THE ROLE OF AUDIT FOR THE PROPER ACCOUNTABILITY OF COMPANY’S FUNDS

THE ROLE OF AUDIT FOR THE PROPER ACCOUNTABILITY OF COMPANY’S FUNDS

(A CASE STUDY OF DEPARTMENT OF PETROLEUM RESOURCES (DPR).

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ABSTRACT

This research work was designed to study and investigate precisely the Role of Audit for the proper Accountability of Company’s Fund with special emphasis on Department of Petroleum Resources.

Prudent fund management requires that available resources be equitable allocated to all activities or proposals such that each ill not suffer under over allocation of funds.  How efficient a manager is can be determined by how effective he can account for funds entrusted to his care.

It is expected that available management tools for the purpose of proper accountability be adopted or used by administrators in the discharge of their administrative responsibilities.  Audit which is mostly used as the last resort of company’s managers need to be enforced by any organization to enable it evaluate performance and deviation.

Data for the study was collected form both the primary and secondary sources.  The questionnaire method was used to collect data.  Forty-three (43) respondents were selected using the stratified random sampling techniques.

The simple percentage was used in the presentation of data, while the chi-square was used to test the hypothesis.

The study revealed that:

  • The internal control system is weak.
  • The accounting system is weak.
  • Payments are sometimes influenced by top management.
  • The occasional audits are mainly concentrated on financial matters.

The study finally proffered solution by recommending ways through which organization could achieve their audit objectives.

 

CHAPTER ONE

  • General background of the study 1
  • Statement of problem 7
  • Objective of the study 10
  • Significance of the study 11
  • Scope and limitation of the study 12
  • Brief history of the Department of Petroleum Resources 12
  • The functions of Department of Petroleum Resources 15
  • Statement of hypotheses 17

 

CHAPTER TWO

LITERATURE REVIEW                                                            18

  • Internal Audit 20
  • System auditing 23
  • Accountability 30
  • The auditing interest in client accounting system 31
  • A documentary evidence of an audited account management 32
  • Management 35
  • System management                               40
  • Financial management 41
  • Aids to proper accountability of fund 43
  • Planning 45
  • Control 48
  • Organizing 48

 

CHAPTER THREE

Research Design and Methodology                                                       50

  • Sources of data 50
  • Research Instruments used 51
  • Determination of sampling size 52
  • Method of data analysis 52

 

CHAPTER FOUR

Presentation and analysis of data                                                           55

  • Testing the hypotheses 66

 

CHAPTER FIVE

Summary, conclusion, findings and recommendation                            72

  • Summary 72
  • Conclusion 74
  • Recommendation 76

Bibliography                                                                                78

Appendix.                                                                                    81

CHAPTER ONE

 

INTRODUCTION

  • GENERAL BACKGROUND OF THE STUDY

The word “Audit” is from a Latin word “Audire”, which means to HEAR.  The practice was known to have first existed in Egypt.

In medieval period, the stewards were responsible for the welfare of their masters, thereby demonstrating the responsibilities of good and efficient stewardships over financial resources provided and entrusted to them for the proper running of their transaction.

Accountability is therefore necessary for managers of company’s funds to ensure that money and other assets entrusted to them are adequately taken care of.  How one is able to account for funds, assets and other valuables entrusted to his care will then determine his efficiency and good stewardship.

There is a belief that auditing is a subdivision of accounting, this is probably because that is how it was introduced considering its origin.  It is true, that every auditor is an accountant but every account is an auditor.

The relationship that exists between auditing and accounting is close but not just the same.  Accounting is objectively concerned with the collection, classification, summarization and communication of financial information.  Accounting has been observed overtime to be “The language of Business” and that big organizations have failed because o lack of adequate accounting records.

Auditing as a phenomenon is the independent examination and investigation of the books of account and vouchers of a business with a view to enabling the auditor to report whether the balance sheet and profit and loss account are properly and adequately drawn up so as to show a true and fair view of the state of the affair and the profit of the business.

The auditor could be said to be an independent critic, for in so far as he is appointed to verify a balance sheet and profit and loss account or other forms of statement of account prepared by others.  An auditor is one to whom the receipt and payment of an organization is read, for him to verify.

Professor settler once said, “Auditing is a managerial control which functions by measuring and evaluating the effectiveness of other controls”.  And according to Arthur W. Holms “auditing is independent appraisal activity with an organization for the review of the accounting financial and other operations”.

Verification of the correctness and reliability of accounting information is an essential process of lending credibility to accounts.  This function is performed by the auditor; auditing investigates and reveals the variance of deviation and provides useful information relating to the sources and usage of funds and assets available to an entity for its daily operation.

Internal auditing is an appraisal of the information flow, for its quality and compliance and is mainly concerned with the reliability and adequacy of the accounting system through:

  • Evaluation of compliance with generally accepted accounting principles and the Companies and Allied Matters Act (CAMA) 1990.
  • Protection of assets
  • Detection of waste
  • Prevention of fraud.

Operating within this entity, internal audit is an independent appraisal of the activity for the review of operation as a service to management; it is a measurement and evaluation of the effectiveness of control in the organization.

The system of external audit however is a more independent assessment of financial operations; it is an objective examination of the account with a view to ascertaining whether or not they show a true and fair view of the state of affair.  It is an impartial investigation to confirm that transactions are supported by relevant and reliable documentary evidence.

Auditing is a method of reviewing system, conducting test, comparing the result and reporting the final opinion.  It is this factor that makes auditing a social responsibility, assessing the quality of resources utilized in a financial operation with a view to ensuring the financial management of an organization is free form error and fraud.

An auditor can either be in a statutory form, such as a limited liability company or a private audit such as sole traders and partnership and non-statutory organization audit.

In the case of statutory and that is most relevant in this discussion, the shareholders of a limited liability company pull their resources together to form the company, but some of them have limited management skills hence the need to employ full time managers who will manage their resources in the company for them.  The directors who manage the affairs of this company are therefore agents or stewards of the shareholders.  The stewards, from year to year give account of their stewards to the shareholder of the investment in the company.

However, for the directors’ accountability to be credible, the Companies and Allied Matters Decree (CAMD), 1990 empowers the shareholders to appoint an outsider (in the form of an auditor) to review the management’s accountability and give his

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