AUDITING AS AN INSTRUMENT FOR ORGANISATIONAL SUCCESS A CASE STUDY OF ANAMCO LTD. ENUGU

CHAPTER ONE
1.0 INTRODUCTION
The practice of auditing in the primitive form can be traced back to ancient times where the receipts and payments of an estate or a manor were read to the head or proprietor, or the Lord of a manor. The word auditing originated fr4om the Latin word Audire (meaning to hear). The business of this period was characterized by sole proprietorship.
But with industrial revolution, there was an increase in business transactions and there emerge partnership and joint stock companies. The evolution of mechanised industries involved the provision of finance far in excess of what it used to be. Business become more complex and required more formal and improved accountability.
Under the company form of organisation, the shareholders as a body delegated the management of the undertaking to a board of directors and periodically the board submitted to the shareholders accounts of the company in order that the members might be able to see a true and fair view of the financial position and the profit or loss of the undertaking in which they were interested.
Because of these circumstances the need arose for some means by which the shareholders as a body might be satisfied that the accounts, presented to them by their board of directors, did in fact show a true and fair view of the financial position and earnings of the company. It was for this reason therefore that the practice developed of appointing auditors whose duty it was to verify on behalf of the shareholders the accounts of the directors and to report there on to the shareholders.
Under the early British companies Acts, the auditors appointed were one or two of the shareholders of the company. As however, the chosen auditors commonly had insufficient technical qualifications, there were probably not able to carry out a very effective audit nor were there paid anything for the work they did although a later Act did provide for them to employ a clerk to do some work, whose remuneration should be provided by the company.
It was the British companies Act, 1900, which first made it legally compulsory for every company to appoint independent auditors, as we now know them, and provided for their remuneration. It was undoubtedly the rapid increase in the number of joint – stock companies that took place at this time, and the compulsory professional audit thus provided for in the companies Act, 1900, that gave the great impetus to the development of the accountancy profession. In Nigeria today the accounts of every company and the majority of partnerships are audited by professional accountants and in recent years the accountancy profession has expanded greatly in many other directions.

1.1 STATEMENT OF PROBLEM
This study entitled “Auditing as an instrument for organisational success” attempts to determine the importance of auditing to an organisational growth.
It is also meant to discover the:
Objective of Auditing
Types of auditing
Relevance of internal auditing to external auditors
Auditing as a means for fraud control
The future of auditing, Auditors liability and report.

1.2 PURPOSE OF THE STUDY
The objective of this study is to identify the need for every organisation to know the importance of auditing in an organisation.
The researcher also wish to put across how auditing enhances organisational success and growth.
1.3 SIGNIFICANCE OF THE STUDY
The significance of the study is to highlight the importance of auditing to the growth and success of a manufacturing company.
This study will also add to the advancement of knowledge in the field of auditing in an organisation. Future researcher in this areas will also benefit from the study.
1.4 STATEMENT OF HYPOTHESES
This study is required to test among other things the following:
Ho: Internal auditing as a part of internal control system is not useful to external auditor.
Hi: Internal auditing as a part of internal control system is useful to external auditor.
Ho: Poor and inefficient internal control and Auditing does not encourage fraud.
Hi: Poor and inefficient internal control and Auditing encourages fraud and mismanagement.
Ho: Growth and survival of Anamco Ltd. does not depend on Auditing and internal control.
Hi: Growth and survival of Anamco Ltd. depends on Auditing and internal control.
Ho: Auditing and internal control does not contribute to the smooth implementation of management policies.
Ho: Auditing and internal control contributes to the smooth implementation of management policies.
1.5 SCOPE OF THE STUDY
This study concentrates solely on a manufacturing company in Enugu state, with special reference to the Anambra Motor Manufacturing Company (ANAMCO) Enugu. The organisation undertakes business in motor manufacturing especially Mercedes Benze products. Particular attention will be paid to the methods and procedures employed by the accounting department in performing its duties.
1.6 LIMITATION OF THE STUDY
Time factor imposes a big constraint on this study as a research of this scope can hardly be completed within the two months time limit set for it. This factor no doubt made some aspects that would have been included to be left out. Such aspects include inter-company comparison and the corporation to the industry.
Another big constraint on the research is finance. Financial problems to a great extent hampered the gathering of data (information) for the study. This is more so when are considers the cost of moving from the school to the site of the organisation used as a case study. One also had to face the difficulty of conviction of the officials taken as specimen, a lot of explanation and persecution to get the co-operation of such respondent.

1.7 DEFINITION OF TERMS
To ensure a proper understanding of what the study is all about some unfamiliar words to those who are not in the same field are explained as they appear in the project.
AUDIT – An independent examination of, and expression of an opinion on, the financial statements of an enterprise.
INTERNAL AUDIT – The act of ensuring that control measures set up by management are complied with.

CHAPTER TWO
2.0 DEFINITION OF AUDITING
Different people, at various times has given different definitions of auditing, here are some of them.
A renown author (Taylor 1982) in his book stated that “auditing is an investigation by an auditor into the evidence from which the final revenue accounts and balance sheet, or other statements, of an organisations have been prepared, in order to ascertain that they present a true and fair view of the summarized transactions for the period under review and of the financial state of the organisations at the end date so enabling the auditor to reports thereon”
Nwabueze PBC (2000), He defines auditing as an independent examination by an auditor of the evidence from which the final revenue accounts and balance sheet of an enterprise have been prepared in order to ascertain that they present a true and fair view of the sumarised transactions of the period under review and of the financial state of the organisation at the year end, thus enabling the auditor to report thereon. It is an investigation into books of accounts and the documents and vouchers from which the books have been written up, with the object of enabling the auditor to make a report on the balance sheet or other statements prepared from the books, to the person(s) to whom he has been appointed to report.
Santock (1974) stated that auditing may be described as “an examination and evaluation of the authenticity, and therefore the reliability, of a firms business documents and records; it also involves mating inquiries to ascertain that the financial statements on which the auditor is reporting and which have been prepared from these records display a true and fair view of the financial results for the year under review and a true and fair view of the state of affairs at the year end”.
Okolo J.U.T (1987), expressed that auditing could be a “conscientious and objective examination of and inquiry into, any statement of account relating to money or money worth the underlying documents, and the physical assets where possible, as will enable the auditor to form an opinion as to whether or not the statement of account presents a true and fair view of whatever it purports to represents, and to report accordingly”
Nwabueze C.C. (1997) stated that auditing is an exercise which is carried out in order to lend credence to statements prepared by directors of the company (who are not the owners) for use by the owners of business (shareholders), the creditors, the employees, the government, etc. whereby the auditor express his opinion as to the true and fair nature of the transactions he examined while carrying out the auditing.
Nwabueze went further to buttress that the main objective to these shareholders, creditors etc is to be convinced that the financial statement by the directors offer all information and explanations exacted by the auditor in his opinion to be genuine and believable. An auditing is an independent examination by a statutory appointed person called the auditor to investigate an organisation, its records and the financial statements prepared from them, and thus from an opinion on the accuracy and correctness of the financial statement. The primary aim of an audit is to enable the auditor to say “these accounts shows a true and view or of course, to say that they do not.

2.1 OBJECTIVE OF AUDITING
The primary objective of auditing is to produce a report by the auditor of his opinion of the truth and fairness of financial statements so that any person reading and using them can have belief in them.
The secondary objective is to:

To detect errors and fraud

To prevent errors and fraud by the deterrent and moral effect of the auditing.

To provide spin-off effects. The auditor will be able to assist his clients with accounting, systems, taxation, financial and other problems.
2.2 TYPES OF AUDITING
It may be useful at this stage to outline briefly some of the different types of auditing:
Financial Statement Auditing: This type of auditing is undertaking in order to determine and report whether the information contained in a set of financial statements is in accordance with certain criteria which have been set for that organisation, such as truth and fairness and compliance with accepted accounting standards. The auditing will usually cover the balance sheet, income statement, funds flow statement and the related notes. The subject of this type of auditing is therefore these reports, not the management or the organisation itself, or any particular aspect of its performance. The auditors focus is simply the correspondence between the relevant statements and the underlying performance, irrespective of its quality.
Regularity Auditing: A regularity, or compliance auditing is one where the principal objective is to establish whether particular policies, procedures or rules of operation laid down for an organisation have in fact been followed. For example, in a public sector organisation there may be established rules governing the way in which available contracts must be advertised, put out to tender and ultimately awarded. Part of the auditing of such an enterprise could involve checking that these procedures have been complied with during the period covered by the audit, or that the organisation’s activities have been regular in the sense of following the relevant regulations. The subject of the auditing in this case is principally the method of working of the enterprise and its personnel. In many situations this type of auditing will be carried out at the request of management itself, who will be the recipient of the auditing report. In other circumstances the auditing may be performed on behalf of a supervisory authority, perhaps that with responsibility for specifying the operating rules in the first place.
Management and Operational Auditing: While financial statement auditing are concerned primarily with the agreement between reported and actual performance and position and regularity auditings with the degree of observance of laid down rules and policies in the organisation being audited, management or operational auditing focus on performance in more qualitative terms. For example, the criteria of economy, efficiency and effectiveness, which are covered by the more general notion of value for money, are commonly applied in auditing assessments of the quality of performance of public sector enterprises. More generally, there are obviously very many types of criteria which could be applied in such performance based auditing. Equally there are many areas of management decision – making where agreed external standards may be difficult to identify and apply and where the auditing therefore involves a much more subjective review. The scope of activities which may be audited obviously goes beyond purely accounting functions.
Auditing firms have for many years provided management with comments on the efficiency and effectiveness of control systems as a by – product of the financial statement auditing. More recently a number of firms have sought to promote the idea of using the statutory audit as an opportunity to offer other operational reviews on a greater scale, looking at, for example, performance in investment appraisal or working capital management.
In theory there is no reason why the concept of a management audit should not extend to the highest levels of management, but in practice most operational reviews are undertaken over lower levels and reported to top management. The main exception to this situation is the public sector where, as already noted, assessing value for money is part of the external auditors responsibility.
Social Audits: A particular aspect of performance review which has developed into an identifiable separate form of auditing is that of social performance. In this area the ‘auditing’ generally involves the collection and publication of a considerable volume of ‘social accounting’ information which is not otherwise available, rather than simply commenting on the quality of information already provided by the organisations management. The aspects of performance included in a social auditing could include pollution and other environmental considerations, community activities and relationships, employment policies and consumer interests. Often social auditing are carried out by groups with a particular interest in an organisations activities rather than by an appointed independent auditor.