AUDITING AS AN INDISPENSABLE TOOL FOR ECONOMIC DEVELOPMENT
(A CASE STUDY OF TEXCO NIGERIA PLC LAGOS STATE)
This research study intends to took into the importance of auditing as a tool in economic development. Often times it is reported at various companies, corporation and others enterprises that productivity is low efficiency narrowed, misappropriation of funds have occurred. The study will there fore find solution to these problems. Further more the research study will try to disclose problems like misappropriation of funds, fraud and irregularities and possibly find solutions to these problems. The research study will also find solution to the imperfection in the ability of those managing resources entrusted with them. The sources of data for the researcher will be as follows.
1. Primary data: The researcher intends to use questionnaire, interviews and personal observation.
2. Secondary data: The major secondary data which the researcher intends to use are text books Journals, accountancy. However, there are so many constraints that I will face in this research work and which include:
1. Lack of finance
2. Limited time as a result of combing the research work and my academic work. However, there are so many constraints that I will face in this research work and which include. Lack of finance. Limited time as a result of combing the research work and my academic work. Lack of material for the research work. Finally what I hope to achieve at the end of this research work is to find solution to the imperfection on the resource of the organization and the importance of auditing in the economic development of the country.
TABLE OF CONTENTS
Proposal of study
Table of contents
1.1 Background of study
1.2 Statement of the problem
1.3 Objective of the study
1.4 Statement of hypothesis
1.5 Significance of the study
1.6 Scope and limitation of study
1.7 Definition of terms.
2.1 Review of related literature
2.2 Historical background of quitting
2.3 Meaning and important of auditing including its, saims
2.4 Internal check internal control and internal audit.
2.5 Various types of audit
2.6 The objective of auditing
2.7 The need for auditing what justification
2.8 Auditing as an indispensable tool for economic development
2.9 Problem of an audit and how to over come audit problems.
2.8.2How to over come or prevent audit problems
2.9 How auditing has helped the growth and prosperity as well as efficient management of Texaco Nig Plc Lagos sate
3.1 Research methodology
3.2 Research design
3.3 Selection of data
3.3.1 Source of data
3.3.2 Primary data
3.4 Secondary data
3.4.1 Research instrument
3.4.2 Direct inter view
3.4.3 Questionnaire design
3.4.4 Data analysis techniques
4.1 Data presentation and analysis of data
4.2 Hypothesis testing
4.3 Data interpretation
5.1 Summary of findings
1.1 BACKGROUND OF THE STUDY
The management of the economy in the past has been characterized by corruption and financial mismanagement which made the country to have persistent balance of payment problems. This financial mismanagement was more pronounced during the civilian administration of 1979- 1983 and the dictatorial government of general Sani Abacha of 1993 to 1998.
The performance of the economy in the past therefore suggest that our economic problem today are the bye product of unpatriotic, uncommitted, selfish and corrupt leadership.
In the face of glaring corruption financial impropriety over invoicing and other facets role the auditors of repute have been playing in a bid to build a virile nation. The purpose of accountability in any society is to showing how well organization and people in position of trust of public and private funds and property have performed. The accounting profession requires of its members integrity transparent honesty independence and objectivity to accepted professional conduct.
During the decade 1970 and beyond the Nigerian economy completely lost its direction. The glory which the economy attained during its pre- and post independence era soon began to dwindle due to the monocultural dependence on oil which the country developed as a result of the unexpected rise in oil prices. The need for integrity oneness of purpose, effective and efficient financial control which enhance profitability at this stage can not be over emphasized in a bid to channel the surplus funds to prioritized areas.
Even the surplus funds could not be used for the development of man power in the area of science and technology for the country consequently there is a total dependence on the foreign sector for technical support. The company under review is a case in point since the production of its marketable product can not be carried out without the assistance of technical partners.
However, the company provides goods and services to the public generate employment opportunities as well as contributing substantially to government revenue.
There is a requirement that all registered limited liability companies must have their financial records audited annually by a firm of auditors so appointed.
The law complies as above for the auditor to express an opinion on such financial statement and for the opinion to be authoritative the auditor must seen to be independent
In an attempt to ensure improve profitability various devices and method such as internal control are used.
Since companies differ both in degree and circumstances depending on the nature of business and commercial environment it operates reliance on certain factors. Paragraph (5)_ of the auditors operational standards and guideline state that if the auditor wishes to place reliance on any internal control he should ascertain and evaluate those controls and perform compliance test on their operation this is to ensure completeness and accuracy of all financial record and transaction.
As we go further in this study the relevant ingredients will be dealt with in order to arrive at the conclusions based on empirical test.
1.2 STATEMENT OF THE PROBLEM
The financial statement of government and other non- business and public sector entities may report on the audit of public sector entities or other public corporation the auditor has to take into consideration the specific requirements and other relevant regulation ordinances and decrees which affect the audit mandate and any special auditing requirement including the need to have regard to issued of natural security.
According to H.D Onuegbu (!991`) in his book auditing for beginners. Such requirement may affect the scope objective and planning of the audit and the extent of the auditors discretion in establishing materiality and in reporting fraud and the form of the audit report. M.G Fred (1990) states that the extent to which reliance can be placed on the work of other auditor and the auditors objective is respect of other information included in the annual report.
This research project is intended to achieve the following objectives.
1. To evaluate the indispensable nature of auditing in economic development.
2. To make suggestion on how auditing is inevitable in accomplishing a sound check on financial records of business organizations.
3. Recommendation on how to prevent mismanagement and misappropriation of business enterprise through efficient record keeping and sound financial management.
4. To identify the problem faced by the auditors in public practices.
A hypothesis is a testable tentative and probable explanation of the relationship between two or more variable that creates a state of affaires or phenomena. For the purpose of this project, the following pertinent hypotheses have been formed.
1. H0: Auditing is an indispensable tool in economic development
H1: Auditing is an indispensable tool in economic development.
2. Ho: Auditors opinion does not assist management in decision making.
H1: Auditors opinions assist management in decision making
3. H0: Auditing does not help in minimizing fraud in an organization.
H1: Auditing help to minimize fraud in an organization
4. H0: Auditing is not a mirror of shareholders investment
and the turn ovens achieved in a company.
H1: Auditing is a mirror of share holders investment and the turn over achieved in a company.
1.5 SIGNINFICIANCE OF THE STUDY
A critical analysis of this research work will be of immense importance to the company. Even through Texaco Nig Plc has gotten a reputable and competent external auditors who audits accounts of the company, the recommendation and suggestions in this work will enable the company to see some lapses in the internal control system. When these are remedied, the efficiency and effectiveness of its management and administration could be further enhanced.
The shareholders and intending investors of the company will see this research work very useful
This work covers the area of auditing in Texaco Nig Plc. The blending of financial accounting. Taxation costing and auditing attuned to a very large extent the effectiveness of administrative and financial co- ordination of this company Texaco Nig Plc.
It was not easy getting valuable and relevant data needed for this research work. The company has its own world operational headquarter in Texas U.SA. However being the third largest oil marketing company in Nigeria, it has its Nigeria head office in Lagos and branch offices in almost every petroleum / crude oil producing states in Nigeria.
Meanwhile the researcher used the accounting department of the company as q basis for his innings. About 30 percent of the staff in the department were given questionnaires and only 23 percent of them filled and returned them. Oral interviews were held with some of its internal auditors and the responses were encouraging. Not with standing the limitation, a second batch of questionnaire s were distributed to ensure accurate research work.
The information given to the researcher work. The information given to the researcher by the auditors was too brief and inadequate. The Chief accountant and the director of finance in their Lagos head office could not be approached due to administrative bureaucracy through the researcher was able to get a general knowledge of the company performance by the head of the internal audit department.
Other limitation of the study were infect, being an examination materials the study was restricted to a certain number of chapters and as such the study could not cover all grounds that one could possibly cover under a chosen topic if one was to write freely. Financial constraints was also a limited factor in carrying out the study. The reason being that the distance between the institution and the company head office involves spending a substantial lager suns of money for transportation. And since the researcher is a student his financial disposition was low thus the data used in this research work was gotten from one journey to the head office.
Time factor was another limitation to the research work because of the combination of light academic time table with the research project.
The following terms found in this research work are here by defined in the sense in which they are used so as to facilitate study.
Auditing: This is an examination or verification of the records of transactions of a business organization in such a way that will enable the auditor to satisfy him self that:
a. Book o accounts of the business or undertaking have been properly kept.
b. The accounts of the business as well as the correct profits and losses incurred for the period of the account.
Auditor: A competent and impartial person appointed to verify or examine the records of transaction of a business.
Auditor report: This is a report made by an auditor of a company to its member on the account examined by him and on every balance sheet and profit and loss account on all group of financial statement, copies of which are to be liad before the company in a general meeting during the auditor’s tenure in office.
Tabulation: This is a way of putting the data collected in tabular forms for the purpose of arranging them in the order of magnitude or degree of importance. This serves to reduce and simplify the data collected./
Internal check: This is described as a day to day check on transaction which operate continuously as a part of the routine system here by the work of one person is proved independently commentary to the work of another, the object being prevention or early detection of errors or fraud
Internal control: This can be effectively be defined by reference to the definition given by professor fred in his book internal control as a tool for efficient management which he quoted from (ICAEW) it is defined as the whole system of control, financial and otherwise, established by management in order to carry on business of the enterprise in an orderly and efficient manner to ensure adherence to management policies, safeguard the assets and secure as far as possible the accuracy and completeness of the records. Internal/Audit. An element of internal control system set up by management of an enterprise to examine evaluate and report on the accounting and other controls on the operation. It exists mostly because of management decision but some times because of statutory requirements.
Frand: Cheating, deceit or trickery deliberately practiced in order to gain some advantage dishonestly deception or anything contrived or intended to deceive,
True: This means that the accounting information contained in the financial statement has been qualified and communicated in such a way as to correspond to the economic events activities and transaction it is intended to describe.
Fair: This means that accounting information in a manner which is objective and without prejudice to any particular sectional interest in the company.
Audit Risk: This is defined as the risk that an auditor may give an in-appropriate opinion on financial information that is materially mistated.
1. H,D. Onuegbu, Auditing for beginners (Lagos New Generation publisher (19991) Page 8
2. M.G Fred, Importance of Auditing (London Prentice Hall. 1990) page 50
3. CM Fred internal control as a tool for efficient management. (Oxford: Churchill Livingstone, 1980 Page 32.