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 stockholders,
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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