ABSTRACT

This study is on the role of internal audit and prevention detection of fraud in a business organisation. The research report has been divided into five characters, which are as follows:

Chapter one is the introduction, it consist of information dealing with the statement of the problem, purpose of the study, significance of the study, research study, research questionnaire and hypothesis about the research.

Chapter two deals with the various literature  reviewed by the researcher on the subject  of the study and other integrate studies  of internal audit and prevention/detection of fraud in an organisation.

Chapter three describes the methods  used in the carrying out of the study, for the collection of data, the population sample and the analysis of data collected, as well as the instrument used in data collection.

Chapter four deals with data presentation analysis and test for hypothesis. Tables were used to present the data, percentage for the data analysis, chi-square for the test of hypothesis. Decision based on the data and hypothesis testing were made.

Chapter five  deal with the summary of findings, recommendation, conclusions and suggestion for further studies. The chapter summary, the research  findings and conclude given necessary recommendation. There are references cited and during the writing of the study this citations are prepared as list of references on the end of each chapters and all references used throughout the cause of the study are also listed as bibliography.

TABLE OF CONTENT

                                                        Page

Title page                                                                   i

Certification                                                                ii

Dedication                                                                  iii

Acknowledgement                                                       iv

Abstract                                                                     v

Table of content                                                          vi

Chapter One

1.1        Introduction                                                       1

1.2        Statement of problem                                         2

1.3        Objective of the study                                                 2

1.4        Research question                                              3

1.5        Statement of research hypothesis                         3

1.6        Significance of research                                       4

1.7        Scope of the research statements                                 5

1.8        Limitation of the research statement                      6

1.9        Definition of term                                               6

References                                                                 8

Chapter Two

2.0.   Literature Review                                                9

2.1        Historical background of the study                         9

2.2        Relating  internal and external auditing                   12

2.3        Internal audit                                                      14

2.4        Functions of internal audit                                     15    

2.5        Fraud and the internal audit                                  17

2.6        Responsibilities of internal audit for fraud                18

2.7        Fraud                                                                19

2.8        Types of fraud                                                    20

2.9        Prevention of fraud                                              23

Chapter Three

         Methodology                                                      28    

3.0        Introduction                                                        28

3.1    Research design                                                  28

3.2        Restatement of research question                          28

3.3        Restatement of research hypothesis                       29

3.4        Characteristics of the study population                    29

3.5        Sample and sampling design                                 30

3.6        Data collection instrument                                     30

3.7        Administration of data collection instrument             30

3.8        Technique of data analysis/test of hypothesis           31

3.9        Limitation of the methodology                               32

References                                                                 33

Chapter Four

4.1        Introduction                                                        34

4.2        Data presentation and analysis bio data                  34

4.3        Data presentation analysis with hypothesis testing    41

4.4        Discussion of findings                                           43

Chapter Five

5.1        Summary of findings                                            44

5.2        Conclusion                                                          45

5.3        Implication                                                                 45

5.4        Recommendation                                                46

5.5        Suggestion for future studies                                         46

Bibliography                                                       47

        Questionnaire

CHAPTER ONE

1.1       INTRODUCTION

Internal auditing is an independent appraisal established with an organisation to examine and evaluate its activities as a service to the organisation in the effective discharge of their responsibilities. To this end, internal auditing furnishes them with the activities, appraisal, recommendation counsel, and information concerning the activities reviewed.

Throughout the world internal auditing is performed in diverse environment and within organisation which very in purpose, size, and structure.

In addition the laws and customs within various countries differ from one another.

The differences may affect the practice of internal auditing in each environment internal auditors owe a responsibility to both, providing information about the adequacy and effectiveness of the organizations systems  of fraud detected and the control of performance. The information furnished to each may differ in format and detail, depending upon the requirements and requests of management and the board. Internal auditors must be independent of the activities they audit. Such independent freely and objectively without independent, the desired results of internal auditing cannot be realized.

1.2       STATEMENT OF  PROBLEM

The reason why internal audit is performed cannot be over emphasized. It should be noted, that modern business arrangement is so complex that ownership needs be separated from its management. Hence there is need for internal auditing.

The process by which the manager reports on the business is achieved by preparing the financial statements which is regarded as “STEWARDSHIP ACCOUNTING”.

The problem that is usually encountered is whether the owners of the business will believe on such financial statements prepared by the managers. Lack of credibility arises because of the following

(1)        Errors in the financial statements not revealed.

(2)        Fraud that occurs but not disclosed or discovered.

(3)        Financial statement maybe incomplete.

(4)        Financial statement may fail to disclose relevant information.

The appointment of internal auditors is the solution to the problem of credibility.

1.3       OBJECTIVE OF THE STUDY

Internal auditors should be objective in performing audit. The objective of internal, auditing is to assist all members of management in the effective discharge of their responsibilities by furnishing them with analyses, appraising activities reviewed. Internal auditors are concerned with any phase of business activities in which may be of service to management. This involves going beyond the accounting and financial record to obtain a full understanding of the operations under review.

Given this objectives, the statement identifies several internal audit activities.

(1)        Reviewing and appraising the soundness, adequacy, and application of accounting, financial and control at reasonable cost.

(2)        Ascertaining the extent of compliance with established policies, plans and procedures.

(3)        Ascertaining the extent to which company assistance are accounted for and safe guarded from losses of all kinds.

(4)        Ascertaining the reliability of management data developed within the organisation.

(5)        Appraising the quality of performance in carrying out assigned responsibilities.

(6)        Recommending operating improvements.

The objectives and the six related activities describe the predominal activity of contemporary internal audit practice. Internal auditing is no longer confirmed to financial matters, it is much broader and much more pervasive.

1.4       RESEARCH QUESTION

1.           Why is independence important for the internal auditor?

2.           Why is communication of results important to the internal auditor?

3.           What is the basic objective of the internal auditor?

4.           What are the professional standards for the performance of work for internal auditing? 

1.5       STATEMENT OF RESEARCH HYPOTHESIS

In recent years, however, internal auditing has become increasingly oriented toward operational control, oversight, and protection all of which are major, rather than management. Internal, auditing is moving further away from financial auditing, its traditional role, and closer toward operational auditing, its emerging role. The institute of internal auditors statement of responsibilities  under scores the significance of independence.

“Independence is essential to the effectiveness  of internal auditing. This independence is obtained primarily through organisation status and objectivity.

“Thus the institute identifies organizational status and objectivity as the primary means for  achieving independence from personnel and activities, respectively. The organizational status of the  auditing functions and the  support accorded to it by management are major determinants of its range and value.

1.6       SIGNIFICANCE OF RESEARCH

The role of internal auditor in all organisation helps the standards of professional conduct and for greater protection against inefficiency,  misconduct, illegibility, and fraud. There is more realistic recognition of the fact that internal auditor can contribute importantly to satisfying the expanded protective needs of an organisation. At the same time there is the continuing truth that organization must be protective and achieve the best possible utilization of their resources. The warfare society is directly dependent on that productivity. Moreover, unless organisation are productive they cannot  survive  and be the focus for protective concerns. There is also greater recognition that internal auditors can make major contributions in helping organizations achieve the needed productivity. Together, therefore, these basic needs for production and productivity requires the need of internal auditors. 

1.7       SCOPE OF THE RESEARCH STATEMENT

Throughout the 1940s and 50s internal audit activities in many organisation focus upon financial  auditing, and internal audit departments were heavily in the review of financial statements.

Today, however, internal auditing takes on  a much broader perspective, as suggested in the institute internal, auditors. Every  organisation can exist for a variety of purpose. It is then most productivity made possible to achieve the organizational objectives. In that endeavour responsible managers requires the assistance of the internal auditing group.

Thus there is need for internal auditing in all types of organisation and there is a common body of personal knowledge that applies to all of the  varied internal auditing activities.

There is potentially a need for the services of the internal auditors at any organizational level in any particular company or organisation. This means that there can be legitimate needs for internal auditing services by the stock  holders, the board of directors and by the responsible management  at the subsidiary or  divisional level and other lower levels of an organisation.

In conclusion, it is the hope of the researcher that at the end of the project study, the concept, problems will truly represent the concept problems prospects and impact of internal audit on the manufacturing sector of the  Nigeria Economy and also suggestion are expected to be appropriate and applicable.

1.8       LIMITATION OF THE RESEARCH STATEMENT

The decision that an internal audit of some type is  to be made can  come about in a variety  of ways. It can be requested by the person who has the responsibility  for the  operational area to be reviewed, it can be requested by  a still higher level officer, or it may be initiated by the director of internal auditing himself as a part of his own broader program of needed audit coverage. The significance here is  that in the first instance the  receptivity for the audit  has been at least partially established.

However,  there is still the further necessity of trying to provide the responsible offer with the  proper professional intention of first importance is the need for a face-to-face discussion, it at all practicable, although frequently this must be by telephone. In any event there is the need to demonstrate to the  extent needed that: 

The internal audit is part of an overall program mandated by high-level  authority to meet higher level organisation needs for both protection and maximum constructive benefit.  The objectives of the review is to provide maximum service in all feasible managerial dimension.

1.9       DEFINITION OF TERMS

Auditing has been regarded, as the  activity carried on the auditor when he verifies accounting data, determine the accuracy  and reliability of accounting statements and  reports and then reports upon his effects. It is an activity carried on by independent person with the  aim of reporting on the truth and fairness of a financial statements.

Another type of auditing internal auditing  exist in business and this research deals with it.

Very large organisation (and some small ones) ahs found a need for an internal audit in addition to an external audit. Internal auditors are employees of the organisation and work  exclusively for the organisation. Their functions  partly  overlap those of the external auditors and in part are quite different.

The precise function of external auditors are either laid down by status or embodies in  a letter of engagement. The functions (which are rarely precisely laid down) of internal auditor are determined by management and very greatly from organization to organisation.

Internal audit can be defined as “An independence appraisal function  established by the management of an organisation for the review of the  internal control  system as a service to the organization. It objectively examines, evaluates and reports on the adequacy of internal control as a contribution  to the proper, economic, efficient and effective use of resources’ internal auditing is thus, carried on by independent personnel.

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