Abstract
This research work is designed for the study of the role of internal auditors in stock taking as it affect Total Nigeria Limited. Internal auditors may be defined as in house approval activity which provide services to management by examining the application and effectiveness of system and controls within the organization in a manner that is independent of those operations, systems and controls. In embarking on this project work, efforts should be made to limit the research to the areas of study which is hinged on their roles in stock taking activity in business organization. In chapter one, this work deals with the general introduction of the work by describing both auditing and stock taking. It also entails statement of problem, purpose of the study, significance, scope, limitation and statement of hypothesis and most of the terms used were defined in this chapter. Chapter two gives the review of the related literature and studies. Also, the role of internal auditor under the law, internal auditing, stock taking, structure of Total Nigeria Limited and its operation, position of the internal audit department in Total Nigeria Limited, functions of the department, an example of internal auditors report, importance of effective communication among and with the internal audit unit, and stock taking of black and white products were reviewed also in this chapter. Chapter three of this work deals with the research design and methodology. It also showed the sources of data and the sample used. Chapter four showed how the data collected was presented and analyzed using a simple or percentage analysis on the hypothesis. Finally, chapter five which is the last chapter of this work contains the summary of findings, conclusion and recommendations.
CHAPTER ONE
INTRODUCTION
- Background of the study
Auditing system has been known as a major factor to which good or poor performance of a manufacturing company can be attributed. Most people think to seriously that auditing is a subdivision of accounting, probably that is how it was introduced to us and because every auditor is an accountant but every accountant is not an auditor. Auditing has its root elsewhere. The relationship of auditing and accounting is close, but they are not the same. There are business associates. One may ask “What is accounting?” Accounting has been defined in many ways by different authors.
Accounting to Eneje (2006) accounting is a service activity which provides and financial information about economic activity that is intended to be useful in making economic decisions” It involves the measurement and communication of business events and conditions as they affect the peculiar enterprises or entity. The task of accounting is reduced a tremendous mass detailed information to manageable and understandable proportion. Nevertheless auditing does more of these things.
Auditing to Nwabueze C.C (1997), “auditing is an independent examination by a statutory appointed person called the auditor to investigate an organization, its records and the financial statement prepared from them, and thus form any opinion on the accuracy and correctness of the financial statement , hence the role of the internal auditors in stocktaking Auditing is analytical not constructive. It is critical, investigative and concerned with the basis of accounting measurement and auditing emphasis its proof of correctness. Auditing is also concerned with adequacy in design, effectiveness in operation and consistency in application of such processing’s.
The researcher will also examine the effects of these aspects of the role the internal auditor in stock taking.
It is aimed at forming opinion on the truth and fairness of the transaction of an enterprise and also has its principles, rules not on accounting, which is learns for ideas and methods. Auditing is therefore a discipline independent on logic with accounting as art of its utilities.
The use of internal auditors controls the measures and its effects on a manufacturing company, hence the establishment of the auditing department will also been show. The effects of these aspect of auditing in stock taking is The objective of this work, hence the research topic “The role of internal auditors in stock taking”. Nevertheless the auditor had the account read to him since the term audit originated from the latin “audire” meaning to hear. The origin of an audit can be traced to the ancient times in Britain when landowners allowed tenant farmers to farm on their land. The landowners did not involve themselves in the cultivation of the land or in the supervision of these tenant farmers.
After Luca pacilo published his book in the 15th century, the work of auditor became more involved but today, the increased complexity of business units, either by the scope of its own operation or by amalgamation, has now forced the auditor to adopt new methods of approach to his work the role of auditors in stock taking. The auditors duty in respect to stock taking is often is often regarded as fully expressed in the case of “re Kingston cotton mill co. ltd” , (1896) in which Lindly L.J. stated that it was “on part of the auditors duty to take stock” . But later in the united states, it is recognized duty of the auditor to make physical stock chedes that is stock taking, this duty having been imposed upon him after much defalcations has took place in case of “ MC” Kasson V- Robin” (1940) whereby fictitious record affecting purchases, sales and stocks enabled various responsible officials working in collusion to overstate to overstate the assets on the balance sheet by sum of 21000, 000 dollars.
On the other hand, stock taking or physical verification of stock by means of fully counted or measurement in case of bulk stock tally with the bin card records stock taking could be done in three ways stated below:
(a) Counting of stock at the end of the year or before the year ends or after the year ends.
(b) Counting of the part of stock by means of interpolating the total statistics.
(c) By means of using continuous stock records
It should be known that where stocks are material in the enterprises. Financial statement and the auditor is placing reliance upon management stock – take in other to prate evidence of existence, the auditor should attend the stock taking. This is because attendance of stock taking normally is the best way of providing evidence of the proper functioning of the management stock – taking. Procedure and the existence of stock and their conditions.
1.2 STATEMENT OF THE PROBLEM
The nature of the product of seven up bottling company plc particularly liquids such as pepsi, mirinda, selen – up and mountain dew makes it very difficult to effectively conduct stock – taking at any point in time and also to determine the extent to which internal auditors are involved. The statement of the problem was discovered as a result of the researcher’s enquiries.
1) 7up Bottling company plc has been going under services of financial problem due to the internal control where not effectively used.
2) The staff do not know whether internal control will regulate the financial constraints of the company.
3) 7up Bottling company does not know whether internal activity stocktaking will make good or loss.
4) The staff of seven – up Bottling company plc do not know the present effectiveness and how efficiency of stock talking method will be
5) The existing auditing system in the manufacturing company does not comply with the generally accepted accounting principles.
- There is incomplete recording of stock in most manufacturing companies in Nigeria, thereby not obeying the principle
1.3 OBJECTIVE OF THE STUDY
The study has one objective which is divided into general and specific objective, the general objective is to examine the role of internal audit in stock taking, the specific objectives are;
- to examine the role of internal auditor in enhancing effective stock taking
- to ascertain if there is any relationship between stock taking and organizational profitability
- To ascertain if there is a significant relationship between stock taking and internal audit
- To proffer suggested solutions to the identified problem
1.4 RESEARCH QUESTIONS
1) Does internal auditor play any role in enhancing effective stock taking in the organization?
2) Is there any relationship between stock taking and organizational profitability?
3) Is there any significant relationship between stock taking and internal auditing?
1.5 SIGNIFICANCE OF THE STUDY
This study is believed will not only be useful to the company where it is carried out but also to other companies that carryout the same type of business not only that, since seven – up Bottling company is prelate limited liability company, there is need to know its internal auditing system and how it has helped the efficiency and proper usefulness of accounting records.
The study of auditing in manufacturing companies will enable them to identify areas were their accounting system inadequate.
The study will also provide information on management to accomplish its objectives.
These research work will help manufacturing companies know how controls can be applied with regards to inventory and why this is necessary.
Researchers, students and teachers will also gain from the techniques and methods of good auditing system exposed in this work. Government will equally benefit through increased revenue from higher profits.
The society at large will benefit through facilities provided from increased revenue accruing to government as well as higher expenditure votes to social responsibility functions by these companies as a result of higher profits. Shareholders and investor will benefit from the study by higher dividend, dividend yield resulting from better auditing records.
1.6 SCOPE OF THE STUDY
Through the study received the internal auditing in companies the investigation carried out by the researcher covered only seven – up Bottling company plc at mile cornch Enugu which was used as a case study.
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 filed are defined as they appear in the project.
- a) Internal Auditing: Internal Auditing is an independent appraisal activity within an organization for the review of accounting, financing and other operations as a basis for services to management. It is a managerial control, which functions by measuring and evaluating the effectiveness of other control.
- b) Internal Control: Internal control is the whole system of controls financial and other wise established by management in order to carry on the business of the enterprise in orderly and efficient manner, ensure assess and secure as far as possible the completeness and accuracy of the records.
- c) Internal Auditor: Internal Auditor is the person that does the above mentioned job.
- d) Stocktaking: Stocktaking is counting and checking the price and physical qualities of goods or items in the store by selected officials of the company in order to know whether the physical numbers and prices tally with what is written in the bin cards.
- e) Bin cards: Bin cards are cards that contain the descriptions of an items, the receipts issued and as well as the balance of the items in question. The bin cards are used not only for detailing receipts and issues of materiel but also to assist the storekeeper to control the stock.
- f) External or Independent Auditing: This is an independent examination of the financial statement of an enterprise conducted with view to the expression of an opinion on whether or not those statements show a true and fair view of the enterprise by a professional practitioner who engaged as an independent contractor.
- g) Watch dog: This is a dog trained and kept to guard property of various kinds, homes and offices. In this context, the term watchdog refers to the internal auditor.
- h) Vouching Approach: Vouching approach is typified by checking and ticking the quantities of transaction and documents to ensure that they have been recoded accurately and correctly.
- i) Verification Approach: Verification approach this concerns the direct verification by independent means of assets, liabilities, income and expenses and other mattes that is concern to the auditor.
- j) Jetty: Jetty is a place in the seaport where tankers carrying soft drinks products berth.
This material content is developed to serve as a GUIDE for students to conduct academic research
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