Internal Auditing Efficiency as a Tool for Improving Companies Performances

Internal Auditing Efficiency as a Tool for Improving Companies Performances

Chapter One

OBJECTIVES OF THE STUDY.

Objectives of the study include:

To ascertain if internal auditing efficiency improve company’s performance
To ascertain if there exist co-operation between internal auditors and external auditors.
To find out if internal auditing efficiency assists in the detection and prevention of fraud in the company.

CHAPTER TWO

REVIEW OF RELATED LITERATURE

Conceptual framework

MILLICHAMP (1996) defined internal auditing efficiency as “an independent appraisal of an organization for the view of an internal auditing efficiency control system as a service to the organization. It objectively examines, evaluates and reports on the adequacy of internal auditing efficiency control as a contribution to the proper economic efficient and effective use of resource”.

Also NWEKE AND UMEZURIKE (1998) said: “Audit as the name implies is a review of operation and records, sometimes continuous undertaking within a business by special staff employed and directed by the management, internal auditing efficiency is carried out by independent personnel, internal auditor are employees of the firm and this independence is not always easy to achieve, however, it can assisted by:

Having the scope to arrange its own priorities and activities
Having unrestricted access to records, assets and personnel.
Freedom to report to higher management and where it exists, to an audit committee.
internal auditing efficiency personnel with an objective frame of mind.
internal auditing efficiency personnel who have no conflict of interest or any restrictions place upon their works by management.
internal auditing efficiency personal having no responsibility for the work or for new system. A person cannot be objected about something he/she has taken responsibilities for. On the other hand, internal auditor should be conducted on new or revised system.
internal auditing efficiency personnel who have no non-audit work since internal auditing efficiency are employees; it is difficult to ensure that they are truly independent in mind and attitude.

Objectives Of Internal Auditing Efficiency

According to Adeniyi (2004), it state objectives of internal auditing efficiency as:

Reviewing of existing accounting system and related management work.
ii) Assisting in the implementation of new accounting system.
Reviewing company polices in the light of changing business conditions and recommending appropriate improvement.

The assessment of the adequacy, accuracy, timeliness and relevance of management information system.
Lasing with external auditor for the purpose of complexes for effort and insuring that prompt and proper action is taken on engagement data.
Identify and draw attention of management weakness in control or measures which are unsound to the organization.
To assure the management that their internal auditing efficiency organization is adequately alright. viii)To carry-out special assignment giving by the audit committee from time to time.
1. To carry-out special investigation on management request.
2. To carry-out detail test of transactions and balances.
3. To advice the management of various aspect of their operation such as matters involving finances.
4. To make a professional opinion on the true and fair view of an organization financial statement.

Specifically, the act legislated in the following auditing objective among others:

To report whether adequate and proper book of account were kept by the directors by implications, the director becomes responsible for the establishment of adequate control in the system for preventing and depreciation of forms and error.
To report whether such books and records were in agreement with company’s profit statement and balance sheet.
Whether this opposition to the statement gives a true and fair view of the company profit for the year and of its financial position at the end of the year.

Characteristics of internal auditing efficiency

For understanding the nature of the organization being audited in the terms of its operating environment, its method of operation and its account polices and systems. Sources of data include the article and memorandum of association, partnership agreement, the relevant technical manual on method and operations organizations charge and administrative manual, legislation and accounting procurement affecting the organization.

Plan of organization with particular references to allocation of staff duties.
ii)Authorization, recording and custody procedures including management check.
ii) Managerial supervision and renews including internal auditing efficiency.

Plans of organizations

Management control cannot be effective without adequate plans of

organization. A satisfactorily intact system will normally entail;

Separation of company operation into appropriate division and sub-division.
Appointment of persons to assume responsibility.
Establishment of clear line of responsibility between the boards of directors.
Overall co-coordinating of company’s activities.
Employment of qualified and dedicated staffs.

CHAPTER THREE

RESEARCH METHODOLGY

RESEARCH DESIGN

Before this task can be effectively performed, some investigations were carried out, data was carefully collected analyzed. Especially, questionnaire and personal observation were used as instrument for the study; techniques were selected in the merit of each one and so combine together to satisfy the desire of the researcher. The method used could be grouped into two.

DATA COLLECTION METHOD

PRIMARY DATA: These include method of data collection in which data are directly collected from staff in a written down form, in this respect researchers uses:

QUESTIONNAIRE: The writer of this project was giving permission by Emenite Limited, Lagos to serve as questionnaire in the internal auditing efficiency department of the company and other department of the company. The questions asked were based on the various process, procedure and auditing guidelines used in carrying out the various operations. The effectiveness and adequacy if the questionnaire express their operation and their answered the questions to the satisfaction of the researcher. To ensure relevance and truthfulness of all information, the writer makes sure that the questionnaire was served under mutual and conducive atmosphere, with no element of compulsion or under pressure of the staff.
PERSONNEL OBSERVATION: in the cause of this study, the researcher visited the company and was allowed to inspect around thus, enabling the researcher to personally observe information and get familiarize activities and recording of transaction on Emenite Limited, most of the document were inspected such as petty cash book voucher, store requisition not store record cord, audit observation form, schedule of account, weekly product report and material utilization report.

SECONDARY DATA

The above mentioned of data collection is not as reliable as the primary data collection, but it attributes in no small measure to the perfection of the research work. The following techniques were employed under this system.

TEXT BOOK:relevant text books written out by popular authorities in auditing and relevant field were consulted by the researcher in the cause of this study.
JOURNAL AND NEWS PAPER:the researcher also spent a lot of time reading some important books and articles written out by knowledgeable people particularly accountants and journals kept by school library which helped the researcher in compiling the project work.
Accounting books and related documents: some accounting documents and books of account such as stock exchange ledger cards, store bin cards, payment voucher and payroll e.t.c.

Research population and sample size

Out of the population of 120 staff, the researcher judgmentally selected 92 staff members, as the target population. The population is involved directly with decision making process. The targeted population of the study comprises of all staff of Eminite Limited Company Lagos state.

Since the population of the company (Eminite Limited Company Lagos state) has a staff of 120, it was not easy to obtain data for the whole population, therefore for ease in collecting and analyzing data, the researcher decided to select a sample from the population.

This population consists of staff drawn from some important departments within the company who are associated directly or indirectly within the application of accounting information on decision making process. The method used in the cause of this research work is the random sampling approach in which 92 of the staff were sampled out of the entire department.

CHAPTER FOUR

DATA ANALYSIS, TEST OF HYPOTHESIS AND SUMMARY OF FINDINGS

DATA ANALYSIS

To find answer to the first research question, some questionnaires has been passed to analyze its findings, this is shown in the table below.

RESPONSE TO QUESTIONNAIRE QUESTION

Question 1: Do internal auditing efficiency improve company’s performance

CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATION

SUMMARY FINDINGS.

Based on the research carried out on the topic internal auditing efficiency for improving companies performance, the researcher discovered the following from the results of the questionnaire served and the hypotheses that:

There is a relationship between the internal auditing efficiency and company’s performance.
auditing has an annual audit plan.
The annual audit plan is submitted to the organization.
internal auditing efficiency report is not acted upon by management.
There is no co-operation between internal auditor and the external auditor.
internal auditor assists the external auditor in his investigation.
There is cordial relationship between the internal auditor and the external auditor.
auditing has up to date internal auditing efficiency manual.
auditing shares information on internal auditing efficiency manual to the external auditor.
auditing assists in the detection and prevention of pilferage and fraud.
The presence of an internal auditor acts as a check against fraud.
The employment of an external auditor does not assist in the fight against pilferage and fraud.
The fear of penalties helps in the check against fraud.

CONCLUSION

Based on the findings of our research work the researcher concluded that internal auditing efficiency indeed serves as a tool to management of Emenite Limited and all organizations generally. Although some areas are still weak, with some effort the internal auditing efficiency can improve and carry out its objectives in the organization.

However, auditing has severed as checked against fraud and other activities of the staff which is one of the objectives of the auditing and the findings have revealed, is a tool to management not only in one but in all organizations because of its findings, objectives, the significance to organizations is general.

RECOMMENDATION

From the findings and problems discovered, the researcher will like to make the following recommendations.

The auditing unit of the organization should keep ethical standard by keeping up to date auditing manual and train its internal auditor in forensic accounting.
auditing units should always draw annual audit plan which is the focus of the company as it will help them to have efficient operation.
The auditing unit of the organization should always submit their audit plan to the management who will have to be pro-active and take action according to findings of the plan.
The researcher recommended that the management on their part should acknowledge the report submitted to the management and allocate more power to the internal auditing efficiency to ensure independence.
The auditing unit should endeavor to carry out their audit work to other departments which is not often visited.
The internal auditor of the company should be subjected to ethical standard so that external auditor will not do the work of internal auditor or the work of an accountant so that cordial relationship should be maintained and external auditor may rely on the work carried out by the internal auditing efficiency of the company.

References

Adeniyi, A. Adeniji, (2004). Auditing and Investigation, Value Analysis Consult Publishing, Lagos.
Adeniyi, A. Adeniji, (2010). Auditing and Assurance Services, Value Analysis Consult Publishers, Lagos.
Akanet, Solomon, (1998). Auditing and Instructual Manual for Accounting Student, 7^th edition, London Publications.
Anthony & Welsch (1974). Fundamentals of Management Accounting, Richard D. Irwin, INC.
Bird, Peter (1971). A Casebook on Auditing Procedures 2^nd edition, The General Educational Trust of the Institute of Chatered Accountant.
Chambers: Andrew D. et al, (1987). internal auditing efficiency 2^nd edition, Pitman Publishers.
Dijk, Van, Williams, and J.C. (1990). Expert Systems in Auditing Macmillan Publishers.
Howard, L. R. (1976). Principle of Auditing 19^th edition, McDonald & Evans, London.
Kola, Olowookere (2001). Fundamentals of Auditing. 2^nd Analysis, Consult Publishing, Lagos.
Millichamp, A. H. (1990). Auditing: A Complete Course Text, 5^th edition, D. P. Publication.

Other Topics