1.1 Introduction
Internal auditing is a process carried out by internal auditors to assure owners of a business that their resources are well managed by persons acting on their behalf. The auditing process originated in the past when landowners let tenant farmers to use their land without actively engaging in farming. Auditing is regulated by laws, professional guidelines published by the Institute of Chartered Accountants of Nigeria (ICAN), such as accounting and auditing standards, and often modified copies of auditing standards from other developed countries. Due to public criticism of auditors, there is a discrepancy between audit expectations and performance, which is reflected in the litigation environment that today surrounds auditing (Boyd et al., 2001:56).
This chapter will address the background information that motivated this study, the challenges that prompted it, its aim, and its objectives as a preface to subsequent sections of the study. Additional factors include the study's significance, scope, limitations, research questions and hypotheses, and the definition of technical terms.
1.2 Background of Study
The substance of every economic entity depends on its ability to achieve its goal and objectives management for the achievement of corporate goals. Wither or not management will achievement this goal depends on how strong and reliable the growth of any corporate body largely depends on the effectiveness and efficient of the internal control system. Therefore management has a duty of or ensuring that a strong and reliable control system exists within the organization for accountability and country.
For accountability within the organization the conduct at audit is mentionable. This is because account prepared by management may not disclose fraud deliberately misleading or failed to confirm to regulations. Therefore the necessary of auditing to cooperative organization cannot be overemphasized as thus will help the safeguard of the assets of the organization by detection and prevention of all kind of misappropriation and fraud within the organization. Over the years business and corporate organizations run into problems of liquidation.
Insolvency and bankruptcy are caused by both economic realities in the corporate environment and inadequate or ineffective management. Consequently, the organization's internal operations provide financial misconduct opportunity to flourish. Consequently, a lot of business entities have to file for liquidation due to internal fraud and money theft. These monies are intended to be utilized to expand the company's operations. Thus, auditing as a professional activity is to birch the gaps and lapses of management activities and to repent to the owner of business on the financial position of the business.
According to the American Accounting Association (AAA) committee on basic Auditing concept (1971), auditing and evaluating process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events o ascertain the degree of corresponding between those assertion and establishment to interested users. The Nigeria auditing guidance sees auditing as an independent tax the appointed and or in pursuance of his appointment and in compliance within any relevant statutory obligations.
from the above, it is clear that despite need of auditing by management within the organization, government also requires the account are audit annually before they publisher. However there are two objective of auditing in any corporate entity, the primary and secondary objects, the projective of auditing require the auditor to give report on this opinion on account investigated.
Therefore, in Nigeria where the research was carried out, the activities that was conducted is to know the Role of Internal Audit on Financial Growth of Business.
1.3 Statement of Problems
Investigation revealed that the news of insolvency, bankruptcy, and liquidation has become a regular feature in periodicals in the current corporate climate. Those unsightly problems are caused by several sources. The issue of liquidation is not only attributed to the business environment bur internal management problems. Therefore the following problems are identified:
- The issue of forgery of public fund for personal interest.
- Lack of sense of responsibility and other forms of social values.
- Low level of official awareness.
- Weakness of internal control system to monitor the activities of management.
1.4 Aim and Objectives of Study
The aim of the study is to examine the Role of Internal Audit on Financial Growth of Business in Nigeria. In achieving this aim, the following specific objectives were laid out as follows:
- To examine the existence of internal control system in the organization;
- To identify the causes of fraud in public parastatals; and
- To determine how audit could help in the prevention and control of fraud.
1.5 Research Questions
The study came up with research questions so as to be able to ascertain the above stated objectives. The specific research questions for the study are stated below as follows:
- Are all daily expenditure authorized and accounted for by concerned authorities?
- Are there any checks and balances in the administration and management of the company?
- Do you think audit can prevent the suspected fraud in your company?
- Does internal audit department check all sources and application of fund?
- Does this business have internal auditors?
- Does this business have internal auditor(s)?
- Do the business allow the internal auditor(s) freehand to perform his function
- Do you think fraud can draw this business liquidation?
- Does your business allow internal auditor(s) freehand to perform their function?
- Has fraud know to have taken place on suspected on this company
- Is the internal audit department independent?
- How does your business perceive auditing?
- What type of fraud was suspected in the business
- What role can auditing play in the eradication minimization of fraud?
1.6 Research Hypothesis
In order to pursue the objective of this study, the following generalized statements have been designed to guide and aids in obtaining the result for the experiment to be conducted. For this work, the null hypothesis will be represented with H0 while the alternative hypothesis will be represented with hypothesis H1.
Hypothesis One
- H0: There is no significant relationship between audit and the prevention and control of fraud.
- H1: There is a significant relationship between audit and the prevention and control of fraud.
1.7 Significance of Study
This study will go a long way helping all corporate to organization on the possibilities and consequence of financial recklessness and misappropriation of fund in business and probably the solution to ineffectiveness in the management firms.
Secondly, this study is significant because focused on corporate bodies which are the bedrock of every economy at large, this granting the continuity of corporate entities.
The study will encourage management to review and establish strategies to achieve maximum efficiency and effectiveness in order to bring about the desired return to contributors (shareholder).
Finally, this study, by using auditing as a tool, for prevention of fraud will help to ensure accountability, reliability and discipline within the management of companies in Nigeria.
1.8 Scope of Study
The scope of this research focuses on the Role of Internal Audit on Financial Growth of Business in Nigeria. The study is limited to companies operating in Yenagoa within effective reference to Scripan nig Ltd. However, the study will cover relevant areas such as auditing, fraud prevention, detection and control of fraud in the management of companies operating in Nigeria.
1.9 Limitations of the Study
During the course of this study, there were some problems encountered which stood as limitations to the research work. Some of the limitations include:
- Time Constraint: The time frame given to accomplish this project was very short due to school academic calendar and it was carried out under pressure which made the researcher not to implement some necessary features.
- Establishment Policies: Establishment policies posed a serious limitation as most staffs are not ready to release information needed for this project work. There were lots of information needed from the staffs of this establishment to enhance the study which took them time to release or they did not release at all for security purposes, hence the scope was reduced.
- Research Material: availability of research material is a major setback to the scope of the study.
- Financial Constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
- Initial Cooperation Delay from Respondents: A particular limitation of this work came as a result of the respondent refusal to offer their cooperation at the initial time they were contacted. This contributed in making the success of this research study difficult.
1.10 Definition of Terms
Audit:
An audit of financial statement is an exercise whose objective is to enable auditor express an opinion on the account presented by management at the end of the years on whether on his opinion the account show true and fair view or otherwise.
Internal Control System:
Internal control is the whole system of control, financial and other wise established by government to evaluate and checkmate the activities of the organization at every point in time.
Internal Auditing:
These are set of professionally qualified auditors (Accountancy that members of ICAN /ANAN) who are not members of the organization, appointed by the shareholder/ directors to audit the financial statement prepared by management.
Error:
This is an un-intentional mistake in financial statement book of account.
Fraud:
This is an intentional act to falsely misrepresent the true state of monetary transaction as fund in the books of account.
Irregularities:
This is an intentional distortion of financial statement or book of account often accompanied by the false files and record.
Audit Risk:
These are the areas in which international auditors should be on the lookout, in the course of their audit exercise.
