TYPES OF RETAILER

TYPES OF RETAILER

Consumers today can shop for goods and services in a wide variety of retail organizations. There are store retailer, nonstore retailer, and retailer organization.

1. SUPERMARKETS

These are large self-service stores traditionally selling food, drinks and toiletries, but range broadening by some supermarket chains means that such items as non-prescription pharmaceuticals, cosmetics, and clothing are also being sold. While one attraction of supermarkets is their lower prices compared with small independent grocery shops, the extent to which price is a key competitive weapon depends upon the supermarket’s positioning strategy.

2. DEPARTMENT STORES

So-called because related product lines are sold in separate departments such as men’s and women’s clothing, jewelry, cosmetics, toys, and home furnishings, in recent years department stores have been under increasing pressure from discount houses, specialty stores and the move to out-of-town shopping. Nevertheless, they are still surviving in this competitive arena.

3. SPECIALTY SHOP

These outlets specialize in a narrow product line. For example, many town centers have shops selling confectionery, cigarettes and newspapers in the same outlet. May speciality outlets sell only one product line such as Tie Rack and Sock Shop. Specialization allows a deep product line to be sold in restricted shops space. Some speciality shops focus on quality and personal services such as butchers and greengrocers.

4. DISCOUNT HOUSES

These sell products at low prices by bulk buying, accepting low margins and selling high volumes. Low prices, sometimes promoted as sale prices, are offered throughout the year. As an executive of Dixons, a UK discounter of electrical goods, commented we only have two sales each lasting six months. Many discounters operate from out-of-town retail warehouses with the capacity of stock a wide range of merchandize.

5. CATEGORY KILLERS

These are retail outlets with a narrow product focus but with an unusually wide width and depth to that product range. Category killers emerged in the USA in the early 1980s as a challenge to discount houses. They are distinct from speciality shops in that they are bigger and carry a wider and deeper range of products within their chosen product category, and are distinguished from discount houses in their focus on only one product category.

Two examples of the category killer are Toys “R” Us and Nevada Bob’s Discount Golf warehouses, e-marketing 20.1 discusses how Toys “R” Us operates and gains competitive advantage over traditional toy outlets, while facing a major threat from a new internet – based competitor eToys.

6. CONVENIENCE STORES

These stores offer customer the convenience of close location and long opening hours every day of the week. Because they are small they pay higher prices for their merchandise than supermarkets, and therefore have to charge higher prices to their customers. Some of these stores join buying groups such as spar or mace to gain some purchasing power and lower prices. But the main customer need that they fulfill is for top-up buying, for example when short of a carton of milk or loaf of bread. Although average purchase value is low, convenience stores prosper because of their higher prices and low staff costs, many are family businesses.

7. CATALOGUE STORES

These retail outlets promote their products through catalogues which are either posted or are available in the store for customers to take home. Purchase is in city center outlets where customers fill in order forms, pay for the goods and then collect them from a designated place in the store. In the UK, Argos is a successful catalogue retailer selling a wide range of discounted products such as electrical goods, jewelry, gardening tools, furniture, toys, car accessories, sports goods, luggage, and cutlery

NONSTORE RETAILING

MAIL ORDER

This non-store form of retailing may also employ catalogues as a promotional vehicle but the purchase transaction is conducted via the mail. Alternatively, outward communication may be by direct mail, television, magazine or newspaper advertising. Increasingly orders are being placed by telephone, a process which is facilitated by the use of credit cards as a means of payment. Goods are then sent by mail. A growth area is the selling of personal computers by mail order. By eliminating costly intermediaries, products can be offered at low prices. Mail order has the prospect of pan-European catalogues, central warehousing and processing of cross-border orders.

AUTOMATIC VENDING

Automatic vending is used for a variety of merchandise including impulse goods like cigarette, soft drinks, coffee, candy, newspapers, magazines, and other products like hosiery, cosmetics, hot food, condoms, and paperbacks. Vending machines are found in factories, offices, large retail stores, gasoline stations, hotels, restaurants and many other places. They offer 24 hours selling, self-service, and merchandise that is always fresh.

BUYING SERVICE

This is a storeless retailer serving a specific clientele usually employees of large organizations who are entitled to buy from a list of retailers that have agreed to give discounts in return for membership.

DIRECT SELLING

Direct selling, sometimes called door-to-door retailing, involves direct sales of goods and services to consumers through personal interactions and demonstrations in their home or office.

TELEMARKETING

Another form of nonstore retailing, called telemarketing, involves using the telephone to interact with and sell directly to consumers. Compared with direct mail, telemarketing is often viewed as a more efficient means of targeting consumers, although the two techniques are often used together.

ONLINE RETAILING

Online retailing allows consumers to search for, evaluate, and order products through the internet. For many consumers the advantages of this form of retailing are the 24-hour access, the ability to comparison shop, in-home privacy and variety.

REFERENCES

Aham Anyanwu (2000), Dimensions of Marketing. 2^nd Edition. (Owerri: Pascal Publications), p.146.

Ben, Ogedengbe (2007), Small Business Management: A Contemporary Approach. 1^stEdition (Kaduna: Data Prints), p. 152.

David Jobber (2009), Principles and Practice of Marketing. 3^rd Edition. (New York: McGraw – Hill), p. 745 – 760.

 

STANDARD COSTING

STANDARD COSTING

Standard costing are target cost that should be incurred under efficient operating conditions. According to Vafeas (2005) standard costing are predetermined costs.

A standard costing system can be applied to organizations that produce many different products as long as production consists of a series of common operations.

For example, if the output from a factory is the result of a given common operations, it is therefore possible that a large product range may result from a small number of common operation. This standard costs should be developed for respective operations and product.

Standard costs are simply derived by combining the standard cost from operations which are necessary to make the product. Standard costing is a system of accounting which is used in determining the standard cost relating to each element of costs material, labour and overhead for each line of product manufactured or service supplied.

According to Brown (2006) a standard is a predicted measurement of what amount of input should be and what that input should be and what that input should cost per unit of that input. A standard should be reasonable be reasonable in that it should be attainable by skilled and motivated workers and should also enable the company to produce a product that is high enough in quality and low enough in cost so as to meet the demands of the competitive market.

It is a tool used by management for cost planning and cost control purpose. When a company uses standard cost, all costs affecting the investor accounts and the cost of goods sold accounts are stated in terms of practice, five standards are usually predetermined for the product of a manufacturing company.

They are as follows:

1. Material quantity standard: This is the amount of material that should be used from a unit of product. In some cases more than one type of material is used, as a standard is set for each material.
2. Material price standard: This is the cost per unit of material.
3. Labour Quantity Standard: is the amount of labour usually expressed in direct labour hours that should be used per unit of product.
4. Labour Price Standard: is the cost of direct labour per direct labour hours. The common name for this type of standard is wage rate standard.
5. Overhead Standard: This is the amount of overhead cost that should be per direct labour hour.

From the definition above, it will be seen that the following process are involved:
1. Predetermination of standard cost.
2. Recording of actual cost.
3. Comparing actual cost with standard cost.
4. Obtaining the cost with standard cost.

Establishment of Standard Cost

The success of any system is assured if cost control depends to some extent on getting the standard cost guaranteed. If the target costs are unattainable, most of the subsequent work of cost control system may be wasted. The first stage warrants constant consideration and setting of suitable standards is not difficult provided that certain rules are observed and certain pitfalls are avoided.

Whether dealing with materials labour or overhead labour, the basic principle of setting standards are similar. The target cost should be estimated in terms of two distinct fact quality expressed in physical terms and the price to be paid for each physical unit. For example, in estimating material cost, the amount of material needed to make the product should be per unit of material.

There are reasons for recommending that target cost be considered in terms of both factors. First, prices may change especially in times of inflation but the physical quality which is required for production is not affected by change in price. This is because the same quantity has to be used and at the same time be maintained.

The second ad more important reason for distinguishing these two factors is that it is essential for analysing the causes of variances if the actual material cost is said to be N300, 000 more than the standard estimated cost, the question that will arise because too much material were used or because the actual price paid was higher than the material allowed for the machine? Without this fundamental knowledge, it may be impossible to identify that proper standard which is extremely important because management will evaluate past performance.

References

Ezeamama, M. C. (2002). Fundamental of financial management (A practical guide). Enugu: Ema Press Publishing Ltd.

Seal, W. (2006). Management accounting and corporate governance. An institutional interpretation of the agency problem. Management Accounting Journal, Vol. 15.

THE CONCEPT OF PROFIT PERFORMANCE

THE CONCEPT OF PROFIT PERFORMANCE

There are various measures or means of attaining profit maximization. Embedded in them are concepts that boost the goal of profit performance. Key performance indicators (KPI) are one of the essential measures through which an organization define and measure progress toward organizational goals. Key performance indicators are quantifiable measurements agreed beforehand that reflect the critical success factors of an organization. They will differ depending on the organization.

A business may have as one of its key performance indicators the percentage of its income that comes from customers return. A school may focus its key performance indicators on graduation rates of students. Also a customer service department may have as one of its key performance indicators, in line with overall company‟s KPIs, percentage of customers calls answered in the first minute. Whatever key performance selected they must reflect the organizations goals, they must be key to its success, and they must be quantifiable (measurable). Key performers indicators usually are long term consideration the definition of what they are and how they are measured do not change often. The goals for a particular key performance indicator may change as the organizations goal changes, or as it gets closer to achieving its goal.

An organization that has as one of its goals to be the most profitable company or industry will have key performance indicators that measure pre tax profit and shareholders equity will be among them. However, if a key performance indicator is going to be of any value, there must be a way to accurately define and measure it. It is important to define the key performance indicators and stay with the same definition from year to year. for a key performance indicator to increase its sales, you need to address considerations like whether to measure by units sold or by naira value of sales.

Will returns be deducted from sales in the month of the return? Will sales be recorded for KPI at a list price or at the actual sales price?

Thus, if a company‟s‟ key performance indicator is increased consumer satisfaction? That KPI will be focused differently in different departments.

The manufacturing department may have a KPI of number of units rejected by quality inspection, while the sales department has a KPI of minutes a customer is on hold before a sales representative answers: success by the sales and manufacturing departments in meeting their respective departmental key performance indicators will help the company meet its overall KPI which is to enhance the company‟s profit performances.

Finally, Key performances indicators can be used as performance management tool, but also as a carrot. KPIs gives everyone in the organization a clear picture of what is important, of what they need to make to make happen. You use that to manage performances and maximize the organizations profit as well. And also that everything the people in your organization do is focused on meeting or exceeding those key performances indicators.

Furthermore, Walter Johnson and Demand media (2005) stipulated that maximizing corporate or organization profit, as an idea seems straight forward, simple and obvious. In terms of basic managerial policy, however, it is anything but maximizing corporate profit at first blush seems to negate the maximization of less tangible assets such as public welfare, efficiency, labour, loyalty, managerial accountability or work place satisfaction. In free market economy, however this is rarely the case.

He argued that the foundation of maximizing organizations profit means that the value of goods and services created and sold in the open market is greater than the costs of creating this value. More specifically to maximize profit is to squeeze as much value out of the resources, machines and labour as possible so that the surplus value will go to the firm owners. The conceptual problem is how this goal of profit maximization relates to other genuine business assets in the market place. Therefore, other variables such as social welfare or marketing share cannot be terminated totally since all of these assist in the development of profit performances.

WHAT IS ACCOUNTING SYSTEM

WHAT IS ACCOUNTING SYSTEM

Accounting systems is defined by different scholars, among this are:

Hussey (2005) defines accounting system as the system designed to record the accounting transaction and events of a business and account for them in a way that complies with its policies and procedures.

Hartzell (2006) says that accounting system is a consistent way of organizing, recording, summarizing and reporting financial transactions.

The minimum requirements for an accounting systems include the following;

It must provide financial information for management to make policy decisions, prepare budgets and grant proposals and provide other. Useful financial reports, also, similar transitions must receive consistent accounting treatment.

Ama (2004) defines the accounting system as “ a formal system for identifying, measuring, accumulating, analyzing, preparing, interpreting and communicating accounting information about a particular entity to a particular group”.

By formal system, we mean that the accounting system carries out its functions with laid down rules, regulations, methods, procedures and techniques. It is also a routine and an automatic system.

An accounting system as opined by Ama (2001) is a formal mechanism for gathering, organizing and communicating information about an organization’s activities.

An accounting system can also be defined as mechanism for gathering and communicating data for the ends of assisting and co-ordinating collective decision in view of the overall objective of a firm or an organization.

Accounting system by definition is a financial information system which includes accounting terms, records instruction manuals flow charts programs, and reports to fit the particular needs of the business.

Accounting systems is a set of records, procedures and equipment that routinely deals with the events affecting the financial performance and position of the organization.

Finally, according to business online dictionary, a system is an organized set of manual and computerized accounting methods procedures and control established together, record, classify, analyze, summarized interpret and present accurate and timely financial data for management decisions.

Financial Management

Financial Management

Financial management is concerned with the planning organizing, procurement and utilization of government financial resources as well as the formulation of appropriate policies in order to achieve the aspiration of members that society.

Premchand (1999) sees public financial management as the link between the community‟s aspirations with resources, and the present with future. It lies at the very heart of the operations and fiscal policy of government of government.

The Stage of Financial Management

1) Policy Formulation: policy formulation is one of the most important stages in financial management structure according to Premchand (1999), the transformation of the society‟s aspirations into feasible policies with well recognized financial implication is at the heart of financial management.

Issues not well addressed during policy formulation tend to grow in magnitude during implementation and may frequently contribute to major reversals in the pursuit of policies or major slippages that may lead to contrary results”.

Financial management should be designed to achieve certain micro and macro economic policies. It entails a clearly defined structural and articulated system that moves to promote cost-consciousness in the use of resources.

The government needs to have an estimate of revenue and expenditure to achieve the policy objective of government.

2) Budget formulation: the budget formulation is the step that involves the allocation of resources before the submission to the legislature for review and final approval.

According to Appah (2009), in Nigeria the budget formulation involves the articulation of the fiscal, monetary, political, economic, social, and welfare objectives of the government by the president; based on these,

I. The department issues policies and guidelines which form the basis of circulars to ministries/departments requesting for inputs and their needs for the ensuring fiscal periods.

II. Accounting officers of responsibility units are required to obtain and collate the needs of their units.

III. Accounting officers of ministries in this case the permanent secretaries are required to collate these proposals which would be defended by units‟ heads before the supervising minister.

1) Budget structures: according to Anyanwu (1997), a budget structure addresses the question of how the budget is or should be composed. In Nigeria, budgets have revenue and expenditure sides. According to prenchard (1999), many governments have yet to put in place cash management systems, which would pave way for coordinated domestic management.

The practice of limiting outlays to collected revenues has exacerbated this problem. He, further argued that there is a massive underfunding of programs and projects provided for in the budget.

2) Payment system: This involves the operational procedures for receiving monies for the public and for making payment to them. In Nigeria, government makes payments using a variety of procedures. These include book adjustments, issue of cheques, and payment authorities and electronic payment systems.

3) Government accounting and financial reporting: this is a very important component of the public sector financial management process in Nigeria. As Adams (2001) noted that government accounting entails the recording, communicating, summarizing, analyzing, and interpreting financial statement in aggregate and in details.

In the same vein, premchand (1999) argues that government accounts have the dual purpose of meeting internal management requirement while providing the public with a window on government operations.

Government financial reports should be prepared with the objective in mind of providing full disclosure on a timely basis of all material facts relating to government financial position and operations (A chua, 2009).

Financial reports on their own do not mean accountability but they are as indispensible part of accountability.

4) Audit: One of the fundamental aspects of public sector financial management in Nigeria is the issue of audit of government financial reports.

Audit is the process carried out by suitably qualified Auditors during the accounting records and the financial statement of enterprises are subjected to examination by the independent auditors with the main purpose of expressing an opinion in accordance with the terms of appointment.

The purpose of expressing an opinion in accordance with the terms of appointment. The high level corruption in the public sector of Nigeria is basically as a result of the failure of auditing.

As prenchand (1999) put it “many audit agencies are legally invented from reviewing policies. Most of them cannot follow the trail of money, as they do not have the right to look into books of contractors, and autonomous agencies”. One fundamental failure of audit is the absence of value of money in the Nigerian public sector.

5) Legislative Control: Nigeria is expected to perform this very important task of controlling and regulating the revenue and expenditure estimates in any fiscal year.

It is the responsibility of the members of the national assembly to ensure that the budget estimates are properly scrutinized to ensure accuracy, effectiveness and efficiency of government revenue and expenditure.

EFFECTS OF TAXATION

EFFECTS OF TAXATION

The effects of taxation is conceived to cover all the changes in the economy resulting from the imposition of tax. Generally, the presence of tax distorts the patterns of production, consumption, investment and employment thus giving validity to what HARPER (1963:213) calls the concepts of “general fiscal rationality”.

The Effects of Taxation are as follows:

a. INCENTIVE TO INVEST:- Heavy taxes may reduce the preventive to invest especially if the tax heavily on savings and profits. All the discrimination features of the companies income tax stems from the fact that company’s net income is the base.

By definition of tax, all unincorporated activities are exempted and even within the corporate sector of the economy. The tax falls more heavily on activities with low rations of debt and it is a deductible expense.

The consequence of this discrimination is the distortion of the economic structure favoring non-corporate sector, there is distortion favoring those activities which can readily be financed in large measure by dealt capital over those that cannot.

However, the Nigerian companies income tax attempts to attract investment in certain preferred sectors by giving tax incentive to firms engaged in such activities.

b. INFLATION &TAXATION:– taxation as a fiscal tool available to the government can be used to fight inflation, deflation, stage, flation and other undesirable trends.

For example, an increase in the rate of both companies and personal income taxes during inflationary period can reduce expenditure from the private sector thereby reducing pressure on the market and curtailing inflation.

The chief of inflation on taxation as noted by EREASER (1980:116) is to change and often increase its filed in money terms without the need to adjust tax.

c. INCENTIVES WORK:- Heavy direct tax may reduce incentive to work if the amount paid too much, the tax payer quite the job or at least work less.

A highly progressive and steep tax structure may serve as demonization from working harder once it has reached a certain income level because and additional increase income after that level will more proportionality increase tax of the individuals.

d. IT REDUCES PRODUCTION: if exercise duties are high, production will be adversely affected.

e. IT WILL ALTER DEMAND SUPPLY:– When few goods are produced and their prices high as a result of indirect taxes demand and supply will be low.

f. CAUSES SCARCITY OF GOODS:– Taxation reduces the quality of goods produced locally an imported thereby causing scarcity of goods.

FUNCTIONS OF TAXATION

FUNCTIONS OF TAXATION

There are three (3) main functions of taxation which were explained by SIUS (1972:522 -523) as:

a. REVENUE:– A tax extracts money from people or organizations and provides revenue for government.

This makes it possible for individuals to have less money for spending while the government has more to spend.

The reduction in the spending potential of the public sector and the corresponding increase in the potential of the public sector are clearly by power of taxation hence tax was solely introduced to help the government out of financial needs rather than from a public objective of reducing the citizen’s spending power.

b. RESOURCE RE-ALLOCATION:– Tax can alter the product mix generated within the private sector. The imposition of taxes may make certain commodities expensive.

Example includes TOBACCO, LIQUOR etc. whereas the use of subsidies or negative tax could make certain commodities of essential nature less expensive. As a result of this, people will tend to use more of the later group and less of the farmer.

The tax includes charge in the product mix which comes about through the effects of taxes on prices and qualities produced. Also, the potential income tax purposely leaves some gains subject to little or no tax and thereby encouraging source activities.

C. INCOME REDISTRIBUTION: Economic power as measure by income or wealth could be redistributed through the use of taxation. When tax is substantially progressive, it takes an increasing proportion of income.

TYPES OF TAX

TYPES OF TAX

Tax according to AGYEI (1983:3) and OKEKE (1994:259) is generally grouped into DIRECT AND INDIRECT TAX. Tax is also classified as proportion, progression and regressive tax.

He (AGYEI) West further to define DIRECT TAX as those taxes levied on factor of production, in world this consist of the following.
a. Personal income tax

b. Companies income tax

c. Petroleum profit tax

d. Capital gain tax

e. Capital transfer tax

f. General property tax

g. Expenditure tax

h. Stamp duties

i. Poll tax

j. Gift tax

k. Estate duties and inheritance/death duties

l. Capitation tax: Some of these taxes are not levied in Nigeria and Africa as a whole, the ones levied in Nigeria include.

a. Personal income tax (payee)

b. Companies income tax

c. Capital gains tax

d. Capital transfer tax

e. Sales tax and petroleum

f. Profit tax and so on Nigeria accountant (1993:2)

He also mentioned that INDIRECT TAX are those tax levied against goods and services, example of these in Nigeria include the followings.

a. Sales tax

b. Import duties

c. Export duties

d. Excise duties

e. Purchase tax

f. Value added tax (VAT)

PRINCIPLES OF TAXATION

PRINCIPLES OF TAXATION

These are guiding principles of governing the various tax systems we have today and even in the past.

According to ADAMS SMITH (1996:87), there are major principles of taxation, among these principles of taxation are the following

1. EQUALITY OF PAYMENT:- This principles of taxation state that income earned the same level and with the same responsibility should pay the same amount of money in tax. This also means that people should pay tax according to their ability of pay (PAYE) pay as you earn.

2. CERTAINTY: This principles  of taxation holds that the amount of tax to be paid by one tax payer should be made known to him or her and how it is worked out should be clearly explained to him or her.

3. CONVENIENCE: This means that tax payment should be arranged so as to be convenient to the tax payers.

4. ECONOMY:- The tax system should be arranged to make it possible to send little amount of money in tax collection. Any system, where by a proportion of the tax money is spent on its collection, is not a good tax system that is to say that the tax authorities should be efficient in their collection of taxes.

5. SIMPLICITY: The tax system or principle should be simple enough for everybody especially the payer to understand.

6. FLEXIBILITY: A good tax system must be easily changed. These tax system concerned must be capable of being easily or conveniently adjustly as occasion warrants.

7. IMPARTIALITY: In this case, there shall not be any partiality in tax assessment. This means that tax officials should not discriminate against tax payer while assessing them for tax payment.

8. PRODUCTIVITY: In tax principle the amount realized from tax should be sufficient to cover some government expenses. According to ANDY (2001:199), this is otherwise referred or known as the principle of fiscal adequacy.

In his own contribution in the subject under consideration, FALDDUMETA (1877:212-213) agrees with the above principle of equality, there are two nations of equality. These are horizontal equity (i.e.) equal treatment for equal and vertical equality, which is the poor and rich. In the authors view, the principle of equality often envisages a transfer of income from the very rich to the poor. Progressive income tax is devised to achieve such redistribution. It takes a greater proportion of income from the rich than from the poor. The principle of equality or ability to pay reflects a concern fro the poor members of the society.

9. NEUTRALITY: In the case of neutrality, a particular tax system should not interfere with the demand and supply of goods and services. This implies that the system involved does not have to be in such a way as to hinders consumers and producers from demanding and supplying various goods and services, also it should not discourage the payers from working, investing and of cause saving.

WHAT IS TAXATION

WHAT IS TAXATION

WHAT IS TAXATION: Taxation has been given various definitions by different author’s some of these definitions are as follows.

OKEKE (1994:254) Defines tax as a payment compulsorily made to individuals, companies, cooperate bodies by the government or governmental agency for the public use.

STEIN (1991:14) defines tax as a means by which the government raises revenue to meet its expenditure. It may also be used as a means of influencing or controlling the economy.

OSITA (2004:1) defines tax as the compulsory levy by government through the various agencies in the income, capital consumption of its subjects.

ONAOLAPO (1988:3) defines taxation generally as hew process or machinery by which communication or group of persons are made to contributes part of their income in some agreed quantum or method for the purpose of the administration and development at the society as a whole.

AGYEI (1983:2) defines taxation as transfer of resource from the private sector in order to accomplish some of the nations economics and social goal.

TYPES OF FRAUD

TYPES OF FRAUD

The following are the different types of fraud:

1. False Accounting

Some of the most dramatic corporate failures over the years have been characterized by false accounting.

I. The main aim of false accounting is to present the results and affairs of the organization in a better light than the reality.

II. This is often done by overstating assets or understanding liabilities to reflect a financially strong; the reasons for doing this are varied and include obtaining financing, supporting the share price, and attracting customers and investors.

Asset misappropriation:

Any business asset can be stolen by employees or third parties, or by employees and third parties acting in collusion. Example of common employees and management fraud includes:

I. Direct theft of cash or realizable assets, such as stock or intellectual property, such as price or customer lists.

II. Make false expenses claim.

III. Payroll fraud diverting payments or creating fictitious employees.

Computer fraud:

There is no such thing as “computer fraud” rather, a computer can be the object, subject or tool of a fraud. As technology evolves, so we see new of perpetrating fraud through computers such frauds have included:

I. Diverting funds from one bank account to another, having gained unauthorized access to the bank, perhaps by hacking.

II. Holding out to be legitimate business on the internet and obtaining payment for goods that are not delivered or a lower specification than that advertise.

III. Manipulating the share price of a company by publicizing invalid news items or claims on bulleting boards.

Each of these frauds could have been carried out without the use of computer. What computer and the internet in particular, have provide is access by connected parties, where previously an insider would need to have been involved. Computer also allow processing of large amount of data to be performed quickly, enabling the creating of password.

Insurance Fraud:

Insurance fraud covers a number of areas are varies widely in its nature; it includes but is not limited to:

I. Overstated claims

II. False claims losses that never occurred

III. Multiple claims

IV. Obtaining property fraud Intellectual Property Fraud

Intellectual property includes items such as patents, design rights and customer lists, and is just as much a business assets as plant a machinery or stock like any other asset, intellectual property is therefore, susceptible to theft by staff and third parties, although it is not always apparent intellectual property right are being misappropriated or infringed.

Employee and management fraud could include direct theft of intellectual property, for example by departing employees using critical business information to set up in competition or through the sale of price lists or it by existing employees.

Theft or Infringement by Third Parties:
I. Deliberate under reporting of royalties by a party selling or manufacturing the product under license.

II. Knowingly developing competing products and infringing design rights that have already been registered and protected by the creator.

III. Passing off fake product as the genuine article, e.g. branded luxury goods, perfumes, CDs and computer software. Corruption:

General, bribery and corruption are off book frauds that occur in the form of:
I. Kicking back or commission

II. Bid rigging

III. Gifts or gratuities. Investment Scheme Fraud:

Investment scheme fraud can also be thought of as third party asset misappropriation. It involves taking money from customers on the promise of spectacular returns but using the cash from one‟s own purpose.

Such frauds result from a combination of motivational and situation factors in which the crucial element is the presence of both opportunity and motivation. Effective control structures, whether preventive or detection based, can serve to reduce or deny the opportunity to a potential fraudster.

Others includes;

Financial Fraud: Cross-border fraud, charities frauds, Romance schemes, debt elimination Nigerian “4-1-9” scams.

It is not the auditor‟s purpose in carrying out an audit to determine whether or not frauds. Or any kinds have been perpetrated by servants of his clients. Kingston cotton mill (2005) he auditor does not guarantee the discovery of all fraud.

The auditor‟s duty is to assess whether or not the published accounts accurately represent the true state of his client‟s business and to produce report addressed to the owner‟s in which he expresses his opinion of the truth and fairness, and sometime other aspects of the financial statements. The phrase “true and fair” does not imply that the accounts are corrects in every detail and the presence of minor in accuracy would not invalidate the auditor‟s opinion. It is however, obvious that if a material frauds has been perpetrated and is not reflecting the true state of the client‟s business.

REFERENCE

Anyanwu, A.(2004): Data Collected and Analysis Okwe, Auan Global Publication

Alvin, A.S & James, K.L (2002): Auditing and Investigation Approach. Longman Group Limited, London.

Ephramin, E.U (2006): Principle of Auditing, Ibandon, Clean Hands production.

Horby, A.S (2001): Oxford Advance Learning Dictionary London, Special Price Edition Oxford University Press

Howlard, R (2001) Auditing Served Edition, Macdonald and Evans Limited, London.

DEVELOPMENT BANKS

DEVELOPMENT BANKS

Development banks are specialized financial institutions providing medium and long – term credit for the creation or expansion of agriculture, commercial and industrial enterprises in developing countries such as Nigeria. They are mostly established by government.

The main objective of development banks is the promotion of economic development in the economy. The idea of setting up development banks in Nigeria was mooted after the establishment of the CBN.

It became apparent that there was an urgent need for banking institutions capable of providing medium and long-term finances, to fill the gaps in the economy which the merchant banks at that time were not well – equipped to service.

The development banks operating in Nigeria includes the Nigeria Bank for Commerce and Industries (NBCI), the Nigeria Agricultural, Co-operation and Rural Development Bank (NACRDB), the Federal Mortgage Bank of Nigeria (FMBN), and the Nigerian Industrial Development Bank (NIDB).

Functions of Development Banks

Development Banks are specialized banks which are established for specified purposes in the economy. Their functions are therefore aimed at developing those sectors which they are established for. However, they perform two broad functions which include the banking functions and the development functions.

1. Banking Functions

i. Development Banks Provide long-term and medium-term finance / loans for commerce, industry and agriculture as well as general development projects.

ii. Development Banks make funds available in the form of equity to development projects.

iii. They raise bilateral and multilateral loans from international aid agencies like the United States Agencies for International Development (USAID), from international donor agencies like the World Bank and from their own governments.

2. Development Functions

i. Development banks provide promotional activities such as identifying and properly articulating investment proposals.

ii. Development Bank facilitates the establishment of institutions and enterprises which fill specific gaps in the financial system.

iii. They help to stimulate their nations’ capital markets (Market for long-term loans) by selling their own stocks and bonds and / or selling and using the proceeds to invest in new enterprises.

iv. Development Banks provide their clients with technical skill and advice at the preparatory and implementation stages of projects.

v. They provide managerial assistance to their clients in project preparation and
evaluation.

vi. Development Banks ensure that allocations to projects are in line with the defined economic, social and political priorities of the government.

vii. Development banks ensure efficient allocation to scarce financial resources in the development planning projects.

viii. They thus help to quicken the pace of economic development.

The Objectives of Banking Regulations

The Objectives of Banking Regulations

Banking regulation is a form of government regulation which subjects banks to certain requirements, restrictions and guidelines, designed to create market transparency between banking institutions and the individuals and corporations with whom they conduct business, among other things.

The following were the objectives of Banking Regulation:

(a) Confidence of Depositors

One of the primary objectives of the bank regulations enacted following the Great Depression was to ensure the confidence of depositors. One of the catalysts of the Great Depression was fear over the security of money deposited in banks. The lack of confidence led to runs on banks, which quickly ran out of financial reserves. By regulating the management of bank finances and the level of reserves a bank has on hand, the government seeks to ensure depositor confidence, avoid similar runs on banks and encourage active participation in the national financial system.

(b) Prevention of Risky Behaviors

Banks make money by investing deposited funds in various activities, typically loans to businesses and individuals. Every loan carries some level of risk. The more risk involved in a financial transaction, the greater the potential reward. Those rewards can be very tempting for banks, and one objective of banking regulations is to restrict the level of risk to which a bank may expose itself. If a bank were to become involved in too many risky investments, it would endanger the money of depositors.

(c) Prevention of Criminal Activity

Many banking regulation require banks to notify the government of deposits over a certain dollar amount or of any suspicious banking activity by the bank’s customers. Money is a means and an end to many criminal activities, such as drug trafficking and international terrorism. By restricting the financial freedom of criminal and terrorist organizations, the government seeks to reduce the strength of such groups. Regulating banks (banking regulation) to ensure they are not knowingly or unknowingly helping criminal groups hide or distribute money is one way of doing this.

(d) Directing Credit

Many bank regulations require or encourage extension of credit to certain industries or classes of loans that are deemed socially desirable. For example, a bank regulation (banking regulation) might provide incentives to encourage loans to minority-owned businesses or students pursuing higher education. Just as the tax code promotes social policy with preferential tax treatment of certain activities, bank regulations promote social policies that have certain requirements and incentives.

References

Pandey, I. M. (2005): Financial Management, Vikas publishing house ltd, New Delhi, pp 517 – 555, helpline@vikaspublishing.com

Central Bank of Nigeria (2004): Guidelines and incentive on the consolidation in the Nigeria banking industry. Abuja.

Douglas, G. (2010): Capital Regulation and Risk Sharing, International Journal of Central Banking, Volume 6, Nunber 4.

Llewellyn, D, T (1986): Regulation and supervision of financial institution, the institute of bankers laundry review.

Audit Objectives with respect to government organization

Audit Objectives with respect to government organization

The following are the general objective of auditing with respect to government organization.

(a) To know whether the resources of the government organization such as funds proportions and personnel are perfectly utilized and controlled in an effective economical and efficient manner.

(b) To ascertain whether all receipt and revenue arising from their operations which are under examination are collected properly accounted for.

(c) To know whether the organizations are carrying out the authorized activities or duties of the government in a way it has been arranged or organized.

(d) To ascertain whether proper internal control system being maintained by the organization and if any, effective is it.

(e) To confirm it the accounting system complies with the principle, standards and related requirements as prescribed by the government or accounting body.

(f) To ascertain if the specification of returns, required to be filed by various, portions, their contents, frequency, number of copies destination and the deadlines for submission are duly followed.

(g) Description of financial procedures and systems for safeguarding of assets (e.g the banking of cash, payment of way).

(h) To know the procedures for reporting and investigating lessons on fraud etc

TECHNIQUES OF INVENTORY CONTROL

TECHNIQUES OF INVENTORY CONTROL

The Techniques of Inventory control are as follows:

• Economic purchase order quantity (how much to order)

• Re-order level[when to order]

• Minimum inventory or safety stock

ECONOMIC PURCHASE ORDER QUANTITY

In order to control the inventory a decision model has been to determine the optimum quantity of material to be purchased on each purchase order.

The model determines the optimum working stock level to be maintained. Each time a purchased order is placed, the company incurred certain cost.

In order to minimize the cost of placing purchase order, the company could increase the order quantity to meet the company’s needs for the year at one time, incurring only the cost of one purchase order.

However, such a practice will lead to having a large average inventory of working stock, resulting increased carrying cost.

The cost of ordering and the cost of any inventory may be summarized as follows:

COST OF ODERING:

i. Preparing purchase or production orders, receiving and preparing and processing of related document.

ii. Incremental cost of purchasing or transportation for frequent order (purchase in small lots is often costlier and transportation cost also increase).

iii. Out of pocket cost of postage, telephones, telegrams, cost of stationary, travelling etc.

iv. Extra cost of numerous small production runs. Overtime, setups, training etc

COST OF CARRYING

I. Interest of investment

II. Losses from obsolesce and deteriorations, spoilage.

III. Storage space cost including rent, rate, tax, electricity etc

IV. Insurance, in addition- fixed cost in form of salaries, wages etc of employees connected with work in-stores and material handling departments.

RE-ORDER LEVEL

Lead time is the time interval between placing an order and receiving delivery. If the lead time and the quantity of demand during lead time are known with certainty the recorder point may be determined.

If in the above example, lead time is 2 weeks and the average usage is 18 per week, the re-order point will be 18 × 2 = 36 units. The day the level of stock falls to 36 units, an order for 173 units will be placed.

By the time these are delivered, the stock will be nil and on the day of delivering it will shoot up again to 173 units and so on.

MINIMUM INVENTORY OR SAFETY STOCK

In our previous paragraph, we had assumed with certainty that 18 units would be used per week. In practice, we seldom come across such a situation and demand cannot be forecast accurately. Actually the demand may fluctuate from period to period.

If, therefore the usage per week at any time goes beyond 18 units per week, the company will be out of stock for sometime hence arise the need for providing for some safety i.e some minimum or buffer as inventory as a cushion against such stock outs.

The re-order point is inter-related with the safety stocks because as the re-order point is moved upward, the amount of the cushion is increased.

Thus the re-order point is the resultant of the demand during lead time plus safety stock. By increasing the safety allowance the re-order point is increased by the same amount. It should be noted that the economic order quantity does not come into the picture and is independent of safety stock analysis.

Key words: Techniques of Inventory control

REFERENCE

Adeniyi.A.(2010). Cost accounting: A managerial approach. Lagos: El-Today venture limited.

Ama. G. A. N. (2006). Management and cost accounting. Nigeria:Amason
publication venture.

Atkison.c.(2005). Inventory Management Review. London: Heinemann
publisher.

Chukwuma.C.U. (2010).Management Accounting. Enugu:Dikasinma
publisher.

Drury.C. (2009).Management and Cost Accounting. Fifth edition; London:
Thomson publisher.

INVENTORY VALUATION METHOD

INVENTORY VALUATION METHOD

According to Enekwe (2010), stock valuation is a means of valuing materials which involve the determination of the cost of materials on hand at the end of a particular accounting period. When inventory are issued, it is pertinent that the firm assigns cost stocks issued for production. There are different valuation methods used by the firm which affect their profit differently.

There are various methods used to value stock and eventually ascertain the value of stock received, issued and the balance after issuing stock out.

Some of the methods are:
I. First-in-first-out (FIFO)

II. Last-in-first-out (LIFO)

III. Specific identification

IV. Weighted average.

V. Based stock

VI. Standard price

VII. Replacement price

VIII. Simple average price

A. FIRST-IN-FIRST-OUT (FIFO)

In fifo method, the units issued or sold at a given period are assumed to be first units that were placed in inventory materials are issued from oldest supply in stock and units, issued are placed at the oldest cost listed on the stock ledger sheet with materials on hand being the most recent purchase.

It s mainly used for food that are subject to deterioration or obsolesces, FIFO if method yield the greatest amount of profit during inflationary period because the cost of units sold is assumed to be the order in which they were incurred.

One advantage of FIFO is that it matches cost with revenue, it is inexpensive to operate, it is systematic and objective and less prone to movement manipulation than other inventory cost assumptions, especially LIFO.

However, during the period of rising prices, FIFO result in very bad matching on the final account as the closing stock and reported profit are overstated.

B. LAST-IN-FIRST-OUT (LIFO) METHOD

This is the opposite of FIFO in that the cost of material issued out for production or goods sold are based on the last unit placed in inventory while the remaining inventory consist of first good placed. This assumes that the most current cost of goods is to be charged to the cost of goods sold.

The cost of unit remaining in inventory represents the oldest cost available, and the issues are cost at the latest available. One advantage of LIFO is that it matches the most recently increased inventory cost against sale revenue.

During inflationary period, reported profit is most likely to be approximately the amount that really is available for distribution to owners whom tax is considered, LIFO provides the greatest tax deductibility and thus it result in the lowest tax burden.

C. SPECIFIC IDENTIFICATION METHOD

Under this method of inventory valuation a unique cost is attached to each item in inventory. When an item is sold inventory value is reduced by that specific amount. Specific identification method is used in term of stock such as automobile and heavy machinery in determining the cost off inventories under the historical cost concept. SAS4 recommends specific identification method for use.

D. WEIGHTED AVARAGE METHOD

The weighted average method involves the computation of the weighted average unity cost of goods available for sales from inventory and this average cost is the applied to the goods or material sold. All good sold are at their weighted average price. The weighted average method is unique in that issue price are calculated on receipts of inventories and not on their selves or issue.

Under this method, the cost of goods sold and the value of closing inventory fall somewhere been the ones obtained by the FIFO and LIFO methods, this will give a more realistic inventory value in the balance sheet and will lead to near accurate method is recommended by a SAS4 for determining of the historical inventory cost.

E. BASE STOCK METHOD

Though this method is conditionally recommended by IAS2, it is obvious that is not independent methods under this method a minimum level of stock, carried at the historical cost of acquisition is held at all time (SAS5 1986). Any addition to or excesses over the base stock are carried at different based such as FIFO, LIFO etc

F. STANDARD PRICE METHOD

Standard price method uses a predetermined price for pricing every method issued out. The standard price may be set over a given period of time say one year, after all factor, which may affect the price had been taken into consideration.

The use of standard price may result in profit the actual material price is less than the standard price or loss if the reverse is the case. The main aim of standard price system is to ensure efficiency purchase of materials the price variance that normally exist between standard and actual prices are usually written off to material price variance account

G. REPLACEMENT OF PRICE METHOD

This method of inventory valuation is a method whereby materials issues are price based on the current market prices that is, the time the issues or sales were made. This method of valuation is no longer regarded as acceptable the advantages are the issues are at current market value and calculations are simple. On the other hand it is different to be up to date with replacement prices. It is not easily practicable and it is not a traditional casting method.

H. SIMPLE AVERAGE METHOD

In the simple average price, stocks are issued at a price which is calculated by dividing the total prices of the materials in the stock from which the material to be priced could be drawn by the number of price used in total. The merit of the method is that it is simple to operate and in period of price fluctuation.

INVENTORY COST CONTROL MANAGEMENT

INVENTORY COST CONTROL MANAGEMENT

The cost of materials makes up a huge portion of spending in most businesses. Failure to monitor and control these costs can create serious cash flow problems. Conversely having the knowledge and ambition to identify and control big cost areas can make quick heroes of new and seasoned managers alike.

The starting point is identifying the major variable cost items in a typical business and investigating the opportunities and impacts of managing each one. Something that top managers and CEOS all understand is that in most businesses, the cost of inventory is the single biggest opportunity for cost savings and cash flow control available. Few managers make it to the top without this lesson well.

The cost of inventory is the largest regularly occurring expenditure in most business, along with salary. Having enough suppliers available to services all of your customers is critical to your business success. Ordering too many supplies can put you in a serious cash flow crisis. Managing inventory costs is critical business.

In theory, you just predict what you are going to sell and purchase the required components. The problem is the word “predict”. Depending on our business, predicting not only total sales but also the mix of what different things you are going to sell is far from an exact science. There is a certain amount of guess work required in forecasting sales forecasts are generally optimistic and generally speaking, management tip number one is that inventory levels should be heavily based on past performance and not just on future sale forecast.

Maintaining high levels of inventory has some definite advantages. High inventory enable you to secure volume purchase discounts, ensure fast delivery time and reduce the risk of losing sales due to supply shortages.

The price is that you tie up large amount of working capital and run the risk of getting stuck with “stranded inventory” that you are unable to sell when something new or better comes along.

For slow changing industries the benefit of high inventories often outweighs the risk. On the flipside, running low levels of inventory will just enough supply also has its advantages. You can save significantly on warehouse space and let your supplier worry about storage coat and facilities.

You can also keep more working capital available for other activities. Remember that money is not free and dollars not tied up in inventory can be re-invested in the business, or even in outside investments.

The downside is that you will not get the same volume discounts as you can if you keep high stock levels, and you run the risk of lost revenue if your suppliers have problems, or you have a period of higher than expected demand and run short of supplies.

Getting just enough supplies, just in time is great if you need to keep money available for other things, and if you supply needs change frequently. As a manager you need to understand that inventory control is a huge factor in your success.

You need to carefully balance inventory levels to ensure adequate supply without wasting money, managing supply levels requires good trained people, and is not an area you want to scrimp on to save a few dollars.

The most important management tip when it comes to inventory control is that this is your first line of defense when you get in a cash flow crunch.

It is most often the easiest you turn up or turn down to manage cash in a significant way; you may find other items to control but few things inside a business have the large dollar impacts you need when quick corrections need to be made. As an effective manager you need to know the inventory situation of business and learn to use it to your advantage.

REASONS FOR HOLDING INVENTORIES

REASONS FOR HOLDING INVENTORIES

Whether a business is in retailing or manufacturing, there are several cogent reasons for holding inventory. Businesses may hold stocks of raw materials spare parts for machinery, work in progress or furnished goods. Given the there are costs involved with purchases, orders and carriage inwards, a firm might want to minimize its order costs and utilize storage inventory, these costs can be offset if there are good business reasons for so doing:

1. To meet the demand: A business must ensure that it has adequate supplies to meet expected demand for its goods, regardless of whether it is a retailing or production environment.

Particularly where a business has a high demand and rapid turnover, having stock in storage ensures that the firm can comfortably meet anticipated demand.

2. To guard against shortages: holding inventory can act as insurance against future shortages. Unexpected shortages in the supply of raw materials or finished goods can affect the production run of a business or its ability to meet demand. Holding inventories allows a degree of continuity for the activities of an enterprise.

3. To benefit from discounts: Suppliers often offer trade discount for bulk purchases, once those purchases are above a certain amount. A business can reduce the unit cost of raw materials and its ordering cost (delivery, import duties) by purchasing a large amount of goods/raw material to hold in stock.

4. To deal with variations in usage or demand: “Usage” refers to production consumption in a manufacturing process. Increased usage can increase the demand for materials. This is the result of either increased inefficiency or increased production levels. Sometimes a business might cater for special orders or have high seasonal demand that it must address, requiring additional stock to facilitate such occurrences.

5. To facilitate the production process: stock can allow the manufacturing process to flow smoothly and help the business to respond quickly and effectively to contingencies.

6. In times of high inflation/supply shortages: holding vast supplies of inventories can be a deliberate strategy in respond to unusual or difficult economies circumstances. In times of high inflation, a business might not wish to purchase stock at increasingly higher prices. Once the business determines that it is feasible to hold additional inventory beyond the usual levels, this is a very sensible strategy.

7. Some processes require holding work in progress: Inventory can also include work in progress. Some products might have longer production cycles than other. (Like wine and cheese for instance). It is necessary to hold a high volume of inventory to cater for the inherent nature of production in some business contexts.

Naturally, there are restrictions on how many inventory a business could or should hold. The nature of a product, regulations and maximum storage capacity are some elements that limit or determines a business from holding too much inventory. Once a business decides to hold inventory, then a proper inventory management and control is necessary to optimize both the stock levels and inventory cost.

BENEFITS OF INVENTORY MANAGEMENT AND CONTROL

BENEFITS OF INVENTORY MANAGEMENT AND CONTROL

Inventory is an important part in every business. Inventory control refers to the proper balance between the cost and the profit, resulting from the accurate management of items on hand.

Inventory management is essential in every business and its efficiency and effectiveness can significantly reduce the capital losses of the business.

Keeping the equilibrium between the cost of stocks and the profits earned by the business can be very difficult because it requires the evaluation of several inventory related task.

The efficient control and management of stocks relies upon how inventories are organized and regulated, cost predictions, the quantity of items to be ordered and stored and the ideal time to order the items to avoid shortage and profit and loss.

The purpose of controlling and managing the stocks on hand is to determine and maintain the precise amount of investment in the inventory.

Successful businesses are incredibly proficient in managing their inventory and monitoring the items on hand. These enterprises are also very competence in developing plans and applying effective scheme for maintain the optimum levels of investment in the inventory.

Controlling and managing inventory tasks can either be very easy or can be presented in sophisticated and complicated mathematical inventory model. The level of sophistication relies on the size of the business and the requirement needed to keep an effective inventory, to keep losses at the lowest level. But how can business owners carry out a reliable inventory management?

First, it is very important for businessmen to purchase methodically. Purchasing goods only when the stocks are very low is not always a good idea. Do not wait for “out-of-stock” conditions to happen before purchase, but never purchase goods in high quantities, leaving the business loss storage space and sell items in their not-so-good qualities.

The re-ordering point is a critical time for the business. It is the moment when the suppliers are low but can still meet the customer demands and new supplies arrives just-in-time before the last item is sold. Second, it is useful for the business to monitor and frequently update their inventory to check if the items required are ordered, the deliveries are correct and on time, which items are on demand and not selling, spot shortages because of high demand or in some instances, theft and to monitor product expiration and spoilage.

Finally, assign a professional and skilled employee who can efficiently carry out the inventory task.

Businessman must also understand the expense of controlling and managing inventory. The cost of ordering may include fees needed to prepare the purchase, shipping cost, processing of the relevant documents and other miscellaneous fees.

The cost of ordering needs a careful evaluation of the correct amount of orders for the business to save more money and to avoid extra costs on small production runs, overtime and others. The cost of carrying includes financial losses that may come from spoilage or expiration of goods, payment for shortage areas and insurances for the safety of the employees.

Efficient inventory control management leads to smooth business operation and an optimized usage of resources and man power.

Additionally, if the inventory is managed perfectly there is a higher coordination which the employees, consumers and stocks and the internal affairs of the business can be systematically organized.

Proper management and control of inventory will result in the following benefits to an organization. Inventory control ensures an adequate supply of material and stores minimized stock outs and shortages and avoid costly interruptions in operations.

It keeps down investment in industries, inventory carrying cost and obsolescence losses to the minimum. It facilitates purchasing economies through the measurement of requirement on the basis of recorded experience.

It permits a better utilization of available stocks by facilitating inter-department transfers within a company. It provides a check against the loss of materials through carelessness or pilferage.

It facilitates cost accounting activities by providing a means for allocating material cost to products, departments or other operating accounts. Perpetual inventory value provides a consistent and reliable basis for preparing financial statement.

FACTORS INFLUENCING ACCOUNTABILITY

FACTORS INFLUENCING ACCOUNTABILITY

There are various factors which influence accountability in our communities. These are as follows:

1. Relevance of purpose.

2. Clearly defined objective.

3. Identification of competent personnel involved.

4. Choice of instruments for assessment.

5. Assessment practices and methods.

6. Provision of incentives for assessors.

7. Identification of support agencies.

8. A seminar for support agencies.

9. Government involvement.

10. Follow-up assessment for accountability purposes.

The effectiveness of our governmental programmers’ has to be tested in order to justify the taxpayer’s sacrifice and the government’s investments in the public system. It is necessary for the office operators whether citizens, administrators or directors etc. and at the supporting agencies to be mobilized for a total success in accountability.

PUBLIC ACCOUNTABILITY

PUBLIC ACCOUNTABILITY

Public accountability is as old as the existence of human beings in social forms. As old as it is, there remain problems as to what should and from age-old tradition implies stewardship.

One of the earliest records of this can be recalled from the allegory given by Christ Jesus in the gospel according to st. Matthew chapter 25 verse 27 of that chapter succinctly describes an expectation of stewardship. “Thou oughest therefore to have put my money to the exchangers, and then on my coming I should have my own usury.

Accountability according to Nwabueze (2005) is synonymous with stewardship. In the public sector, there appears to be great demand for regular appraisal and reviews of financial performance of public sector bodies. It is also the basic requirement that every steward should be faithful.

Accountability then can be seen as involving: Exercising public power Giving an account of the action taken and Being held to account for those actions.

It is not function of the remuneration of the steward; rather it is a test of faithfulness and transparency. When a steward is faithful in little, much will be added to him. It is by a good performance at a lower post that promotion is gained to a higher post and remuneration is increased.

According to Oshisami (1993:188) accountability in government however goes beyond the stewardship function. The complexity of accountability has very serious consequences, when decisions taken by the public scrutiny particularly by those who were either not parties to those decisions or are even incapable of appreciating the intricacies of such decisions.

Oshisami (1994) identifies five known patterns of accountability viz. legal, political, and financial, ombudsman or public complaint and public opinion.

It would appear those public office holders are expected to show accountability in these five dimensions, our concern in these would be the financial accountability, but in brief mention should be made of legal and political accountability.

Public sector accountability can also be defined as those charged with drafting and| or carrying out policy should be obliged to given an explanation of their actions to their electorate being a composite group that include clients, employees and taxpayers.

Accountability is all about relationship both internally and externally. An important way to communicate accountability is through the provision of financial and related information.

The various aspects are: Financial accountability: it is the accounting system that is intended to keep a record of all legal authorizations as well as commitments, agreements, obligations and expenditure that use any part of authorization granted.

Legal accountability: it is primarily directed towards providing protection for the individual against administrative discretion.

Political and managerial accountability: they are concern with the provision of an account of why frauds are disbursed in a particular manner and what results or benefits thereby resulted.

So every financial accountability calls for:

a. Openly declared facts and open debate of them.

b. The giving of reasons for and explanation of actions taken.

Government accounting system is good but there is lots of accounting and financial control failures and public office holders tend to use these tapes as shield.

Accounting for the stewardship of public office holders and government officials is the basic concept of public accountability. It is the reckoning of revenue and expenditure, government programmers’ and management of the activities of the community. Civil servants have always been instructed by top government authorities to be accountable i.e. answerable to their responsibilities. They should give proper account of their stewardship regularly and most especially at the end of their tenure in the office.

The researcher has the view that the concept of public accountability is difficult to be put into practice in Nigeria because of self-centeredness, social and economic injustice.

In theory, accountability may be defined as process of justifying cost by presenting the positive effect derived from expenditures (Merhens and Lehrmann, 1974).

EVALUATION OF INTERNAL CONTROL

EVALUATION OF INTERNAL CONTROL

The evaluation of internal control within a system comes from:
a. System documentation: i.e. deciding how the system works, and describing this on paper.

b. Identification of potential errors: i.e. recognizing what can go wrong in this system.

Potential errors can arise whenever the is a chance that one of the following objectives might not be achieved or satisfy:

i. Existence or occurrence – i.e. proof that something exists or has happened.

ii. Completeness – which an account balances contains every item that it should.

iii. Valuation or measurement – that a proper system of valuation has been used.

iv. Ownership – proof of ownership of assets.

v. Disclosure – those items that are disclosed whenever disclosure is appropriate.

vi. Identification of controls- recognizing the controls within the system they are designed to detect or prevent errors in the system.
Having identified potential errors and the controls detect or prevent them, the auditor can assess whether the controls appear to be good enough to do their job sufficiently well.

When a control is evaluated, the auditor must assess the level of risk that the control is inadequate or might not be properly applied. Factors to consider:

a. The nature of the control itself.

b. The timing and frequency of the internal check.

c. Who performs the control taking into consideration the competence, experience and integrity of staff, and the degree of supervision;

d. What errors the control has succeeded in identifying and eliminating in the past.

e. Whether there have been changes in the system or in staff, bearing in mind that control procedures might weaken and become slack in the early period of a new system or just after a change of staff.

f. The attitude of management to control.

QUALITIES OF AN AUDITOR

QUALITIES OF AN AUDITOR

According to Okereke (2009: 9), the qualities or characteristics required of an auditor are:

i. Integrity:

This is a skill of dealing with people so as to prevent hurting or offending them unjustly. By being tactful, an auditors can obtain more information and explanation.

ii. Independence:

Before an auditors can give an unbiased opinion, he has to be independent of all the parties involved in the account he is examine.

iii. Competence:

He must be able to perform his work in accordance with the generally accepted best practice and procedures of the day. The knowledge of accounting and auditing standard are inevitable.

iv. Inquisitiveness:

An auditor has a broad and inquiring mind in order to be prepared to ask and for the information and explanation that he or she needs.

AUDITORS RIGHT

According to the provisions of the companies Act 1990 provides the auditor with the following rights:

i. Right to access all the whole books, records and vouchers of the company.

ii. A right to attend all general meeting held during his tenure of office.

iii. Whereby there is a proposed resolution to remove the auditors or appoint another auditors, the company act gives the auditors to be removed a right to demand that those members who receives the initial notice of proposing to remove him and who are entitled to attend and vote at the meeting.

iv. Under the rules of common law, it would appear that the auditors has a right of lien over his report where the company fails to discharge his full obligation.

AUDIT TEST

AUDIT TEST

The language and vocabulary of audit test (ing) include the following;
i. Walk through audit test
ii. Compliance audit test
iii. Substantive audit test
iv. Rotational audit test

i. WALK THROUGH AUDIT TEST

This is the test of the recording of transaction to determine if the auditor has obtained a correct description and understanding of a system.

The modern system base audit requires auditor to have in his working papers a record of the accounting system, this record may be in the form of simple written description, the answer to an internal control questionnaire or a flow chart which may be prepared by audit staff or client staff.

When these has been prepared by the staff sof the client. It is necessary for the auditor to be sure that the record correctly described the system as it exist and is operated. To test the correctness of the description, the auditor takes a field transaction of each type (sample) and walkthrough them. This means tracing the transaction from it ignition e.g. as an enquiry from a customer to the entry in the books of account, looking at documents and records produced, the manner of preparation and the internal control applied.

The objective is to make sure that the auditor has a correct description and understanding of the system.

ii. COMPLIANCE AUDIT TEST

These are those tests which seek to provide evidence that the internal control procedures are being applied as described. If the system appears to be defective, weak then the auditor may need to abandon the system approach and apply substantive test. If the system is effective then the next stage is for the auditor to obtain evidence that the system is applied in accordance to its description at all times.

The evidence is obtained by examining the sample of the transaction to determine that each has being treated as required by the system. A pragmatic (practical) illustration of a compliance test; suppose that a system provided that all credit note used by a client had to be approved by the sales manager and space was provided on each credit note for the initial, then the auditor will inspect a sample of the credit note to determine if all of them have being initialized by the sales manager.

iii. SUBSTANTIVE AUDIT TEST

These are those that test of transaction and balances and other procedures such as analytical review which seek to provide audit evidence as to the completeness, accuracy and validity of the information contend in the accounting record or financial statement. It is any test which seeks direct evidence of the correct treatment of the transaction, a balance of the asset, liability or any item in the books or the account.

Some examples

a. Of a transaction: The sale of a piece of plant will require the auditor to examine the company‟s invoice, the authorization, the entry in the plant register and other books. The accounting treatment and some evidence that the price obtained was reasonable.

b. Of a balance: Direct confirmation of the balance in a deposit account obtains from the bank.

c. Of analytical review Evidence of the correctness of cut off by examining the gross profit ratio.

d. Of completeness of information: Obtaining information from client legal adviser that potential payments from correct litigation have being considered.

e. Accuracy of information: Obtaining from directors a confirmation that a correct statement of remuneration or expenses has being obtained.

f. Validity of information: Validity means base on evidence that can be supported.

iv. ROTATIONAL AUDIT TEST

These are test carried out on the assumption that the auditor will be in office for several years and can in any individual year bring to bear special emphasis on a particular branch. There are basically two kinds of rotational test:

a. Rotation of audit emphasis: The auditor perform a system audit on all areas of client business every year but each year he select one area (wages, sales, stock control, purchase etc) for special in depth testing.

b. Visit Rotation: where the client has numerous branches, factories, locations etc in such case the auditor visit them in rotation so that each will not be visited every year, all will be visited over a period of years. It is vital the rotational tests are carried out randomly so that the client staffs do not know which area of location will be selected in any one year.

Furthermore, the techniques of auditing testing involve four (4) categories which include:

1. INSPECTION
Looking at records, document and tangible assets which involves examining company‟s sales for initial of the member of staffs charged with checking invoice calculation. Give evidence of compliance with a system which prevents calculation error. Example: inspecting building provide evidence of the existence of the building.

2. OBSERVATION
With regard to the procedures actually taking place e.g observing the counting of stock at the year end with the same end in view.

3. ENQUIRY
Seeking relevant information by asking questions from knowledgeable persons inside or outside the enterprise whether formally, informally, orally or in writing. Example: Circularizing debtor or routine quarries to client staffs such as why is invoice company invoice number 63 missing.

4. COMPUTATION
Checking or performing calculation e.g. verifying the accuracy of detailed internal calculation by global calculation or checking the accuracy of stock extension (quantity × cost price).

REFERENCES

Nweke & Unegbu (1998). Introduction to Auditing. Onitsha: Scholar Book Company.

Nwokolo, C. O. (1985). Auditing as a Watchdog. Enugu Pitman Publication.

Osita, A. (1993). Fundamental of Auditing. Onitsha: Tabashi press ltd.

Pratt, M. J. (1993). Audit Practice. London: Pitman publishing company Inco.

WHO IS AN AUDITOR?

According to the Oxford Advance learners Dictionary 6th Edition defined an Auditor as “somebody who verifies accounting data, determines the accuracy and reliability of accounting statements and reports, and then reports upon its efforts.

He is an independent person who reports on the truth and fairness of a financial statement. Thus, the internal auditor(s) of the company who must be a qualified accountant is always charged with the duty of providing a complete and continuous audit or the accounts and records of revenue, expenditure, plant, allocated and unallocated stores, contracts and the internal controls relating to the financial operations of the company.

QUALIFICATION OF AN AUDITOR

Of Colossal importance of paramount necessity is it, and justifiable too to state emphatically that one of the major and indispensable qualification of an auditors is that;

Auditors must undergo professional training and must be registered with an accounting body such Institute of Chartered Accountant of Nigeria (ICAN), ANAM etc at stipulated in the Company Allied Matter Act (CAMA) 1990.

APPOINTMENT OF AN AUDITOR

According to section 358 of Company and Allied Matter Act (CAMA) 1990, the stipulations as regards to the appointment an auditors are as follows;

i. An auditors may/could be appointed by the company if there is casual vacancy in the position of an auditor.

ii. Another reason according the provisions of the said section are when the in ambient, acting auditor dies before the expiration of his tenure.

iii. Yet another reason is when the auditor resign willing.

iv. When the members agree to remove the incumbent auditor before the expiration of his tenure.

v. An auditors may be appointed when at the Annual General Meeting (AGM) of the company, the members, shareholders agree to appoint a new auditor or reappoint the incumbent one.

PROFIT AND PROFITABILITY

PROFIT AND PROFITABILITY

Sometimes, the term ‘profit’ and ‘profitability’ are used interchangeably. But in real sense, there is a difference between the two. Profit is an absolute term, whereas, profitability is a relative concept. However, they are closely related and mutually interdependent having different roles in business.

Pandey (2010), defines profits as the difference between revenue and expenses over a period of time( usually one year) while profitability refers to the operating efficiency of the enterprise. It is the ability of an enterprise to make profit on sales. It is the ability of an enterprise to get sufficient return on the capital and the employees used in the business operation.

Profit is the test of efficiency and a measure of control to the owners, a measure of worth of investments to the creditors, the margin of safety to the government, a measure of taxable capacity and a basis of legislative action to the country. Profits is an index of economic progress. National income generated and the rise in the standard of living while profitability is an outcome of profits. In other words, no profit drives towards profitability.
Firms having same amount of profits may vary in terms of profitability. That is, profits in two separate business concern may be identical, yet, many a times, it usually happens that there profitability varies when measured in terms of size of investments.

VARIANCE ANALYSIS

VARIANCE ANALYSIS

Variance analysis is defined by Ama (2001) as the process of analyzing the total difference between planned and actual performance into its constituent parts, variance analysis can also be defined as a sign post which alerts management to the need for inquiry into cause of off standard results.

Eze and Ani (2009) indicates that the variance analysis involves the analysis of the causes of variance on three major elements of costs viz; material, labor and overhead. The basic variances will be computed by looking at the components of the total cost of material, labor and overheads. These components are quantity and money value for materials while the components of labor and overhead costs are hours worked and money value. Consequently, there are possible ways of analyzing the basic variances;

Material cost variance (MCV)

It is a principal material variance which occurs when the actual material cost is at variance from the standard material cost, in fact, it is the difference between the standard cost for material and actual material costs.

It is determined thus;
MCV= actual cost –standard cost

(AQ X AP) – (SQ – SP)

Where;

AQ= actual quantity

AP = actual price

SQ = standard quantity

SP = standard price

Direct material price variance (DMPV)

This is caused by paying a higher or lower price than the standard price set for material, while the actual quantity hold constant. In equation form, the material price variance is;
DMPV = (AP – SP) AQ

Direct material usage variance (DMUV)

This is caused by using more or less of the standard amount of materials to produce a product or complete a proves where the standard cost holds constant.
In equation form, the material usage variance is
DMUV = (AQ – SQ) SP

Direct labor total variance (DLV)

This is a principal variance. It occurs as a result of the difference between the actual wage pay and standard wage pay.
DLV = (SH X SR) – (AH X AR)

Direct labor rate variance (DLRV)

This is caused by paying a higher or lower rate of pay than standard to produce a product or complete process. The direct labor rate variance is compute by multiplying the difference between the actual direct hour rate paid (AR) and the standard direct labor rate allowed (SR) by the hours of direct labor services required (AH).

In equation form, direct labor rate variance is
DLRV =(AR – SR) AH

Direct labor efficiency variance (DLEV)

It is caused by using more or less of than the standard amount of direct labor hours to produce a product or complete a process. The direct labor efficiency variance is computed by multiplying the difference between the actual direct labor hours required (AH) and the standard direct labor allowed (SH) by the standard direct labor hour rate per hour (SR).

In equation form,
DLEV = (AH –SH) SR

Variable overhead expenditure variance

It is the difference between the actual variable overheads incurred and the allowed variable overhead based on the actual hours worked.
VOEV= Actual variable overhead- (actual labour hour x overhead absorption rate)

Variable overhead efficiency variance

This is the difference between the allowed variance overhead and the absorbed variable overhead.

VOEV= (Actual labour hours – standard labor hours) x variable overhead expenditure rate

Fixed overhead expenditure variance

This is the difference between the actual fixed expenditure attributed and charged to a particular production period and the budget cost allowance for that production period. Alternatively, it is the difference between actual fixed overhead and allowed or budgeted fixed overheads.
Fixed overhead expenditure variance= Actual variable overhead x (actual labour hour x variable overhead absorption rate).

Fixed overhead efficiency variance

This is part of the fixed production overhead volume variance. It is the difference between the actual direct labor hours worked times by the standard hourly absorption rate; and the standard cost absorbed in the production accomplished.

Fixed overhead efficiency variance= Actual labour hours – standard labour hours) x variable absorption rate

Fixed overhead capacity variance :

This is part of the fixed production overhead volume variance. It is the difference between the actual direct labor hours worked times by the standard hourly absorption rate at the budgeted cost allowance for the period.

Fixed overhead capacity variance = (actual hours x fixed overhead absorption rate) – budgeted expenditure