Role of Auditor In Small Business
Abstract
This bachelor’s thesis deals with analysing the importance of internal auditors for the company. It aims to solve the issue about the way the new management of John Holt Nigeria Plc perceives the internal audit department. The management of the company believe that the organization can function effectively without the internal audit department. Therefore, as a result of the ongoing downsizing process in the company, the management is considering scrapping the audit department. The main objective of this research is to ascertain the impact and values of internal auditors as well as their roles and responsibilities to John Holt Nigeria Plc. This thesis consists of a theory and empirical section. The theory section will discuss about auditing, accounting, internal auditing and characteristics of an internal auditor which will be established by studying relevant literature, books, articles and internet sources. The empirical part will focus on the result of interviews conducted. The study will be based on qualitative method and will adopt interview as the main research tool which will be carried out with some senior managers who has experience about the subject matter. The findings will enable the management to decide if the internal audit department will be useful and beneficial to the organization or not. The conclusion will be based on the result of the research while recommendation will be drawn from conclusion which will assist the management to decide if the functions, roles and responsibilities of the internal audit department are vital to the overall effective performance of the organization or maybe the department should be scrapped.
It is imperative for John Holt Plc to know the impacts and values of the internal audit department. The author therefore recommend that the management of John Holt Nigeria Plc should consider carefully several risks that might occur if the internal audit department is eventually scrapped without any alternative in place.
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 Chapter one
Introduction
Background to the study
Over the past years, the scope of auditing has broadened due to the dramatic changes in its impact to organizations. It has always been carried out in diverse environment within organization depending on the structure, size and purpose (Faudziah, Haron & Jantan 2005). Compulsorily, all registered companies under the Companies and Allied Matters Act in Nigeria must audit their financial statements after a certain period of time. Companies benefit from the audited financial statement in a large variety of ways. Users of financial information such as investors, stockbrokers and financial experts sees the audited financial statement as a major thing to look out for when deciding on a choice of company to invest. These people rely on the auditor’s report because they believe it gives a true and fair view of the financial statement.
Never the less, many companies have also drifted away from the use of internal auditors. While some perceives the department as a cost centre that does not generate revenue, some regard it as a unit whose value is not appreciated. Therefore, while some appreciate the advantages that are derived from having internal auditors others believe they are irrelevant and waste of money. Gone are the days when auditing is just about reviewing records or detecting irregularities and frauds. Modern auditing has developed and has thus increased the need of investors in requesting for credible financial statements.
According to Adeniji (2012, 1), Auditing is defined as an independent, objective assurance and consulting actions established to add value and help to improve an organization’s operation. The actions carried out is done by an independent person called an Auditor. The independence in context refers to someone been free from all material conflicts such that the objectivity of the audit work is not threatened (Christopher, Sarens & Leung 2008). There must not be any form of interference with the independence of an auditor in discharging his or her duties. An auditor should be given freedom in planning, executing, analyzing and reporting his findings without been biased.
Apart from the fact that auditors express their opinion on the financial statement, they also conduct examinations on the financial records of the organization. The report in which auditors analyses their facts, give their opinions and recommendations is called audit report. The audit report is a vital information to the users of audited statements in making decisions.
According to the requirements of Nigerian stock exchange, all companies listed on the stock market must have their financial statement audited. Also companies and allied matters act (CAMA) 2004 request that auditors need to express their opinion on whether the financial statement is prepared in accordance with the act and if the balance sheet, profit and loss account and group accounts shows a true and fair view. However, there are many issues hindering an auditing assignment. Such issues needs to be managed and curbed from future occurrence if possible in order to avert possible damage that might be caused.
Statement of problem
There has been some discussion on a live tv streaming broadcast about the difference between internal and external auditor. Some owners have argued and queried the role of internal auditors while at the end of the financial year,they still invite the external auditor to conduct the financial year audit. The aim of majority of these companies are to make profit and also cut their cost whenever they have liquidity issues. Internal audit department, tax and payroll department and other departments are always victim of such issue whenever it comes to downsizing all because they are regarded as cost centre that generates no-profit for the organization. While some organizations acknowledge the need for the department, others believe they are irrelevant or less important.
The topic came as a result of the perception of the new management of John Holt Nigeria Plc. Yearly decline in the annual profit of the company has made the management to embark on downsizing . The management of the company believe that the organization can function effectively without the internal audit department and as a result of that, the management is considering scrapping the audit department . Therefore, the department is faced with a problem of convincing the management why the department should not be wiped out.
Research objective
The topic is about Role of Auditor In Small Business. As the name implies, it will cover details why internal auditors are needed in an organization, their impacts and values as well as auditor’s liability. It will also focus on what exactly are the duties of internal auditors in an organization as well as the advantages companies derive from having the internal audit department. The goal is to identify internal auditor’s key roles and responsibilities, their contributions and reasons why the department is regarded as vital one among many others. These goals are the objective of the study.
Research question
What is the Role Of Auditor In Small Business in John Holt Nigeria Plc.
Investigative questions:
- What are the key responsibilities of internal auditors in an organization?
- What is required of internal auditors in an organization?
- What are the benefits of having internal auditors in an organization?
Significance of study
beside the investigative questions, the theoretical frameworks will emphasis on accounting and the connection that exist between accounting and auditing. Attention will be given to history and evolution of auditing, its categorization, internal auditor’s roles and responsibilities including development in internal audit. Audit risk and failure will also be examined and researched. The empirical aspect, analysis and presentation of the result should provide a detailed answer to the research question.
All necessary information and aspects to be covered in this research are highlighted in the overlay matrix. Beginning from the research question to different investigative questions, it will convey the selected theories, concepts and models coupled in designing the interview framework adopted in this research including measurement questions, theoretical framework, data analysis and results.
Scope of the study
In order to distinguish this thesis topic from topics that does not belong in it or that are very close to it, it will be of great benefit to define the criteria for demarcation. When researching the above topic, emphasis will be placed on auditing, audit classification, internal auditor’s liability, internal auditor’s code of ethics and their roles and responsibilities.
Also, because of the similarity that exist between auditing and accounting, similar questions related to accounting information, users of accounting information and relationship between accounting and auditing will need to be answered. The main reason for this is because we cannot research about internal auditing without mentioning accounting and also, they form sub-topics within the subject area.
The topic does not include roles and responsibilities of external auditors. It will not cover specialised investigations and audit as well as emerging concerns in auditing. Also financial fraud, budgeting and cost management and other topics are outside the research area and are therefore excluded. The aim of not including the above listed topics in the research is to ensure diversion from the main subject area does not happen in order to achieve the goals.
