STATUTORY AUDIT AN EFFECTIVE TOOL OF MANAGEMENT CONTROL IN A MANUFACTURING COMPANY

ABSTRACT

This research work is aimed at identifying the importance of statutory audit to management control.

Statutory audits made mandatory by legislations for business organisation. These legislations include the CAMA 1990 (Company and Allied Matters Act) BOFID 1991 (Bank and Other Financial Institutions Decree).

Chapter one contains an introduction of the topic in relation to manufacturing companies, which goes through process to the products of their organisation.  It further stretches across various research heating of chapter one.  Such as objective of the study, delimitation, research questions, hypothesis and definition of terms.

Chapter two basically in details discussed literature review; a check into other materials written by experts concerning the selected topic.

The third chapter examines the methods used in acquiring and collecting data which were used in the overall writing of the project.

Chapter four contains the presentation and analysis of data collected from the various manufacturing companies used for the research work.

The last chapter contains various recommendations and conclusions.

CHAPTER ONE

1.1 INTRODUCTION

Nobody knows why the jinx has subsisted for so long? Sole and adequate management of capital has been impracticable for the owners of capital resources.  For very obvious reasons capital owners require others to help in the management of such capital resources and this gives rise to the polarization of business.  These brings about the ownership management relationship such as:

–              Master and servant

–              Master and Apprentice

–              Landlord and peasant/tenant

–              Entrepreneur and management

–              Some others

In early days when businesses were handled solely by the owners who took all the risks and consequently the reward.  There was no apparent need to involve third party to scrutinize the financial operation of such enterprises.

Modern day development in business has necessitated separation of ownership from management and the use of borrowed funds for business. These has led to the appointment of unbiased, skillful and professional examiner who scrutinize the account of organisations.  It is a legal requirement that account of limited liability companies be subjected to an audit of at least once a year.

This form of business relationship naturally give rise to the need for stewardship accounting.  The master often suspicious of the servant and as a result of the communication gap that exist require the servant to render its account of stewardship and when required to do so.

The joint stock company Act 1844    united kingdom was the first enactment to require all incorporated companies to have their annual financial statement audited.  The appointed auditors was required by this account to examine and report on the financial statement presented by the company to its shareholders.  The act did not require that the auditors should be independent of companies management nor that he had to be professional accountant.

In most cases, it appears to have been a non accountant elected by the shareholders from their own body, for in those days professional accountant were few and far  within reach.

The 1888 Act is considered the most crucial of all acts relating to auditing and the decisions are not far fetched.  The Act define the attributing qualification of the auditor.  This set the stage for philosophy of auditing requiring the auditor to be independent, to act with integrity, to put himself away from position of conflicts by not auditing the account.  It allows not being a member of the management nor the shareholders, act impracticably between the two etc.

The 1888 Act however, did not require the auditors to be professionally qualified ,it was the United Kingdom act of 1948 that first stipulated professional qualification for the auditor and went further to mentioning the Accounting bodies whose member could practice as auditor in UK.

THE NIGERIAN SCENE

The Nigerian scene is governed by the Nigerian company Act 1968 and stipulated that only members of the Institute of Chartered Accountant of Nigeria (ICAN) could act as auditors in Nigeria.  The company and Allied Mater Decree (CAMD 1990) upheld this, Added a clause that member of any other accounting body recognize federal military government afforded recognition to association of National Accountants of Nigeria (ANAN) which by invitation of this clause can also licence it’s members to act as auditors.