CHAPTER ONE
INTRODUCTION
1.1. Background of the Study
Internal audit is a management tool used in ensuring
transparency in conduct of business.
Auditing took the entire stage after the industrial revolution since
before this period, transactions increased, precipitated by the development of
large corporations, limited liability companies, there became the need for
divorce of ownership from control. Hence
mangers and shareholders became two different partners. Then it became apparent
for mangers to render accounts of their stewardship to those who has pooled
their resources together for the business .it is noteworthy that an independent
person be appointed to represent the interest of the shareholders in reviewing
the report of mangers to ensure accuracy and transparency. This is
how auditing started.
We have two
types of sectors. Public and Private sectors.
Public sector is the governments initiate and control in economic
activities with the aim of rendering services at a breakeven point.
The private
sector is the private initiative aimed at profit/wealth maximization for the
owners Mill champ (1996) defines internal audit as an independent appraisal
function within an organization for the review of system of control and the
quality of review of systems of control and the quality of performance as a
service to the
organization.
The papers seek to empirical and statistically
ascertain the impact of the internal audit in the private sector of the
Nigerian economy, while the private sector of the economy is studied at large;
the case study
MB ANAMCO Ltd, Emene, Enugu is
particularized.
1.2. Statement of the Problem
The private sector according to Anyanwu (1993; 25) is
that part of the economy not under direct government control. It entails
production and distribution that is in private hands. It serves as a complement
to the public sector since increased public sector efficiency results from
improvements and places government in a better position to focus on the objectives,
conduct and performance of those enterprises that remain in the public sector
(Hamming and Mansoor 1987).
Despite this enormous role, the sector has been
beclouded with problems such as:
(i)
Financial impropriety
(ii)
Lack of auditing control
(iii)
Lack of independence of the internal
control
(iv)
Incomplete recording of business transactions
(v)
Over blow expenses to reckless spending
(vi)
Non compliance and adherence to accounting
standard and
guide lines.
(vii)
Mismanagement of scarce funds
1.3 Statement of
Objectives
The broad objective of the study is:
1.
To determine if internal audit ascertain the
correctness of financial records.
2.
To determine the extent to which internal audit
helps in enforcing compliance to rules and regulations regulating private
sector accounting and auditing.
3.
To find out if internal audit inspect and
verifies organizational assets and liabilities.
4.
To know the factors hammering pa ring audit
procedures in the private sector
1.4 Research Hypothesis
To address the above mentioned problems the following
hypothesis are formulated.
(i)
Ho: internal audit has not significantly
affected Private sector performance.
(ii)
Ho: There is no relationship between achieving
corporate
objective and efficient internal
auditing in the private sector.
(iii) Ho:
Inefficient internal audit and internal control has hampered audit
reports.
1.5. Significance of the Study
(I) The study will be of immense benefit to the
shareholders who have contributed the funds for the business and needs a reward
in form of dividends.
ii)
This can be achieved if ineffectiveness and
corrupt practices such as fraud, loss of revenue, sharp practices, and lack of
transparency etc .associated with the private sector are minimized or even
eradicated.
iii)
Since a virile private sector is noted for the
economy will be of great benefit from the findings of the study
iv)
Equally, future researches on auditing will find
the study
interesting in their research.
1.6. Scope of the Study
As the study is centered on the effect of the
internal audit in M.B ANAMCO LTD, Emene
Enugu State, the research covers all
department under the firm in other to ascertain
whether auditing has an effect in the private firm and if not what is the
cause.
1.7 Limitation of the Study
The researcher in the course of carrying out the
research was faced with the following problems and constraints.
(a) Time factor: Time shortage posed
serious challenges, since it was indeed very short considering the enormity of
the research work.
(b) Lack
of information and data due to unavailability of materials and other vital
information. Libraries are either out of stock or scanty in their content of
relevant materials.
(c) Financial
problem was also a deterrent in carrying
out the research since the
available fund was not enough to sustain the vast research proposals, it was
also a challenge in that regard.
1.8
Definition of Term:
(A)
Audit:
Audit can be
define as the independent examination of a financial statement and expression
of opinion on the financial statement of enterprise by an appointed auditor in
pursuance of that appointed and in compliance with any relevant statutory
obligation.
(B)
Auditor:
Auditor is a
qualified accountant who also passed a professional examination. Such a person
must be of good conduct and have a vast knowledge and able to understand a
practical business, endeavor always to grasp the technicalities and business,
methods of
any concern whose account he
undertakes to audit.
(C)
Internal Auditing
According to
Bright (1964) “Internal auditing has to do with the independent
examination of the books of account so as to ascertain whether the books of
accounts are in agreement with the organization transaction.
(D)
Private sector:
Private sector
includes the part of the economy that is fully controlled and managed and
financed by private individuals.