THE ROLE OF AUDITORS IN COMBATING FRAUD IN BUSINESS ORGANIZATION

CHAPTER ONE

INTRODUCTION

1.1  BACK GROUND OF THE STUDY  

       For any business organization to continue Perfectually in business, there is the need for that business to be internally efficient. The business should have a watertight internal control structure in relation to a financial accounting system that will facilitate the day- to-day transaction recording in the organization recording in the organization without difficulty.

Fundamentally and stipulated in section 59 of companies and allied matter Decree (CAMD) of   1990 (1) is also the vital need for an independent body which has to monitor and check the organizations’ financial statement.

This study focuses on the role of this independent body, who is the auditor in combating fraud in a business organization.

An auditor his one who has acquired a professional certificate - passed is ICAN examination (Nigeria) and  has demonstrated sufficient acceptable knowledge  of accounting and auditing to carry out his responsibility of combating fraud, section 362 CAMA 1990 has  to confirm certain power and duties on the auditors.

i.            That every auditor of a company shall have a right of assess at all time to the company’s books, account and vouchers.

ii.         He is entitled to require form government such as information and explanation as he thinks necessary for the performance of his duties.

iii.       The stages in audit processes are designed to ensure that the auditor fully discharge his legal and professional obligation.

1.2     STATEMENT OF PROBLEM

So many managers have failed to recognize the effort of auditor in auditing financial performance. And  as a result, it has  led them to poor planning, control and decision making.

IMPLICATION

§  It  retards the  growth of the parastatals

§  It  leads to loss in shareholders fund 

§  The  reputation of the company will be at stake

The loss of public confidence in the company and shifting of interest to other company.

It is a well known fact that officers of the

parastatals are entrusted with the management  of  both material and human  resources of their establishment  and in most cases, these officers are not  brought under thorough control  or question, the ultimate consequence of this is that much of the resources are indiscriminately mismanaged. 

Equally, some accountant and key personnel in most parastatals and companies do not resist the temptation of colliding with other  workers to embezzle their  organizations funds to the  determent  of the  masses and owners of the business or even the shareholders.

Also some parastatals do not seam to have an audit department or engage the service of the external auditor or where such a unit exist, they allow it to exist only in name as a mere compliance to the statutory requirement. An audit department of such standard will not make or have any impact as regards to internal control. This state of affaires from investigation is usually deliberate attempt by management to execute its exploitation, plans within any hindrances.

Another aspect of this, is lack of adequate regulatory standards in Nigeria regarding the duties, rights,  responsibility  and qualification of  auditors.    

1.3     OBJECTIVE  OF THE STUDY

It is not easy to convince administrator or owners of most private owned enterprises the need and advantage  it will derive  from complying  with all forms of internal control  structure, which will be consequent  to the auditor’s  role in safeguarding the organization from an earlier collapse.

The researcher focuses on the primary merits of appointing auditor annually for the going concern of a business life.

How the auditor could use his magic word to prefect and safeguards the profit of a business concern. Investigating and examine when it  requires the records and  accounts  in the business to make sure that there is no manipulation of what so ever. Presenting his public reporting the time and fair position of the business  in relation with the financial using the auditing  standard and  guide to act a  basis for his audit or examination through out his consideration of the  statement  made by the directors.

       Furthermore, the work will stress on the role the auditor plays to the external user of the company’s financial   statement.

       And the effectiveness of the auditor is using the auditing standard application to achieve the goal of every business. 

1.4         RESEARCH QUESTIONS:

Based on the purpose of the study, the following questions are raised to provide a guide and solution to the research  problems:

i.            What is the impact of auditing an organization

ii.           Does the management rely heavily generated by the auditor.

iii.          What is the  management perception on the role of the  auditor in the prevention  and detecting of fraud  and error in an organization.       

1.5     SIGNIFICANCE OF THE  STUDY

    The appointment of the auditor right from the first  annual  general meeting  by the company’s shareholders shows credence as per the auditors professional and important role in the life of the company giving him the mandate,  which  implies that he  holds a duty of care to inform them (shareholders) about the dealings of the companies which is managed by the  directors. And also in his capacity  will check the excesses of the manager through his public report. More so this study makes it obvious for the public to know the civil liability of the auditor towards to know the civil liability of the auditor towards checking the daily activities of the business carelessly. Another important significant of this study is on the area of a business operational structure. Majority of business owners and administrator are not ware of the legal requirement for putting up a solid internal mechanic in its organization. They are able to record, process and present information about the commercial activities that obtains in their domain. Some do not even keep proper books of account  for the  business. The absent of all this statutory requirements in a defined Accounting system will effect the role the auditor will play in combating and reducing fraud in that organization.

It is also on the strength of this internal control structure that the auditor will use its audit test and questionnaires to identify some area of interest or possible lapse in the system  were there could be weakness. The auditor can also use audit test in an efficient system/organization balances and other procedure such as analytical review as to the completeness, accuracy and validity of the information contained in the accounting record.

1.6      SCOPE OF THE STUDY    

   This work tries to answer question on how a company’s accounting system which involve gathering financial data generated, recording it, and processing it into a financial statement can be managed tools for auditor to use in auditing the company. The financial statement of an organization is been prepare by the company’s Accountant  while the Auditor examines and investigate the statement given to him shows true and fair view.