THE IMPACT OF INTERNAL AUDITING IN IMPROVING PRODUCTIVITY IN AN ORGANIZATION (A CASE STUDY OF ZENTUS NIGERIA LTD AFIKPO, EBONYI STATE)
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THE
IMPACT OF INTERNAL AUDITING IN IMPROVING PRODUCTIVITY IN AN ORGANIZATION
(A
CASE STUDY OF ZENTUS NIGERIA LTD AFIKPO, EBONYI STATE)
ABSTRACT
Most profitable private sector
organization does not have an internal audit department, they believe that
internal auditors offer their services to the highest bidder and they cannot
afford to pay them. It is important to establish and run an internal audit
department in spite of the factor that the organization makes profit. The
project is carried out of investigate the role and extent of responsibility of
internal auditing in improving productivity in the organization, a study of
Zentus Nigeria Ltd. Afikpo, Ebonyi State. the work highlighted the need for
internal control system in private organization. Internal auditing
is used to discover fraud and error in the various book of account of the
organization. The researcher used descriptive method and longitudinal survey
design trend. data were gathered from both primary and secondary sources.
Management should always meet up with their responsibility of installing,
maintaining effective and efficient internal control system hence it will
enhance the orderliness of operations. The project will be of great value to
all those who may desire to fight weakness in their control system and will
offer assistance to people who may decide to research more on this topic.
TABLE OF CONTENTS
Chapter One
1.0
Introduction
1.1
Background of the Study
1.2
Statement of
Problem
1.3
Purpose of
study
1.4
Research Questions
1.5
Relevance of Hypothesis
1.6
Delimitation of the
study
1.7
Assumptions
1.8
Significance of the
Study
1.9
Definition of Terms
CHAPTER TWO
Literature
Review
1.10 Historical Background of
Internal Auditing
1.11 Historical Development of
Internal Auditing
1.12 Definition of Internal
Auditing
1.13 Independence of Internal
Auditors.
1.14 Problems of Internal
Auditors
1.15 Scope and objectives of
Internal Auditing
1.16 Internal Audit in Commercial
Enterprise
1.17 The contribution of internal
auditing in improving
productivity
1.18 The role of Internal Audit
in big Organization
1.19
Summary
CHAPTER THREE
2.0
Research Design and Methodology
2.1 Brief
Outline of the Chapter
2.2
Research
Design
2.3
Population of the study
2.4
Sample Design and
Procedure
2.5 Data
Collection
Instrument
2.6
Validity and Reliability of the Instrument
2.7
Administration of the Data Collection Instrument
2.8 Procedure
for Processing Collected
Data
2.9
Limitation of the
study
CHAPTER FOUR
3.0
Presentation and Analysis of Data
3.1
Restatement of the Research Questions and
Hypothesis
3.2
Hypothesis Testing
3.3
Summary of Findings
CHAPTER FIVE
4.0
Summary, Conclusion and Recommendation
5.1 Summary of Findings
5.2
Conclusion
5.3
Recommendation
5.4 Suggestion For Further
Studies
Reference
Appendix
LIST OF TABLES
1.0.
Distribution of Respondents by Analysis of Data Collection According to
Research Question and Personnel
Data
1.1.
Distribution of Respondents by Sex
1.2.
Distribution of Respondent of
Age
1.3.
Distribution of Respondent of Marital Status
1.4.
Distribution of Respondents by Educational Qualification
1.5.
Distribution of Respondent by Working Experience
1.6.
Presentation of Table Showing the International Audit Department in your
Organization
1.7.
Presentation of Table Showing how often the Internal Auditor carry out
its
works
1.8.
Presentation of Table showing the weak internal control system a major cause
of fraud and low productivity in the organization
1.9.
Presentation of Table showing how a weak internal control system be
discovered
1.10.
Presentation of table showing who is responsible for establishing and
maintaining effective internal control
system.
1.11.
The table explaining what role internal auditor plays in maintaining an
effective internal control
system
1.12.
The table showing internal auditors responsibility in fraud detection and
prevention in the private
sector.
1.13.
The table showing the responsibility of internal auditors in performing their
function
1.14.
The presentation of table showing whether the internal auditors independence
are maintained in the organization
1.15.
The table showing whether the effective and efficient internal auditing an lead
to an increase in the level of production
1.16.
The table explaining on how the internal auditors full access to all the book
of account in your organization
1.17.
The table Showing the internal audit has contribution to the over all
management performance and improves the level of productivity in your
organization
1.18.
Table Showing the great need for internal audit unit in your organization
1.19.
The table explaining the level of in the management hierarchy is the internal
audit unit occupy in your organization
1.20.
The table Showing the internal auditors conducive working environment in your
organization.
1.21.
The table showing if the management adhere to internal audit recommendation
1.22.
The table showing on how the internal auditor read his report to management
1.23.
The table showing the causes of fraud in the private
sector.
1.24.
The table showing the negative effect on the economy
1.25.
The table showing if the internal audit is useful in the effort to eliminate
corporate fraud.
1.26.
The table explaining the effective and efficient internal auditing can lead to
an increase in the level of production
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
This research is meant to view the effective management performance and
productivity improvement of any organization. Most firms have deemed it fit to
introduce an internal audit in addition to an external audit, they need the
services of an internal auditor in order to enhance the efficiency of their
operation.
Internal auditing has proof of an indispensable tool in improving productivity
in most organization including profit oriented institutions. Internal auditing
is an independent appraisal of the function and qualify of performance of an
organization for the review of the financial accounting and its operation as a
basis for protective and constructive service to management.
According to Woolf (1985), internal audit is an element of the internal control
system set up by the management of an enterprise to examine, evaluate and
report on accounting and other controls on operation. It exist either
voluntarily or in certain circumstance because of statutory requirements.
There are no precise functions for an internal auditors since he does not have
any statutory responsibilities.
Aguolu (2002) states that the functions
of an internal auditor are specified by the management who appointed him or by
an audit committee where this exist. Specific responsibilities of the internal
auditors depends on the entity’s size, structure and management requirements.
They includes the following.
·
To review the data and information made available to management for decision
making.
·
A continuous review of the system of internal control within the organization
for adequate report and recommendation to the management any required
amendments.
·
Carrying out a review of the transaction of the organization for compliance
with the established procedure.
·
Carrying out special investigation on the specific aspect of the business as
may be directed by the management.
·
Providing technical support to management for the establishment, implementation
and improvement in the systems of internal control.
It is not the duty of
the internal auditor to establish the system of internal control. This remains
the duty of management however, being skilled in accounting and being part of
the management team, internal auditor is expected to make substantial
contributions in setting up a good system of internal control, once set up, it
becomes his responsibility to ensure its efficiency and effectiveness.
Historical Background
Study Of ZENTUS Nigeria Limited Afikpo
According to the managing Director of Zentus Nigeria Limited Afikpo, the
company started business properly in 1977 as a sole proprietorship business.
The company started with the sales of timber (plank) and later extended into
block industry business in 1989 at his residence Zentus Lodge-Ndibe road Afikpo.
In 1990 given the need to have a good office to transact business and the
increasing rate of sales, the block industry was moved to No. 1 $ 2 E timber
market road where it presently has its head office. as a result of
extensive research Zentus Nigeria Limited has maintained five (5) strategic
branches in Nigeria, They are Located at Lagos, Onitsha, Abakiliki, Aba and
Ndibe beach. They trade on items such as Palm oil, roofing sheets, building
materials, timber and beach sand respectively. Presently, the company is an
authorized distributor of Emenite roofing sheets, super quality roofing and
ceiling sheets.
Consequently, the company was given certificate of incorporation on 29th
May 1989 as a limited liability company under the company and allied matters
decree (CAMA) 1990) of Nigeria, which confers a legal status on all its
business. The administration department of Zentus Nig. Ltd could be described
as the life wire of the organization. According to the managing director, the
department comprises of all the sections connected with the administration set
up of the company. The company has thirty seven (37) workers employed and they
are usually transferred from one branch to another every two years for control
purposes and eliminated conspiracy but the general manager is exempted in this
exercise.
The company is a strong player in all its line of business and has secured not
just a firm assurance of future financial health but also the goodwill of all
the main thrust to customers are;
·
Supplying and selling of building materials.
·
Conveying of goods to the doorstep of customers.
·
Making their product readily available at all time.
·
Advising customers on the best product for building.
·
Advertising customers on the best product for building.
·
Creating development in its business environment as their customer build.
General Description
of the area of Study
Internal audit is a
basis and indispensable tool for effective business control that production
companies and government department have found the need to introduce internal
audit units to review their operations and records periodically with a view to
ensure the updating of their financial records. Internal auditing appeared on
the business scene much later than auditing by public accountants. The
principal factor in its emergence was the extended span of control faced by
management in employing thousands of people and conducting operations form wide
spread locations.
For internal auditing to be worthy of the name it is essential that personnel
who are independent in all respect perform the functions of the internal
auditor. In order to ensure the independence of the internal auditor he should
not perform any routing functions which is part of the implementation of the
system of internal control but to carry out a review of the system, for
example, checking the accuracy of sales invoice after they have been prepared
forms part of the system of internal control. Internal auditors appears to be
better acquainted with procedures and problems of the institution and the
auditing activity could be carried on continuously rather than the annual
statutory auditing as compulsorily entrenched in the company and allied matters
Decree (CAMA) 1990.
1.2 STATEMENT
OF PROBLEM
Productivity level is very low in most private organizations in Nigeria. Low
productivity can be traced to frauds and errors in the accounts and financial
statement of these firms that often lead to the collapse of such organization.
Most organizations do not have functional audit unit and they often have
problems associated with the report of the financial statement.
1.3 PURPOSE OF THE STUDY
The objectives of this project is to examine the contribution of internal
auditing in improving productivity in Zentus Nig. Ltd, Afikpo. For this study
to be successfully achieved, the following objectives will be noted
a. To examine
whether internal audit has really helped to discover frauds and errors in the
various books of accounts presented in the organization.
b. To identify
the problems faced by internal auditors in their investigation / assignment.
c. To
ascertain how far its application has improved the efficiency of Zentus Nig.
Ltd.
d. To examine
the possible areas of friction between the institution and its internal audit
which hinder or impede the operation.
1.4 RESEARCH
QUESTIONS
Given the challenges associated in the technicalities of internal audit and
company’s productivity which makes it almost impossible for non-accountants to
understand the need to present the findings of this study for the understanding
and benefits of all. The following questions are considered very relevant at
the attainment of the research objectives.
a. Has internal
audit improve the productivity of the organization?
b. Is internal
audit useful in the effort to eliminate corporate fraud?
c. Is
weak internal control a major cause of law productivity in the organization?
1.5 STATEMENT
OF HYPOTHESIS
1. Ho: Internal
audit has not improved the productivity of the organization
Ha: Internal audit has improved the
productivity of the organization.
2. Ho; Internal
audit is not useful in the effort to eliminate corporate fraud
Ha; Internal audit is useful in the
effort to eliminate corporate fraud.
3. Ho; Weak
internal control is not a major cause of low productivity in the organization
Ha; weak internal control is a major
cause of low productivity in the organization.
1.7 ASSUMPTIONS
It was assumed that the supervisor
would guide the researcher in the process of conducting the research. it was
also assumed that the internal audit department and the staff of Zentus Nig.
Ltd Afikpo would corporate with the researcher by completng and returning the
questionnaire.
1.8 SIGNIFICANCE
OF THE STUDY
The economy of any
nation grows and develops when most of the factors of production i.e Land,
Capital and entrepreneur are fully employed in the most effective sector of the
economy. This implies that the major difference between a poor and rich nation
is seen on the productivity level of each of the country. It follows therefore,
that any research study on the role of internal auditing in improving
productivity of any organization will be of benefit to the entire country. This
study would be of immense value as it would act as a secondary aid to
students of other higher institutions who may want to research into internal
audit. It would also help to expose the contribution of internal auditing in
improving productivity in the profit oriented industry.
1.9 DEFINITION OF
TERMS
Attempts were made to avoid technical
or complex words but those that could bot be avoided are defined as follows.
a. Internal
Control: It is the whole system of controlling financial or otherwise
established by management in order to ensure as far as possible the accuracy
and reliability of the records, run the business in an orderly manner and
safeguard the company’s assets, its objectives being the prevention or early
detection of fraud and errors, it may include internal auditing.
b. Internal
Check: It is defined as the statement of auditing as the allocation of
authority and work such as a manner as to day work by means of the work at one
person being proved independently by another or the work of a person being complementary
to that of another.
c. Internal
Auditing: it is the independent appraisal of the functions and quality of
performance of an organization by a specially assigned staff as part of the
internal control system. It objectively examines events and reports on the
adequacy of internal control as a contribution to the efficient and effective
use of resources.
d. Audit
Program: It is an outline of the work that an audit intends to carry out.
It is a set of instructions as to the specific steps of actions to be taken,
the procedures to be adopted the questions to be asked, the examinations to
carry out, the specific places to be visited and the documents to be obtained.
The main objective of keeping an audit program is ton offer definite guidance
to the audit check as to the work to be done.
e. Appraisal:
the document, assessing the value, quality of nature of the activity within the
organization.
f. Vouching
Audit: It is an audit approach which involves an in dept examination of the
transaction of the business together with the documentary evidence of
sufficient validity to satisfy the auditor that the transactions are in order,
properly authorized and accurately recorded.
g. Tracing:
This means firstly inspecting the sources documents and then determine whether
the transactions or the amount has been recorded. It is generally used to test
the completeness assertion.
h. Fraud:
It is defined as the international distortion of the financial statements to
secure particular advantage such as the misappropriation of assets.
i. Independence:
It is defined as an attitude of mind much deeper than the surface display of
visible standard. It is essential for the auditor to be able to express an
objective pinion in his report.
j. Audit:
according to Taylor (1982), an audit is the independence examination of the
financial statement of an organization with a view to expressing an opinion as
to whether these statements give a true and faire view and comply with the
relevant statutes for the period under review and of the financial state of the
organization at the end date so enabling the auditor to report thereon.
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