CHAPTER ONE

INTRODUCTION

1.1. Background of the Study

Internal audit is a management tool used in ensuring transparency in

conduct of business. Auditing took the entire stage after the industrial

revolution since before this period transactions increased

precipitated by the development of large corporations limited liability

companies there became the need for divorce of ownership from

control. Hence mangers and shareholders became two different

partners. Then it became apparent for mangers to render accounts of

their stewardship to those who has pooled their resources together

for the business .it is noteworthy that an independent person be

appointed to represent the interest of the shareholders in reviewing

the report of mangers to ensure accuracy and transparency. This is

how auditing started.

We have two types of sectors. Public and Private sectors. Public

sector is the governments initiate and control in economic activities

with the aim of rendering services at a breakeven point.

The private sector is the private initiative aimed at profit/wealth

maximization for the owners Mill champ (1996) defines internal audit

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as an independent appraisal function within an organization for the

review of system of control and the quality of review of systems of

control and the quality of performance as a service to the

organization.

The papers seek to empirical and statistically ascertain the impact of

the internal audit in the private sector of the Nigerian economy while

the private sector of the economy is studied at large; the case study

MB ANAMCO Ltd Emene Enugu is particularized.

1.2. Statement of the Problem

The private sector according to Anyanwu (1993; 25) is that part of

the economy not under direct government control. It entails

production and distribution that is in private hands. It serves as a

complement to the public sector since increased public sector

efficiency results from improvements and places government in a

better position to focus on the objectives conduct and performance

of those enterprises that remain in the public sector (Hamming and

Mansoor 1987).

Despite this enormous role the sector has been beclouded with

problems such as:

(i) Financial impropriety

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(ii) Lack of auditing control

(iii) Lack of independence of the internal control

(iv) Incomplete recording of business transactions

(v) Over blow expenses to reckless spending

(vi) Non compliance and adherence to accounting standard and

guide lines.

(vii) Mismanagement of scarce funds

1.3 Statement of Objectives

The broad objective of the study is:

1. To determine if internal audit ascertain the correctness of

financial records.

2. To determine the extent to which internal audit helps in

enforcing compliance to rules and regulations regulating private

sector accounting and auditing.

3. To find out if internal audit inspect and verifies organizational

assets and liabilities.

4. To know the factors hammering pa ring audit procedures in the

private sector

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1.4 Research Hypothesis

To address the above mentioned problems the following hypothesis

are formulated.

(i) Ho: internal audit has not significantly affected Private sector

performance.

(ii) Ho: There is no relationship between achieving corporate

objective and efficient internal auditing in the private sector.

(iii) Ho: Inefficient internal audit and internal control has hampered

audit reports.

1.5. Significance of the Study

(I) The study will be of immense benefit to the shareholders who

have contributed the funds for the business and needs a reward

in form of dividends.

ii) This can be achieved if ineffectiveness and corrupt practices

such as fraud loss of revenue sharp practices and lack of

transparency etc .associated with the private sector are

minimized or even eradicated.

iii) Since a virile private sector is noted for the economy will be of

great benefit from the findings of the study

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iv) Equally future researches on auditing will find the study

interesting in their research.

1.6. Scope of the Study

As the study is centered on the effect of the internal audit in M.B

ANAMCO LTD Emene Enugu State the research covers all

department under the firm in other to ascertain whether auditing has

an effect in the private firm and if not what is the cause.

1.7 Limitation of the Study

The researcher in the course of carrying out the research was faced

with the following problems and constraints.

(a) Time factor: Time shortage posed serious challenges since it

was indeed very short considering the enormity of the research work.

(b) Lack of information and data due to unavailability of materials

and other vital information. Libraries are either out of stock or scanty

in their content of relevant materials.

(c) Financial problem was also a deterrent in carrying out the

research since the available fund was not enough to sustain the vast

research proposals it was also a challenge in that regard.

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1.8 Definition of Term:

(A) Audit:

Audit can be define as the independent examination of a financial

statement and expression of opinion on the financial statement of

enterprise by an appointed auditor in pursuance of that appointed and

in compliance with any relevant statutory obligation.

(B) Auditor:

Auditor is a qualified accountant who also passed a professional

examination. Such a person must be of good conduct and have a

vast knowledge and able to understand a practical business

endeavor always to grasp the technicalities and business methods of

any concern whose account he undertakes to audit.

(C) Internal Auditing

According to Bright (1964) "Internal auditing has to do with the

independent examination of the books of account so as to ascertain

whether the books of accounts are in agreement with the organization

transaction.

(D) Private sector:

Private sector includes the part of the economy that is fully controlled

and managed and financed by private individuals.

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