ABSTRACT
A significant contribution to the development and survival of business organization is the role that auditors play. This research work, The Role of Auditors in Small business organizations, give a broad understanding of what the auditors role entails.
In the course of this research, data was collected by means of questionnaire. The collected data were analyzed with the aid of percentages. Further analysis was done on relevant information. The statement of research hypothesis was tested using chi-square distribution.
The use of internal control questionnaire and evaluation forms by auditors, to ascertain and evaluate the strengths and weaknesses of internal control systems of business organization, with a view to determining the degree of reliance to be placed on the internal control system, is a major finding of this research.
The recommendation made in respect of the above finding, is that internal control questionnaire and evaluation forms which auditors use in ascertaining and evaluating internal control system should be constantly reviewed and revised in light of current changes made in clients internal control systems
CHAPTER ONE
INTRODUCTION
According to the third national development plan (vol 1 page 353) "manufacturing establishment employing less than 10 people or whose investment in machinery and equipment do not exceed N600, 000 are referred to as small scale industries
In the credit guidelines of the Central Bank of Nigeria (CBN) small scale enterprise are classified as those business with an annual turnover of less than half a million naira Currently, as given by the government, small scale industry refers to those industries with a capital investment not exceeding N150, 000 in machinery and equipment alone
Today, every business organization intends to continue as a going concern, ie continue to acquire assets, increase sales, improve profit margin, to remain in operational existence into the foreseeable future and not having any intention to curtail or significantly reduce its scale of operation
To acquire this aim, the organization will have to institute sound internal control and accounting system, appoint directors and managers to direct the affairs of the business and to ensure that the funds intended to achieve this aim are well applied
Business organization who successfully put these structures in place may yet fail to develop and survive in isolation of the auditor It is evidenced by the fact that the directors and managers who are expected to manage the funds and direct the affairs of the business may begin to perform their activities with non-challant attitude knowing fully well that their work will be checked by an independent person (the auditor), as a result, funds may be misapplied, diverted, embezzlement may be on the increase, loss of confidence by shareholders on directors etc with all these, the organization may no longer be able to continue as a going concern, and this will eventually result to the liquidation of the business
No doubt, the role of an auditor in the development of small business organization is inevitable With the role of auditor in force, the directors and managers are more careful in performing their duties as they may want to protect and maintain their integrity As a result, mis-management, diversion, mis-application and embezzlement of funds will be greatly checked The auditors’ role in achieving these may include: reviewing the controls of the organization in the traditional areas of accounting and finance to ensure compliance and contemporary areas of personnel, marketing, sales, and production, to ensure efficiency of the economy etc
During the audit, frequent correspondences are made between the auditor and the client such as internal control letter, management letter, letter of representation, all aimed at ensuring the survival of the business At the end of the audit, a final audit report is made to the shareholders to boost their credibility on the directors
This project brings out in details what auditors do in practice that is, their roles in the development and survival of small scale business organization
A substantial aspect of this project shall focus on external auditing with particular reference to small business organizations in Akoko-Edo
12 STATEMENT OF THE PROBLEM
Though in most cases, small business organizations are usually operated by their proprietors, yet there is still many of those small business organizations whose management is rested on people other than the proprietors hence the need for audit arises
However, in the course of this research, the following problems are to be examined
The main objective of this research work is to appraise the auditor himself in respect of the role he plays in the firm such as:
This research work looks at the role of the auditors in small scale business organizations with reference to small scale business organizations in Akoko-Edo It takes a critical look and reveals the various activities of the auditors in order to ascertain the performance of the internal control of small business organizations
An insight as to the correctness and accuracy of the records kept by small business organization will be looked into and the auditors areas of concentration will be emphasized
15 STATEMENT OF RESEARCH HYPOTHESIS
The under listed hypothesis are formulated for testing in this research study Scientific test of these hypothesis are employed to arrive at reasonable conclusions The formulated hypothesis for considerations includes
a) Ho: The auditor does not help to check the internal control system in small business organizations
Hi: The auditor helps in checking the internal control system in small business organization
b) Ho: The auditors do not play a significant role in the development and survival of small business organization
Hi: The auditors play a significant role in the development and survival of small business organization
16 SIGNIFICANCE OF THE STUDY
The research work is an investigation into the role of the auditor in small business organizations with reference to small business organizations in Akoko-Edo
Its purpose is to show the importance of an auditor to users of accounting information such as:
f Tax analyst etc
Its also based on correcting the wrong interpretation of the role of auditors in small business organization
17 LIMITATIONS OF THE STUDY
A lot of limitations was encountered in collecting information in carrying out this research study The problems of the executive officers willing to give information or have a direct interview with the researcher
Financial constraint is inevitable considering the present economic situations Due to lack of finance at the researchers disposal it was not possible to capture many small scale businesses
In developing countries like Nigeria, there is the problem of insufficient data
Furthermore, the organization secrecy as to relating their financial report to the researcher was also faced
18 METHOD OF DATA ANALYSIS
Most analysis was done by means of tables and percentages Tables were drawn, to show the various response of the question raised in the survey In testing the two hypothesis, chi-square (X2) is used in that, the data are discrete and variables studied are independent of one another
19 DEFINITIONS OF TERMS
Terms used in the course of this study are explained in relation to what it stands for They include:
REFERENCES
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Arens, AA (1984): Auditing An Integrated Approach 3rd Edition Prentice Hall Int Englewood Cliffs New Jersey
AustinO Okolie (2007): Fundamentals of Audit 3rd Edition Benin city Nono publishers
Mautz, RK and Sharaf, HA (1961): The philosophy of Auditing, American Accounting Association, Florida USA
Mellichamp, AH (1990): Auditing, An Instructional manual for Accounting Students 5th Edition London DP publications limited shepherds Bush Green
Okolo, JU (1987): The concept and practice of Auditing Ibadan Evans Brothers Limited
Vivian RV Copper (1977) Statement manual of Auditing Gec and Co publisher 1 Hod London and Albon 1977