The Effect of Auditing and Investigation in Small-scale Business Organizations

The Effect of Auditing and Investigation in Small-scale Business Organizations

Chapter One

OBJECTIVE OF THE STUDY

The objective of the study is as follows

To ascertain why small-scale industries are unable to attract reasonable customers to them self.
To determine why small-scale industries experience difficulty in attracting well trained and qualified employees.
To ascertain the reasons for the redundant growth in terms of market expansion, profitability and size.

CHAPTER TWO

REVIEW OF RELATED LITERATURE

Conceptual framework

SMEs in Enugu State

SMEs are defined as business entities with 5 to 50 staffs or those entities which an annual revenues of less than N50 million. SMEs is one of the largest sector in Nigerian economy since it employs many Nigeria’s workforce as well as contributing up to 18.4% of Nigerian’s GDP. In Nigeria, the number of SMEs has been rising at a very high rate in last two or so decades with many of them based in rural areas of Nigeria. SMEs sector has made an exceptional contribution to Nigerian economy (Oseh, 2013). As such, SMEs are a vast majority of business entities found in Enugu City State and they have created employment for a large portion of the workforce in Enugu State.

In Nigeria, an SME is defined as an entity that is not generally accountable to the public; does not publish its financial statements for general external users and whose equity and debt instruments are not publicly traded or even over the counter market or traded in a foreign stock exchange (ICPAK, 2009).

Small businesses like enterprises are mostly likely to have some internal controls to help them protection of their assets as well as a reduction in risk of fraud (Jiang, 2010). Thus, understanding of the internal controls system and how the system works by SME owners can help protect their small enterprises against fraud and embezzlement. With a proper system of internal control, SMEs would be able to use their financial resources in a manner that will help in safeguarding owners’ interests. Thus, internal control system is able to provide a reasonable assurance, but not an absolute assurance which SMEs objectives are likely to be met (Neneh & Zyl, 2012).

Auditing

MILLICHAMP (1996) defined internal auditing as “an independent appraisal of an organization for the view of an internal auditing control system as a service to the organization. It objectively examines, evaluates and reports on the adequacy of internal auditing 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 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 personnel with an objective frame of mind.
internal auditing personnel who have no conflict of interest or any restrictions place upon their works by management.
internal auditing 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 personnel who have no non-audit work since internal auditing are employees; it is difficult to ensure that they are truly independent in mind and attitude.

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:

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.

CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATION

SUMMARY FINDINGS.

Based on the research carried out on the topic internal auditing in small-scale business organization, the researcher discovered the following from the results of the questionnaire served and the hypotheses that:

There is a relationship between the internal auditing and growth of small-scale business.
auditing has an annual audit plan.
The annual audit plan is submitted to the organization.
internal auditing 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 manual.
auditing shares information on internal auditing 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 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 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 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 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 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.

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