CHAPTER ONE

INTROUCTION
1.1 BACKGROUND OF THE STUDY

At the beginning of the century, most businesses are small and sole-operated.
The owners/managers are overly involved with most of the decision making. As
business grows in size and complexity, professional managers take position of
the owners and the operators.

Consequently, they rely heavily upon streams of accounting and
statistical report which summarizes current happenings and conditions in the
enterprise. The information carried by these streams of report enables
management to control and direct the enterprise in order to assure
management that the information received are both reliable and accurate. A
system of internal audit is developed to monitor the activities of the company.

The need for maintaining the adequate efficient and effective internal
audit, therefore cannot be overemphasized especially in days when Nigeria’s
economy still is witnessing depression and every company is making effort in
ensuring that wastage, pilferage, misappropriation are checked or avoided,
and to ensure that assets are being secured.

Some problems were noticed during the cause of this research;
problems within the company, these problems necessitate this work. The researcher noticed that there was ineffective co-operation between the
internal audit and management, audit reports were sometimes ignored by the
management. The relationship between the internal auditor and external
auditor was strained making work harder for the external auditor. The lack of
internal audit to prevent pilferage and fraud within the company thereby
preventing an error free working condition.

1.2 STATEMENT OF PROBLEM
Often, management and internal audit department function were seen as
contradictory rather than complementary. Internal audit department is setup
to ensure adherence to management policy but this objective cannot be
achieved because of interference and undue influence by the top
management.

More so, monthly or quarterly internal audit report as the case may be
in an organization is expected to provide information required by management
to determine how effective their policies and implementation are. It is on this
realization that this study will attempt to determine how effective are those
information to aid management in solving day to day problems. It signifies
defects or problems; the research will examine number of them namely:

a) There exists no relationship between the internal audit and
management.
b) Co-operation does not exist between the internal auditor and
external auditor.
c) Internal audit does not assist in detection and prevention of fraud.

1.3 OBJECTIVES OF THE STUDY.
Objectives of the study include:
 To ascertain if the duties of the internal auditor assist management in
taking informed decision.
 To ascertain if there exist co-operation between the internal auditor and
external auditor.
 To find out if internal audit assists in the detection and prevention of
fraud

1.4 RESEARCH QUESTIONS.
i) Is there any relationship between the internal audit and management?
ii) Does co-operation exist between the internal auditor and external
auditor?
iii) Does internal audit assist in the detection and prevention of pilferage
and fraud?

1.5 STATEMENT OF HYPOTHESIS
To justify the research topic, internal audit as an aid to management and to
enable the researcher to draw a logical conclusion, there is need to make
guesses as solutions to the topic which are subject to acceptance and rejection
are based on the result of the test.

HYPOTHESIS ONE
 H0: There is no relationship between the internal audit and management.
 H1: There is a relationship between the internal audit and management.
HYPOTHESIS TWO
 H0: There is no co-operation between internal auditor and external
auditor.
 H1: There is co-operation between internal auditor and external auditor.
HYPOTHESIS THREE
 H0: Internal audit does not assist in the defection and prevention of
pilferage and fraud.
 H1: Internal audit assist in the detection and prevention of pilferage and
fraud.

1.6 PURPOSE OF THE STUDY.
 The purpose of the study is to determine the extent of co-operation
between the internal audit and management.
 To ascertain the extent of co-operation between the internal auditor
and external auditor.
 To evaluate the extent to which internal audit helps in preventing
pilferage and fraud.
 To find out if internal audit is equipped enough to prevent an error proof
working condition.

1.7 SIGNIFICANCE OF THE STUDY.
The benefits of the study to:
The Internal Audit-
i) Internal audit within an organization is effective for efficient work of the
general staff.
ii) The internal audit in an organization will help detect, minimize or
eliminate fraud in an organization.
iii) Internal audit assist the management in the smooth running of the
organization by complying with the policies, laws and regulation.
iv) Internal audit in an organization will help to review and appraise the
effectiveness, adequacy and application of accounting, financial and other controls in order to promote effective control at the lowest
possible cost.
v) Whether an internal audit department could help to determine the
reliability and integrity of financial and other data produced within the
organization, thereby securing the jobs of employees.

The management of the organization-
i) Management will experience an error free working environment
maintained by internal audit.
ii) Management will enjoy the reduction or elimination of pilferage and
fraud within the organization.
iii) The general staff will be effective and dedicated.
iv) Management will enjoy a healthy relationship between it and internal
auditors.

The External Auditors-
i) Good internal audit by the internal auditor will save time for the external
auditor.
ii) Co-operation will lead to easier and more efficient work.
iii) Assistance of internal auditor will lead to smooth investigation.

1.8 SCOPE AND LIMITATION OF THE STUDY
This research work is to evaluate internal auditing in an organization
using soap, detergent and household products company as a case study. The
research work particularly focuses on the internal audit as an aid to
management in the chosen company.

LIMITATION OF THE STUDY
There are constraints encountered in carrying out this research work,
this includes;

1. TIME FACTOR
This research work was conducted simultaneously with normal academic
work within a short period of time in which some valuable information could
be obtained.

2. FINANCIAL DIFFICULTY
In an effort to have a sufficient research material to be able to write
extensively on the subject matter, the researcher was faced with some
financial predicament considering high cost of not only education materials
coupled with the high transport fare.

1.9 DEFINITION OF TERMS
AUDITING
It is defined as a process of carrying out an independent examination
and expression of opinion on the financial statement of an enterprise by an
appointed auditor in pursuance of that appointment and in compliance with
any relevant Law and Regulation.

INTERNAL AUDIT
MILLICHAMP 1996, defined internal audit as “An independent appraisal
of an organization for the view of the internal audit control system as a
service to the organization. It objectively examines, evaluates and reports on
the adequacy of internal audit control as a contribution to the proper
economic efficient and effective use of the resources”.

Internal audit reviews existing accounting system and related internal
work. It assists in the implementation of new accounting systems. It identifies
and draws attention to management weakness in control or measures which
are unsaid to the organization. To investigate and eliminate pilferage and
fraud, thereby ensuring the survival of the organization.

EXTERNAL AUDITOR
They are independent firm or persons appointed from outside an entity
to audit the accounts and activities of that entity. They are also referred to as
statutory auditor whose appointment, duties and other related matter are
provided by law.

INTERNAL AUDITOR
He is an employee of a particular firm as related to its operation. It is in
itself an internal control which reports the effectiveness of the other controls.
Its objective is to help manager in discharging their responsibilities and
to evaluate compliance with cooperate procedure within the organization.

MANAGEMENT
It is a body charged with the responsibility of planning, directing and
controlling of all the activities within the organization. Therefore management
control is the process by which managers assure that resources are obtained
and used effectively and efficiently in the accomplishment of the
organizations goals (Anthony and Welsch, 1974).