THE INFLUENCE OF VALUE FOR MONEY AUDIT ON THE PROFITABILITY OF MANUFACTURING FIRMS.

ABSTRACT

This research work is intended to the influence of value for money audit on the profitability of manufacturing firms. This study tends to find out some of the objectives which will include: To find out the effect of value for money audit on the profitability of manufacturing firms. To findout the relationship between internal control and fraud detection. To determine what extent is the value for money audit relevant to the profitability of manufacturing firms. The researcher therefore adopted the descriptive/survey method as well as the employment of dichotomous questionnaire to enable the collection of necessary data. The simple frequency table was used in presenting the data whereas the t-test statistical regression method was used in testing the formulated hypothesis. Below are the findings made by the researcher. It was discovered that there is significant effect of value for money audit on the profitability of manufacturing firms. The following recommendations were made based on the findings of the study. The right of users to request special financial reports must be legally mandated, and be made accessible; value for money audit should be mandated by law as well as a shift from stewardship reporting to emphasis on external accountability and programmed planning budgeting. There should be reorganized government ministries to give room to a proper control and reporting system which will be entrenched, the Nigerian government should look forward for a privatization and commercialization of the ministries to attain an effective and financial control and reporting practices in the government ministries. The government of Nigeria should enact into law the full implementation of the present anticorruption law in order to restore the confidence of the public on civil service. Government should include an external audit to the ministries to ensure that weak internal control system occasioned by mere toothless audit units, is corrected.

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Every sector of the economy both the public, private and the manufacturing firms has its own objectives and goals to achieve. Anosike, (2009) for the manufacturing firms of the economy, their goal is to satisfy the social  needs of citizens and in the effort to achieve these purposes, auditing more often play  a vital role.

The size and scope of these sectors have sometimes made it clear for the executor to exercise personal and first hand supervision of operation. It clears for the light that value for money audit established by management is initiated. For any organization to carry out its efficiently and effectively. There must be factors that will be put in place for the smooth running of the organization like materials, machine, human labor, and money etc. Anyanwu(2009) Ebubechukwu (2009) Egbulonu (2007) and the (2006).Auditing is seen to play an intermediary function in between management and the resources of the organization.It’s also fundamental to any business, the public or private sector which will help the business to keep its adequate financial records.Alugbus, (2002). These financial records are kept in response to the demand by a system control which requires that the business enterprises must be carried out in an orderly manner. Ensure adherence to management policies, safe guard the assets and secure possibly the completeness and accuracy of the records. Irrespective of these facts of system of control established by the management of the organization, fraud still thrives.

Although value for money auditing is relevant in both the private sector and manufacturing firms. It is the public sector that has taken the lead because of the special need for government organization to demonstrate their accountability and their regard for economy.

In the early 1970s, the role of the state auditors began to change dramatically, Changes began in USA, Canada, and in several European countries. The representative of the people started demanding information on the efficiency  and effectiveness of public expenditure.

In Nigeria no specific legislation has been put in place to empower auditors to carryout value for money audit.However, the 1999 constitution section 88(2) Empowered both the two federal house and the state house of Assembly to conduct investigation to expose corruption, inefficiency or waist on the executive or administration of law within the legislative competence and in the disbursement or administration of fraud appropriated by it, Albrechf, (2001).

However, value for money audit will be wildly concerned with the economy and efficiency of an organization and the effectiveness of the internal control system within the organization,Anyanwu, (2002).

1.2 STATEMENT OF THE PROBLEM

Fraud is a complex phenomenon, It is rampant in both private and public sectors of Nigeria Economy. In the manufacturing firms, Value for money audit reports are mostly unqualified even in a glaring situation or cases of corrupt practice by the managers, that means that auditors especially those in public establishment compromise their duties or their duties are influenced and threatened  in the performance of their statutory functions Baridam, (1994).

Therefore these studies tend to find out why there are:

1. Improper methods of appointment of auditors.
2. Inadequate internal control.
3. Lack of independence of auditors.
4. Untimely and unrealiable financial statements.
5. Lack of transparency and inadequate method of accountability.

1.3 OBJECTIVE OF STUDY

This study tends to fine out some of the objectives which will include.

1. To find out the effect of value for money audit on the profitability manufacturing firms.
2. To find out the relationship between internal control and fraud detection.
3. To determine what extent is the value for money audit on the profitability of manufacturing firms.
4. To find out why is lack of transparency and inadequate method of accountability.
5. To find out why there is inadequate internal control system.

1.4 THE RESEARCH QUESTIONS

The following question shall be in the course of this research study.

1. To what effect is value for money audit on the profitability of manufacturing firms?
2. Is there any alignment relationship between internal control and fraud detection?
3. To what extent is the value for money audit relevant on the profitability of manufacturing firms?
4. What are the causes of lack of transparency and inadequate method of accountability?

1.5 RESEARCH HYPOTHESES

The following are the research hypotheses:

Hi: There is significant effect of value for money audit on the profitability of manufacturing firms.

H0: There is no significant between effects of value for money audit on the profitability of manufacturing firms.

H01: There is no alignment between internal control and fraud detection.

H02: the value of money audit does not institute financial discipline in organization.

1.6 SIGNIFICANCE OF THE STUDY

This research is on the influence of value for money audit on the profitability of manufacturing firms, and it will be beneficial to the Nigerian manufacturing sector,this research work will serve as a framework for scholars and students who are researching into similar topics, most especially students of Accountancy department of Rivers State Polytechnic (KEN SARO-WIWA POLYTECHNIC), and other institutions of learning. The study is also intended to provide a yardstick for the manufacturing firms, Nigerian government, accountant, auditors and the society at large on influence of value for money audit on the profitability of manufacturing firms.

1.7 SCOPE OF THE STUDY

Basically, the scope of this research work is on the influence of value for money audit on the profitability of manufacturing firms. Detection and financial crime prevention in ourpresent day manufacturing firms. The Nigerian bottling company and Brewery in Port Harcourt as a study”, if focuses on the need for auditing and the importance of auditing in detecting and prevention fraud in other for organization to ascertain their problems.

The population of study in selected staff of the unit or department of the manufacturing sector namely the audit unit, finance, account and public relation department.

1.8 LIMITATION OF THE STUDY

The most limiting factor encountered in course of carrying out this research work was lack of fund, the limitation to the research work includes the uncooperative attitude of the respondents who were not willing to give confidential information and sometime-based answers were given. Most of information and data needed for the research work were not easy to gather because some respondents believe that the information involved in gathering and processing the data into meaningful information was also short.

Also, the time duration required for the completion was too short, hence not encouraging sourcing of material was a difficult task due to the fact that some materials were not available at the time of writing.

1.9 DEFINITION OF TERMS

Auditing: An independent examination of an expression of opinion on the fundamental statement of an entity by an appointed auditor (Ihe and Umeake(2008).

Accountability: This simply is a requirement on public servant entrusted with certain financial responsibilities to render and account of or answers for their actions to their superior officers.

Budget: A budget is a plan of financial operation stating an estimate of proposes expenditure for a given period and proposed means of financing it.

Control: Means, the ability to direct the financial and operating policies of another undertaken with the intention of gaining economic benefits of financing it.

Financial Control: It is the process assures that financial resources are obtained economically and utilized efficiently and effectively in the attainment of the desired goals.

Fraud: Refers to international act by one or more individual among management, those charges with governance employees or third parties involving the use of deception to obtain an unjust or illegal advantage (Anesike 2009).

Internal Control: This simply mean as the whole system of controls financial and otherwise; established by the management in order to carry on the business of the enterprise in and orderly and efficient manner, ensure adherence to management policies, safeguard the assets and secure as for as possible the competences and accuracy of the records.

Internal Control System: The whole system of control financial and otherwise established by management in other to carry out the business of an enterprise in an orderly and efficient manner (Chukwu 2005:17).

Management: Is an applied discipline concerned with the achievement of organizational objectives (Norbert 1999).

Value For Money Audit:- Audit is systematic purposeful, organized and objective examination of government activities.

Warrant: Is an authority to incure expenditure,it’s a document from the minister or commissioner of finance to the accountant general (AG) empowering the later to disburse funds to meet the expenditure described in the warrant, it is an instrument used to release funds.