THE IMPACT OF INTERNAL AUDIT EFFICIENCY ON THE FINANCIAL PERFORMANCE OF COMPANIES A CASE STUDY OF JULIUS BERGER PLC.

CHAPTER ONE

INTRODUCTION

1.1   Background To The Study

The Internal audits constitute an independent appraisal function which review the internal control system of the organization established. Auditing ensures the effective, proper, and economic use of resources in the organisation through the objective examination, evaluation and reporting on the adequacy of internal control. The effectiveness of the auditing functions lies on its independence; The independence in terms of organisational status and personal objectivity of the internal auditor facilitates the proper and effective performance of his duties .It is therefore essential that the internal audit unit be appropriately staffed with people with the right qualification and given the training necessary .The internal auditor must constructively align its functions with the management policy and maintain a good working relationship and mutual understanding with management, external auditors, and other review and exercise due care in executing its function of planning, controlling and recording of work. The internal control system must be properly evaluated to ensure its adequacy and effectiveness .The evidence obtained in the audit function should constitute the auditor’s report which must be communicated to the management for appropriate action. It is also the auditors role to ensure that all recommendations and conclusions are monitored to determine that action has been taken on them .The organisation terms of reference for the internal audit function should be clearly specified to enhance the auditors independence in the execution of his legitimate functions. A crucial function of internal auditing is to facilitate management in the creation of value for money. through economic, efficient and effective use of resources. Consequently the auditor must be objective in the presentation of its report to management So as to exercise judgement, express opinions and present recommendations with impartiality. The problem confronting the research therefore is to determine the impact of internal audit efficiency on the financial performance of companies A case study of Julius Berger PLC.

1.2   STATEMENT OF THE PROBLEM

The Internal audits constitute an independent appraisal function which review the internal control system of the organization established. Auditing ensures the effective, proper, and economic use of resources in the organisation through the objective examination, evaluation and reporting on the adequacy of internal control The effectiveness of the auditing functions lies on its independence; The independence in terms of organisational status and personal objectivity of the internal auditor facilitates the proper and effective performance of his duties and of enhancing the financial performance of the organisation But many instances reveal that the internal auditor is not given the freedom and independence to exercise his functions objectively.Unneccessary influences by some senior staff who are part of management some time digress the sense of objectivity of the internal auditor in presenting is report and recommendations to management. This as a result affects the objective of audit and that off the organisation in ensuring effective and economic use of the firm’s resources and of the firm financial performance. The problem confronting the research therefore is to determine the impact of internal audit efficiency on the financial performance of companies A case study of Julius Berger PLC.

1.3   RESEARCH QUESTIONS

i.  What is the impact of internal audit efficiency on the financial performance of companies?

ii.  What is the impact of internal audit efficiency on the financial performance of Julius Berger Plc.?

1.4  OBJECTIVES OF THE STUDY

i.  To determine the impact of internal audit efficiency on the financial performance of companies.

ii.  To determine the impact of internal audit efficiency on the financial performance of Julius Berger Plc. 

1.5  SIGNIFICANCE OF THE STUDY 

The study intends to provide an appraisal of the impact of internal audit efficiency on the financial performance of companies A case study of Julius Berger Plc. It shall also serve as a veritable source of information on the fundamental issues of auditing.

1.6   STATEMENT OF THE HYPOTHESIS.

Ho: The impact of internal audit efficiency on the financial performance of Julius Berger Plc is low.

Hi: The impact of internal audit efficiency on the financial performance of Julius Berger Plc is high.

1.7  SCOPE OF THE STUDY

The study focuses on the appraisal of the impact of internal audit efficiency on the financial performance of companies. A case study of Julius Berger Plc. It shall serve also serve as a veritable source of information to managers and other professionals.

1.8  LIMITATION OF THE STUDY

The research was confronted by some constraints which include geographical factor and logistics.

1.9   DEFINITION OF TERMS

AUDITING: The Internal audits constitute an independent appraisal function which review the internal control system of the organization established. Auditing ensures the effective, proper, and economic use of resources in the organisation through the objective examination, evaluation and reporting on the adequacy of internal control.

Organisation: The organisation consists of a group of people in the conduct of business activities of providing goods and services with the common purpose of achieving corporate aims and objective.

Audit Committee: A committee Instituted to carry out the external and internal audit plans, programs and reviews internal control arrangements.

Internal Auditor: A person whose function is the conduct of internal audit in the organisation.