AN APPRAISAL OF AUDITING IN A COMPUTERISED ACCOUNTING SYSTEM (A STUDY OF UNILEVER NIGERIA PLC)


Content

ABSTRACT

The study was aimed at examining auditing in a computerised accounting system precisely Unilever Nigeria Plc. Some of the aims and objectives of the study is to know whether the involvement of auditor at system development stage will enhance the auditability of a computerized accounting system and also to know whether when auditors performs their works on the company’s operations unexpectedly, it will enhance the efficiency of his audit assignment. A survey research design was used. A sample size of eighty (80) staff from Isolo, Agbara and Apapa branches of Unilever Nigeria Plc in Lagos was chosen and administered randomly. The major statistical model employed are simple percentage used to analyse section ‘A’ of the questionnaire and chi-square for section ‘B’ in testing the hypothesis developed. Out of the 80 questionnaires, 70 were completed and returned; giving a response rate of 87.5%. the core findings of the results obtained showed that the involvement of an auditor at system development stage will enhance the auditability of a computerized  accounting system and when auditor performs his work unexpectedly; it will enhance the efficiency of the audit assignment. Hence it was recommended that auditors should be more equipped and practical in the area of computer usage, programme and its applications and that experienced auditor in electronic data processing systems should be physically present at the system departments and installation stage to offer useful suggestions.         

TABLE OF CONTENT

TITLE                                                                                               PAGE

Certification                                                                                     ii

Dedication                                                                                                 iii

Acknowledgement                                                                          iv

Abstract                                                                                           v

Table of contents                                                                            vi

 

CHAPTER ONE

 INTRODUCTION

1.1       Background to the Study                                                      1

1.2       Statement of the Problem                                                    2

1.3       Aims and Objective of the Study                                         3

1.4    Relevant Research Questions                                            3

1.5    Research Questions and Hypothesis                                 4

1.6    Significance of the Study                                                     4

1.7    Scope of the Study                                                               5

1.8    Definition of Terms                                                               5

1.9    Historical Background of Unilever Nigeria Plc                             7

References                                                                                               8

 

CHAPTER TWO

LITERATURE REVIEW

2.1    Preamble                                                                               9

2.2    Theoretical Frame Work Of The Study                               9

2.2.1 Definition of Information Technology (IT)                                    9

2.2.2 Information Technology (Early Development)                            10

2.2.3 Definition of Computerised Accounting Information System     12

(Information Technology Based Accounting Systems)

2.2.4 The Differences between Computerised Accounting Information 13

Systems (CAIS) and Manual Accounting Systems.

2.2.5 Theoretical Presentation                                                                15

2.2.6 Conceptual Framework                                                                  16

2.3    Empirical Review Of Previous Work In The Study Of Studies   36

2.3.1 Innovative uses of computer audit techniques and continuous         36

Auditing

2.3.2 Financial informatics enterprise and audit risk in developing    40

Economy

References

 

CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Preamble                                                                                            48

3.2 Research Design                                                                               48

3.3 Population of the Study                                                                     48

3.4 Sampling, procedure and Sample Size                                           48

3.5 Data Collection Instrument and Validation                                               49

3.6 Method of data Analysis                                                                             49

3.7 Limitation of the Methodology                                                          50

References                                                                                                         51

 

CHAPTER FOUR

DATA PRESENTATION AND ANALYSIS

4.1       Preamble                                                                                         52    

4.2       Presentation and Analysis of Data According to Research Questions 52

4.2.1  Age Distribution                                                                              52

4.2.2  Sex Distribution                                                                               53

4.2.3  Marital Status                                                                                  53

4.2.4  Education Qualification                                                                  54

4.2.5  Age of Specialization                                                                     54

4.2.6  Working Experience                                                                       55

4.2.7  Status and Department in the Organisation                                56

4.2.8  General Findings                                                                            57

4.3       Test of Hypotheses                                                                        66

4.4    Discussion of Findings                                                                            69

 

CHAPTER FIVE

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

5.1 Summary                                                                                            70

5.2 Conclusion                                                                                         71

5.3 Recommendation                                                                              71

 

BIBLIOGRAPHY                                                                                               73

APPENDIX                                                                                                        

 

 


 

 CHAPTER ONE

 INTRODUCTION

1.1 Background to the Study

Many years ago computerization was virtually unknown in the accounting environment, but today there are few organizations whose accounting data are not processed by computers.

Before computer was introduced into the business world, accounting computerization were usually done manually, but with the recent development, accounting jobs become easier and quicker to perform.

Though computerized accounting system has it own advantages but there are some disadvantages attached to the system. Auditors are faced with some problems using the computerized accounting system.

It is generally believed that computers are mistake free but rather the human elements involved could manipulate the system.

One of the problems confronting computer auditor is the inability to obtain computer time.

Also, most auditors in a computerized accounting system adopt ‘Round the computer Audit Approach’. This exposes them to high audit risk.

Many at times computer acts impersonally, that is, the auditors may not be able to obtain all the necessary information or fact that are non-financial in nature.

Also, most auditors are not always involved in the system development and design stages. This poses threat to the auditor.

The study would look into how the problems would be rectified in order to make auditors make use of the system without any threat.    

1.2     Statement of the Problem

Emphasis has been made that auditing through the computer in approach may vary depending on the organization, type of operations, technological factor and other factors.

The likely problems that confront the computer auditors in performing their assignments are as follows:

The Inability to Obtain Computer Time

Many a times, auditor might come around to use the computer and its facilities, but the staff as well as management might be using the system, thereby, making it impossible for the auditor to perform his audit works.

At times, computer acts impersonally, that is, the auditor may not be able to obtain all the necessary information’s or facts that are non-financial in nature, for instance, what motivate employees most to ensure better performance.      

Also, most auditors in a computerized accounting system adopt “Round the Computer Approach”. This exposes them to high audit risk in a situation where the outcomes have no direct correlation with the input on which they based their opinion on the financial statement.  

At times auditors are not always involved in the system development and design stages. This poses threat to the auditor as it denies him of some special print outs and controls to obviate the lack of audit trail.

Unless, the auditor performs the audit unexpectedly, he might not be given the correct version of the accounting application package for the purpose of the audit. And in an attempt to perform the audit unexpectedly, computer time might not be available.

1.3 Aims and Objective of the Study

The study look into the various procedures, approaches and controls in the computerized accounting system with reference to Unilever Nigeria Plc. The aims and objective of the study is to point out the likely problems faced by auditors in the process of performing the audit assignment within the computerized system of the company.

The study is aimed at knowing whether computer facilities are enough for auditors use; if  the use of computer time by auditors affect productivity, to know whether the involvement or non-involvement of an auditors affect productivity, to know whether the involvement or non-involvement of an auditor at system development stage will enhance the auditability of a computerized accounting system. To know whether the possibility or non-possibility of the auditor in performing his works unexpectedly on the company’s operations will enhance the efficiency of his audit assignment.   

 

1.4         Relevant Research Questions

i)     Are computer facilities enough for the auditors use?

ii)   Does the use of computer time or facilitates by auditors affect productivity?

iii)  Are auditors involved at the system development stage?

iv)  Does unexpectedly audit isit affect the organization’s activities?

v)    Are controls which are in existence and satisfactory in principle, applied throughout the period under consideration or review?

 

 

 

1.5 Research Questions and Hypothesis

The following research hypothesis  are established and tested in this study.

Hypothesis 1

H0:  The involvement of an auditor at system development stage will not enhance the auditability of a computerized accounting system.

H1:  The involvement of an auditor at system development stage will enhance the auditability of a computerized accounting system.

Hypothesis 2

H0:     The auditor’s performance during unexpected visits will not enhance the efficiency of the audit assignment.

H1:     The auditor’s performance during unexpected visits will enhance the efficiency of the audit assignment.

 

1.6 Significance of the Study

It is generally believed that computers are mistake free but rather the human elements involved could manipulate the system or not properly used in accordance with exception. To eliminate unauthorized access, inefficient and ineffective use of the system, has resulted in the need to adopt some important controls in data processing.

The aim of this research efforts is to critically examine the tools  to be used, approach  to be adopted and the system control with the view to encouraging the promotion of operational efficiency, safeguarding the company’s assets and encouraging compliance with existing company’s policies and procedures, check and maintain the accuracy of business data.

The study also focuses on the capabilities of the auditor to ascertain his needs to cope with the computerized accounting system of the company.

 

1.7 Scope of the Study

The covered areas of this research work are some of the branches of the company in Lagos which are situated at Isolo, Apapa and Agbara respectively.

However, major constraint of the study is the time interval required for an in-depth coverage, financial constraint and the unco-operative attitude of an already aggrieved Nigerian work force occasioned by the harsh economic situation.

 

1.8 Definition of Terms

Application Package: These are Bundles of two or more computer programmes that together address a specific business need.

Auditing: This is an independent examinations being carried out by an independent person known by the management of an organization with the aim of expressing an opinion on the financial statement.

Audit Risk: This is the possibility of expressing an invalid opinion on the financial statement.

Audit Round the Computer: Auditor solely depends on the computer operators for the supply of all required information. He needs not operate the computer but must obtain adequate print outs of the various accounts he wants to examine.

Audit Trail: This is a term used to describe those documents and records generated within an accounting system which enable the individual transaction to be traced through the accounting system from origination to conclusion.      

Computer Auditor: The computer auditor is that person with the professional know-how to cope with the complexities of computer problems ranging from errors, omissions, system malfunction, inappropriate computer applications, improper operating procedure and personal administration.

Computer: Is a machine that is capable of accepting data as input, obey some stated rules alternatively called programmes to procedure an output.

Data:  The name given to basic facts e.g. number of items bought.

Data Processing: The systematic recording, arranging, filing and dissemination of facts relating to the physical events occurring in the business.

External Auditor: An external auditor is an independent person that examines the financial statement prepared by an organization.

Internal Controls: These are measures such as procedures, rules, policies and regulations established within an organization, which are aimed at increasing the probability of the organization in achieving its objectives.

System Development and Design: This involves the designing of a new system to replace the old one with proper authorization.

Stock Exchange: Organized market place in which stocks and bonds are traced by members of the exchange.

Merger: The combining of two or more entities into one, through a purchase acquisition or a pooling of interest different from a consolidation, in that no new entity is created from a merger.       

 

 

 

1.9 Historical Background of Unilever Nigeria Plc

 Unilever Nigeria Plc, was incorporated as Lever Brother (West Africa) Ltd on 11th April, 1923 by Lord Leverhulme, but the company’s antecedents have to be traced back to his existing trading interests in Nigeria and West Africa  generally, and to the fact that he had since the 19th century been greatly involved with the soap business in Britain. Unilever Nigeria Plc started as a soap manufacturing company, and is today one of the oldest surviving manufacturing organization in Nigeria.

After series of Mergers/acquisitions, the company diversified into manufacturing and marketing of foods, non-soapy detergents and personal care products. These mergers/acquisitions brought in Lipton Nigeria Ltd in 1985, Cheesebrough Ponds Industries Ltd in 1988. The company changed its name to Unilever Nigeria Plc in 2001.

Unilever Nigeria Plc is a public liability company quoted on the Nigerian Stock Exchange since 1973 with Nigerians currently having 49% of equity holdings.

Unilever, as a company has embarked on a programme of restructuring in a bid to re-energize itself; the vision is “re-investing ourselves”, so that it can deliver fully on its promises to its consumers, customers and investors.

Over the years, Unilever Nigeria Plc has been a socially responsible and response organization that takes strategic actions for the improvement of the communities and environments in which it operates. The company has made provision for assistance in fields of health, education (children welfare and potable water/hygiene as part of its social responsibility programme in the Nigeria communities.  


REFERENCES

Baseselt P.H. (1987), Computerized Accounting NCC Publication, England.

Brenda Porters et el (1998), Principle of External Auditing, John Weley and Sons Ltd, England.

Internet. www. Google.com    

Joshua O. Auditing Through the Computer: Problems Tools and Techniques (Nigerian Accountant October 1993 Pg 28).

Millichamp A.H. (1994), Auditing An Instructional Manual for Accounting Students. Dp Publication Ltd, London.

Rcrae T.W. (1976), Computers and Auditing John Weley and Sons Ltd. London.

 


 

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