ABSTRACT
This study examines audit and its
impact on activity of business, using Hamdala Hotel, Kaduna as a case study. The
basis of this study is to inform organizations on the necessity of internal
auditing and how it can be properly implemented. It is in the light of this
that this research work embarks to examine the role being played by auditing in
enhancing the performance of business organizations. To this end, the research
initially outlined the background to the study, objectives and research
questions were formulated to guide the study. The study subsequent reviewed relevant
literatures on the subject matter. The study adopted survey method as the
research design, data were gathered from 30 staff of Hamdala Hotel who
constituted the sample size. The data were analyzed using simple percentage and
hypothesis was tested. The findings of the study indicate that auditing is very vital for objective reporting and
that auditing eradicate total fraudulent act in business organization. It was
recommended among other things that
management should be fully aware that audit should be carried out
regularly in order to increase the reliability on the account by outsider e.g.
tax authorities.
TABLE OF CONTENTS
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
1.2 Statement of the Problem
1.3 Objectives of the Study
1.4 Research Hypothesis
1.5 Significance of the Study
1.6 Scope of the Study
1.7 Historical Background of the Case Study
1.8 Definition of Terms
CHAPTER TWO
LITERATURE REVIEW
2.1
Concept of Auditing
2.2 Development
of Auditing
2.3
Reasons for an Audit
2.4 Advantage
of Auditing
2.5 Differences
between Accountancy and Auditing
2.6 Types of Audit
2.7 The
Auditor
2.8 Types of Internal Control
2.9 Control of Wastage and Detention of Lapse
in Management Structure
2.10 Small-Scale
Business
2.11 Large-Scale
Business
2.12 Audit
Benefit Accruing to the Organization
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 Introduction
3.2 Population
and Sample Size
3.3 Sampling Technique
3.4 Sources and Method of Data Collection
3.5 Method of Data Analysis
CHAPTER FOUR
DATA PRESENTATION, ANALYSIS AND INTERPRETATION
4.1 Introduction
4.2 Data Presentation and Analysis
4.3 Testing
of Hypothesis/Questions and Interpretation
4.4 Summary of Findings
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 Summary
5.2 Conclusion
5.3 Limitations
of the Study
5.4 Recommendations
Bibliography
Appendix
CHAPTER ONE
INTRODUCTION
1.1 Background
of the Study
The
dynamic nature of business environment growth and increasing complexity of
business has made it imperative for management to seek for more avenues of
control, which has resulted internal audit which serves as a control measure in
both public and private sector.
It
is now rare indeed to find an enterprise of any size which does not have an
internal auditing function. In many cases internal has eclipse other management
services to become efficiency, effectiveness and economy. The need for internal auditing in business
organization cannot be ruled out.
As
business expands and the level of transaction increases there had been cases of
frauds, misappropriation of cash and other irregularities, which if not checked
will obviously not be interested of the organization, that is why internal
auditing must be introduced in every form of business organization be it large
or small to check such irregularities.
Internal
audit functions are performed by employees of organizations functioning in a
staff capacity and reporting to a high level officer in the organization.
Internal
audit is essentially an appraisal activity within organization for the review
of accounting, financial and other operation as a basis for services to
management.
Auditing
is the examination of certain statement covering the company’s business
transactions over a period of time and the financial position of an
organization on a certain date in order that true auditor may issue a report on
them. They also make sure that the final statement is true and fairly viewed.
There are more involved definition, such as that issued by the consultative
council of the accountancy bodies (CCAB). This body defined auditing as “The
independent examination of an expression of opinion on the financial statement
of an enterprise by an appointed auditor in pursuance of that appointment and
in compliance with any relevant statutory obligation”.
The
statement adds that the responsibility for the preparation of the financial statement
and the presentation of the information included in rests with the management
of the enterprise (in the case of a company the director).
The
auditor responsibility is to report on the financial statement as presented by
the management. The auditor’s duties do not require him specifically to search
for fraud unless require by the statute or on the specific terms of his
engagement. However, the auditor should recognize the possibility of material
irregularities or fraud which could unless adequately be disclosed or state of
affairs shown by the financial statement.
Auditor
therefore examines the financial transaction to test they are in compliance
with the generally acceptable accounting principles and that of the financial
statement are true and fair.
Setting
up an internal audit department to a large extent help in ensuring that
operational activities comply with management policies and other related
standards. These will give no room for any form of irregularities.
Setting
up an internal audit department to a large extent help in ensuring that
operational activities comply with management policies and other related
standards. These will give no room for any form of irregularities. The basis of this study is to inform
organizations on the necessity of internal auditing and how it can be properly
implemented.
1.2 Statement of the Problems
Inspite
of the existence of internal audit department/section in business organization,
it is often argued that the rate of fraud in the organization of the economy is
still on the increase.
By
delaying payment vouchers, some people argue that the internal auditors are
creating more problems than they are solving. Others even see internal auditors
as mere tools to witch-hunt and therefore see them as unnecessary evils. An
attempt would be made in this study to properly educate other operational
managers (who see internal auditors as constituting a nuisance to them) on the
proper functioning of internal audit department. The wrong impression held by
non audit staff will be eliminate, that internal auditors are merely to detect
fraud and therefore must not be concerned with their normal operations.
The
research questions therefore are in the problem of this research work which is
restricted to the following: does internal auditing play a role in
accomplishing true and fair presentation of statement of profit and loss
account and balance sheet? Does internal auditing enhance internal control
leading to efficient running of enterprise?
1.3 Objectives of the Study
The
objective of the study is to determine the benefit that could accrue to
business organization through auditing with specific reference to Hamdala Hotel
Kaduna.
The
study will further bring into highlight the importance attached to the auditing
system adopted by business organization whether it satisfied their present and
future needs.
It
will also show whether the limited liability companies are among the
beneficiaries of auditing system.
1.4 Research Hypothesis
This
sub-chapter has an important attribute in any research work. In order to come
out with a meaningful conclusion at the end of the research works, the
researcher postulates the following hypothesis:
1)
H1: That auditing is effective and efficient in business
organization.
H0: That auditing is not effective and efficient in business
organization.
2)
H1: That auditing eradicate total fraudulent act
in the business organization i.e. auditing represents tool for controlling
frauds on resources in an organization.
H0: That
auditing does not eradicate total fraudulent act in the business organization
i.e. auditing does not represent a tool for controlling frauds in resources in
an organization.
Infact,
the researcher is concerned with the examination of empirical evidence to test
the efficiency of this hypothesis to examine the evaluation and also use of
auditing in business organization. It is hope that by the end of the exercise
the writer should be able to outline the importance of auditing in business
organization.
1.5 Significance
of the Study
The
major significance of the study is to enlighten the public on the need to adopt
the usefulness of auditing in business organization. Business organization are
facing serious problem due to lack on internal auditing. If more attention is
given to it, it will contribute greatly towards the development of the
organization as a whole. It is significant to study the importance of auditing
in business organization in Nigeria and by so doing it gives management a
better insight as to know how to operate with the auditors in order to make the
objective of the organization or company.
To
the management/directors, the benefit from this system will help in terms of
internal control and the prevention of fraud that may occur in the
organization. It would also show the importance attached to audited account
made by auditors to the management and external users is financially sound and
having met up with the requirements of the information.
As
the organization /company continues to exist and make profit, management will
now know that auditing is good in term of financial statement given by the
auditor that the account is true and fair.
In
addition, it widen the knowledge of the researcher, in the course of study and
other researchers can go through it for further knowledge of gathering relevant
facts.
1.6 Scope of the Study
Judging
from the fact that auditing has contribute in measurable to organization in
enhancing their efficiency, productivity as well as profitability. The study is
focused on the following as an acid test of auditing relevance to organization
and company: examining the existing auditing in the organization; method of
appointing removal and remuneration of auditors as well as the operation of
internal control in Hamdala Hotel, Kaduna.
1.7 Historical
Background of the Case Study (Hamdala Hotel, Kaduna)
Hamdala Hotel Kaduna is one
of the international Hotels, which is solely owned by the New Nigeria
Development Company Limited (NNDC). It is managed by Arewa Hotel Limited, which
also manages a number of other hotels.
As the
oldest hotels in Northern Nigeria, it was officially opened in January, 4th
1961, by the late Sir. Ahmadu Bellow then Sardauna of Sokoto, Premier of
Northern Nigeria. It was commissioned to promote tourism and provide up to date
services in Kaduna and the neighboring states.
The
decision to construct such on ultra modern international hotel in Kaduna was to
provide standard accommodation and catering service for other government
functionaries on official visit to Kaduna.
Being
the first international hotel in Kaduna the one hundred and ninety four bedroom
hotel has been playing an important role in solving accommodation problems for
both government and the private companies who may like to accommodate their
visitors by giving them accommodation for brief period. The hotel is widely
recognized.
Handala
hotel is located along Mohammed Buhari way and it is opposite Murtala Muhammed
square polo field and the Kaduna club among others.
The
Hotel is made up of six (6) departments and cursory look into the several
organization and chart shorts that it consists of the following departments:
·
Food and beverages department
·
Accounts department
·
Personnel department
·
Front office department
·
Maintenance department
At the
top of the organizational chart is the chief executive with the rank of managing
director, who is responsible for the smooth running of the affairs of the
hotel. Next to him is the general manager then the departmental managers, like
housekeeping. The house keeping department is in charge of keeping the
surrounding clean and keeping the rooms tidy ready for a quest check in.
The food
and beverages, the chief is in charge of kitchens affairs and these are other
mangers assisting the food and beverages because of the sub-section under 17,
example, banqueting handed by the banquet managers and other important
department as mentioned above.
Hamdala
hotel has contributed in one small measures to the development of business more
especially in the times of seminars, launching, rather, symposium, training,
end of the year parties, wedding reception and many more people comes from far
and near to share common views for the purpose of business transaction and
individual needs. Many organization also use the hotel for holding meetings and
even launching of new products and for with worthwhile activities that have
impact on the society.
1.8 Definition of Terms
§ Fictitious Account: They
are account that does not exist. There are the types that stolen money is
usually lodged.
§ Irregularities:
This can be defined as the act of doing something in such a way that gives
against the usual way.
§ Forgery:
According to the website dictionary forgery is the falsification or
counterfeiting which involve the making of false document writing knowing it to
be false and with the interest that is acted upon as genuine.
§ Audit:
Accounting to Webster business dictionary is an examination of accounting
document and of supporting evidence for the purpose of reaching propriety
fairness, consistency and conformity with accepted principles.
§ Internal audit:
This refers to the institutionalized examination of accounting procedures with
an organization.