AUDITING AS AN AID TO ACCOUNTABILITY IN AN ORGANIZATION

CHAPTER ONE

Introduction

1.1 Background of the Study

       This is now a national issue. The increasing incidence of fraud and misappropriation of funds and property by Accounting officers and chief executive in the public sector of the Nigeria economy pose pertinent question as to whether auditing plays any significant role towards ensuring proper accountability and judicious use of fund set aside for various purposes and corporate objectives. Some programmers and activities organized by these individuals are assumed to be done on behalf of   the people therefore deserted to be assured the resources which they put at the disposal of these accounting officers are efficiently, effectively and economically managed since it is known that not all of us are judicious in the in the management of our private affairs and much less, the public affairs entrusted to us.

A case in point is about distressed banks like continental marchant bank and Nigeria marchant bank. Poor management was the problem with these banks, if these banks hard carried out proper audit and made use of the recommendation, the directors would have reduced proper accounts of their deeds.

According to Eze J.C (2010) define auditing as an independent examination by a statutory appointed person called the auditor to investigate an organization, its records and thus form on opinion on the accuracy and correctness of the financial statement.

Accountability has clearly manifested itself as a principle to be pursued if the status quo is not to be perpetrated. Several past leader have pledged to introduce a more responsible system of government with accountability but their subsequent conduct or governance have show that they have little or no understanding of the definition and application of accountability, hence the question of what then is accountability arises.

       Accountability as it is contained in long man dictionary of contemporary English is the condition or quality of being able (that is having) to give an explanation for ones actions. Accountability is also defined as the management of funds and other assets of which individuals or institutions had been custodians.

Auditing is regarded as one of the more recently established professions born out of the complexity of modern business world. It became relevant so as to discourage men from erring and to expose those who erred when they give account of how they managed the funds and property entrusted t them. This account or report is usually done by means of financial statement in order to verify the true and fairness of this report, an independent person- an auditor will audits the account. There are more involved definitions such as; that issued by the consultancy council of accountancy of accountancy bodies (CCAB), which defined an audit as the “independent examination of and expression of opinion on the financial statements of an enterprise by an appointed author in pursuance of that appointment and incompliance with any relevant statutory obligations.

The law also makes provisions for the establishment of audit department as seen from the above definition, SEC 357 of companies and allied matters act auditors that will audit the financial statement of the company at the annual general meeting.

The question now is that in spite of all these provisions and safeguards one still experience the alarming rate of fraud and misappropriation of public funds and property by those entrusted with their safeguards. It is not surprising that great emphasis is being laid on proper auditing as means to enhance accountability in the public sector of the nations.

      Origin of Power Holding Company of Nigeria (PHCN)

Power holding company of Nigeria (PHCN) formally known as National electricity power authority (NEPA) is a public corporation owned by the federal government of Nigeria to generate, transmit and distributes electricity to the populace.

       National Electric Power Authority (NEPA) was established in April 1972, with the amalgamation of the former electricity corporation of Nigeria (ECN) and the Niger Dams Authority (NEPA) with the Headquarters in Lagos. As a government parastatal, its employees and consumers seriously hamper NEPA’s operations due to several government directive and fraudulent activities. In order to reduce this anormaly, the authority was granted partial autonomy as a quasi-commercialized organization in 1992 while this gesture has granted some powers to the authority, it is still under the control of the government hence the authority could still not take some necessary drastic and far-reaching measures to improve its revenue collection and reduce the incidences of fraudulent activities.

Like most state-owned enterprises, NEPA has suffered from severe under-funding and under-capitalization, inappropriate capital structure, excessive executive interference, and sub-optimality and decision making.

NEPA equipments are subjected to vandalism and theft by group of cabals in different part of the country. The hydro power stations suffer from low water level during dry season and the generation output capabilities of thermal stations are often hampered by shortage of fuel. Equipments are expensive to repair, mostly due to their obsolete status.

      NEPA as we know is a government ran entity as earlier stated that enjoys a lot of the financial transfers, subsidies grants and tax and import duty naivers from the government. These social incentives from the government were counterproductive for NEPA’s efficiency. It resulted in an undertrained and unmotivated manpower and lack of will to operate as a profitable entity.

       NEPA was formally changed to power holding company of Nigeria (PHCN) in January 2004 in readiness for privatalization. To provide the legal framework for the restructuring of Electric Supply Industry (ESI), the electric power sector reform bill was signed into law on the 11th of March 2005. The bill seeks to provide for the formation of successor companies to take over the functions, assets, liabilities and staff of NEPA; develop competitive electricity markets; establish the Nigeria Electricity Regulatory Commission; provide for the licensing and regulation of the generation, transmission, distribution and supply of electricity; enforce such matters as performance standards; consumer rights and obligation; provide for the determination of tariffs; and to provide for matters connected with or incidental to the forgoing.

An initial holding company (IHC) has been incorporation as provided for the act. The name of the IHC is Power Holding Company of Nigeria (PHCN) Plc and it was incorporated on 31st may 2005. The PHCN has taken over all NEPA assets and liabilities.

     Power holding company of Nigeria (PHCN) Enugu Zone was officially opened many decades ago. The office is responsible for the distribution and sales of electricity to Enugu and its environment. The office maintains an undertaking office and service centers and cash offices in many government areas of Enugu state. Just like any other PHCN office in the country, it has all the departments such as administrative and service, Technical / service, Customer service, Finance and Accounts, and Audit department each headed by a manager. As a zone, the office reports directly to the chief executive officer Enugu. It also has direct communication with PHCN Headquarters Abuja.

PHCN Enugu Zone has a total staff of 250 including Top management. Power holding company of Nigeria (PHCN) accounting system is uniform throughout the country and that of Enugu Zone would not be left out. The classification of the branch is the same other branches nationwide.

1.2 Statement of Problems

       There has been an out-cry of poor accountability in the public sector of Nigeria with more emphasis on PHCN.  The effectiveness of an independent audit is not however limited to the added statement of creditability derived from the audit itself. There is the statutory effect of the prospective audit on employer who may be tempted to defraud their employers and or management that may find it expedient to endeavour to deceive third party users by preparation of misleading financial statements. The problem is that the funds and property of the organizations are entrusted to certain individual workers in the organization and in most cases; these individual employees are not brought under through surveillance. The result is that most of the funds and for property are distorted to personal use.

Another Problem is the identification of the reasons for this ugly situation and why despite the fact that the accounts of these public organizations are said to be audited, there’s still an increase in fraud and misappropriation of fund and property.

1.3  Objectives of the Study

The object of this study is to find out;

1.    To determine the role of audit as aid to accountability in the public        sector with reference to PHCN.

2.    To examine the problems facing auditors, which hinder      their performance in PHCN

3.    To assess the roles being played by auditors towards protection of funds and property in PHCN

4.    To ascertain whether the standard of auditing has fallen     in recent years.