CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
Accountability is the practice whereby public and private organizations and people within them are held answerable for their end results and activities, consisting of their stewardship. Accountability guarantees reliable accounting and financial reporting, and distribution of resources in an effective way. This helps in accomplishing the main objective of organisation which is to distribute limited capital assets to the production of those products for which demand is excellent. Unsatisfactory accounting and reporting, on the other hand, conceal waste and inefficiency, thus avoiding competent allocation of economic resources (Andrew & Sayag, 2010).
Initially many firms’ set-ups were handled by their owners. The owners' manager was the sole financial contribution to the enterprise. However, with the growth in the range and scope of business, a substantial capital beyond that affordable by the single individual or a family was required. As a result, contributors (hereafter called investors) were needed to increase the funds for the business. The emergence of these investors resulted in the separation of the owner managers from the management of the business as every one of them cannot be directors at the very same time. This the management of business was delegated to the hands of individuals that have no financial claims to the business and the investors were doubtful concerning this especially as the law does not allow them individually to go through the books of the firm in their desire to always keep abreast of the performance of the directors. This skepticism aroused the need for surveillance over the activities of the non-owner managing directors. This bid to fulfil the later led to the involvement of third-party (an Auditor) to carry out an audit of the firm's accounts.
Audit has since then got a lot of meanings and/or after that got a lot of definitions and/or interpretations both from accounting bodies and auditors and their non-the-like. Understandable is to claim that audit has experienced a great deal of misinterpretations. The majority of the misgiving interpretations see it as being armed at fraud and error discovery. However, audit basically includes a lot more than that. One of the most involved and obviously the most appropriate interpretations up until now is that provided by the consultative council of accountability bodies (CCAB) which sees audit as the independent examination and expression of opinion on the financial statement of a business by an appointed auditor in pursuance of statutory obligation (Howard 1982).
In Nigeria especially, there have been several instances or revelations of ineffective internal control, particularly in the public sector (Abubakar, Dibal, Peter & Pwagusadi, 2017). Thus, the Auditor General's report on the public accounts from the time of independence to date, revealed that there are series of unacquainted payments, unpresented payment vouchers, misappropriation of revenues and other receipts, contract irregularities, poor debt management huge debt stock, procurement without entity tender committee approval, illegal payment and/or drawing of salary as well as bank lodgments not reflecting in bank statements, among others. The instances cited clearly show that there are a lot of internal control weaknesses in the public sector in Nigeria (Emmanuel, 2013; Ogubunka, 2002).
As Usman and Ogbada (2010) opined that auditors as watchdogs are expected to consider and share their professional opinion on the financial statements and to reveal whether such statement presents a real and reasonable view of the financial position of companies.In the local government system, every staff of the organization carryout his/her duties perform their jobs in the absence of much of the organisation and the need to report their performance and conduct to the executive board of the organization if they are to continue to enjoy the support of the executive board in the procurement of necessary resources. For that reason, it has become typical knowledge in many organisations in Nigeria that some senior staff would certainly not report their performance and conduct fairly to members of executive board. It is on the basis of this that the researcher aims to focus on enhancing corporate accountability through audit systems.
1.2 Statement of the Problem
The increasing wave of fraud and funds misappropriation of funds by high officers and chief executives in the private and public organisations brought to the lime light some misunderstandings of what the job of an auditor is and what audit is all about. To the uninformed, the auditor is a wizened person that wears the conventional green eyeshade and sleeve garters. They will expect to find him perched on top a high stool counting money, diligently adding long columns of numbers and gaining his sole pleasure in life from the apprehension of luckless individuals whose books failed to balance or whose cash account confirmed to be short (Harword, 2002).
Accountability and audit systems are gradually more interesting, broadly germane, but also more under-researched in organisations (Chipwa, 2005). Despite existing business regulation comprising legislative framework and procedures which govern business activities, the insufficient audit systems and accountability encapsulated into comprehensive corporate governance practices has directly or indirectly brought about organizational failures (Katera, 2003). To a certain extent, studies broadly on audit systems and accountability in corporate organizations in Nigeria are very scarce. Likewise, the factors contributing to audit systems and accountability in corporate organizations in Nigeria have also received little or no empirical research to the best of our knowledge. It is on this claim that this study aims to focus on enhancing corporate accountability through audit systems.
1.3 Objectives of the Study
This study has both main and specific objectives. The main objective is to focus on enhancing corporate accountability through audit systems. However, the specific objectives are:
i) To find out whether independent audit can enhance managerial ability
ii) To understand the role of independent audit towards accountability in an organization
iii) To ascertain if independent audit can control fraud and misappropriation
1.4 Research Questions
The following are the research questions for this study:
i) Does independent audit enhance managerial ability?
ii) What is the role of independent audit towards accountability in an organization?
iii) Can independent audit control fraud and misappropriation?
1.5 Research Hypotheses
The following are the research hypotheses for this study:
i) There is no significant correlation between independent audit and managerial ability
ii) There is no significant correlation between role of independent audit and accountability in an organization
iii) There is significant relationship between independent audit control fraud and misappropriation
1.6 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.
Conclusively, the study will become a reference material for other student who will carry out further studies in the field.
1.7 Scope of the Study
The study will be primarily focused on enhancing corporate accountability through audit systems by using Champion Brewery, Akwa Ibom as a case study. The researcher would go beyond desk search into field to sample the opinion of workers, officers as well as chief executive of the organisation.
1.8 Limitations of the Study
In the process of carrying out this study, constraints of various natures were encountered, which in no small measure constituted some barriers to the progress of the study. Among the militating factors are the following:
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.
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.
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.
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.
1.9 Definition of Terms
The following terms were used while carrying out this study:
Accountability: This is the state or condition being accountable.
Audit: This is the dependent 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.
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.
