ABSTRACTS
This research examines the impact of
auditing in enhancing business survival, a case study of guaranteed trust bank
(GTBank) and united bank for Africa (UBA). The work is aimed at determining the
aims, objective, and achievement of auditing and how auditing through a well planned
work of an auditor can have impact in the development of business and its
profitability. It was also highlighted that auditors who confronted with some
problems should demonstrate adequate skill, care and independent as to prove
business development, survival and corporate accountability and by so doing
will propel the enhancement in business and other sectors of the economy.
CHAPTER ONE
1.0
INTRODUCTION
This research work is on the impact of
auditing in enhancing business survival: A case study of guaranteed trust bank (GTBank) and united
bank for Africa (UBA). Auditing has been
the backbone of the complicated business world and has always changed with
times. As the business world grew strong horizontally and vertically, auditors’
role becomes more complex and challenging. The auditors’ job becomes more
difficult and complicating as the accounting principles and standards changes.
Organizations application of internal control software and use of internal
controls specialists, which introduces the need for testing, makes audit
assignments fairly easy and reduces the scope covered as reliance is placed by
the auditor on the works done by the internal control specialists. Scandals and
stock market crashes, failure of some financial institutions and sudden
failures of many companies highlighted to the auditors the deficiencies in
auditing and loopholes in audit work. This also led to several innovations which
made the auditors and the auditing community to quickly review their operations
and fix the anomalies.
The practice of auditing existed even
in the Vedic period. Historical records show that Egyptians, Greeks and Roman
used to get this public account scrutinized by and independent official.
Kautaly in his book “arthshastra” has stated that “all undertakings depend on
finance; hence foremost attention should be paid to the treasury”. Auditing as
it exists today can be associated with the emerging of Joint Stock Company
during the industrial revolution.
Historically the word “audit” was derived from the Latin word “audire”,
meaning “to hear”. The practice of auditing has existed since the primitive
days when men were required to account for their transactions. This was
developed from the concept of stewardship, where by productive resources were
supplied by person or group of persons. These providers of funds would in turn
require the stewards of the business to give an account of stewardship
accordingly at the end of a particular period of how the resources given to
them were been expected.
The practice of stewardship can be
linked to present day limited liability companies, which are owned by
shareholders, who provide the finance for running the business and managed by
directors appointed by them.
“Auditing as we understand now has its
root two or three hundred years ago in the first division of interest between
those engaged in a business undertaking (the entrepreneurs) and those who made
the finance available without necessary becoming directing involved in the day
to day management. It was used mostly for the detection of fraud and was done
through extensive detailed examination from ancient times until the late
nineteenth century. Fraud was a great concern during the early history of
auditing, because internal controls were not used or not used effectively until
the twentieth century. The late nineteenth century was a turning point in
auditing history, when laws like the English Companies Act of 1862 were
enacted. “The English Companies Act of 1862 was a general acceptance of the
need for an independent review of accounts for both large and small
enterprises.” This Act of 1862 showed that there was a great demand for
specialized-trained professionals to perform these reviews reliably and
-independently. The text by William Jackson, In the True Form of Debtor and
Creditor, written in 1823 discussed the need for an orderly and standardized
system of accounting. Accurate reporting and the prevention of fraud would
result through the use of an orderly and standardized system of accounting.
It is a bit difficult to give a precise definition of the word audit in
a word or two. Originally its meaning and use was confined merely to cash audit
and the auditor had to ascertain whether the person responsible for the
maintenance of accounts had properly accounted for all the cash receipts the
payment on behalf of his principle. But the word, audit, had a wide usage and
it now means a through scrutiny of the books of accounts and its ultimate aim
is to verify the financial position disclosed by the balance sheet and the
profit and loss account of a company. The following are the some of the
definitions of audit given by some writers:
Clement (2012) defined auditing as a
means of evaluating the effectiveness of a company’s internal control,
maintaining an effective system of internal control, the notes is vital for
achieving a company’s business objectives obtaining reliable financial
reporting on its objectives, preventing fraud and misappropriation of its
assets and minimizing its cost of capital. Inasimilan tone, auditing is
an independent examination of an expression of opinion on the
financial statements of an enterprise, by an appointed auditor in
pursuance of that appointment and in compliance with any relevant statutory
obligation (Okezie, 2008 and Uwota, 2012).
Wikipedia (2012)
asserted that auditing plays a vital role in accounting of a
systems internal control; it seeks to provide a reasonable assurance that the
financial statements are free from material misstatement and error. In
supporting this claim, Uwota (2012) wrote that auditing consists of a searching
investigation of the accounting records and other evidences supporting the
financial statements in order to provide a fair and reasonable picture of
financial details of the company.
Auditing is an independent examination
of, and the expression of an opinion on the financial statements of an
enterprise by an appointed auditor, in accordance with his terms of engagement
and the observance of statutory regulations and professional requirements
(Mainoma, 2007)
Spicer and Pegler’s practical
auditing, supplements: companies Act 1980 expanded the above definition as
follows:
‘‘An audit may be said to be such an
examination of the books, accounts and vouchers of a business as well enable
the auditor to satisfy that the balance sheet is properly drawn up, so as to
give a true and fair view of the state of affairs of the business and whether
the profit or loss for the financial period according to the best of his
information and the explanations given to him and as shown by the books, and if
not, in what respect he is not satisfied.’’
Lawrence R. Dicksee (2003) defines
audit is an examination of records undertaken with a view to establishing
whether they correctly and completely reflect the transactions to which they
relate. In some circumstances it may be necessary to ascertain whether the
transactions are supported by authority.
According R.B. Bose (2006) explain audit may
be said to the verification of the accuracy and correctness of the books of
accounts by independent person qualified for the job and not in any way
connected with the preparation of such accounts.
The international auditing practices
committee defines auditing as “the independent examination of financial
information of any entity whether profit oriented or not and irrespective of
size/legal form when such an examination is conducted with a view to express an
opinion thereon”.
In a statement issued by the
international federation of accountants committee (IFAC) on international
auditing guidelines (IAG) defined audit as ‘‘the independent examination of,
and the expression of opinion on, the financial statement of an expertise by an
appointed auditor in pursuance of that appointment and in compliance with any
relevant statutory and professional obligations’’. The statement added that
‘‘the responsibility for the preparation of financial statements and the presentation
there in rests with the management of the enterprise’’.
It is clear from the above definitions
that auditing is the systematic and scientific examination of the books of
accounts and records of a business so as to enable the auditor to satisfy
himself that the balance sheet and the profit and loss account are properly
drawn up so as to exhibit a true and fair view of the financial state of
affairs for the business and profit or loss for the financial period. The
auditor will have to go through various books and accounts and related evidence
to satisfy him about the accuracy and authenticity to report the financial
health of the business.
Generally, it can be deduced from all
the definitions that an auditor is one person whose independent, honesty,
integrity and competent in performing his work is not in doubt in terms of
expressing an opinion (professional), which measures the degree of
correspondence between actual transactions that have failing place and what is
being presented to him in conformity with statutory laws outlined for the
profession.
The auditor therefore should be one
appointed to investigate activities of an organization, its records and the
financial statements prepared by the management and thus form an opinion on the
accuracy, truth, validity, reliability, correctness and fairness of the
financial statements.
The primary aim of an audit is to
determine and judge the reliability of financial statement and supporting
accounting records of a particular financial period is the main purpose of the
audit.
These primary objective of an auditor
is in respect to the owners of his business expressing his opinion whether
account exhibits true and fair view of the state of affairs of the business. It
should be remembered that in case of a company, he reports to the shareholders
who are the owners of the company and not tot the director. The auditor is also
concerned with verifying how far the accounting system is successful in
correctly recording transactions. He had to see whether accounts are prepared
in accordance with recognized accounting policies and practices and as per
statutory requirements.
Secondary aim on its own part report
the financial condition of the business, auditor has to examine the books of
accounts and the relevant documents. In the process he may come across some
errors and fraud. We may classify these errors and frauds as below:
- Detection and prevention of errors
- Detection and prevention of
frauds.
- Provide other services like
taxation, receivership and liquidation, management consultancy, financial
advisory services, accountancy services, investigation and secretional
services.
Auditing is classified mainly into
two:-
- External and
- Internal auditing
Ø
External
Audit: this is an independent
examination of financial statement being carried out by non-employees of the
business enterprise. External audit therefore can be statutory or private.
Ø
Internal
auditing is a function of effective internal control put in place by an
organization and to ensure the efficient and effective operation of the
business of the organization.
This research work will be concerned
on both external and internal auditing.
1.1
BACKGROUND OF THE STUDY
Banking industries in Nigeria have over the
year experienced a remarkable growth and expansion that the traditional
approach of business management is no longer adequate to meet the heavily
bordered company management in maintaining control over the wide spread
operations. The increase in regular activities, the trend towards decentralization
and greater geographical dispersion has in themselves posed serious challenge
to management control. When this is added, the fact that in any representation
of financial information or in the operation of internal activities, individual
could be guilty of self-interest, carelessness, and dishonesty. There is the
need for an outstanding performance for all levels of management, these new
problem have made it necessary for management to delegate
responsibilities and authority to many level of supervision. However management
responsibilities does not end with these allocation of duties, management has
to turn to a control specialist, (Auditor) for assistance in ~maintaining a
close watch over the management control network. Without auditors guide, management
could not rely on financial statement as a guide in making any decision and the
auditor (external) cannot rely on the internal control system without greatly
increasing his test and the extent of his auditing procedure.
The role of auditors incorporate generally
studying the efficiency of functions within the organization which includes
financial checks, operational accounting, and evaluation and reviewing of the
system of internal control. The auditors appraise financial and control
periodically summarises the results of continuous investigations, prepare
recommendations for better procedure and report the results of his findings to
top management says A.W. HONES and W.S. OVERMYER auditing standard and
procedure page (3) three.
The
auditors (external and internal) perform the same functions except that
external auditors perform their investigation on periodic basis usually once or
twice in a year. The regulatory examination is done by Central Banks and
business activities to ensure that banks conforms to the lay down central ~bank
banking guidelines.
The
objectives of auditing as stated in the company and allied decree (CAMD) 1990
is to express on opinion as to the truth and fairness of the financial
statement as presented by the companies. The reason why and to prevent and
detect fraud in banking industries and its implication for auditor is bone of
public contention in the country today, this is why as academician and
concerned citizens of this country, the researcher has taken it as a challenge
to make it cleared to the public on the impact of auditing in enhancing
business survival in order to settle the misconceptions of the public in
regards to the auditors roles, responsibilities, duties, right and
independence.
The auditors in addition to their
obligation carry out risk assessment of their client. Risk assessment refers to
management identification and analysis of relevant risks that hampers the
achievement of specified objectives. All entities regardless of its size,
nature, structure or industry are subject to business risk. Business risk
affects each entity’s ability to survive, successfully, compete within its
industry, maintain its financial strength and positive public image; and
maintain the overall quality of its products, services and people.
1.2
STATEMENT OF PROBLEM
The life span of a business organization is expected to exist on a going
concern basis. The organizations that have survived the economic crises and
environmental influence have succeeded principally because of the efficiency
and effectiveness of management and auditors.
The
fact that in any representation of financial information or in the operation of
internal control system activities in a banking industries or organisations
today, individual has been found guilty of one problem or the other which
always leads to fraud, errors or mismanagement in bank/business entities.
This
event might be due to errors committed in financial institution (bank) or
organisation:
Such
errors include;
- Clerical
errors and
- Errors
of principle
Fraud
on the other hand can be of the following types:
- Misappropriation
of cash
- Misappropriation
of goods
- Falsification
or manipulation of accounts
- Window
dressing
- Secret
reserves.
The
examination and scope of external auditing contributes to a great extent in
business substance. It goes a long way in detecting fraud and to express an
opinion on the truth and fairness of the financial statements of an
organisation presented to him.
Internal
auditing on its own part, contributes to the extent of assurance and consulting
activity designed to add value and improve an organisational operations. It
helps organisation accomplish its objective by bringing a systematic,
disciplined approach to evaluate and improve the effectiveness of risk
management, control and governance processes.
A
careful and critical review of the ways and manner in which several
organisations have closed down or liquidated in the recent time in Nigeria,
comprising, manufacturing companies, banks, marketing and service industries, one
may be compelled to ask such question as;
- What
effect has auditing to business organisation in Nigeria?
- How
competent and effective are auditors?
- To
what extent is the work of auditors contributing to enhancing business
survival?
- Can
business survive without the auditors? If yes to what extent?
- Has
the business threat been unveiled to the auditors?
- Has
the auditors been given all the freedom to carry out their job as
required? If yes then what has gone wrong?
This research shall attempt to proffer
solution to these question and several others alike that demands urgent
responses as it will go a long way to enhance the survival of business in
Nigeria. At this same time it will prevent the occurrences of several problems
attached to business organizations that lead to subsequent closure and
liquidation thereby redeeming the image and the credibility of
auditing/accounting profession.
1.3
OBJECTIVES OF THE STUDY
Generally, every research report has to have aims or reasons for
conducting it. There has to be goals or target laid down at the beginning to be
achieved at the end of the research. These goals are compared with the end
results of the research to determine whether or not the objective is achieved.
Furthermore, at the end of this research work knowledge would be gained among
the quality of good research is its open-ended nature which gives room for
constructive criticism and further research.
The primary aim of this research is to
improve the already existing knowledge on how auditing scope could be enhanced
for efficient/effective result. This research study shall also examine a number
of objectives which includes:-
1. To review scope and effectiveness of auditing.
2. To ensure that financial institutions and business enterprises adheres
strictly to audit principle in carrying out their operation.
3. To determine or ensure that they adhere to various audit
statutes.
4. To examine that documents necessary for proper auditing present
a true and fair financial statement
5. To assess the problem facing the auditors in the cause that enhances
the survival of the clients business.
6. To examine the extent to which business risk assessment is carried
out.
7. To review a constraints of auditors.
8. To review how audit work can be improved.
9. To examine the internal control system, identify and document the
management weaknesses, suggest possible solution and recommendation on how it
could be improved for more effectiveness and efficiency.
10. To identify trait and utilize
opportunities.
11. To make recommendations based on the
finding of this study.
TOPIC: THE IMPACT OF AUDITING IN ENHANCING BUSINESS SURVIVAL
Format: MS Word
Chapters: 1 - 5
Delivery: Email
Delivery: Email
Number of Pages: 83
Price: 3000 NGN
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