THE ROLE OF THE AUDITOR IN SMALL BUSINESS ORGANIZATIONS (A CASE STUDY OF SOME SMALL BUSINESSES IN UYO METROPOLIS)
| Format: Ms Word | 1-5 Chapters | Table of Content|
INSTANT PROJECT MATERIAL DOWNLOAD
Study Level: BTech, BSc, BEng, BA, HND, ND or NCE
Amount: ₦3,000.00
ABSTRACT
This study centers on the role of the auditors in small business organizations, citing some selected business centers in Uyo Metropolis. Just like large organizations, small and medium scale businesses need auditors to survive. The role of auditors in helping small business owners keep accurate and concise financial records cannot be underestimated in corporate Nigeria today. Concerning Methodology, data was collected by means of questionnaire. The collected data were analyzed with the aid of percentages. Further analysis was done on relevant information. The statement of research hypothesis was tested using chi-square distribution.
The use of internal control questionnaire and evaluation forms by auditors, to ascertain and evaluate the strengths and weaknesses of internal control systems of business organization, with a view to determining the degree of reliance to be placed on the internal control system, is a major finding of this research.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
According to the third national development plan (vol. 1 page 353) “manufacturing establishment employing less than 10 people or whose investment in machinery and equipment do not exceed N600, 000 are referred to as small scale industries. In the credit guidelines of the Central Bank of Nigeria (C.B.N) small scale enterprise are classified as those business with an annual turnover of less than half a million naira. Currently, as given by the government, small scale industry refers to those industries with a capital investment not exceeding N150, 000 in machinery and equipment alone.
Today, every business organization intends to continue as a going concern, i.e. continue to acquire assets, increase sales, improve profit margin, to remain in operational existence into the foreseeable future and not having any intention to curtail or significantly reduce its scale of operation.
To acquire this aim, the organization will have to institute sound internal control and accounting system, appoint directors and managers to direct the affairs of the business and to ensure that the funds intended to achieve this aim are well applied.
Business organization who successfully put these structures in place may yet fail to develop and survive in isolation of the auditor. It is evidenced by the fact that the directors and managers who are expected to manage the funds and direct the affairs of the business may begin to perform their activities with non-challant attitude knowing fully well that their work will be checked by an independent person (the auditor), as a result, funds may be misapplied, diverted, embezzlement may be on the increase, loss of confidence by shareholders on directors. e.t.c. with all these, the organization may no longer be able to continue as a going concern, and this will eventually result to the liquidation of the business.
No doubt, the role of an auditor in the development of small business organization is inevitable. With the role of auditor in force, the directors and managers are more careful in performing their duties as they may want to protect and maintain their integrity. As a result, mis-management, diversion, mis-application and embezzlement of funds will be greatly checked. The auditors’ role in achieving these may include: reviewing the controls of the organization in the traditional areas of accounting and finance to ensure compliance and contemporary areas of personnel, marketing, sales, and production, to ensure efficiency of the economy. e.t.c.
During the audit, frequent correspondences are made between the auditor and the client such as internal control letter, management letter, letter of representation, all aimed at ensuring the survival of the business. At the end of the audit, a final audit report is made to the shareholders to boost their credibility on the directors.
There is an auditing guideline- guideline for internal auditors issued in June 1990 where internal audit was defined as a service to the organization.
It objectively examines, evaluates and report on the adequacy of internal control as a contribution to the proper, economics, efficient and effective use of resources.
Internal auditors are employees of the firm and thus independences is not always every to achieve. However, it can be assisted by having the scope to arrange its own priorities and activities, having restricted access to records, assets and personnel.
Freedom to report to higher management and where it exists to an audit committee.
Internal control in present day escape embark all department and all activities of a business concern. It includes the methods by which top management delegates’ authority ends assipin responsibility for such functions as selling, purchasing accounting and production. It also includes the programme for preparing, verifying and distributing the various levels of supervision. Those current reports and analysis which enable executives to maintain control over the variety of activities and function which constitute a large corporate enterprise.
This definition possibly is boarder than the meaning sometimes attributed to the term. It recognizes that a “system” of internal control extends beyond those matters which relate to the functions of the accounting and financial department.
The broad definition of internal control may be conveniently summaries by stating that internal control is the means by which management obtains the information, protection and control that are vital to the successful operations of a business
Control is necessary to ensure that management policies and directives are properly adhered to. Management is far removed from the scene of operation in the typical large business, and personal supervision of employee is impossibility. As a substitute, management must rely on various control techniques to implement its decisions and goals.
These brief comments suggest that good internal control is a key factor in the effective management of business enterprises. Internal control is also the means by which management can discharge its primary responsibility for the reporting of adequate and accurate financial and operating information to which interest parties as stockholders and creditors. Management has recognized internal control as a valuable tool in effective carrying out it responsibilities and auditors have pressed for improvement in internal control of their efforts to be of assistance to management, as well as to permit reduction in audit work made possible by the concomitant increase in the credibility of the accounting records. The effect of auditing has been to reduce the need for routine, mechanical, verification of book- keeping accuracy , permitting substitution of a less time consuming approach that involves reasoning and judgments and stressing such activities as review , analysis, evaluation , and statistical sampling.
A part from the work which the internal auditors should do themselves if they encounter weakness in the system of internal control, it is good practice for them to advise management, proffer the management in the discharge of its obligations and control and safeguard the assets of the company.
This project brings out in details what auditors do in practice that is, their roles in the development and survival of small scale business organization.
A substantial aspect of this project shall focus on external auditing with particular reference to small business organizations in Uyo Local Government Area.
1.2 STATEMENT OF THE PROBLEM
Though in most cases, small business organizations are usually operated by their proprietors, yet there is still many of those small business organizations whose management is rested on people other than the proprietors hence the need for audit arises.
However, in the course of this research, the following problems are to be examined.
1) Do auditors in small-scale business, comply with the provisions of the companies and Allied matters Act 1990 (CAMA) in the execution of his audit assignment?
2) How efficient is their internal control mechanism?
3) Do audited accounts present a “true and fair view?
4) What are the auditors’ responsibilities in the accounts of the business organizations?
5) Has cases of fraud and error been prevented in the business?
6) Is the principle of independence and honesty, competency observed in small scale industry?
7) Do the auditors get all necessary information and right access to the business books of accounts and financial statement?
1.3 OBJECTIVES OF THE STUDY
The main objective of this research work is to appraise the auditor himself in respect of the role he plays in the firm such as;
- i) To ascertain whether auditing is aimed at checking the internal control system adopted in business organizations.
- ii) Ensuring that Auditors in small business organizations comply with the companies and Allied matters Act 1990 provisions in the execution of his audit.
iii) To ascertain the auditors responsibilities in the accounts of the business organization.
iv) To ensure that the audited work represent a true and fair view of the records.
4 RESEARCH HYPOTHESIS
The under listed hypothesis are formulated for testing in this research study. Scientific test of these hypothesis are employed to arrive at reasonable conclusions. The formulated hypothesis for considerations includes;
H0: The auditor does not help to check the internal control system in small business organizations.
H1: The auditor helps in checking the internal control system in small business organization.
H0: The auditors do not play a significant role in the development and survival of small business organization.
H2: The auditors play a significant role in the development and survival of small business organization.
1.5 SIGNIFICANCE OF THE STUDY
The research work is an investigation into the role of the auditor in small business organizations with reference to small business organizations in Uyo Local Government Area. It is believed that at the completion of the study, the findings will be useful to the management of organizations as the study seek to emphasis on the usefulness of auditing in fraud prevention and detection in organizations. The study will also be of great importance to the audit profession as the study seek to elaborate on the importance and role of forensic audit in crime prevention and detection. The study will also be of great importance to student who intend to embark on a study in similar topic as the findings of the study will serve as a pathfinder to them. Finally the study will be of great importance to students, teachers and the general public as the finding will add to the pool of existing literature. Generally, the result of this research would help prospective investors, students, researchers, bankers, managers, governments, directors, employees and other financial institutions.
1.6 SCOPE AND LIMITATIONS OF THE STUDY
This research work looks at the role of the auditors in small scale business organizations with reference to small scale business organizations in Uyo Local Government Area. It takes a critical look and reveals the various activities of the auditors in order to ascertain the performance of the internal control of small business organizations.
An insight as to the correctness and accuracy of the records kept by small business organization will be looked into and the auditor’s areas of concentration will be emphasized.
A lot of limitations was encountered in collecting information in carrying out this research study. The problems of the executive officers willing to give information or have a direct interview with the researcher.
Financial constraint is inevitable considering the present economic situations. Due to lack of finance at the researcher’s disposal it was not possible to capture many small scale businesses.
In developing countries like Nigeria, there is the problem of insufficient data. Furthermore, the organization secrecy as to relating their financial report to the researcher was also faced.
1.7 DEFINITIONS OF TERMS
Terms used in the course of this study are explained in relation to what it stands for. They include:
AUDIT: Okolo (1987:7) defined Audit as “an objective and conscientious examination of a statement of account, the underlying records and all the available evidence relating to the statement of account as will enable the auditor to form an opinion as to whether it represent a fair and true view of whatever it purports to represent and to report accordingly.
AUDITING: Mautz and Sharaf (1961) say that auditing is concerned with verification, the examination of financial data for the purpose of judging the faithfulness with which they portray events and conditions
AUDITOR: An auditor is an independent professionally trained accountant who deals with statement of accounts relating to different organizations. Austin. O. Okolie (2007).
EXTERNAL AUDIT: Okolie (1988:61) defined external audit as “the independent, objective and conscientious examination of a statement of account, the underlying documents, physical assets and all other evidence as will enable the auditor to form an opinion as to whether or not the statement of account presents a true and fair view of whatever it purports to represent, and to report accordingly”.
INTERNAL AUDIT: Millichamp (1990:434) defined internal Audit as “an independent appraisal function within an organization for the review of systems of control and the quality of performance as a service to the organization. It objectively examines, evaluates and report on the adequacy of internal control as a contribution to the proper economic, efficient and effective use of resources.
FINANCIAL STATEMENT: Ayaduba (1996:16) defined financial statements as “periodical financial reports of accounts and other related documents that highlight the financial position of an enterprise as well as its profitability.
INTERNAL CONTROL: Millichamp (1990:76) defined internal control as the whole system of controls, financial and otherwise established by the management in order to carry on the business enterprise in an orderly and efficient manner.
FRAUD: Okolo (1988) it is used to refer to the intentional mis-representation of financial statement/information or mis-appropriation of assets which could result in mis-statements of an entity’s financial statements by proprietors, management, employees, third parties e.t.c.
ERROR: Okolo(1988): this refers to unintentional mistakes in preparing financial statements.
AUDIT PROGRAMME: Austin .O. Okolie (2007): is a list of audit assignments detailing work to be carried out by the auditor.
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.
USE THIS MATERIALS AS A GUIDE FOR YOUR PERSONAL RESEARCH WORK (IF PROPERLY CITED)
PAY ₦3,000 HERE TO DOWNLOAD MATERIALS
Account Number: 0709546102
Access Bank: Savings
Account Name: Emmanuel Idorenyin Samuel.
THIS MATERIAL IS READY AND GOES FOR #3,000 ONLY.
MAKE PAYMENT TO GET THE COMPLETE MATERIALS