1.0 CHAPTER ONE
1.1
INTRODUTION
Auditing is conducted by an independent professional who
is not only independent in mind but must be seen to be independent judging from
the fact that he does not conduct an audit of the company owned by any of his blood relation or close
relatives.
Auditing involves a detailed examination
embracing a critical review of the system of book keeping and accounting and
internal control. Make such inquiries as he deem fit to enable him form an opinion
of the reliability of the records as a basic for the preparation of the
account, to compute the profit and loss accounts and balance sheet. To make a
critical review of the profit and loss account and a balance sheet in order
that a report may be make to the members or shareholders. To sate whether in
the opinion of the auditor, the accounts are prepared and the items are described
in such away that they shows not only the true and fair view, but also are
prepared in accordance with the accounting principles.
The purpose of auditing is for the auditor
to form an opinion on the financial statement whether they present a true and
fair view but can only be done after the auditor must have satisfied himself on
the authenticity of the accounts.
Auditing is very important to business organization
and because of its importance, every organization expects its account to be
audited by an independent professional auditor at the end of the year. Audit report gives the
shareholders the confidence that their business is properly managed by the
board of directors appointed by them (shareholders).
This project therefore is an attempt to
evaluate the importance of auditing as a tool for analyzing business venture
profitability. Coca -Cola Bottling Company, Nguru depot is choosing as a case
study.
1.2
BACKGROUND OF THE STUDY
This research work
seeks to critically examine the importance of an auditor and auditing as a tool
for analyzing venture profitability in relation to the internal control system
of an organization in the detection and prevention of fraud in the business
world today.
Similarly, the reason why auditors sometimes
compromise their independence while executing their duties will be properly examined.
Finally providing auditors as well, as student and non-students of business
studies to know the relationship between auditing and internal control system
of fraud detection and prevention.
1.3
STATEMENT OF THE PROBLEM
Generally speaking, human beings
are very complex in nature, and understanding. With the rapid increase in the
development of auditing information system and the use of computer in modern
business organization, one will have to expect a high degree of excellence and
perfection. It is however, disappointing to note that, some organization system
still performs below expectations.
An auditing of financial statement is commuted
to determine whether the overall financial statement and the quantifiable
information being verified is conducted in accordance with specified criteria.
Normally the criteria are generally accepted accounting principles and
generally accepted auditing practice which are adopted in the preparation of
financial statement, income statement and cash flow statement.
1.4 THE SIGNIFICANCE OF
THE STUDY
This
research work will be of great importance to financial institutions. The study is also
important in the following ways:
It will serve as a tool for further study
or research. It will also serve as an important tool for the management of
institution and office planners in getting the best options of higher
productivity. It will also spotlight available information on the auditor’s
independence and prevention and detection of fraud in an organization. Taking
special note on duties and responsibilities of auditor as stated in the companies
and Allied Matters Acts of 1990 and other statutory provisions. Students undertaking
relevant work and trainees will find
this work to be of a great help to them.
Managers and shareholders will also benefit from this research work.
1.5
OBJECTIVE OF THE STUDY
The primary objectives
of auditing is to enable the auditor to
say that accounting shows the true and fair view of the financial situation of
an organization. The objectives of these
study are :
1. Primary reason: to
produce a report by the auditor and form his opinion of the truth and fair view
of financial statement to any person reading it.
2. Secondary reasons:
·
To detect error and fraud
·
To prevent errors and fraud
·
To provide spin off effectiveness the
auditor will be able to accept his clients with accounting system, taxation,
financial and other problems.
·
To produce report of what has been
audited for Information purposes.
·
To give credibility on the financial
statement.
·
To enforce the auditor work in
accordance with auditing guidelines or standards.
1.6 HISTORICAL BACKGROUND OF NGURU
LOCAL GOVERNMENT
Nguru
is a local government area in Yobe state Nigeria. It head quarters area in the
town of Nguru near the Hadeja river. It has an area of 19kms and a population
of 150,632 at the 2006 census.
Nguru
town, northwestern Yobe state, Northen Nigeria, near the Hadeja river, a
seasonal tributary of the Komaduge Yobe river, which flows into lake Chad
precisely when the town was founded was unknown, but by the Kanuri people and
was the seat of the Galadima the Borno governor of the western provinces.
Nguru’s location in the disputed area between the Hausa state and Bornu led it to be temporarily occupied by
the forces of Muhammed Kisori, the Hausa king (1509-65) of Kano, 150 miles
(240km) west southwest. Nguru was also the site above 1561 of the major victory
by Kebbi, a Hausa state to the west over Bornu, but Bornu succeeded in
regaining throne there after. Nguru once again become the seat of
the Galadima about 1808, during Fulani Jihad, or Holy war.
Since
the arrival of the rail road in 1929, Nguru has become one of Nigeria’s major
collecting points. For gum Arabic, and skins by rail to Lagos. A modern
slaughter house and refrigeration plant was built there in the 1960s to process
the cattle and goats pasture during the dry season in the Hadejia valley. The
town serves as the chief trade centre (Sorghum, millet, peanuts, cowpeas, cotton)
for the nearby Predominant Muslim Kanuri
Bade (Bade), and Manga peoples. Nguru is the northern terminus of the raiway
branch from Zaria and Kano. It is also served by a local high way that connects
it with the main high way network at Damaturu, to the southeast. Pop (2002)
local government Area, 150, 632.
1.7 RESEARCH QUESTION/
HYPOTHESIS
1. How
does reliable auditing improve organization performance?
2. How
does fraud detection improve venture profitability?
1. Ho
the performances of organization does not depend on a good and reliable
auditing.
2. H1 a good and adequate auditing will help
improve performance of organization.
1.8
LIMITATION OF THE STUDY
1. TIME FACTOR: At
the initial stage before I could get a good topic that is relevant to
management field, it took a lot of time.
2. TRANSPORT: However, the limitation of
this research work is lack of transportation which affected every researcher.
3. FINANCIAL: During the collection and
gathering of data much amount of money is required and this causes some delay
for the work of research work.
1.9
DEFINITION OF TERMS
To
help the readers to have better understanding of terms used in this study, the
following definitions of the key terms listed in the study are defined below:
1. AUDITING:
Is an independent examination of the financial records and statement of
business organization, nonprofit making bodies, governmental agencies and
parastatals etc with a view to reporting on them as to whether they show a true
and fair view.
2. FRAUD:
Fraud in this context refers to distortion of financial statement for whatever
purpose. And also in it means appropriation of assets, or distortion of
financial statement, and defalcation of figures.
3. INTERNAL CONTROL:
Refers to the whole system of control, financial and otherwise established by
the management in order to carry on the business of the enterprises in an
orderly and efficient manner. It ensures
adherence to management policies, safeguard the assets and secure the
completeness and accuracy of records.
4. BUSINESS:
Business is any activity which involves the investment of capital with the aim
of maximizing profit.
5. ORGANISATION: Organization refers to a
set of people working towards the accomplishment of limited set of goals and
service in the society.
6. SHAREHOLDERS:
Shareholders are the owners of the business.
7. ERROR:
Error can be described as an any intentional or un-intentional mistakes. Error
can occur at any page in business transaction, processing transaction,
occurrence on documentation, records of primary entry, double entry records,
financial etc,
8. VENTURE:
Venture is an undertaking that is dangerous, or of uncertain outcomes. A
business enterprise engages in that involves some risk in expectation of gain.
9. PROFITABILITY:
Is the measure of the difference between the purchase price and the cost of
bringing to market. Example, the revenue
a company derives from its operation, less all explicit cost