BENEFITS OF ACCOUNTABILITY THROUGH INTERNAL 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 role of internal audit system towards accountability in an organization (b) To determine if internal audit can control fraud and embezzlement in Uta, Ajeje Investment Company Ilupeju Ekiti. 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

INTRODUCTION

1.1 Background of the Study

Accountability, both in the public and private sectors, remains a crucial topic due to its significant impact on organizational performance. It entails reporting back actions and tasks carried out by individuals to the authorities who assigned such functions. Accountability is essential for ensuring proper and satisfactory performance of assigned duties, playing a pivotal role in the success or failure of any business, especially when managed by entities other than the owner.

Initially, most businesses were managed solely by their owners. However, as businesses expanded in scale and scope, requiring larger capital investments beyond individual or familial means, shareholders became essential for raising funds. This transition led to a separation between ownership and management, with non-owner managers assuming control. Consequently, shareholders, unable to directly oversee management, sought ways to monitor non-owner directors' activities, thus necessitating third-party involvement, such as auditors, to review company accounts.

The concept of audit, though often misunderstood, extends beyond mere fraud and error detection. It involves an objective examination of a firm's records and operational policies to ensure compliance and the reliability of financial statements. Accountability, as commonly perceived, involves more than just financial matters. It encompasses answerability, liability, and responsibility for one's actions and decisions.

For accountability to be effectively established within an organization, proper internal control measures are essential. Additionally, subjecting company accounts to external and independent audits at regular intervals is crucial. This ensures transparency and helps shareholders assess the stewardship of funds and assets entrusted to management.

Drawing from the biblical analogy of the parable of the talents, accountability demands that leaders answer for their stewardship. Similarly, in the corporate world, executives and directors must be answerable for their management of shareholder assets, hence the necessity for audits.

1.2 Statement of Problem

The rising instances of fraud and embezzlement in both public and private sectors have led to misconceptions regarding the role of auditors and the purpose of audits. The public often perceives auditors as mere number-crunchers tasked with preventing fraud. However, this perception is flawed, as the primary responsibility of auditors is not fraud prevention or producing figures.

The key problems identified include mismanagement by directors and top management, who may lack financial stake in the business, leading to negligence and indifference toward the company's progress. Additionally, instances of misappropriation often go undetected, undermining the credibility of audits and raising questions about auditor independence.

1.3 Objectives of the Study

Based on the identified problems, the objectives of this study are as follows:

1. To examine the role of internal audits system in fostering accountability within organizations.
2. To assess the potential of accountability in enhancing managerial effectiveness in Uta, Ajeje Investment Company Ilupeju Ekiti.
3. To evaluate the effectiveness of internal audits in mitigating fraud and embezzlement risks in Uta, Ajeje Investment Company Ilupeju Ekiti.

1.4 RESEARCH QUESTIONS

The following research questions will aid in the successful completion of the study:

1. Does accountability through internal audit play any role in fostering accountability within organizations?
2. Does internal audit system enhanced managerial efficiency in Uta, Ajeje Investment Company Ilupeju Ekiti?

• Does effectiveness of internal audits mitigating fraud and embezzlement risks in Uta, Ajeje Investment Company Ilupeju Ekiti?

1.4 RESEARCH HYPOTHESES

In order to complete this study successfully the following hypotheses have been formulated in null form:

H₀: Independent audit does not enhance accountability in an organization.

H₁: Independent audit does enhance accountability in an organization

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 creditors‟ report and has dented the 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 will help to enhance 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 measure constituted some “Road block” to the 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 reminder letters. Their reasons ranged from 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” and “blue prints” As a result; comprehensive data were not easily collected notwithstanding the researcher’s letter of introduction.
2. 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.
3. 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 researcher‟s findings/observations, recommendations to the information user and a conclusion of the entire work based on the researcher findings, observations and tests.

1.9 DEFINATION OF TERMS

Some terms used in this study which may not be clearly understood by some readers are hereby defined.

Audit:
This is the independent 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.

AUDITOR:
The individual or partnership firm appointed to carry out an audit of the financial statements of an entity.

AUDIT REPORT:

Any report, written by an auditor on a matter on which an opinion has been sought within the terms of an auditor‟s appointment.
AUDITOR‟S REPORT:

This is another term for audit report.

AUDIT EVIDENCE:

This is information obtained by an auditor inn arriving at the conclusion which forms the basis of the auditor‟s opinion on the financial statement being audited.

INTERNAL AUDIT:

This is the audit function carried out within an organization of evaluating and reporting on accounting and other controls on the operations of the organization.
An audit of an accounting entity carried out by an auditor who is not employed by that entity or by its manager and is as far as possible independent of the person(s) who manage(s) the entity.
ACCOUNTABILITY:
This is the state or condition being accountable.
ACCOUNTABLE:
This is the required provision for the description, analysis and evaluation of actions.
INTERNAL CONTROL SYSTEM:

This is the whole system of controls financially and otherwise established by the management in order to carry on the business of the enterprises in an orderly and efficient manner, ensure adherence to management policy, and safeguard the completeness and accuracy of the records, as regards to an organization.