AUDITING AS AN INSTRUMENT FOR ENSURING ACCOUNTABILITY A CASE STUDY OF CATHOLIC INSITUTE FOR DEVELOPMENT, JUSTICE AND PEACE AND CARITAS (CIDJAP)

ABSTRACT

Over the years and specifically from the last two decades to date, there have been high clamour by different organizations both governmental and non-governmental organizations for introduction of auditing into their organizations.

Auditing which is an indispensable aspect of accounting is as vital as breath itself, for it has greatly improved the efficiency of many organizations through the birth of efficient accountability.

Thus, some organization are reaping the good fruit of auditing as a result of enhancing accountability I their organizations while others are wallowing in the doldrums.

Inside this project the researcher goes ahead to clearly define and explain what auditing is all about, the principles, sections of companies and allied matter act 1990 (CAMA) regulation.  Its operations and in the best way it can ensure accountability of any organization.

The first chapter is the introductory part of the project and brief history of (CIDJAP) Catholic Institute for Development Justice and Peace and Caritas.  In the second chapter we have literature review which highlight on the numerous diversified views of other authors on the subject matter of this project.  The third chapter deals with the method use in this project.  Then the fourth chapter deals with data presentation and analysis.

The last chapter is all about the discussion of result, conclusion, implication, suggestion for further research and limitations of the study.

CHAPTER ONE

This chapter is concerned with the introductory part of the research work.  It deals with the following:

1. Background to study
2. Statement of problem
3. Objective of study
4. Scope of study
5. Research question
6. Significance of study
7. Definition of term

BACKGROUND OF STUDY

In the origin auditing was not used to cross check accounts by the management or owners’ of the business.  Auditing was     introduced when the capital used for running the business was large and the fund was entrusted in the hands of few who are managing the business. Under this condition the need to have an auditor becomes apparent to the owners of the business.

Auditing is one of the management instrument for efficiency and effectiveness, control and monitoring exercise towards accomplishing organizational goal. Auditing improves the information available for parties interest in the activities of an organization usually by commenting on the quality of management report, thus enhancing their credibility.

Theoretical rationalization for organization audit review focuses on two main themes. They are accountability and economic incentive. Accountability means that the recognition that responsibility or duty is owned by one party to one or more other parties and the idea that it should be possible to monitor the way, the responsibility has been discharged through the provision of some information, explanation report on its performance.

On the other hand, economic incentive means that the realization that in the absence of statutory requirement there are economic motivation of both parties to the audit. The relationship between members of a company and managers are seen as a contract between a principal and an agent, both of whom act to maximize their economic self-interest. In the absence of monitoring by the principal, the agent will not maximize the principal’s objective at the expense of his own self-interest. This is the reason section 357 of companies and Allied matter act 1990 (CAMA) stipulates that “every company shall at each Annual general Meeting appoint an auditor or auditors to audit the financial statement of the company and to hold office from the conclusion of that until the conclusion of the next Annual General Meeting”. The statutory auditor will audit the financial statement of the company and report to the members of the company, expressing in his report, whether the financial statement show true and fair view. As a result this will redress the imbalance between the principal and the agent. So the management will be willing to have an auditor because auditing is seen as a control mechanism, which aids the process of monitoring performance and promote accountability.

In recent years the number and monetary value of some organizations activities have increased substantially. This increased in activities have brought with it an added demand for accountability. The directors, managers and employees, who are running these activities need to render adequate account of those activities to the public and members of the company. The members of the company need to receive a report in order to assess the performance of the company. The members of the company need to receive a report in order to assess the performance of the company. Accountability concept is inherent in the management and governing process of any organization. Auditing is one of the elements of accountability and management of the company is responsible to ensure that appropriate audit are made.

The need for accountability has cause demand for more information about some organization’s programme, projects and services. In Nigeria, the companies and Allied Matter Act 1990 (CAMA) section 342 stipulate that report should be prepared in respect of each year by the directors. The members of the company are entitled to know whether the financial statements are handled in compliance with accounting principle and statutory requirements. They are also entitled to know whether the programmes, projects, services and other activities of the company are operating economically, efficiently and effectively towards achieving the objective set to achieve. Therefore auditing is the best practice and procedure that will ensure accountability and assist directors, managers and employees in carrying out their responsibility.

 In conducting financial audit by an auditor, test should be made to ensure compliance with applicable laws. The auditor will design the test in such away to provide reasonable assurance of detecting errors, irregularities, illegal act and mis-statement, which could have material effect on the financial statements. During the preparation of accounts, the accountant will just prepare the financial statement with any available information given to him by the company officials, but the auditor during the cause of his duty will consider each entry in financial statement by reviewing it with the one in book keeping. Auditor also works with receipt, vouchers and other documents in reviewing the financial statement. Even when the original document or if all the document is not given to him, the document will assist him in his duty, he will do so because he has the right. These documents will satisfy, the auditor that the transactions are authorized by the management and too within the aim and objectives of the organization.It is difficult to place a high degree of reliability on the financial statement prepared by the management of a company due to the fact that the present day Nigeria citizens are passing through a moment of dishonesty and lack of trust in all political, religious, social and business activities. This has given rise to increasing need and claim for internal auditing, but this is not to say that auditors main objective is to detect fraud but it is one of his secondary objectives of which if he detect fraud during the course of his duty he will pass the information to the management.

Harcourt 1969 said “management should give considerable attention to internal reporting or managerial at the expense of external reporting. Any significant at the expense of external reporting. Any significant different between expectation of investors and actual result will trigger some responses which is his decision to retain investment in the company.” If the management take note of this, it will make the financial statement may:

          (a)     Fail to disclose relevant information

1. Contain error
2. Fail to conform to regulations
3. Not to disclose misleading
4. Be deliberately misleading
5. Be inadvertently misleading

Besides, the financial statement may fail to comply with fundamental accounting concept. They are explained below.

(i)      GIVING CONCERN CONCEPT: This means that a business will continue in operation for unforeseeable future. The profit and loss account and balance sheet will not liquidate.

1. ACCURAL CONCEPT: This means that out standing expenses should be recognized as liabilities of an organization when preparing profit and loss account.     

(iii)    CONCEPT OF PRUDENCE: This means that revenue and profit are not anticipating but are recognized for inclusion in profit and loss account only when realized in form of assets or cash.

(iv)    CONSISTENCY CONCEPT: There is consistency of accounting treatment of like items within each accounting period and from one accounting period to the next.Some accountants when preparing financial statements do not take note of the above principles and accounting concept and cannot detect fraud. Shall we continue folding hands while things are falling apart my interest in this research?