CHAPTER ONE
1.0
INTRODUCTION
Accountability in both public and
private section has being an issue that is worth discussing due to its
paramount and colossal impact to the overall performance of an organization.
It (Accountability) has to do with
reporting back action, task carried out by an individual to the authority who
apportioned such function.
1.1
BACKGROUND OF THE STUDY
Accountability is the process or act of
reporting back to a higher authority, body or individual the actions taken by a
steward. It enables the person or persons reported to determine if the steward
has acted or performed the assigned duties properly and satisfactory. It plays
a major role in the success or failure of any business, particularly when the
business is not managed by its owner.
Initially most business set-ups were
managed by their owners. The owners‟ manager was the sole financial
contribution to the enterprise. But with the development in the scale and scope
of business, a huge capital beyond that affordable by the sole individual or a
family was needed. Consequently contributors (hereafter called shareholders)
were required to raise the funds for the business. The emergence of these
shareholders led to the divorce of the owner managers from the management of
the business as all of them cannot be directors at the same time. This the
management of business was entrusted to the hands of people who have no
financial claims to the business and the shareholders were sceptical about this
particularly as the law does not permit them individually to go through the
books of the company in their desire to 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 engagement of third-party (an Auditor) to
perform an audit of the company‟s accounts.
Audit has since them received a lot of
definitions and/or then received a lot of definitions and/or interpretations
both from accounting bodies and auditors and their non-the-like. Justifiable is
to say that audit has suffered a lot of misinterpretations. Most of the
misgiving interpretations see it as being armed at fraud and error detection.
But audit essentially involves much more than that. One of the most involved
and of course the most acceptable definitions so far is that issued by the
consultative council of accountability bodies (CCAB) which sees audit as “the
independent examination and expression of opinion on the financial statement of
an enterprise by an appointed auditor in pursuance of statutory obligation
(Howard 1982:1).
Deductively, an audit is the objective
scrutiny of someone‟s work or presentation by a third party (an auditor) who is
different from the users and the preparing of the presentation. The general
essence of audit is to ascertain compliance of the firm‟s records and
operational policies with usefulness of acceptability of and the dependability
on the firm‟s financial statements.
Accountability as explained above has
suffered some misconceptions, surprisingly in the hands of those who should
have understood it better. Most of the lay men conceptual understanding of accountability
relates it to
„communicating about monetary matters (Odon, 1999:7)
but accountability goes beyond that. According to the Webster encyclopaedia
dictionary of English language (1995:110), accountability is defined as “the
state of being accountable, answerable, liable or responsible” the same
dictionary goes further to define accountable as “liable to pay or make good in
case of loss; responsible to a trust, liable to be called to account, put in
another way an much more
related
to the context in the articles Aba times of fourth September 1999 captioned
“accountability in the third republic” it says
Accountability
connotes answerability and stewardship, by answerability is meant answering for
one‟s actions and decisions (odon1999:7)
Stewardship
according to the article means service; it means that every leader should be
responsible to the people who reposed trust in him.
For accountability to
be accorded its rightful place in an organization the writer believes that there
is a high need for proper internal control measure and in addition, efforts
should be made to ensure that company accounts are subjected to external and
independent audits after each financial period.
The bible also records
in chapter 25 verse 14-30 of saint Matthew gospel, the story of a rich man who
went on a far journey entrusting the affairs to his servants and who when he
returned, required the servants to answer individually, for their stewardship
to the business while he was away. It in the same manner that it is required of
the chief executives and directors of a company who are quite different from
the real owners of the business to answer for their stewardship of the funds
and property entrusted to them by the shareholders. It is desire for accountability
that gave rise to what we know today as audit- a mechanism through which the
shareholders are made abreast of the true and fair picture of the activities of
the directors and chief executive of the company
THE HISTORICAL BACKGROUND OF
SHEFFIELD RISK
MANAGEMENT LIMITED, OWERRI
Sheffield risk management limited is
located within the industrial layout area of Owerri, it is established as a
private limited liability company, it is an incorporated company.
The company is an insurance brokerage
firm that serves as an intermediary between the insurer and the insured; they
also serve as underwriter of insurance policies. The insurance policies in
which Sheffield risks management limited act as intermediary between the
insurer (insurance company) and the insured (client) or consultant to each or
both include Life insurance, Car insurance, Burglary insurance, Motor vehicle
insurance etc.
OWNERSHIP STRUCTURE
According to the memorandum of
understanding signed by the stake holders of Sheffield Risk Management, the
company has its ownership structure as shown below out of the start-up capital
of twenty two million naira
(₦22,000,000).
Shareholders
|
% Of shareholding
|
Nominal value (₦)
|
Mr. Musa yar'adua
|
50
|
11,000,000
|
Barr Obasanjo
|
||
Awolowo
|
22
|
4,840,000
|
Mrs. Basketmouth
|
18
|
3,960,000
|
Barr Buhari
|
6
|
1,320,000
|
Mr Azikiwe
|
4
|
880,000
|
BOARD OF DIRECTORS
Going by the memorandum and article of
association of the company, it has provision for six member board which
comprises of the chairman, general manager, company‟s secretary, marketing
manager, company‟s accountant, company‟s P.R.O.
This composition has been
maintained throughout the company‟s existence
1.2 STATEMENT OF
PROBLEM
The increasing wave of fraud and
embezzlement of public funds by high officers and chief executives in the
private and public companies brought to the lime light some misconceptions of
what the job of an auditor is and what audit is all about. To the uninformed,
the auditor is a wizened individual who wears the traditional green eyeshade
and sleeve garters.
They will expect to find him perched on
top a high stool counting money, meticulously adding long columns of figures
and gaining his sole pleasure in life from the apprehension of luckless person
whose books failed to balance or whose cash account proved to be short (harword
2002:135).
According
to Pratt (1998:1), were you to ask the average man in the street about the
auditor‟s job, he will probably tell you that he prevent fraud, press our
layman further, he may paint you a picture of a rather gray individual who
buries himself in ledger, emerging only from time to time to produce sets or
figure which are not important anyway
Such are the image that the auditor has attracted
but they are incorrect in the sense that “the auditor‟s primary responsibility
is neither to prevent fraud nor to produce figures” (woolf 1982:12)
The problems are:
I.
Mismanagement of enterprises by
directors and top management who in most cases have no real financial stake in
the business.
II.
Because of the fact that the directors
and top managers have no financial claims to the business or its enterprise,
they tend to exhibit the highest level of truancy to work and are generally
indifferent to the progress of
the company. Most them regrettably choose their
moments for putting the company into liquidation of little or no cost to them,
by diverting the funds and assets entrusted into their care for their personal
uses.
III.
And without the misappropriation being
detected not the culprit being brought to book the auditor expresses an opinion
of “a true and fair view” of the perpetrated fraud. The problem is that this
attitude has dented considerably the professional image of audit. To most
employees of the auditor, the effect is “there is no need for auditors as it
has failed to detect fraud”.
And to the few informed ones the question constantly
asked is “how independent is the independent auditor?”
1.3 OBJECTIVES OF
THE STUDY
Having had the
problem stated, the objectives of this study which are stated in
null
form are:
I.
To ascertain the role of independent
audit towards accountability in an organization
II.
To determine whether independent audit
can enhance managerial ability;
III.
To determine if independent audit can
control fraud and embezzlement.
1.4 RESEARCH
HYPOTHESES
In order to complete this study
successfully the following hypotheses have
been formulated
in null form:
I.
Independent
audit does not enhance accountability in an organization.
II.
Fraud and embezzlement will not decrease
if independent auditors do their work properly
III.
Mismanagement
is not due to lack of accountability.
1.5 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.
Finally the thesis will become a
reference material for other student who will carry out further studies in the
field.
1.6 THE
SCOPE OF THE RESEARCH
The study will mainly focus on the
company selected as a case study i.e. Sheffield Risk Management Limited,
Owerri. The researcher would go beyond desk search into field to sample the
opinion of workers, officers as well as chief
executive. These would be accomplished through the
construction and issuance of questionnaire to the potential respondents and
also through oral interviews.
The researcher intends to convince the
misinformed minds about the relevance of independent auditing as a tool for
enhancing accountability. To do this only well informed individuals will be
consulted during the primary data collection stage.
The scope of the study will be limited
to the statutory role of the auditor. The auditors power and rights, lead
liability, ethics and types opinion. The study will also cover intend control
as a very important variable in accountability. Further aspects and functions
of internal audit will also be covered.
1.7 LIMITATIONS OF
THR STUDY
In the course of this research work,
problems of various natures were encountered, which in no small measure
constituted some “Road block” to the progress of the study. Among the
militating factors are the following:
1. 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.
2. Piecemeal
collection of information: information was collected in piecemeal from
management due to bureaucracy among others.
3. 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.
4. 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.
5. 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.
6. Exeat:
Considering the school system, time spent on the search for permission to leave
school as regards to the research study is yet another factor that ate deep
into the very fabric of time allocated for this study, hence it is considered
as a limiting factor to the progress of the study.
1.8 ORGANZATION OF
STUDY
In order to realize the aim and
objective of this study the write-up was divided into five chapters not only
for an intensive study but also for the convenience and better understanding of
the information by users.
Chapter one of the research work covered
an introduction to the study: the statement of problem objectives of the
research; the limitation encountered by the researcher during the study:
Organization of the study and the operational definition of terms used in the
study.
Chapter two covered an
interview of current and related literature.
Chapter three dealt with the methods and
procedures used by the researcher in conducting the study.
The analysis of the data
collected by the researcher is treated in chapter four.
The fifth chapter dealt on the
researcher‟s findings/observations, recommendations to the information user and
a conclusion of the entire work based on the researcher findings, observations
and tests.
1.9 DEFINATION OF
TERMS
Some terms used in this study which may not be
clearly understood by some readers are hereby defined.
Audit:
This is the dependant 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.
AUDITOR‟S
REPORT:
This is another term for
audit report.
AUDIT EVIDENCE:
This is information obtained by an
auditor inn arriving at the conclusion which forms the basis of the auditor‟s
opinion on the financial statement being audited.
INTERNAL AUDIT:
This is the audit function carried out
within an organization of evaluating and reporting on accounting and other
controls on the operations of the organization.
An audit of an accounting entity carried
out by an auditor who is not employed by that entity or by its manager and is
as far as possible independent of the person(s) who manage(s) the entity.
ACCOUNTABILITY:
This is the state or condition being
accountable.
ACCOUNTABLE:
This is the required provision for the
description, analysis and evaluation of actions.
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.
TO GET THE COMPLETE MATERIAL CLICK HERE
No comments:
Post a Comment