying out the research work encountered many problems, ranging from time constraint, poor response, financial constraint etc.

Financial constraint: the researcher having considered the financial involvement and other problems and bearing in mind that the work was singled handedly sponsored plus the need to meet up with the standard set for the working to its logically and exhaustive conclusion, he faced a lot of financial predicament with the merger financial resources. The researcher virtualized the fear that the study will be adversely constrained due to financial transport involved in running around to get the needed information and other incidental express.

Poor response: most of the research work are characterized with poor response from various respondent and having taking into consideration some of the misguided beliefs and expression by many respondent, they are usually faced with problem like;

(a) Fear of been exposed and fear of been retrenched or dismissed for revealing official information

(b) General apathy, indifference towards the question being put to the potential respondent

Time constraint: other factors like the time factor militates against the progress of the project. The time allocated to carry out this research was too short plus other logistics problems. The time for work done, compilation, completing, and submission for assessment irrespective of the fact that there are other academic engagement were too small.

Furthermore, as the interview necessary to carry out this research have to be conducted during the official working hours and days of the weeks with a view t get the respondent in the office, the researcher has occasionally forfeited his lectures in order to get the researcher successfully executed.

1.7 DEFINITION OF TERM

Audit: in general is the mechanism within the process of accountability whereby the performer of those in control of the research of the organization is check or monitored by or on the behalf of the interested persons. The statutory audit of limited companies is the commonest example.

Internal audited: an element of the internal control system set up by the management of an enterprise in order to review accounting, financial, and operating and determine whether the prescribe policies are being adhered to. External auditors take account of the work done by an eternal auditor letters independence, staff resource, test mode, and influence by the management action.

Efficiency: the is referred to the ability to perform a duty well and produce a statistical result

Tool: it is an instrument used in doing a certain work or producing a certain result especially such that require accountancy or precision

Company; an association of persons for a business purpose in particular which incorporated in the united kingdom under the companies Act or by the Act of parliament or by royal charter. In Nigeria, company is registered by a cooperate affairs commission Abuja and regulated by the companies and allied matter decree 1990. There are companies limited by share and those limited by guarantee.

Companies can be divided into

(a) Private limited companies

(b) Public company

Improvement: this means to make or become better or addition or alteration, form of repaired to better the face of an asset or to enhance the value of anything.

Diagnosis: ascertaining, analyzing, or determine the cause of nature of problem, situation from observation.

Performance evaluation: the easement by a superior or a subordinate and an important part of any management control system. To evaluate performance is necessary to decide which measure are to represent organizational goal, how qualify, what standard is to be used, what step back is to be taking.

1.8 ORGANIZATION OF THE STUDY

This research work is organized in five chapters, for easy understanding, as follows. Chapter one is concern with the introduction, which consist of the (background of the study), statement of the problem, objectives of the study, research questions, research hypotheses, significance of the study, scope of the study etc. Chapter two being the review of the related literature presents the theoretical framework, conceptual framework and other areas concerning the subject matter.     Chapter three is a research methodology covers deals on the research design and methods adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding.  Chapter five gives summary, conclusion, and recommendations made of the study.

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