ENHANCING CORPORATE ACCOUNTABILITY THROUGH EFFECTIVE AUDIT SYSTEM

(A Case Study of Sheffeild Risk Management Limited Owerri Imo State)

ABSTRACT

Ability to report back the conclusion of an assignment of the progress made so far to the
person(s) who delegated the authority to the performer of an assignment, duty or function,
has for decades eluded this nation both in the private and public responsibilities to be
performed and performed and reported back has been carried out as accomplished. The lack
of accountability leads to many vices in our social and economic system. The objectives of
this study therefore are: (a) To ascertain and determine the role of independent audit
towards accountability in an organization (b) To determine if independent audit can control
fraud and embezzlement. The primary data sources (the questionnaire) collected response
from thirty two (32) respondents out of forty (40) that was sampled. Data collected through
primary sources were analyzed on tables using percentages, three hypotheses were stated
in null form and ere tested using the X2 statistics, simple percentages and the test revealed
that audit enhances accountability in an organization and also help in controlling fraud,
embezzlement and defalcation in an organization.
 CHAPTER ONE

1.0 INTRODUCTION

Accountability in both public and private section has being an issue that is worth discussing due to its
paramount and colossal impact to the overall performance of an organization.
It (Accountability) has to do with reporting back action, task carried out by an individual to the
authority who apportioned such function.

1.1 BACKGROUND OF THE STUDY

Accountability is the process or act of reporting back to a higher authority, body or individual the
actions taken by a steward. It enables the person or persons reported to determine if the steward has
acted or performed the assigned duties properly and satisfactory. It plays a major role in the success
or failure of any business, particularly when the business is not managed by its owner.

Initially most business set-ups were managed by their owners. The owners‟ manager was the sole
financial contribution to the enterprise. But with the development in the scale and scope of business, a
huge capital beyond that affordable by the sole individual or a family was needed. Consequently
contributors (hereafter called shareholders) were required to raise the funds for the business. The
emergence of these shareholders led to the divorce of the owner managers from the management of
the business as all of them cannot be directors at the same time. This the management of business
was entrusted to the hands of people who have no financial claims to the business and the
shareholders were skeptical about this particularly as the law does not permit them individually to go
through the books of the company in their desire to keep abreast of the performance of the directors.
This skepticism aroused the need for surveillance over the activities of the non-owner managing
directors. This bid to fulfill the later led to the engagement of third-party (an Auditor) to perform an
audit of the company’s accounts.

Audit has since them received a lot of definitions and/or then received a lot of definitions and/or
interpretations both from accounting bodies and auditors and their non-the-like. Justifiable is to say
that audit has suffered a lot of misinterpretations. Most of the misgiving interpretations see it as being
armed at fraud and error detection. But audit essentially involves much more than that. One of the
most involved and of course the most acceptable definitions so far is that issued by the consultative
council of accountability bodies (CCAB) which sees audit as “the independent examination and
expression of opinion on the financial statement of an enterprise by an appointed auditor in pursuance
of statutory obligation (Howard 2022:1).

Deductively, an audit is the objective scrutiny of someone’s work or presentation by a third party (an
auditor) who is different from the users and the preparing of the presentation. The general essence of
audit is to ascertain compliance of the firm’s records and operational policies with usefulness of
acceptability of and the dependability on the firm’s financial statements.

Accountability as explained above has suffered some misconceptions, surprisingly in the hands of those
who should have understood it better. Most of the lay men conceptual understanding of
accountability relates it to communicating about monetary matters (Odon, 2019:7) but accountability
goes beyond that. According to the Webster encyclopedia dictionary of English language (2015:110),
accountability is defined as “the state of being accountable, answerable, liable or responsible” the
same dictionary goes further to define accountable as “liable to pay or make good in case of loss;
responsible to a trust, liable to be called to account, put in another way an much more related
to the context in the articles Aba times of fourth September 1999 captioned “accountability in
the third republic” it says Accountability connotes answerability and stewardship, by answerability is
meant answering for one’s actions and decisions (Odon2019:7)

Stewardship according to the article means service; it means that every leader should be responsible to
the people who reposed trust in him.

For accountability to be accorded its rightful place in an organization the writer believes that there is a
high need for proper internal control measure and in addition, efforts should be made to ensure that
company accounts are subjected to external and independent audits after each financial period.

The bible also records in chapter 25 verse 14-30 of saint Matthew gospel, the story of a rich man who
went on a far journey entrusting the affairs to his servants and who when he returned, required the
servants to answer individually, for their stewardship to the business while he was away. It in the
same manner that it is required of the chief executives and directors of a company who are quite
different from the real owners of the business to answer for their stewardship of the funds and
property entrusted to them by the shareholders. It is desire for accountability that gave rise to what
we know today as audit- a mechanism through which the shareholders are made abreast of the true
and fair picture of the activities of the directors and chief executive of the company.

1.2 STATEMENT OF PROBLEM

The increasing wave of fraud and embezzlement of public funds by high officers and chief executives in
the private and public companies brought to the lime light some misconceptions of what the job of an
auditor is and what audit is all about. To the uninformed, the auditor is a wizened individual who
wears the traditional green eyeshade and sleeve garters.

They will expect to find him perched on top a high stool counting money, meticulously adding long
columns of figures and gaining his sole pleasure in life from the apprehension of luckless person
whose books failed to balance or whose cash account proved to be short (Harword 2012:135).

According to Pratt (2018:1), were you to ask the average man in the street about the auditor’s job, he
will probably tell you that he prevent fraud, press our layman further, he may paint you a picture of a
rather gray individual who buries himself in ledger, emerging only from time to time to produce sets or
figure which are not important anyway

Such are the image that the auditor has attracted but they are incorrect in the sense that “the auditor’s
primary responsibility is neither to prevent fraud nor to produce figures” (Woolf 2012:12)
 The problems are:

I. Mismanagement of enterprises by directors and top management who in most cases have no real
financial stake in the business.

II. Because of the fact that the directors and top managers have no financial claims to the business
or its enterprise, they tend to exhibit the highest level of truancy to work and are generally
indifferent to the progress of the company. Most them regrettably choose their moments for
putting the company into liquidation of little or no cost to them, by diverting the funds and assets
entrusted into their care for their personal uses.

III. And without the misappropriation being detected not the culprit being brought to book the auditor
expresses an opinion of “a true and fair view” of the perpetrated fraud. The problem is that this
attitude has dented considerably the professional image of audit. To most employees of the
auditor, the effect is “there is no need for auditors as it has failed to detect fraud”.

And to the few informed ones the question constantly asked is “how independent is the
independent auditor?”

1.3 OBJECTIVES OF THE STUDY

Having had the problem stated, the objectives of this study which are stated in null form are:

I. To ascertain the role of independent audit towards accountability in an organization

II. To determine whether independent audit can enhance managerial ability;
III. To determine if independent audit can control fraud and embezzlement.

1.4 RESEARCH HYPOTHESES

In order to complete this study successfully the following hypotheses have been formulated in null
form:

I. Independent audit does not enhance accountability in an organization.

II. Fraud and embezzlement will not decrease if independent auditors do their work properly
III. Mismanagement is not due to lack of accountability.

1.5 SIGNIFICANCE OF THE STUDY

The misconception of the function of audit has, no doubt, eroded in most minds the confidence and
reliance on creditors‟ report and has dented the credibility with which the audit profession was known.
The researcher has, therefore taken to this study for the need to show management and directors that
reliance on auditor’s report will help to enhance their performance. The studies will contribute to
knowledge by bringing the opinion of many experts in one text and this make it easier for readers to
have a broader knowledge of the subject without having to go through several texts.

Finally the thesis will become a reference material for other student who will carry out further studies

1.6 THE SCOPE OF THE RESEARCH

The study will mainly focus on the company selected as a case study i.e. Sheffield Risk Management
Limited, Owerri. The researcher would go beyond desk search into field to sample the opinion of
workers, officers as well as chief executive. These would be accomplished through the construction
and issuance of questionnaire to the potential respondents and also through oral interviews.

The researcher intends to convince the misinformed minds about the relevance of independent
auditing as a tool for enhancing accountability. To do this only well informed individuals will be
consulted during the primary data collection stage.

The scope of the study will be limited to the statutory role of the auditor. The auditors power and
rights, lead liability, ethics and types opinion. The study will also cover intend control as a very
important variable in accountability. Further aspects and functions of internal audit will also be
covered.

1.7 LIMITATIONS OF THE STUDY

In the course of this research work, problems of various natures were encountered, which in no small
measure constituted some “Road block” to the progress of the study. Among the militating factors are
the following:

1. Non-return of completed questionnaire by some respondents: some of the respondents did not
return their response of the questionnaire irrespective of the researcher’s series of reminder letters.
Their reasons ranged from forgetfulness to lack of chance to attend to the questionnaire.
2. Piecemeal collection of information: information was collected in piecemeal from management due
to bureaucracy among others.
3. Reluctance in releasing information on even oral interviews. The researcher was looked upon as a
spy in disguise who has come from their competitors to x-ray what they called their “top secrets”
and “blue prints” As a result; comprehensive data were not easily collected notwithstanding the
researcher’s letter of introduction.
4. Time: This was not a good friend of the researcher. The time allocated to this study was very
insignificant compared to the volume of the work involved. This time constraint was further
companied by the existence of other class room work.
5. Funds: Money was another constraint to the research work. Most often, the researcher ran out of
funds and had to delay the work for money to come in.
6. Exeat: Considering the school system, time spent on the search for permission to leave school as
 regards to the research study is yet another factor that ate deep into the very fabric of time
allocated for this study, hence it is considered as a limiting factor to the progress of the study.

1.8 DEFINITION OF TERMS

Some terms used in this study which may not be clearly understood by some readers are hereby
defined.

Audit:

This is the dependant examination of a financial statement by an auditor expressing an opinion about
the true and fair view of the financial statement and state of affairs of the enterprise.
It is the independent examination of, and expression of opinion on, the financial statement of an
enterprise by an appointed auditor in pursuance of that appoint and in compliance with any relevant
statutory obligation.

AUDITOR:

The individual or partnership firm appointed to carry out an audit of the financial statements of an
entity.

AUDIT REPORT:

Any report, written by an auditor on a matter on which an opinion has been sought within the terms
of an auditor’s appointment.

AUDITOR’S REPORT:

This is another term for audit report.

AUDIT EVIDENCE:

This is information obtained by an auditor inn arriving at the conclusion which forms the basis of the
auditor’s opinion on the financial statement being audited.

INTERNAL AUDIT:
This is the audit function carried out within an organization of evaluating and reporting on accounting
and other controls on the operations of the organization. An audit of an accounting entity carried out
by an auditor who is not employed by that entity or by its manager and is as far as possible
independent of the person(s) who manage(s) the entity.

ACCOUNTABILITY:

This is the state or condition being accountable.

ACCOUNTABLE:

This is the required provision for the description, analysis and evaluation of actions.
INTERNAL CONTROL SYSTEM:

This is the whole system of controls financially and otherwise established by the management in order
to carry on the business of the enterprises in an orderly and efficient manner, ensure adherence to
management policy, and safeguard the completeness and accuracy of the records, as regards to an
organization.
CHAPTER TWO

REVIEW OF RELATED LITERATURE

2.1 WHAT IS AN ANDIT?

In his book “Practical Auditing”, Biggs (2010:30) stated that an audit is an examination of books and
accounts and vouchers of a business as will enable the auditor to report whether he is satisfied that
the balance sheet is properly draw up, so as to give a true and fair view of the profit or loss for the
financial period according to the best of the information and explanations given him and as shown by
the books and not to report in what respects he is not satisfied.

Howard (2019:10) stated that “an audit may be described as an examination by an auditor of the
evidence from which the final revenue accounts and balance sheet of an organisation have been
prepared, in order to ascertain that they present a true and fair view of the summarized transactions
for the period under review and of the financial stat of the organisation at the end date, thus enabling
the auditors to report there”. Most standard definitions of audit are more or less along the lines of the
tow quoted above. It is submitted, however that defining an audit in this manner is defective in two
respects:

a. By stressing revenue account and balance sheet an impression could be created that an audit
cannot be carried out where they do not exist. There are several organisation (the largest being the
government) who do not prepare profit and loss accounts. Many social organisations do not have a
profit motive and therefore do not prepare profit and loss accounts. Many do not also prepare
formal balance sheet at the end of a period. In respect of government, the quarterly balance sheet
which the Accountant General prepares in respect of government fund is not strictly speaking, a
balance sheet in the true sense as it merely shows cash balance and inter-government balances. It
does not include the fixed assets of government and liabilities to outsiders. The government and
social organisations prepare statements of account to suit their particular purpose. These
statements of accounts can be and are indeed subjected to audit even though they cannot, by any
strength of interpretation be described as profit and loss accounts or balance sheets.

b. The second defect of most standard definitions of audit is the emphasis placed on examination of
book of accounts, vouchers etc in other words they stress an examination of documents. This
emphasis gives the wrong impression that an audit is confined to the examination of documents. In
the course of an audit, the auditor will normally examine physical assets where possible and ask for
explanations from officers of the organisation whose account he is auditing. A more embracing
definition of an audit could therefore be a conscientious and objective examination of, an inquiry
into, any statement of account relating to money or money’s worth, the under lying documents and
 the physical assets where possible, as well enable the auditor to form an opinion as to whether or
not the statement of account presents a true and fair view of whatever it purports to represent and
to report accordingly (Okolo, 2010:42).

The phrase “any statement of account” is considered sufficiently embracing to accommodate any
form of account an organisation may prepare to suit its purpose, be it a profit and loss account, a
receipt and payment account, an income and expenditure account, a balance sheet or any variation
of these.

Again, it is worthy to not e that the term “Audit” is used to describe not only work done by
accountants and auditors in examining financial statements but also work done in reviewing:

i. Compliance with applicable laws and regulations.

ii. Economy and efficiency or operations.
iii. Effectiveness in achieving programme results.

1. Financial and compliance: Determine

a. Whether the financial statement of an audited entity present fairly operation and the results of the
results of financial operations in accordance with generally accepted accounting principles and
b. Whether the entity has complied with laws and regulations that may have a material effect on the
financial statements.

2. Economy and Efficiency: Determine

a. Whether the entity is managing and utilizing its resources (such as personnel, property, and space)
economically and efficiently.
b. The cause of inefficiencies or uneconomical practices and
c. Whether the entity has complied with laws and regulations concerning maters of economy and
efficiency.

3. Programme result: Determine

a. Whether the desired results or benefits established by the legislature or other authorizing body are
being achieved and
b. Whether the agency has considered alternative that might yield desired results at a lower cost.
The audit of a governmental organisation, programme, activity or functions may involve one, two
or all three of the elements of expanded scope auditing.

2.2. WHO IS AN AUDITOR?

According to the Oxford Advance learners Dictionary 6 th 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 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.

2.2.1 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 auditor is that;

An auditor 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.

2.2.2 APPOINTMENT OF AN AUDITOR

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

i. An auditor 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 auditor 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.

2.2.3 OBJECTIVES OF AUDITING

According to Santock (2019:8), auditing is an examination and evaluation of the authenticity, and
therefore the reliability of an organisation’s business documents and records. It also involves making
inquires to ascertain that the financial statements on which the auditor is reporting display a true
and fair view of the financial results for the year under review and a true and fair view of the state
of affairs at the year end.

The main objective of auditing flows naturally from the definition above. It is express (at least), after
having gathered acceptable evidence in support of it, a professional opinion as to the fairness and
reasonableness of the financial statement on which the auditor is reporting.

The discovery and minimization of errors and frauds, not as it sometimes claimed prevention of them,
can now be put in the right perspective. It is not the main objective of auditing, but secondary or
supplementary to the main objective. The discovery and minimization of errors and frauds is best
described as a by-product of audit work conducted to achieve the main objective.

2.2.4 AUDIT TEST

The language and vocabulary of audit testing include the following;

i. Walk through test

ii. Compliance test
iii. Substantive test
iv. Rotational test

i. WALK THROUGH 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 of 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 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 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 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).

2.2.5 AUDIT EVIDENCE

According to the Oxford Advanced Learner’s Dictionary (6th Edition), Evidence is the facts, sign or
objects that makes you believe that something is true.

Evidence could also be said to be “clearness, obviousness, sign, testimony, facts making for a
conclusion.

Audit evidence therefore comprise the totality of signs, testimonies and facts which an auditor obtains
in the course of his examination of a financial statement as would enable him to form an objective
opinion as to the correctness or otherwise of the financial statement and to report accordingly. In
considering audit evidence one need to consider;

i. How the auditor obtain his evidence

ii. The sources of such evidence.
iii. The sufficiency and reliability of each source of evidence.

2.3 THE ACCOUNTING SYSTEM

The evidence on accounting system will be centred on the following:

a. Adequacy of the accounting records being kept both in volume and format: the auditor as a
qualified accountant should know what accounting record needs to be kept by any organisation to
suit the nature and size of its operations.
b. Adequacy in principle and effectiveness in operation of the internal check and internal control
system in the organisation. In respect of these the auditor will carry out compliance test.
c. The promptness with which accounting records are written up. There are organisations whose
ledger postings are allowed to fall months or even year behind. This is an unfortunate situation but
an examination of the ledgers of some these organisations will confirm that

2.3.1 ADVANTAGES/DEBATES ON AUDITS

Having discussed the reasons for audit and the main objects for undertaking an audit, let us look at
some of the numerous advantages that may arise from audit, particularly when the essential features
of audits are properly carried out.

i. It has been made possible through audits for individual shareholders to be familiar with the details
of all the various businesses in which they have interests as shareholders recall that the article
of companies does not as a matter of rule permit individual shareholders to have access to the
books and accounts of the companies in which they have shares. They, therefore depends
entirely as a matter of last result, on auditors appointed by them to act on their behalf whose
duty it is to scrutinize objectively the books and accounts of the company and report to them in
the company’s general meeting.

ii. Audits acts as check upon the directors, the knowledge of the fact that the company’s books
and accounts are surely to be audited restraints them form hatching any conceived fraudulent
act and to be much more careful with their duties.
iii. On the part of the other employees, audit acts as a precaution against irregularities or fraud.
iv. Audit has made it possible for an auditor to render to the management some valuable
assistance on matters of accounts and finance generally from his wealth of expert knowledge
and experience in the profession. In fact, his presence is useful because of other capacities in
which he is able to assist. However, it is note-worthy that it is not within the province of the
auditor to offer advice unless he is asked to do so.
v. The applications to banks and other outside parties for the purpose of raising finance, if
supported by audited accounts are greatly enhanced.
vi. Its advantage is also portrayed in the weight of authority which the audited accounts submitted
to the Inland Revenue carries relative to the accounts which have not been audited.

2.3.2 STANDARDS OF REPORTING

Of the three standards in auditing, the standard of reporting is singled out for discuss in this section.
After the field work, the auditor is expected to write his opinion and present at the annual general
meeting, tends to present the model, format and shape that the report should take, and the nature of
its contents.

The audit standards of reporting require that the report should state whether:

i. The financial statements presented by auditor are done in accordance with General Accepted
Auditing Principle (GAAP).
ii. Such principles have been consistently adhered to in current periods in relation to the preceding
period.
iii. Information disclosed in the financial statement is to be regarded as reasonably adequate or
otherwise.
iv. The standard further stipulates that the report shall either contain an expression of a qualified,
unqualified or adverse opinion regarding the financial statements taken as a whole or an
assertion indicating that an opinion cannot be expressed. It also requires that reasons be given
where an overall opinion cannot be formed.
v. Further, the standard demand that where an auditor’s name is associated with the financial
statements, the report shall contain a clear cut indication of the character of the auditor’s
examination. If any and the degree of responsibility he is taking (Meigs, et al, 2014:135)

2.3.3 INTERNAL CONTROL CONCEPT

Internal Control was defined by the committee on Auditing procedures of the American Institute of
Certified Public Accountant (AICPA, 2012:10). Thus; Internal control comprises the plan of organisation
and all of the coordinate methods and measures adopted within a business to safeguard its assets,
check the accuracy and reliability of its accounting data, promote operational efficiency and encourage
adherence to prescribed management policies.

From the definition above, it could be seen that internal control is broader than the meaning often
attached to it. The definition showed that internal control system goes beyond those items directly
related to the functions of accounting and financial departments.

The determination of the extent and type of internal control system appropriate for any organisation is
a central responsibility of top management. Though the nature and scope of internal control varies
between enterprises and between departments in a particular organisation. Internal control adopted in
a specific business organisation depends to a large extent on the nature, size and volume of
transaction conducted, the degree of control, to which management executives can competently
exercise individually the geographical distribution of the enterprise, the assets employed and the
abilities and calibre of staff.

However, irrespective of the nature and scope of interest control system an organisation tops for the
objective of an effective system of internal control is to ensure that, within acceptable level of costs

a. All liabilities and assets are properly recorded and accounted for.
b. All assets are safeguarded.
c. All operations are effectively and efficiently carried out.
d. All income, claims or account receivable are received and recorded.
e. All expenditures are authorized and incurred.
f. The accounting records are liable and become the foundation for the Entity’s final accounts.

2.4 CHARACTERISTICS OF SATISFACTORY SYSTEM OF INTERNAL CONTROL

Internal control has many characteristics, these include:

1. Organisation of functional responsibility.

2. High quality personnel with commensurate responsibility.
3. Healthy policies and procedures in each department of guide staff in the performance of duties and
functions.
4. Good system of authorization and adequate records procedures to safeguard assets and liabilities.
Furthermore, there is basic principle which aid sound system of internal control i.e. for a
satisfactory and effective system of internal control the following under listed principles as
explained in Cooper is Manual of Auditing (2019:31) should be adhered to:

The duties of various members of staff should be set out in writing, together with the limit of
authority therewith. The procedures lay down for carrying out duties and discharging
responsibilities should evidence who has done the work or made the decision.

1. Precise instructions should be made for the rearrangement and delegation of duties in the event of
a member of staff being absent.
2. Accounting department should have control over all accounting records.
3. Persons having custody of assets should not also be responsible for the accounting in respect of
those assets. Should a person be responsible for both frequent in dependent checks of the
accounting record must be made.
4. Records and forms should be as simple as possible and properly designed for the purpose for which
they are being used.
5. Payment should be made only on the authority of properly authenticated vouchers.
6. The books should be kept properly and written up to date in permanent form.
7. The book should be balanced at regular intervals and such balancing should include the
reconciliation of any control accounts which may be maintained with relevant detailed accounts.
8. Staff must understand and be competent to carry out the work entrusted to them.
9. There should be well defined division responsibilities between departments, sections and individuals
so that no one person handles a transaction from beginning to end. Work carried out by one
section or person in the accounting department. Should be in dependently checked or controlled
by another.
10. All staff should take their holiday according to a settled roster.
2.5 RELATIONSHIP BETWEEN INTERNAL AUDITING AND INTERNAL CONTROL

Internal auditing is a part of internal control. However, it is that part of internal control which reviews
and evaluates the effectiveness of other control measurer operative in an organisation. Internal
auditors investigate and appraise the system of internal control and the efficiency with which the
various units of an organisation are performing their assigned functions and therefore report their
findings with recommendation to top management. Internal auditors are interested in determining
whether each unit or department has a clear understanding of its assignment, whether it is
adequately staffed, maintain good records, protect cash and inventories and other assets, properly
cooperate harmoniously with other departments and in general carries out the function provided for in
the overall of the organisation.

According to meigs (2022:141) “internal auditors are not responsible for performing routine control
procedures such as reconciling bank statements balancing subsidiary ledgers or verifying the
mathematical accuracy of invoices.” These functions are performed by a separate unit within the
accounting department such as the operations group. Internal auditors provide a higher level of
internal control by appraising the internal control system and the efficiency of the entire system of
internal control. They design and carry out procedures that test the efficiency and effectiveness of
virtually all aspects of the company operations.

2.6 IMPORTANCE OF INTERNAL CONTROL IN AUDITING

When accounting records and financial statements are prepared in accordance to generally accepted
accounting principles and strong internal control system, there is more assurance with regards to their
reliability than when they are developed under unsatisfactory conditions of weak internal control
system. The auditor’s objective in evaluating and testing internal control system is to determine the
degree of reliance which he may place on the information contained in the accounting records. If he
obtains reasonable assurance by means of compliance tests that the internal controls are effective in
ensuring the completeness and accuracy of the accounting records and the validity of entries therein,
he may limit the extent of his substantive tests. This decision requires skill and judgment because it is
rare to find a system in which the controls are so effective and so well designed and implemented that
one should place maximum reliance on it. Thus, due to the inherent limitation in even the most
effective internal control system, auditors rarely, rely and solely o it to form their opinion of the
financial statements. In some enterprise, unless there is an effective control system, the auditor most
often finds it difficult to determine whether all the transactions have been reflected in the accounting
records. Thus, the importance of internal control to audit cannot be over emphasized.

There are often circ umstances in which controls are weak or practically non- existent. This kind of
situation requires special action by the auditor if he must carry out the audit work. In such cases he
has several alternatives to his discretion.

He may decide to carry on the audit, but rather than limiting his tests, he extends it to cover an
extremely large percentage of transactions. The auditor uses this alternative where the client is a small
organisation and so cannot afford the personnel to maintain adequate control system. The auditor also
uses this procedure where the volume of records is small such that he can gather sufficient
evidence without spending too much of his time.

The auditor may alternatively choose to withdraw on the appreciation of the fact that risk of
overlooking material errors or irregularities is too great be overcome with increased volume of tests.
The auditor can withdraw temporarily and ask the client to do what is necessary to make the system
auditable.

2.6.1 INTERNAL AUDITING DEFINED

Internal auditing is a managerial function that appraises the problems and performance of every
department in the company (Meigs and Meigs 2017:158). The internal auditor is a representative of
top management. It is his responsibility to design and carry out audit procedures which test the
efficiency of virtually all aspect of a company’s operation and existing system of controls.

The purpose of internal auditing is to assist members of the organisation in the effective discharge the
user with analysis, appraisal, recommendations, counselling and information concerning activities
reviewed, and this, assist management in controlling the operations of the enterprise efficiently (Meigs,
et al, 2017:152).

Internal auditing vary from one company to another, depending on the size rate of development,
financial resources and management obligatory to use the information generated and to act promptly
on their recommendations. There are however, certain audit objectives which must be established and
continually reviewed if the internal audit function is to be effective. These audit objectives according to
Holmes and Burns (2019:151), may be classified as:

i. Accounting controls objectives

ii. Administrative controls objectives.

The two objectives are discussed under the function of internal auditing. Internal Audit Functions
Generally, internal auditors of an organisation normally perform the following duties:

 They appraise the effectiveness of accounting and administrative controls

 They review the internal control system established by management to check for compliance with
company or organisation policies and procedures and the effectiveness of the system (Fayemi,
2017:37)
 It is the internal auditor’s duty to review the means of safeguarding assets
and to ensure that such assets actually exist.
 The internal auditors should appraise the effectiveness of established controls plans, and
recommend operating improvements (Santocki, 2019:111).
 It is the internal auditors function to appraise the quality of staff and management.
 It is part of the internal auditors function to review the operations of the organisation to ascertain
whether results are consistent with established objectives and goals.
 The internal auditors help in co-ordination of auditing activities with external auditors and other
regulatory bodies.
 It is the internal auditor’s duty to review the organisation’s compliance
with relevant laws and with new accounting rules and standards.
 The internal auditors of an organisation may act as an in-house consultant on control matters and
at times help to implement new system and procedure.
 The internal auditors may advice management on future recruitment of personnel (Madriaverna,
2018:5)

2.6.2 QUALITIES OF INTERNAL AUDITORS

According to Pitch (2017:19), the modern internal auditors make detailed examination of the
accounting system and control in such areas as cash receipts of transactions review, the modern
auditors, both internal and external new perform review on a quality basis. This model approach is
referred to as “The Business Approach” and should commence with the planning of the auditing. To do
this effectively, the internal auditor must conform to the general standards established by the (Holmes
and Burns, 2019:7).

Those standards state that:

1. The examination is to be performed by a person or persons having adequate technical training and
proficiency as an auditor.
2. In all matters relating to the assignment independence in mental altitude is to be maintained.
3. Due professional acre is to be exercised in the performance of the examination and preparation of
the report

Although, these standards are required of the independent auditors, there are good attributes or
qualities, which an internal auditor should possess. It therefore means that internal auditor should
have a thorough knowledge (both theoretical and practical) of accounting and also of the internal
regulation governing procedures in operation in his entity (Woof, 2013:30). In addition to the above,
the internal auditors should also have the following qualities:

1. General Bearing: The internal auditor should not behave in such a manner as to indicate
suspicious of anyone but should of purpose of those section/departments/accounts he is examining.
The auditor must not restrict the thoroughness of his efforts and must not jeopardize the possibility
of discovering embezzlement. His acceptance of explanations given him by other employees in the
section/department in the organisation should be based on facts and objectives.
2. Tact: Apart from having good technical ability and qualification the internal auditor should have
good human relationship with those whose accounts are being audited. Tact is the ability to work
with people. Its foundation lies in respect to others.
3. Constructive curiosity: it means a desire to know or understand. It requires an inquisitive
mind. Internal auditors must be interested in his work and also in that of the organisation which
 he serves. He should exercise sufficient mental energy to find out what goes on at the account and
other departments in the organisation.
4. Analytical Ability: The internal auditor should distinguish between important things and
inconsequential things and should view all problems against their backgrounds.
5. Construction Ability: The internal auditor must be able to give recommendation and specific
remedies for weakness he observed in the course of his audit work to management. Therefore
analytical ability must be buttressed with constructive ability.

2.6.3 INDEPENDENCE OF INTERNAL AUDITORS

Independence in mental attitude is a good requirement for internal auditors. Independence is essential
to the effectiveness of internal auditing. This independence is obtained through organisational status
and objectivity.

According to Holine, etal, (2010:40), the organisational status of the internal auditing function and the
support accorded to it by management are major determinants of its range and value. Moreover
internal auditors are employees of an organisation whose records and procedures they examine, and
they owe their allegiance to the organisation. The duties of the internal auditor, their enumeration and
their opportunities for progress are controlled by management. This does not mean that internal
auditors have no independence in both management set up and attitude. In further explanation of this
assertion, Maulz argued that internal audit must be controlled as well as function, yet it must be free
and sufficiently independence to fulfill its audit role. The establishment and maintenance of
independent status normally require that:

a. Audit department/unit should not be a part of accounting department.

b. The leaders of the internal audit team should be responsible to top management level and should
have a right of direct access to be Account unit of the organisation. If internal audit function is to
be effective and reliable. It must be performed by someone who is sufficiently independent of the
people whose work they are to appraise.
c. The audit report should be concise and objective, and should include recommendation s on how to
improve the operations of the entity.

2.7 MEAURING THE PERFORMANCE OF AN INTERNAL AUDITOR

The proper measurement of the job of an internal auditor depends on standards; performances should
be assessed on the accuracy of information filled by the auditor on the state of affairs of the company.
If the job is performed in accordance to description this should be reported to ensure management
that its desire are being followed. This usually boosts the ego of the supervisor where he is to be told
that he is operating in accordance with management objectives. Deviation should according by e
reported whether they have monetary value or not, as these constitute departures from what has
been prescribed for those concerned. The benefit of this could be seen in reports file when obsolete
item are still carried in stock and the internal auditor comments on that to management queries the
supervisor of the warehouse stores and improves by checking stock status regularly.
2.7.1 RELATIONSHIP BETWEEN INTERNAL AND EXTERNAL AUDITORS

Peterson (2012:2) wrote that their common areas of interest include:

a. Continuous information flow to avoid communication gap.

b. Safeguard of the assets of the company.
c. Installation of adequate controls in the accounting system.
d. Internal control measures that are ineffectively reviewed.
e. Scope of operation- wholly, the work of the external auditor is determined by law or letter of
appointment that of the internal auditors is determined by management.
f. The external auditor is interested in true and fair view of the accounts while the internal auditor
looks at both the control procedures and information for management. The emphasis for the
internal auditor is to ensure that managerial guidelines are adhered to.

Both the internal and external auditor according to Stettle, (2017:84) ensure that:

1. There is an effective system of internal control and that the system works effectively not only on
paper but also in practice.
2. There is an efficient and adequate management information flow.
3. There is an adequate accounting system as provided by the company and Allied matters Decree of
1990.
4. Assets of the organisation are safeguarded.

Both the internal and external auditors have similar methods of approach in accounting matter
such as:

1. Examination of accounting records and supporting documents.

2. Examination of system of internal controls for both soundness in principle and effectiveness in
operation.
3. Verification of assets and liabilities
4. Observation, enquiry and use of accounting ratios in the interpretation of financial statement.

2.7.2 COOPERATION OF INTERNAL AND EXTERNAL AUDITORS

Opurum (2010:7) wrote on the benefits of cooperation between the internal and external auditors
and they include the following: for the external auditor.

5. A source of evidence concerning the quality of internal control and extent to which established
procedures are followed. Management reports and other working papers prepared by the internal
auditor may provide this evidence.
6. A guide to the nature of existing internal control system, especially those systems which have been
recently introduced or amended.
7. A guide to the nature of audit procedures which may be adopted by the external auditor.
8. An important source of assistance in the design, administration and evaluation of internal control
questionnaire.
9. A source of general information about the nature of organisation and how to help resolve audit
queries.
10. A source of in house training materials and information about training materials and information
about training programmes which could benefit the external auditors.

For internal auditors:

1. A use of independent assessment of the internal control systems (including internal audit itself) in
the light of knowledge and experience gained in the organisation by the external auditor.
2. A guide to adequacy of the control and scope of internal audit programmes.
3. Assistance is the identification of area of risk assessment method used.
4. The use of training materials developed by the external auditor in areas concerns with internal
evaluation. These materials may help build the experience of the internal auditor.

2.8 FRAUD DEFINED

Fraud is defined as misrepresentation by a person of a material fact, known by that person to be

untrue or made with reckless in difference as to whether the fact is true, with the intent to deceive and
wit result that another party is injured. Constructive fraud differs from fraud as defined above in that
constructive fraud does not involve a misrepresentation of fact with intent to deceive (Meigs, etal,
2014:85). Instead a person who requires the exercise of exceptional good faith might be accused of
constructive fraud because of the very lack of good faith.

2.8.1 TYPE OF FRAUD

Having discussed and had an overview of what fraud means in auditing. It becomes of colossal
importance and paramount necessity to discuss the various phases in which fraud could be
perpetrated.

a. Collusion

The amount of detailed checking which the auditor must perform before he can satisfy himself that no
fraud exists will depend on his assessment of the quality of the internal control system. When the
system is good, it takes collusion between two or more persons for fraud to be perpetrated, and yet
remains undetected. Collusion is not infrequent hence daily cases of it abound. But for fraud to be kept
at bay, the auditor should pay particular attention to those classes of transactions which offer special
facilities for fraud. The principal of which are cash transactions of one kind or another. It, therefore,
goes without saying the auditor should not relent in his examination of transactions on the ground that
the internal control system is good; hence a good internal control system is also a good safeguard for
fraud to be perpetrated and concealed.

b. Falsification of Accounts
The second class of fraud involves the falsification of accounts. It is usually less frequent than the
collusion class of fraud, but when it occurs it may involve very large amounts, it does not inmost case,
however involve defalcation (that is removal of either property is often done by various persons for
various reasons notably:
i. For the purpose of bolstering up a business which is in an insecure condition in order to
maintain the confidence of the shareholders, creditors or the public or
ii. By the manager for the purpose of increasing the apparent profit of the business, thus
showing that he has been successful in his management, and possibly increasing the
commission on results payable to him or
iii. By director for the purpose of enabling them to pay dividends which would otherwise not been
possible.
From this discussion, one observes that this form of fraud is often very ingeniously and skillfully
concealed, and is in most cases carried out by persons holding the entire confidence of directors and
shareholders.

Honesty and Integrity

The auditor is legally and ethically required to exhibit a high degree of honesty and integrity in the
course of his audit. He should always realize that his work is relied upon by many others. In a
celebrated case between an auditor and the general Bank, the London judge said that the auditor must
be honest not believe to be true, and he must take reasonable acre and skill before he believes that
what he certifies is true.
CHAPTER THREE

RESEARCH METHODOLOGY

3.0 INTRODUCTION

This chapter contains the methods and procedures employed by the researcher to obtain primary and
secondary data for the study. The chapter will also discuss in detail the methods for data collection,
simple selection, data analysis and test or hypotheses.

3.1 THE RESEARCH DESIGN

The research design entailed the combine procedures of preliminary personal observations, oral
interview and questionnaire that constitute the major research instructions. The questionnaire
developed for the study was mainly designed to obtain responses from respondents on the topic
studied.

In further pursuance of the objectives of this study, the researcher conducted some unscheduled
interviews on the management staff and on lower cadre managers of the company.

3.2 DATA SOURCES

Data used for this study were mainly obtained from the review of other peoples past write-ups related
to the study and from data/information obtained through questionnaire responses.
PRIMARY DATA

This refers to the raw data or the first hand data collected directly from the sample studied by the
researcher. These primary data includes that information collected by the researcher from initial
investigation and from direct field survey which involved direct contact of the researcher with the
source of the data. The major instruments used for primary data collection were the questionnaire and
interviews the questionnaires were administered by the researcher on the respondents who filled and
returned them on the interview, the researcher was also directly in contact with the respondents such
that he collected the responses instant.

SECONDARY DATA

Secondary data refers to data collected by works writers and researchers that are closely related to the
research topic. The researcher’s sources of the secondary data include among others, textbooks,
journals, newspapers, lecture papers and notes (better qualified as unpublished materials).

3.3 POPULATION AND SAMPLE SIZE

The population of this study was made up of all the staff of the case study. The choice and
determination of this sample size was not done arbitrarily. The preliminary study (pilot survey) carried
out in the company was very helpful. It was on the basis of the researcher’s preliminary observation
on the company that the sample size figure of forty (40) was randomly and judgmentally selected
based on the stratification shown in chapter four (4).

3.4 DATA COLLECTION/INSTRUMENTS

As already stated, the research instruments employed included questionnaire, interviews and
observations.

The researcher administered a total of forty questionnaires to the top management. Each
questionnaire contained twenty-five questions. The questions were structured to reflect on the
position and importance of independent auditing in ensuring accountability in any enterprise. The
questions were in the form of the simple alternative question with options to choose from. A
rectangular box is provided beside each alternative response in which the respondent is expected to
tick “against whichever choice he makes. This type of question structure usually used Yes or No, True
or False, Weak or Strong, Agree or Disagree, among others.

INTERVIEWS

The researcher was, through interview, able to have direct contact with the strategic, tactical and
functional/operational decision makes of the organization, among which were the chief executives,
accountants, the marketers, personnel and advertising managers, including the public relations
officers. The interview was aimed at obtaining primary data for the study that is devoid of distortions
hence the response to the question of the interview was instant.
OBSERVATION

The researcher was taken around the company of that the researcher was able to observe the workers
go about their duties, observed the organisational setup of the company, observed how far the
company has and how the production, personnel etc departments of the company are operated. The
researcher was also able to glance through the documents containing the policies of the company as
well as the internal control system of the organisation.

INSPECTION

Apart from glance through the records containing the policies and internal control system of the
organisation, the researcher inspected some accounting and auditing manual s and documents of the
company. He also looked at the organisation chart of the company and compared it with what he has
observed of conformity.

3.5 VALIDITY OF RESPONSES

Certain techniques were incorporated into the questionnaire to ensure the validity of the instruments
used and that of the response received.

In the design of the questionnaire, some questions were deliberately repeated in varying forms to
forestall mechanical completion or filling of the questionnaire. The questionnaire was also structured in
such a manner that an idea of what operate at the completion of the questionnaire by the
respondents. This is the more reasons why the distribution of the questionnaire was to allow below the
functional staff cadre of the company by the researcher.

3.6 METHODS OF DATA ANALYSIS

The objectives of the research were tested by deductive evaluation on the collected responses. This
involves some simple statistical and mathematical techniques such as simple averages and
percentages. The researcher would have used some complex mathematical and statistical technique
instead, but for the enhancement of the understanding of those who though may need to use the
generated information, are not in good terms with complex mathematical and statistic techniques. It
is for this reason that the analysis of the data collected and distributed have been close using simple
averages and percentages as are evident in the questionnaire.

However in testing the hypothesis to the study, a more technical mathematical and statistical
technique- the chi- square was inevitably put to use the formula of which is
 CHAPTER FOUR

DATA PRESENTATION, ANALYSIS AND INTERPRETATION

4.1 INTRODUCTION

Chapter three has provided a base point from which exploration can be started as to prove the
relevance or irrelevance of audit to the enhancement of accountability in an organization. it is
therefore, the task of this chapter to prove the fact which would be achieved through the analysis of
the data and responses gotten by the researcher from the respondents in the course of the
study ,and by testing the hypothesis formulated about the research in chapter one. The intention
herein would be to have the hypothesis either validated or nullified by the tests or analysis.

For a general overview of the responses from the respondents, on abridged and summarized response
to the questionnaire is herein given.

Table 4.1: Questionnaire Distributed and Responses.

Departments No. Distributed Percentage No. Returned Percentage

Administration 12 30 10 25
Accounting 10 25 8 20
 Sales 8 20 6 15
Production 4 10 4 10
Purchases 6 15 4 10
40 100 32 80
Source: Field Survey, 2024

From the above table, one sees that a total of forty (40) questionnaires were distributed, out of which
thirty-two (32) or 80% of the distributed was returned. The breakdown of the return is as follows.

Twelve (12) or 30% of the total questionnaire distributed were administered to the administrative
department of the company, out of which ten (10) representing 25% of the entire distribution was
returned. This gave a shortfall of 2 or 5%.

To the Accounting department, ten(10) representing 25% was issued out of which eight(8) i.e. twenty
percentage(20%) were returned, giving a shortfall of 2 representing 5% of the total number of
questionnaire issued to the Accounting department.

The sale department was given eight(8)questionnaires which represented 20% of the questionnaire
distributed to the company, of this figure six(6) or fifteen percentage(15%) of the distributed were
returned ,giving a shortfall of 2 or 15%.In the same vein, the production and purchases department
were issued with four and six questionnaire respectively, these represented 10% and 15% of the total
number of questionnaire distributed to the company and the number of questionnaires returned were
four for production and four for purchase department, and these numbers represent ten percentage
each for both departments.

Having gone this far in the analysis of the data collected from the respondents, the researcher would
want to use a few of the questions stated in the questionnaire to verify the research objectives. This
does not mean that all other questions in the questionnaire not used are immaterial or cannot be used
for the verification of the researcher objective.

None the least, the researcher has elected to do some for time constraints and more also, to avoid
making the work boring for those who may find the work useful for their needs. on that note
therefore, the researcher has based his analysis mainly on question numbers 10,12,14,17,20,22 and 24

4.2 DATA ANALYSIS

A tabular presentation of the respondents responses to the questions in the questionnaire were shown
below to ensure that the reader were not put in doubt as to how certain figures were arrived at the
actual analysis of data begins.

Table 4.2: Responses To Questionnaire

S/No Variable Yes % No % Other %

1 Do you work for Sheffield Risk management 30 93.75 2 6.25

 Owerri?
2 If “Yes” are you a staff of the company? 27 84.38 5 15.62
3 Are you in the management cadres 10 31.25 22 68.75
4 Have you been with the company for at 28 87.5 4 12.5
least two (2) years?
5 Are you married? 19 59.38 13 40.62
6 Will you like to be with the company for the 31 96.88 1 3.12
next two (2) years?

8 Do you think the administration and other 18 56.25 14 43.75

functional departments of the company are
being effectively run?
9 Do you think the accounting department of 29 90.62 3 9.38
the company has got the required qualified
Accountants?
10 Is your company periodically 32 100 - -
audited?
11 Was the company 32 100 - -
audited last year?

12 Will you attribute or owe the degree of 25 78.12 7 21.88

accountability in your company to audits?
13 Would accountability in your company have 25 78.12 7 21.88
been different, were the company not
audited periodically?
14 Do you think that Audits have helped in any 19 59.38 13 40.62
way to prevent fraud in the company?
15 Mismanagement in any enterprises is largely 23 71.88 9 28.12
due to lack of accountability?

16 Do you think the external Auditors who 25 78.12 7 21.88

audit your company are professionally
qualified for the job?
17 Do the Auditors discuss their findings with 20 62.5 12 37.5
the management before they are presented
at the general meeting in the form of audit?
18 Do you think the audit report is the true 25 78.12 7 21.88
situation report of your company’s financial
statement?
19 Do you think management should worry 21 65.62 11 34.38
herself with the implementation of the
 auditors’ recommendation usually contained
in the report

20 Has management been implementing such 30 93.75 2 6.25

recommendations?
21 How does management and workers of your
company perceive external audit function?
-Not worth having. 3 9.38 2 6.25
-Worth having. 4 12.5
-An unnecessary duplication of internal audit 5 15.62
function. 20 62.5
-A necessary evil.

22 Do you still see a need for internal 25 78.12 7 21.88

audits?
23 Do you think your company has been 19 59.38 13 40.62
consistent with her system of preparation
and presentation of financial statements?

24 Would you have opted for the scrap of 9 28.12 23 71.88

external audit as a statutory requirement?
25 If „NO‟ do you think external audit is 20 62.5 12 37.5
indispensable for proper accountability in
your company?
Source: Field survey, 2024

Table 4.3: Question 10—Is your company periodically audited?

Response Frequency %

Yea (Favourable) 32 100

No (Unfavourable) - -
Total 32 100
Source: Field survey 2024

The table showed that 100% or of the respondents were of the opinion that the company is
periodically audited. There is no contrary belief to this opinion.

It then goes that if the company has a strong internal control system and the auditor does his job
properly and independently, accountability would be at its peak in the company. But then, the
independent auditor as portrayed by the following table is most often not independent of the
management.

Table 4.4: Question 17—Do the Auditors discuss their finding with the management before
presenting them at the general meeting as audit report?

Response Frequency %
Yes (Favourable) 20 62.5
No (Unfavourable) 12 37.5
Total 32 100
Source: Field survey, 2024

From the table above, 62.5% or 20 of the respondents affirmed that the independent auditors discuss
their findings with the management of the company before presenting their reports at the general
meeting.

37.5% or 12 of the respondents however were of a contrary idea. These twelve (12) respondents who
thought otherwise may be those who did not understand the question very well or those who knew
that such liaison is incriminating that they wanted it to remain a secret.

Going by the majority opinion, one can deduce that the independent auditors for the company are in
practice not independent. And so, if accountability is a function of audit, this auditors/mismanagement
liaison would be an impediment to accountability in the company.

Table 4.5: Question 20—Has management been implementing such recommendation?

Response Frequency %
Yes (Favourable) 30 93.75
No (unfavourable) 2 6.25
Total 32 100
Source: Field survey, 2024

The above table indicates that 30 of the respondents, representing 93.75% of the respondents believe
that the company has been implementing the auditors‟ report’s recommendation while 2 or 6.25% of
the respondents had the notion that management does not implement the auditors‟ recommendations.
As to whether the audits and management implementation of its resultant recommendation does make
any difference to accountability, the table ventures into the answer.

Table 4.6: Question 14—do you think Audits have helped in any way to prevent fraud in your
company?

Response Frequency %

Yes(Favourable) 29 98.62
No(Unfavourable) 3 9.38
Total 32 100
Source: Field survey, 2024

From the table above, 96.62% or 29 0f the respondents affirmed that audits have helped to
prevent fraud, misappropriation and embezzlement in the company, While 9.38% or 3 of the
respondents disagreed to that. These 3 respondents may be those who thought that the auditor’s
primary role is that of fraud detection such that they have not come to appreciate the important role of
audits towards the improvement of accountability.

From the table one can then deduce that audits have helped to prevent fraud in the company. This fact
is further confirmed by the respondent’s response to the question twelve (12) shown below.

Table 4.7: Question 12—will you attribute or owe the degree of accountability in your company to
audits?

Response Frequency %
Yes (favourable) 23 71.88
No (Unfavourable) 9 28.12
Total 32 100
Source: Field survey, 2024

The table above shows that audit makes positive contribution towards the improvement of
accountability. 71.88% or 23 of the respondents however, thought otherwise. Once more, the 9
respondents who could not owe the present degree of accountability in the company to audits may be
those who, because they believe the auditor’s primary role to be fraud detection, felt that the impact of
audits is yet to be felt.

But by the majority opinion, one could conclude that audits influence accountability. Therefore, we
reject the null hypothesis which says that audit does not influence accountability, accept its alternative
which says that audit influence accountability.

Table 4.8: Question 22—Do you still see a need for Internal audits?

Response Frequency %
Yes (favourable) 25 78.12
No (Unfavourable) 7 21.88
Total 32 100
Source: Field survey, 2024

The above table confirms question 14 and 12 shown in table 4.6 and 4.7 respectively. If audit has
helped to prevent fraud and if to it owed the present degree of accountability in the company, there is
no doubt one should still see a need for it until frauds errors cease to exist in public companies. In the
above table ,25 respondents or 78.12 of the respondents uphold that there is still a need for audit
while 21.88% or 7 of the respondents thought otherwise, the seven(7) respondents may be those who
believe that audit should be scraped as a statutory requirement for it has “Failed” them in the fraud
detection. They are those who have erroneous ideas of what audit is all about.

But going by the majority’s impression, one sees that there is a mass belief that there is still a need for
audit. That audit is necessary for accountability. We therefore, reject the null hypothesis which states
that audit is not necessary for accountability in an organization, and accept its alternative which says
that audit is necessary for accountability in the public company.

This desire and notion about the audit accountability relationship is further confirmed by the following
table.

Table 4.9: Question 24—would you have opted for the scrap external audit as a statutory
requirement?

Response Frequency %
Yes (Favourable) 9 28.12
No (Unfavourable) 23 71.88
Total 32 100
Source: Field survey, 2024

The above table shows that nine (9) respondents or 28.12% of the respondents opted for the scrap of
audit as a statutory requirement. On the other hand, 23 or 71.88% of the respondents opted for the
retention of audits in the public company. These twenty-three (23) respondents are those who feel
that audit has made some positive contribution towards the enhancement of accountability, or better
still those who owe the present degree of accountability in the company to audits. We therefore
reject the null hypothesis that states that “audit does not enhance accountability in the public
company” and accept its alternative.
 CHAPTER FIVE

SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS

5.0 INTRODUCTION

This chapter is aimed at presenting the summary of findings obtained by the researcher as regards to
the needs and implications of Audits to accountability in an organisation.

It also went further to present the conclusion as regards the opinion of the researcher on the subject
matter.

The researcher with kin interest and rapt attention and with the help of his knowledge as regard the
needs, implications and probable consequences of Audits to accountability in an organisation, made
some recommendations which he believes will go a long way to helping the users of the research work.

5.1 SUMMARY OF FINDINGS

Through this study, it has being possible for us to discover the needs and implications of Audit to
accountability in an organisation. This study has also made it possible for us to understand the external
audits cannot be properly conducted in sheer isolation of the management, workers and shareholders
of the audited company, rather each of these groups, collectively and individually has a role to play
towards audits and invariably to the enhancement of accountability. The paper emphasized that
management has a duty to comply with and implement auditors recommendations; the workers have
to intimate the auditor of any management misappropriation or fraud, and the shareholders has a role
to ensure that the auditor is not fired by the board of directors without any good reason.

Most importantly, the study has pointed out that the detection of fraud and embezzlement in the
company is not essentially the primary object of an audit, particularly when such fraud is not material
enough as to distract the information contained in the financial statements. However, if the auditors
do their works in accordance with the General Accepted Audit principles (GAAP), fraud may be
uncovered. On the obstacles on the road to proper accountability, the paper identified such problems
as poor segregation of duties, improper classification of accounts, lack of qualified accountants, the
directors‟ nonchalant attitudes, and their deliberate attempt to cover up their fraud and embezzlement.
Other problems also identified in the paper include Government interference, Board members‟
indifference, rampant change of policies and auditors and auditors‟ responsibility towards
independence.

The data for the study were obtained from four principal sources; Questionnaire, Oral interviews,
Library research and observations. These data were analysed using percentages, simple average and
Chi-square statistical techniques.

On testing the research hypothesis using the questionnaire responses. It was found that audit
influences accountability that audit makes positive contribution to the improvement of accountability
that accountability helps to improve managerial performance.

5.2 CONCLUSION

In the opinion of the researcher, the study clearly showed that independent auditing Enhances
accountability and thus to prevent mismanagement. Auditors have a role to play in the society. Their
duty is to attest to the fact that financial statements prepared by the management have being
presented fairly and the accounts and the financial statements clearly show the results of operation of
the enterprise for the period stated.

This function bridge the gap between management and users of financial statements, by bringing
credibility to the statements prepared by management. Without accountability, fraud, embezzlement
and other irregularities are bound to occur in an organisation. Particularly, when the enterprise is
mismanaged.

5.3 RECOMMENDATIONS

Having discovered the needs, implications and probable consequences of audits to accountability in an
organisation. The researcher wishes to advance the following recommendation, which he believes
would eliminate the identified problems and quicken the match to greater accountability in an
organization.
 1. An organisation should endeavour to be consistent in the policies and method of preparation
and presentation of financial statements.

There should be a strong and effective internal control system that does not give room for
misappropriation. To ensure this, there should be a proper classification of accounts and a well
established division of labour in which the work of one department acts as a check and control to the
other(s).

2. The employees of the auditing company should endeavour to intimate the auditors on suspicious
activities. This would enable the auditor to be more cautious and to carry out exhaustive tests aimed at
unveiling misappropriations, where they exist.

3. Auditors should strive to be independent, not only on paper but also in practice so as to redeem
and uphold the glorious image of the noble profession. The auditors should also allow honesty and
discipline to reign in their daily activities being always truthful no matter whose ox is gored.

4. Effort should be made to include shareholders in the Board of Directors of the company. This,
the auditor believes would go a long way to putting to check the activities and the indifference of the
directors who have no financial claims to the company or its business.

5. Shareholders should insist on management implementation of the auditors‟ recommendations and

where this is not complied with, to sue the Directors for negligence and for wanting to liquidate. Where
this is applied, the management would no doubt sit up such that accountability is given its proper seats
in the company.

6. The auditors should in no wise rely solely on the goodness of the audit client internal control
system without due tests, for expression of their opinions. This is necessitated by the discovery that a
good internal control system is also a good ground for fraud to strive.

7. There should be yearly seminar for management and employers of auditors, as well as yearly
orientation courses for auditors organized by the institute of chartered Accountants of Nigeria (ICAN),
and the Association of National Accountants of Nigeria (ANAN), which should focus on the needs and
implications of audits and on the role expectation of Auditors. This would go a long way to creating
more understanding of what audit is all about and also correct the misconception on primary objectives
of an audit.

8. The auditors should report cases of management non-compliance with past audit recommendation
to the members at the Annual General Meeting so that the management would be called to order
before a legal action is instituted against the director for wanting to liquidate the company.
 BIBLIOGRAPHY

Brinkz, V. Z. (2013). Modern International Auditing, An Operating Approach. New York:

The Ronald Press company.

Burgress, T. (2011). Internal Auditing Handbook for Auditors. New York: McGraw Hill
Book company.
Harmanson, R. H. (2016). Auditing Theory and Practice. Homewood: Richard Inco.

Hoel, P. G. (2018). Introduction to Statistics. New York: Macmillan publishing company.

Howard, R. L. (2012). Principles of Auditing. London: Macdonald ltd.

Mautz, J. (2019). Principles of Auditing. New York: John Wiley Inco.

Nweke & Unegbu (2018). Introduction to Auditing. Onitsha: Scholar Book Company.

Nwokolo, C. O. (2015). Auditing as a Watchdog. Enugu Pitman Publication.

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

Pratt, M. J. (2013). Audit Practice. London: Pitman publishing company Inco.

Ubesie, M. C. (2013). Research and Scientific Writing. Enugu: Jodek press.

JOURNALS

Chambers, A. D. (2017). The Structure of internal Auditing Research Report. United Kingdom: The
Institute of Internal Auditors, Vol. 9, Pg, 121.

Ekeigwe, C. C. (2011). Organizing and Planning, The Internal Audit Function, Formation for successful
Internal Auditing. A seminar paper presented to Company Director At Concord Hotel. Owerri,
Vol.2 Pg. 21.

ICAN. (2011). A Case in Support of Internal Auditors. The Nigeria Accountant Journal. Vol. 4, Pg 42.

FGN. (2010). Companies and Allied Matter Decree. Nigeria: Federal Ministry of Information.

Onu, J. N. (2016). Internal Auditing and Management Policy. A seminar Paper Presented at Concord
Hotel. Owerri, Vol. 12, Pg. 47.

Opurum, A. (2010). The Internal and External Audit. A Seminar Paper Presented at Imo Hotel.
Owerri, Vol. 2, Pg. 17.

APPENDIX 1

Department Of Accountancy,

Imo State Polytechnic Omuma

Imo State.

12 March, 2024

Dear Sir/Madam
TO WHOM IT MAY CONCERN

I am a final year student of Imo State Polytechnic Omuma and currently undertaking a
research on the Topic: “Enhancing Corporate Accountability Through Effective Audit
System”. (A Case Study Of Sheffield Risk Management Ltd. Owerri, Imo State).
Enclosed herein is a questionnaire designed to ascertain your view on the said topic. The
project is in partial fulfillment of the requirements for the award of Higher National Diploma in
Accountancy. All information being sought for is exclusively for academic purpose and such
information would be treated with utmost confidentiality.

Thanks and God bless.

Yours Faithfully,

(Researcher)

APPENDIX II

QUESTIONNAIRE

1: Do you work for Sheffield Risk management Owerri? [yes] [No]

2: If “Yes” are you a staff of the company? [yes] [No]

3: Are you in the management cadres? [yes] [No]

4: Have you been with the company for at least two (2) years? [yes] [No]

5: Are you married? [yes] [No]

6: What sex are you? [Male] [Female]

7: Will you like to be with the company for The next two (2) years? [yes] [No]

8: Do you think the administration and other functional departments of the company are being
effectively run? [yes] [No]

9: Do you think the accounting department of the company has got the required qualified
Accountants? [yes] [No]

10: Is your company periodically audited? [yes] [No]

11: Was the company audited last year [yes] [No]

12: Will you attribute or owe the degree of accountability in your company to audits?
[yes] [No]

13: Would accountability in your company have been different, were the company
not audited periodically? [yes] [No]

14: Do you think that Audits have helped in any way to prevent fraud in the company?
[yes] [No]

15: Mismanagement in any enterprises is largely due to lack of accountability? [yes] [No]
16: Do you think the external Auditors who audit your company are professionally qualified for
the job? [yes] [No]

17: Do the Auditors discuss their findings with the management before they are presented at
the general meeting in the form of audit? [yes] [No]

18: Do you think the audit report is the true situation report of your company’s financial
statement? [yes] [No]

19: Do you think management should worry herself with the implementation of the auditors’
recommendation usually contained in the reports? [yes] [No]

20: Has management been implementing Such recommendations? [yes] [No]

21: How does management and workers of Your company perceive external audit function?
[Not worth having] [Worth having] [An unnecessary Duplication of internal audit
function] [A necessary evil]

22: Do you still see a need for internal audits? [Yes] [No]
23: Do you think your company has been consistent with her system of preparation and
presentation of financial statement? [Yes] [No]

24: Would you have opted for the scrap of external audit as a statutory requirement?

[Yes] [No]

25: If „NO‟ do you think external audit is Indispensable for proper accountability in your

company? [Yes] [No]