The Impact Of Audit Committee On Financial Management Of An Organization ( A Case Study Of 7up Bottling Company Plc 9th Mile Conner Enugu)

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The impact of a Good Audit committee on the financial management of an organization can not be over emphasized. This is because internal control is the bedrock of any organization that wants continuity in the existence of the organization. The problem facing 7up bottling company plc is that the do not have an internal control system and also they lack organizational control. I make use of primary and secondary source of data collection, Oral interview, questionnaire, Newspaper etc. and found out that loses occure on daily bases due to there is no relationship between 7up company plc and audit committee. Then I came to a conclusion, therefore it is conclusively to say that the financial management of an organization via internal control system may never be possible if the board and senior managements are not committed in providing well planed internal control system.



Title page                                                                     ii

Approval page                                                               iii

Dedication                                                                    iv

Acknowledgements                                                        v

Abstract                                                                       vii

Table of contents                                                          viii

List of table                                                                  xi



1.1      Background of the study                                          1

1.2      Statement of problem                                             6

1.3      Objectives of the study                                           8

1.4      Research hypothesis                                               8

1.5      Research questions                                                 9

1.6      Significance of the study                                          10

1.7      Scope and limitation of the study                              12

1.8      Historical development of 7up Bottling company Plc    14

1.9      Definition of terms                                                  16


2.0 Literature Review

2.1  The Audit Committee                                              22

2.2  The Audit committee duties                                     25

2.3  Membership and operations                                     27

2.4  Role in oversight of financial reporting and Accounting        29

2.5  Monitoring internal control process                                  30

2.6  Meaning, membership composition and functions of an audit committee                                                                     36

2.7  Classification of fraud and causes condition that give rise to fraud                                                                           40

2.8  Examples of management fraud and employees fraud  42

2.9  Inadequate by which organization manages its

scarce fund                                                                   44


3.0 Research Design and Methodology

3.1  Research Design                                                     57

3.2  Population of the study and sample size                           57

3.3  Sources of data collection                                        58

3.4  Validity and reliability test                                        61


4.0 Presentation and Analysis of Data

4.1  Analysis of Data                                                     62

4.2  Test of hypothesis                                                  63


Summary of Findings, Conclusion and Recommendations

5.1  Summary of major findings                                      71

5.2  Conclusion                                                             74

5.3  Recommendations                                                  75

5.4  Suggestion for further research                                77

       Reference                                                              78

        Appendix I                                                            80

       Appendix II                                                            81



Table 4.1                                                                      63

Table 4.2                                                                      64

Table 4.3                                                                      66

Table 4.4                                                                      68



According to Orjih John (2001:2) every business organization profit making has objectives and goals in mined to achieve their goals. It is to satisfy the social need of the citizens, and in the achievement of these purpose supervisor more often than not its activities, play a document role. The size and scope impossible for the executors to exercise personal and first hand supervision of operations. It is in this light that audit committee, financial or otherwise established by management is initiated.

By section 360 of the companies and avoid matter act 2004, the auditor is expected to carry out investigations as would be necessary to enable him from a opinion. It follows from above, that even the law does specify the extent of the examination to be carried out by the auditor. This is left to the director of the auditor. This decretion is not abused by the auditor. In practice he goes beyond the legal requirement in discharging his duties and his primary focus is to plan for the projects to be audited and how each project it’s the organization’s needs. This brings to bear on his job a very high standard of professional practice and considerations.

An auditor will therefore involve for distinct practice and procedures via:

Ascertain the validity of original transactions.

Confirming the completeness and accuracy of the recording of these transactions.

Ensuring that the financial statements have been prepared from and are in agreements have been prepared from and are in agreements with the record and

Confirming that the financial statements conform to the relevant status and accounting standards.

According to Chambers Andrews (1974), a complex organization needs an auditor as an extension of the eyes and ears of management who however effective the organization might be unable to inspect the work of their subordinates whose stewardship is dilegated to them.

Internal control system can be broadly divided into two main categories.

1.  Administrative control

2.  Accounting or financial

It is the accounting or financial control function that internal audit, audit committee, internal checks and other accounting policies and systems built into the initial control network to promote and encourage the attainment of the objectives of the firm.

Initial audit is an initial function which means that it is conducted by the employers of an organization specially designed for this purpose.

It is an organization management responsibility to establish the department not to do so.

The objective of audit committee as internal auditing is to assist all members of management in the effective discharge of their responsibilities, by furnishing them with analysis, appraisal, recommendation and pertinent commentary in the activities reviewed.

To attain such overall objective, initial audit involves such activities as:

1.  Reviewing and apprasing the soundness, adequacy and application of accounting, financial and other operating controls and recommending effective control at a reasonable cost.

2.  Ascertain the reliability and relevance of management data development within the organization.

3.  Appraising the quality performance in carrying out assigned responsibilities.

Where an internal audit department operates the statutory auditor pays particular attention to its activities as these will have a direct bearing on the scope and depth required by members.

According to Onovo (2011:282), the auditor should consider whether analytical procedures that are perform at or near the end of the audit when forming an overall conclusion as to whether the financial statement as a whole are consistent with the audit’s knowledge of the business indicate a previously unrecognized risk of material misstatement due to fraud. Determining which particular tends and relationships may indicate a risk of material misstatement due to fraud require professional judgment.

       Material misstatement of financial statement due to fraud offer involved the manipulation of the financial reporting process by recording inappropriate of unauthorized journal entries throughout the year or at period end, or making adjustments to amounts reported in the financial statements that are not reflected in formal journals entries, such as through consolidating adjustment and reclassifications.


It has been stated earlier that the duty of detecting frauds and irregularities lies with the management.

This could only be done through effective and efficient audit committee of the internal control system in an organization. But even with the presence of the internal auditor some problem are still inherent in organization that interfere with goal attainment.

These include:

Stock disappears in large numbers on their daily basis.

Assets are either misappropriated or not accounted for.

Those names appear in large numbers on payroll and are undetected for at longtime.

Physical cash are stolen while signatures are forged in cheques also to steal cash frauds perpetuated are only being discovered after longtime.

This project is intended to find out with the above or other problem. If any, is caused by lack of good internal control system by the audit committee in an organization.


The objective of the study are as follows:

1.  To find out the impact of audit committee on financial management in bottling company.

2.  To ascertain whether audit committee on financial management of an organization is effective.

3.  To evaluate the profitability of audit committee on financial management in achieving organizational objective.

4.  To find the strategies adopted by 7up bottling company in achieving financial objectives.


The results of the research hypothesis of the study are as follows:

1.  Ho: There is no relationship between audit committee and financial management.

Hi: There is relationship between audit committee and financial management.

2.  Ho: There is no relationship between profitability of audit committee in achieving organization objective.

Hi: There is a relationship between profitability of audit committee in achieving organization objective.

3.  Ho: There is no relationship between effective internal control system improvements in profitability.

Hi: There is relationship between effective internal control system improvements in profitability.


From the above objective of the research study, the research questions are as follows:

1.  Is there any relationship between audit committee and financial management?

2.  How does effective audit committee improve profitability?

3.  How dos application of audit committee techniques improve effective profit?

4.  Is there any relationship between committee and financial management in 7up bottling company?


No internal control system never elaborate could be completely water tight, but a good audit committee operated in a company is an indispensable aid to efficient management, in that it assures management of the reliability of decisions taken by them and that these decisions are in line with goals to be attained.

The significance of this study is to bring to the notice of management the impact of a good internal control system in the financial management of organization.

That is to say that it will help the organization to know now to manage it scarce fund. It will help to discover the existence of internal control system in an organization, and to know it here is weaknesses in the system, and suggest measures to correcting them. Again, it will equally help to reveal the problems that are caused by a bad internal control system.

This piece of work will also be useful to on-coming researchers. Non management owners of a business will be adequately protected because all material fraud which either to, are undetected by auditors in case of this project work will be brought to be notice of management, so corrective action may be taken.


This research work is restricted only to most organization; both profit and non-profit making type that have accounting department are carrying out the works that are designed to them.

Usually internal controls in an audit committee are very important features of any organization enterprise that is run efficiently and effectively.

However for every coin there must be two sides. It is necessary to acknowledge that internal controls have internet limitations which includes internal controls tend to be channeled at routine transactions.

The one off or unusual transaction tends no to the subject of internal control likely human error caused by stress of work load alcohol carelessness distraction mistakes of judgment and the misunderstanding of instruction.

A requirement that the cost of an internal control is not disproportionate to the potential loss which may result from its absence alone or through collusion with parties outside or inside the enterprise management override of control abuse of responsibility.

Human cleverness no matter how secure the computer code is designed to prevent access, there is always tackier who gets in. change in environment making controls inadequate and fraud. Most of these organizations are liquid Nigeria plc both in Port-Harcourt and Enugu.



The 7up Bottling company plc (NBC) was incorporated in November 1951 as a subsidiary of A.G Leventis Group with the franchise to bottle and sell coa-cola products in Nigeria.

According to A.G Leventis, that for a humble beginning as a family business, that company has grown to become a predominant bottler of non-alcoholic beverages in Nigeria, responsible for the manufacture and sale of over 33 different coca-cola branches, other popular branches of beverages produced by the company are Eva water, five Alive juice and the newly introduced Burn energy drink.

The company presently has 13 bottling facilities and over 80 distribution were houses located across the country. Since production started, N.B.C plc has remained the largest bottle of non-alcoholic beverages in the country in terms of sales volume, with about 1.8 billion bottles sold per year, making it second largest market in Africa.

Board and management

The company is governed by a stable nine member board of directors comprising of very prominent individual who have excelled in different filds of endeavor within and outside Nigeria. The board is headed by Ambassador Olusegun Apata while the management team is led by Mr. Ronald Ebelt, an expatriate professional.

Financing structure

The authorized share capital of the company is N 750 million made up of 1.5 billion ordinary shares of 50k each or N 6.54,367 million is issued and fully paid.

The share capital of the company grew from N 487 million in2003 to the present amount in the FYE 2006 through several script issues. Majority of the shares are held by foreign investors.

Finally, the company recently embarked on a restructuring exercise to expand further its market share and growth profit. It invested in a new state of the cut can filling and packing line at the Apapa plant.

This is addition to a new bottling plant in Abuja, investment in the upgrade of other manufacturing infrastructure, distribution delivery facilities.


Certain words have been used in this write up and they need to be defined as they relate to the research topic. The words are as follows:

Internal control

According to Eze (2001:94), internal control system is defined as the whole system of control, financial and otherwise, established by the management in order to carry on the business of the enterprise in an orderly and efficient manner, ensure adhereace to management police, safeguard the asset and secure as far as possible the completeness and accuracy of the records. The individual components of an internal control system are known as “control”

i.            The whole system

Internal control can be seen as single procedure (e.g. a clerical officer y, checks the calculations done by a clerical officer Y, checks the calculation done by a clerical officer Z) or as whole system.

The whole system should be done than more of the part-(Eze 2008).

ii.         Established by the management

Internal control system are establish by the management, either directly or by means of externals consultants, internal audit, or accounting personal external auditor may be asked to advise on the establishment of system.

iii.       Ensure adherence to management policies

Not all management has expressed policies but management policy and adherence to the budget can be achieved by procedures such as variance analysis.

iv.        Safeguard the assets

Usually, assets may not be allowed to be broken, lost or stolen. Procedures are always devised to safeguard them. Example are locks and key keeping of a plant register of regular review of debtor balances an aspect of this which is often over looked is that payment where to benefits have been relieved, is payment for piece work not done and embezzlement of goods by employees are example of failure to safeguard assets.

v.          Secure completeness

It is essential that all transaction are recorded and processed.

The procedure includes checking that no goods have the organization without adelivery note followed by regular comparison of invoices with delivery notes to see that no goods have failed to result in an invoice.

vi.        Accuracy of the records

To achieve this include checked of the work off one clerk by another or the uses off control accounts, independent comparison of two sets of records e.g. stocks records and stock, or piece work payments and good work put into store.

vii.     Financial management

The management of the scarce fund of organization in a bid to maximize the eventual wealth of the organization.

System approach

The system approach to auditing entail on appraisal of the control features which governs a system in order to determine the extent to which the objective of the system will be met.


This comes from Latin word-Audire meaning to wear or Auditors meaning hearing generally, it means official examination of accounts and records.

A system

This is an internal component or parts directed ton achieve a particular objectives. This is any irregularity perpetrated by a person to gain or obtain an unjust or illegal advantages it could be referred to as any criminal deception to gain an unjust or illegal advantage.

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The Impact Of Audit Committee On Financial Management Of An Organization         ( A Case Study Of 7up Bottling Company Plc 9th Mile Conner Enugu)