ABSTRACT
This study is on the role of internal audit and
prevention detection of fraud in a business organisation. The research report
has been divided into five characters, which are as follows:
Chapter one is the introduction, it consist of
information dealing with the statement of the problem, purpose of the study,
significance of the study, research study, research questionnaire and
hypothesis about the research.
Chapter two deals with the various literature reviewed by the researcher on the
subject of the study and other integrate
studies of internal audit and
prevention/detection of fraud in an organisation.
Chapter three describes the methods used in the carrying out of the study, for
the collection of data, the population sample and the analysis of data
collected, as well as the instrument used in data collection.
Chapter four deals with data presentation analysis and
test for hypothesis. Tables were used to present the data, percentage for the
data analysis, chi-square for the test of hypothesis. Decision based on the
data and hypothesis testing were made.
Chapter five deal
with the summary of findings, recommendation, conclusions and suggestion for
further studies. The chapter summary, the research findings and conclude given necessary
recommendation. There are references cited and during the writing of the study
this citations are prepared as list of references on the end of each chapters
and all references used throughout the cause of the study are also listed as
bibliography.
TABLE OF CONTENT
Page
Title page i
Certification ii
Dedication iii
Acknowledgement iv
Abstract v
Table of content vi
Chapter One
1.1
Introduction 1
1.2
Statement of problem 2
1.3
Objective of the
study 2
1.4
Research question 3
1.5
Statement of research
hypothesis 3
1.6
Significance of
research 4
1.7
Scope of the research
statements 5
1.8
Limitation of the
research statement 6
1.9
Definition of term 6
References 8
Chapter Two
2.0. Literature Review
9
2.1
Historical background
of the study 9
2.2
Relating internal and external auditing 12
2.3
Internal audit 14
2.4
Functions of internal
audit 15
2.5
Fraud and the
internal audit 17
2.6
Responsibilities of
internal audit for fraud 18
2.7
Fraud 19
2.8
Types of fraud 20
2.9
Prevention of fraud 23
Chapter Three
Methodology 28
3.0
Introduction 28
3.1 Research
design 28
3.2
Restatement of
research question 28
3.3
Restatement of
research hypothesis 29
3.4
Characteristics of
the study population 29
3.5
Sample and sampling
design 30
3.6
Data collection
instrument 30
3.7
Administration of
data collection instrument 30
3.8
Technique of data
analysis/test of hypothesis 31
3.9
Limitation of the
methodology 32
References 33
Chapter Four
4.1
Introduction 34
4.2
Data presentation and
analysis bio data 34
4.3
Data presentation
analysis with hypothesis testing 41
4.4
Discussion of
findings 43
Chapter Five
5.1
Summary of findings 44
5.2
Conclusion 45
5.3
Implication 45
5.4
Recommendation 46
5.5
Suggestion for future
studies 46
Bibliography 47
Questionnaire
CHAPTER ONE
1.1 INTRODUCTION
Internal auditing is an independent appraisal established
with an organisation to examine and evaluate its activities as a service to the
organisation in the effective discharge of their responsibilities. To this end,
internal auditing furnishes them with the activities, appraisal, recommendation
counsel, and information concerning the activities reviewed.
Throughout the world internal auditing is performed in
diverse environment and within organisation which very in purpose, size, and
structure.
In addition the laws and customs within various countries
differ from one another.
The differences may affect the practice of internal
auditing in each environment internal auditors owe a responsibility to both,
providing information about the adequacy and effectiveness of the organizations
systems of fraud detected and the
control of performance. The information furnished to each may differ in format
and detail, depending upon the requirements and requests of management and the
board. Internal auditors must be independent of the activities they audit. Such
independent freely and objectively without independent, the desired results of
internal auditing cannot be realized.
1.2 STATEMENT OF PROBLEM
The reason why internal audit is performed cannot be over
emphasized. It should be noted, that modern business arrangement is so complex
that ownership needs be separated from its management. Hence there is need for
internal auditing.
The process by which the manager reports on the business
is achieved by preparing the financial statements which is regarded as
“STEWARDSHIP ACCOUNTING”.
The problem that is usually encountered is whether the
owners of the business will believe on such financial statements prepared by
the managers. Lack of credibility arises because of the following
(1)
Errors in the
financial statements not revealed.
(2)
Fraud that occurs but
not disclosed or discovered.
(3)
Financial statement
maybe incomplete.
(4)
Financial statement
may fail to disclose relevant information.
The appointment of internal auditors is the solution to
the problem of credibility.
1.3 OBJECTIVE OF THE
STUDY
Internal auditors should be objective in performing
audit. The objective of internal, auditing is to assist all members of
management in the effective discharge of their responsibilities by furnishing
them with analyses, appraising activities reviewed. Internal auditors are
concerned with any phase of business activities in which may be of service to
management. This involves going beyond the accounting and financial record to
obtain a full understanding of the operations under review.
Given this objectives, the statement identifies several
internal audit activities.
(1)
Reviewing and
appraising the soundness, adequacy, and application of accounting, financial and
control at reasonable cost.
(2)
Ascertaining the
extent of compliance with established policies, plans and procedures.
(3)
Ascertaining the
extent to which company assistance are accounted for and safe guarded from
losses of all kinds.
(4)
Ascertaining the
reliability of management data developed within the organisation.
(5)
Appraising the
quality of performance in carrying out assigned responsibilities.
(6)
Recommending
operating improvements.
The objectives and the six related activities describe
the predominal activity of contemporary internal audit practice. Internal auditing
is no longer confirmed to financial matters, it is much broader and much more
pervasive.
1.4 RESEARCH QUESTION
1.
Why is independence
important for the internal auditor?
2.
Why is communication
of results important to the internal auditor?
3.
What is the basic
objective of the internal auditor?
4.
What are the
professional standards for the performance of work for internal auditing?
1.5 STATEMENT OF RESEARCH
HYPOTHESIS
In recent years, however, internal auditing has become
increasingly oriented toward operational control, oversight, and protection all
of which are major, rather than management. Internal, auditing is moving
further away from financial auditing, its traditional role, and closer toward
operational auditing, its emerging role. The institute of internal auditors
statement of responsibilities under
scores the significance of independence.
“Independence
is essential to the effectiveness of
internal auditing. This independence is obtained primarily through organisation
status and objectivity.
“Thus the institute identifies organizational status and
objectivity as the primary means for
achieving independence from personnel and activities, respectively. The
organizational status of the auditing
functions and the support accorded to it
by management are major determinants of its range and value.
1.6 SIGNIFICANCE OF RESEARCH
The role of internal auditor in all organisation helps
the standards of professional conduct and for greater protection against
inefficiency, misconduct, illegibility,
and fraud. There is more realistic recognition of the fact that internal auditor
can contribute importantly to satisfying the expanded protective needs of an
organisation. At the same time there is the continuing truth that organization
must be protective and achieve the best possible utilization of their
resources. The warfare society is directly dependent on that productivity.
Moreover, unless organisation are productive they cannot survive
and be the focus for protective concerns. There is also greater
recognition that internal auditors can make major contributions in helping organizations
achieve the needed productivity. Together, therefore, these basic needs for
production and productivity requires the need of internal auditors.
1.7 SCOPE OF THE RESEARCH
STATEMENT
Throughout the 1940s and 50s internal audit activities in
many organisation focus upon financial
auditing, and internal audit departments were heavily in the review of
financial statements.
Today, however, internal auditing takes on a much broader perspective, as suggested in
the institute internal, auditors. Every
organisation can exist for a variety of purpose. It is then most
productivity made possible to achieve the organizational objectives. In that
endeavour responsible managers requires the assistance of the internal auditing
group.
Thus there is need for internal auditing in all types of
organisation and there is a common body of personal knowledge that applies to
all of the varied internal auditing
activities.
There is potentially a need for the services of the
internal auditors at any organizational level in any particular company or
organisation. This means that there can be legitimate needs for internal
auditing services by the stock holders,
the board of directors and by the responsible management at the subsidiary or divisional level and other lower levels of an
organisation.
In conclusion, it is the hope of the researcher that at
the end of the project study, the concept, problems will truly represent the
concept problems prospects and impact of internal audit on the manufacturing
sector of the Nigeria Economy and also
suggestion are expected to be appropriate and applicable.
1.8 LIMITATION OF THE
RESEARCH STATEMENT
The decision that an internal audit of some type is to be made can come about in a variety of ways. It can be requested by the person
who has the responsibility for the operational area to be reviewed, it can be
requested by a still higher level
officer, or it may be initiated by the director of internal auditing himself as
a part of his own broader program of needed audit coverage. The significance
here is that in the first instance
the receptivity for the audit has been at least partially established.
However, there is
still the further necessity of trying to provide the responsible offer with
the proper professional intention of
first importance is the need for a face-to-face discussion, it at all
practicable, although frequently this must be by telephone. In any event there
is the need to demonstrate to the extent
needed that:
The internal audit is part of an overall program mandated
by high-level authority to meet higher
level organisation needs for both protection and maximum constructive
benefit. The objectives of the review is
to provide maximum service in all feasible managerial dimension.
1.9 DEFINITION OF TERMS
Auditing has been regarded, as the activity carried on the auditor when he
verifies accounting data, determine the accuracy and reliability of accounting statements and reports and then reports upon his effects. It
is an activity carried on by independent person with the aim of reporting on the truth and fairness of
a financial statements.
Another type of auditing internal auditing exist in business and this research deals
with it.
Very large organisation (and some small ones) ahs found a
need for an internal audit in addition to an external audit. Internal auditors
are employees of the organisation and work
exclusively for the organisation. Their functions partly
overlap those of the external auditors and in part are quite different.
The precise function of external auditors are either laid
down by status or embodies in a letter
of engagement. The functions (which are rarely precisely laid down) of internal
auditor are determined by management and very greatly from organization to
organisation.
Internal audit can be defined as “An independence
appraisal function established by the
management of an organisation for the review of the internal control system as a service to the organization. It
objectively examines, evaluates and reports on the adequacy of internal control
as a contribution to the proper,
economic, efficient and effective use of resources’ internal auditing is thus,
carried on by independent personnel.
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