INTERNAL AUDITING AS AN AID TO MANAGEMENT

INTERNAL AUDITING AS AN AID TO MANAGEMENT

(A STUDY OF HOUSEHOLD PRODUCTS COMPANY, ORLU, IMO STATE)

ABSTRACT

This research work deals with internal audit as an aid to management. It aims at finding out the role of internal audit in management decision making in organizations. It is a survey research. Data were collected from primary and secondary sources which included using questionnaires, personal observations, text book, journal and internet. Sample of 92 were collected by random sample method. Three hypotheses were formulated and tested using Z-test statistics, while questionnaires were analyzed using simple percentages. We discovered among other things that internal audit assists management in managerial decisions. We recommended among other things that the auditors be trained in forensic accounting to enable them to be more effective in their duties.

CHAPTER ONE
INTRODUCTION

1.1 BACKGROUND OF THE STUDY.

At the beginning of the century, most businesses are small and sole-operated. The owners/managers are overly involved with most of the decision making. As business grows in size and complexity, professional managers take position of the owners and the operators.

Consequently, they rely heavily upon streams of accounting and statistical report which summarizes current happenings and conditions in the enterprise. The information carried by these streams of report enables management to control and direct the enterprise in order to assure management that the information received are both reliable and accurate.

A system of internal audit is developed to monitor the activities of the company. The need for maintaining the adequate efficient and effective internal audit, therefore cannot be overemphasized especially in days when Nigeria’s economy still is witnessing depression and every company is making effort in ensuring that wastage, pilferage, misappropriation are checked or avoided, and to ensure that assets are being secured.

Some problems were noticed during the cause of this research; problems within the company, these problems necessitate this work. The researcher noticed that there was ineffective co-operation between the internal audit and management, audit reports were sometimes ignored by the management. The relationship between the internal auditor and external auditor was strained making work harder for the external auditor. The lack of internal audit to prevent pilferage and fraud within the company thereby preventing an error free working condition.

1.2 STATEMENT OF PROBLEM

Often, management and internal audit department function were seen as contradictory rather than complementary. Internal audit department is setup to ensure adherence to management policy but this objective cannot be achieved because of interference and undue influence by the top management.

More so, monthly or quarterly internal audit report as the case may be in an organization is expected to provide information required by management to determine how effective their policies and implementation are. It is on this realization that this study will attempt to determine how effective are those information to aid management in solving day to day problems. It signifies defects or problems; the research will examine number of them namely:
a) There exists no relationship between the internal audits and management.

b) Co-operation does not exist between the internal auditor and external auditor.

c) Internal audit does not assist in detection and prevention of fraud.

1.3 OBJECTIVES OF THE STUDY.

Objectives of the study include:

1.     To ascertain if the duties of the internal auditor assist management in taking informed decision.

2.     To ascertain if there exist co-operation between the internal auditor and external auditor.

3.     To find out if internal audit assists in the detection and prevention of fraud.

1.4 RESEARCH QUESTIONS.

i) Is there any relationship between the internal audit and management?

ii) Does co-operation exist between the internal auditor and external auditor?

iii) Does internal audit assist in the detection and prevention of pilferage and fraud?

1.5 STATEMENT OF HYPOTHESIS

To justify the research topic, internal audits as an aid to management and to enable the researcher to draw a logical conclusion, there is need to make guesses as solutions to the topic which are subject to acceptance and rejection are based on the result of the test.

HYPOTHESIS ONE
H0: There is no relationship between the internal audit and management.

H1: There is a relationship between the internal audit and management.

HYPOTHESIS TWO
H0: There is no co-operation between internal auditor and external auditor.

H1: There is co-operation between internal auditor and external auditor.

HYPOTHESIS THREE
H0: Internal audit does not assist in the defection and prevention of pilferage and fraud.

H1: Internal audit assist in the detection and prevention of pilferage and fraud.

1.6 PURPOSE OF THE STUDY.

1.     The purpose of the study is to determine the extent of co-operation between the internal audit and management.

2.     To ascertain the extent of co-operation between the internal auditors and external auditor.

3.     To evaluate the extent to which internal audits helps in preventing pilferage and fraud.

4.     To find out if internal audit is equipped enough to prevent an error proof working condition.

1.7 SIGNIFICANCE OF THE STUDY.

The benefits of the study to:
The Internal Audit-

i) Internal audit within an organization is effective for efficient work of the general staff.

ii) The internal audit in an organization will help detect, minimize or eliminate fraud in an organization.

iii) Internal audit assist the management in the smooth running of the organization by complying with the policies, laws and regulation.

iv) Internal audit in an organization will help to review and appraise the effectiveness, adequacy and application of accounting, financial and other controls in order to promote effective control at the lowest possible cost.

v) Whether an internal audit department could help to determine the reliability and integrity of financial and other data produced within the organization, thereby securing the jobs of employees.

The management of the organization-
i) Management will experience an error free working environment maintained by internal audit.

ii) Management will enjoy the reduction or elimination of pilferage and fraud within the organization.

iii) The general staff will be effective and dedicated.

iv) Management will enjoy a healthy relationship between it and internal auditors.

The External Auditors-
i) Good internal audit by the internal auditor will save time for the external auditor.

ii) Co-operation will lead to easier and more efficient work.

iii) Assistance of internal auditor will lead to smooth investigation.

1.8 SCOPE AND LIMITATION OF THE STUDY

This research work is to evaluate internal auditing in an organization using soap, detergent and household products company as a case study. The research work particularly focuses on the internal audit as an aid to management in the chosen company.

LIMITATION OF THE STUDY

There are constraints encountered in carrying out this research work, this includes;

1. TIME FACTOR
This research work was conducted simultaneously with normal academic work within a short period of time in which some valuable information could be obtained.

2. FINANCIAL DIFFICULTY
In an effort to have a sufficient research material to be able to write extensively on the subject matter, the researcher was faced with some financial predicament considering high cost of not only education materials coupled with the high transport fare