ENHANCING CORPORATE
ACCOUNTABILITY THROUGH EFFECTIVE AUDIT SYSTEM
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 the 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 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
sceptical 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 fulfil the later led to the
engagement of third-party
(an Auditor) to
perform an a
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 examin financial statement of an enterprise by an appointed
auditor in pursuance of statutory obligation (Howard 1982:1).
Deductively,
an audit is the objective scrutiny o 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‟scies with records
usefulness of and acceptability of and the dependabilit 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
beyond that. According to the Webster
encyclopaedia dictionary of English
language (1995:110),
accountability is defined as “the
state
accountable, answerable, liable
or re
to define accountable incase of“liableloss;responsible to p
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 thir
Accountability connotes answerability
and stewardship, by answerability is meant answering fo decisions (odon1999:7)
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 2002:135).
According
to Pratt (1998:1), were you to ask the average
man in the street about the audito tell
you that he prevent
fraud, press our layman further, he
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 res
produce figures”982:12)
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 express 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 fraud”.
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
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 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 in the field.
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 THR STUDY
In
the course of this research work, problems of various natures were encountered,
which in no small measur 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 remi 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”
As a result; comprehensive data were
not easily collected notwithstanding the researcher‟s
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 ORGANZATION OF STUDY
In
order to realize the aim and objective of this study the write-up was divided
into five chapters not only for an intensive study but also for the convenience
and better understanding of the information by users.
Chapter
one of the research work covered an introduction to the study: the statement of
problem objectives of the research; the limitation encountered by the
researcher during the study: Organization of the study and the operational
definition of terms used in the study.
Chapter
two covered an interview of current and related literature.
Chapter
three dealt with the methods and procedures used by the researcher in
conducting the study.
The
analysis of the data collected by the researcher is treated in chapter four.
The
fifth chapter dealt on the r recommendations to the information user and a
conclusion of the entire work
based on the researcher findings, observations and tests.
1.9 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.
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