CHAPTER
ONE
1.0
INTRODUCTION
Background of the study
the word auditing comes from a Latin Word ‘’AUDIRE’’ ‘’TO HEAR’’, This is so
because in those days the account of nobleman was checked by being read out to
him by his steward. The steward has the responsibility of looking after the
affairs at the estate during the absence of the noblemen.
However,
today auditing involves the checking at the account of an enterprise by a
suitably qualified auditor in order to enables the auditor to form an opinion
in the truth and fairness.
Fraud it is an act of criminal deception
formed by many people in an establishment or within two people. These examples
range from the public office holders who wish to embezzle public fund, a
passenger who board a bus and refuses to pay and a contractor who criminally
inflate the cost of executing the contract work.
It is also the international
misrepresentations of financial information by one or more individuals among
management, employees, or third parties. It involved the use of criminal
deception to obtain an unjust or illegal financial advantage. The impact of
fraud can be quote subsentire on a company’s operation. Therefore internal
controls must be excellent.
The
origin of an audit dates from ancient times when the land owners allowed tenant
farmers to work on their land while the landowners themselves did not become
involved in the business of farming. The land owners relied upon on overseer
who listened to the account of the
stewardship given by the tenants.
In
those days, the receipt and payment of an establishment were read to the
hearing of an individual termed as the AUDITOR. The word ‘’Auditor’’ was
derived from the Latin verb ‘’AUDIRE’’ which means ‘’to hear’’ therefore, the
individual to whom the receipts and payment of an organization were read to was
called the auditor. In the early days of auditing, the prime qualification for
the position of auditor was reputation.
A man known for his integrity and independence of mind would be sought
for his honored position, the matter of technical ability being entirely
secondary, and consequently, his function, in those days, was never confused
with that of accountant.
However,
as accounting gradually becomes more complex and concerned with technicalities,
auditors found themselves out of their depth and in turn, become
increasingly dependent upon the
expertise prouded by the accountant
until eventually , the Audit function
itself become totally dominated by the accountancy professional. It is
for this reason that the description auditing profession and accountancy
profession are today used synonymously until the advent of limited liabilities
companies where ownership is deferent from the management.
Kola
Olowookere ‘’fundamentals of auditing “recent edition’’ (2007).
1.2 STATEMENT
OF THE PROBLEM
Auditing
which are the independent critical examination of and the expression of opinion
on, the financial statement and underlying records of an enterprise by an
appointed auditor in pursuance of the audit objectives and in compliance with
his appointment.
A good internal audit
function in an organization is a sign of existence of good internal control
system. And auditing has to be carried out in away to avoid both management and
shareholders conflict. Through the secondary objectives of auditing are to
prevent errors and fraud, it is the responsibilities of the management to
safeguard the company’s asset.
However,
attempts have been made in this project to examine critically the followings:
·
How the goal of asset
safeguarding will be achieved.
·
Means of achieving adequate internal control.
·
To know what the impact of the internal audit function will be to the
success of the organization.
·
How the audit strategy will be determined.
·
How the records of accounts, and internal control system are
documented.
·
How the control will be evaluated to know if it can be relied upon to
prevent or detect irregularities that may arise.
·
The relevance of audit committee in achieving effectiveness.
1.3 OBJECTIVES
OF THE STUDY
The objectives of this work are as
follows:-
·
To know the procedure
to be followed by the system of internal control in discharging its
responsibilities in relation to fraud and errors.
·
To know the conditions that increases the possibility of the existence
of irregularities within the enterprises.
·
To determined the conditions of arrangement in operation and defection
fraud.
·
To ensure the importation of quality control policies and procedure
design to ensure that all audits are conducted in accordance with relevant
national standard.
·
To determine the means of
achieving internal control
1.4 SIGNIFICANCE OF THE STUDY
The significance of this project
work amongst others hall be as follow:
·
To know how the
internal audit committee of the organization beep the internal control system
of the organization to entrance efficiency and reliance on the audit work
·
To help the organization adapt ways of keeping asset physically
secured, by the verification.
·
To ensure that the controls are designed to ensure that transactions
are currently calculated, recorded and proceed.
·
To ensure segregation of duties within the organization that is, no
single individual should be responsible for all aspect of the transaction from
the beginning to the end.
·
To help the organization ensure that documentation takes the form of:
a)
Internal control questionnaire.
b)
Written narratives.
c)
Flow charts.
·
To ensure information are obtained about the internal control bys
a)
Inquiry of appropriate client personnel.
b)
Inspecting the organizations documents and records.
c)
Observing and control activities and operations as they are performed.
Auditors and company
owners also failed to see auditing as a vital tool for ensuring efficiency and
accountability in an organization
It is commonly, and mistakenly through
that the purpose of an auditor is to detect errors and fraud.
This might be the case
when investigation of a set accounts and supporting documents are conducted,
but this is not the main purpose of an audit. The main purpose of an audit is
to give an opinion of the truthfulness and fairness of the financial statement.
The main of this study
is to the know the method of auditing and prevention of fraud in coca-cola
bottling company Plc in line with public accounting system procedure.
1.5 SCOPE OF THE STUDY
This project work
covers auditing and prevention of fraud in the case of (the coca-cola bottling
plc). The researchers have tried as much as possible to clearly define and
explain what auditing and fraud means and their relevance in auditing and fraud
control or prevention in coca-cola bottling company plc.
Due
to the nature of the topic, the researcher has limited their finding and study
to the auditing department of the place chosen as a case study from the year
1995/1996.
1.6 LIMITATION
OF THE STUDY
The most obvious limitation to this
study is the size of sample.
More samples could be
used to yield more significant result but because of time and financial
constrains, this was impossible.
Similarly, reluctance in giving information is another limitation.
Despite the fact that
the researchers introduce themselves as students of kwara state polytechnic,
most of the respondents were still very skeptical about the motives behind the study.
1.7 PLANS OF THE STUDY
The research work takes the following
format.
Chapter one contains introduction to the
topic of the project work, which includes the problem of the study, objectives
of the study, significance of the study, limitation of the study, scope of the
study, definition of the terms, and research questionnaire.
Chapter two embodies
literature review, various scholars review on auditing and fraud, nature and
classification of fraud and auditing in an organization as a means of control,
qualification and qualities of an auditor and auditor independence.
Chapter three contains the historical
background of coca-cola bottling company plc research design, method of the
data collection, population and administration of the questionnaire, the
sampling techniques and method of data analysis.
Chapter four includes
the data analysis of the chosen case study it will examine critically the
department of auditing and fraud control in coca-cola bottling company plc, the
internal and external auditor.
Chapter five concludes
the project by devising possible solution to potential problems that is
summary, recommendations and conclusion which might help adequate auditing to
be carried out.
The external auditor
and internal auditor are considered as having common objectives such as:-
·
Effective internal
auditor control system and accounting system.
·
Continuous effective operation of such system.
·
Reliable and adequate management information.
·
Verify asset liabilities and carry out observation.
However, the extent to
which the eternal auditors can rely on the internal auditor depends on the
external auditor’s general assessment of the effectiveness and relevance of the
internal audit function in term of:-
i.
Degree of independence
of the internal auditor in doing his work.
ii.
The number of qualified skilled and experience staff employed in the
internal audit units.
iii.
The evidence of internal auditors work and review of its quality by the
external auditor.
iv.
The scope, extent and timing of the tests made by the internal auditor.
v.
The quality of internal audit reports and the extent to which
management takes action based upon the report.
Gene Brown, hard book for
auditor edit
1.8 DEFINITION
OF TERMS
The followings are
terms that one could come across during the reading of this project work.
AUDITING:
It is the independent examination of, and expression of an enterprise by an
appointed auditor in pursuance of that appointment and compliance with any
relevant statuary obligation.
FRAUD:
Deception either stating what is false or by suppressing what is true, in order
to induce a person to give up something of value.
INTERNAL AUDIT:
The function came within an organization in examining, evaluation and reporting
on accounting and other controls in the operation of the organization.
INTERNAL CONTROL SYSTEM:-
The whole system of controls, financial and otherwise, established by the
management in order to carry on the business of the company in an orderly and
efficient manner, ensure adherence to management policies, safeguard the asset
and secure as far as possible the completeness and accuracy of the records.
EXTERNAL AUDITING:
This is an audit carried out by an
auditor, who is not employed by that entity or by its manager and, as far as
for possible, independent of the person who manage the entity.