Auditing – The Impact On Government Parastatals

Auditing – The Impact On Government Parastatals

Auditing – The Impact On Government Parastatals

Almost all human activities revolve round the pivot of the principle of auditing, just as the auditors carryout audit work on the state of affairs of financial statement to know whether the financial statement prepared by an accountant gives a true and fair view.

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The technologist, merchants, markets, and even mediocre do the same to find out whether their research, trades, factory activities such as production, businesses and their daily activities or transactions are carried out with care and prudency to ensure prosperity is seen.

Auditing is a thorough examination of an expression of an opinion on financial statement that had been prepared by an accountant. This audit is a check of the work of an accountant. In the view of audit operational standard audit is defined as an instatements of an enterprise by an appointed auditor in pursuance of that appointment and in compliance with the relevant statutory obligation. One can point out from this definition that an auditor has to be purely independent. The need for independence is to enable him carryout his audit job without inference by the management.

It is very necessary to point out that the auditing jobs are discharged by an auditor – an auditor is a qualified accountant who had also passed a professional examination. Institute of chartered accountant of Nigeria is the only board that is empowered by company and Allied Matters act of 1990 to conduct such examination. Such a person must have a vast knowledge and able to understand a practical business endeavour always to grasps technicalities and business methods of any concern whose account he undertakes to audit.

Parastatals are enterprise own and managed by the government or its agencies, distinguishable from private enterprise and organized on behalf of the whole citizen. Examples of parastatals are Nigerian National Petroleum corporation (NNPC), etc. The accounting of parastatals is designed to demonstrate the correctness and reasonableness of transactions and their agreement with established rules and to give evidence of accountability and stewardship of government resources.

1.2 Statement Of Problem

Inspite of all the ideas and contributions of some academician, and some noble men in government parastatals the researcher had encountered some few problems which are:

1. Inadequate fund available for his research work.

2. Inadequate material or related literature.

3. Inadequate respond by some personality.

1.3 Objective Of Study

The researcher’s main objective is to find out the impact which auditing has shown in government parastatals. To also alert or inform the internal auditor on their duty as a watch dog to government parastatals and organizations other than government parastatals.

1.4 The Scope Of The Study

The researcher’s work is limited to government parastatals and with a kilm interest on administration of the government parastatals.

1.5 Research Questions

In an attempt to achieve a satisfactory work some questions may be asked. In this case the questions asked are:

i. Do government parastatals keep records of their books.

ii. Do government parastatals maintain an accounting practice according to fundamental accounting principles.

iii. Do parastatals keep complete accounting records.

1.6 Significant Of Study

The study will provide a measure management of government parastatals to correct lapses and mend loops holes where necessary within the organisation.

This work will provide a plat-form for user in applying a sound principle of accounting in preparation of financial statement and also ensure a cordial relationship between the employer and employee.

It is hoped that permanent secretary of both state and federal ministry and parastatals will make this work their great companion.

Churches and voluntary organizations will find this work useful.

2.0 REVIEW OF LITERATURE REVIEW

The shortest and simplest way for the researcher to acquire knowledge on the topic is to review the related work done by previous writers and researchers. Ogili (1999) stated that review of literature involves building your research project on specific foundation of earlier studies in a given area of interest. Auditing in government parastatals is an important aspect of audit job which emphasis has to be laid upon. It is at this level that the researcher wants to review further related literature in this area of study.

2.1 What Is Auditing

The auditing standards and guidelines issued by the combined councils of the accounting bodies defines auditing as follows: “An audit is the independent examination of, and expression of opinion on the financial statements of an enterprise by an appointed auditor in pursuance of that appointment and compliance with any relevant statutory and professional obligation”. An audit involves the examination of certain evidence in the process of investigating a statement in figures. The objective of investigation being to enable the auditor make a report on the statement.

Auditing is conducted by an independent professional who must not only be independent in mind but must be seen to be independent judging from the fact that he does not have interest in the company he is auditing and does not conduct an audit of a company owned by any of his blood relations or close relatives.

The bane of auditing is for the auditor to form an opinion on the financial statement whether they represent a true and fair view but can only be done after the auditor must have satisfied himself on the totality of the accounts.

2.2 Objective Of Auditing

Nwabueze E.C. (1997) state that the main objective of the shareholders, Debenture holders (creditors), etc, is to be convinced that the transactions carried out to arraign of financial statement by the directors after all the information and explanations exacted by the audit is for the opinion to be produced by the auditor of the truth and fairness of the financial statement, so that any person reading and using them can rely on them. Also to prevent errors and fraud by the deterrent and moral effective of the audit.

2.3 Qualities Of An Auditor

The judge in the London and general Bank cases (1895) said: The auditor must be honest that is must not certify what he does not believe to be true, and he must take reasonable care and skill before he believe that what he certifies is true.

It is important that auditors should have fairly grasp of legal luminaries. For instance, in company, law where it is recognized that a business that has been incorporated is a separate legal entity quite different from the original V. SOLOMON.

It is also necessary that an auditor acquaint himself with certain legal decisions so as to be able to render useful and meaningful services to his clients and wider public.

2.4 Qualification Of An Auditor

Going by section 358 of CAMD 1990 only accountants that are members of institute of chattered Accountants of Nigeria and Association of National Accountants of Nigeria are qualified for appointment as auditors.

Subsection (2) of the same decree qualifies the followings for appointment as auditors.

a. An officer or servant of the company.

b. A person who is a partner of or in the employment of an officer or a servant of a company.

c. A person or firm who or which offers to the company professional advise in a consultancy capacity in respect of secretarial, taxation or financial management.

d. A body corporate. No person shall act as auditor when he knows that he is qualified from so acting; if he becomes disqualified during a term of office he shall vacate office forth with and advise the company accordingly in writing failing which shall be guilty of an offence and liable.

2.5 Internal Control And Internal Check

Internal control is defined as the whole system controls, financial and otehrwsie, established by the management in order to carry on the business of the enterprise in an orderly and efficient manner, ensure adherence to management policies, safeguard the asset and secure as far as possible the completeness and accuracy of the records. The individual components of an internal control system are known as “controls or internal controls”.

This is the allocation of authority and work in such a manner as to afford checks on the routine transactions of day-to-day work by means of the work of one person being proved independently by another or work of a person being complementary to that of another.

2.6 Rights And Duties Of An Auditor

DUDITOR’S RIGHT

Auditor have the right of access at all time to the company’s books of account and vouchers, and are entitle to require from the organization as they think necessary for the performance of their duties as auditors.

DUTIES

a. A company’s auditors shall in preparing their report carryout such investigations as it will enable him form an opinion as to:

i. Whether proper accounting records have been kept by the company and proper returns adequate for their audit have been recorded from branches not visited by them.

ii. Whether the company’s individual accountants are in agreement with the accounting records and returns.

b. If the auditors are of opinion that proper accounting records have not been kept, or if the company’s individual account are in agreement with the accounting records and returns, the auditors shall state that fact in their report.

c. If the auditors fail to obtain all the information and explanations which, to the best of their knowledge and belief, are necessary for the purpose of their audit, they shall stat that fact in their report.

d. The auditors have the duty of giving certain information about directors the information is not given in the accounts eg remuneration, loan, etc.

2.7 Government Voucher

A voucher is a document that evidence receipt or payment of money. A voucher system which calls for the preparation of vouchers for transactions involving payments and for the recording of such voucher in a special book of original entry, known as voucher register.

Voucher can be classified into:

a. Receipts vouchers

b. Payments vouchers

c. Adjustment vouchers

2.8 Legal Basis Of Government Accounting

These are rules, norms to be observed in the preparation of government accounting in Nigeria, the legal document in the area of government accounting are:

a. Constitution of federal republic of Nigeria

b. Financial regulation

c. Treasure and financial circular and call circular.

It is legislative bodies that establish the basis through which the government accounting should be prepared. These includes:

a. Cash basis

b. Actual basis

c. Commitment basis

2.9 Fraud In Government Parastatals

Fraud is one of the irregularities, ‘irregularities’ are referred to intentional distortions of financial statements, for whatever purpose, and misappropriation of assets, whether or not accompanied by distortions of financial statements. Fraud is use to refer to irregularities involving the use of criminal deception to obtain an unjust or illegal advantage.

Fraud is noticed almost every time in our organizations, Bank and the most notable is government parastatals. When fraud is committed it is detected, if the fraud is not material it is made known to management but if it has a material effect an appropriate test is done. Fraud could also be discovered and there are some factors that could be indicative of fraud, the factors are:

i. Evidence of falsified document

ii. Missing vouchers or document

iii. Unsatisfactory explanations

iv. Evidence that internal control is not operating

v. Unexplained items on reconciliation or suspense accounts.

vi. Evidence that internal control is not operating.

vii. Failures of figures to agree with exceptions produced by analytical review.

viii. Investigation by government department or police or regulatory authority.

Summary Of Findings, Recommendation And Conclusion

Summary Of Findings

As a result of the researcher’s constructive and critical analysis of data presented detects that fundamental accounting principles and convention is not rightly followed and the accounting section find it difficult to maintain up to date ledgers. The researchers also discovered that an academic year hardly be completed without long strikes action by workers. Lastly some administrative policies in use by the parastatals are that recommended by the previous external auditors.

Summary Of Conclusion

1. It was observed that the accounting principles are not thoroughly and strictly followed by government parastatals. This becomes explicit where the double entry is partially maintained.

2. It was discovered that most record are incomplete, this account the inability of the parastatals to have conclusive statement on matters relating to finance.

3. It however becomes clearer that the internal control is weak. This account for the liability of the external auditor to visit parastatals on yearly basis.

Summary Of Recommendation

In the light of the above results and findings, the researcher wishes to recommend the following steps to be followed strictly by parastatals so that the impact of auditing will be seen as positive to the parastatals.

Firstly, the accountant and internal auditor must ensure that a sound accounting principles and conventions are strictly followed or adhered to. This will make work of the external auditor easier.

Secondly, a sound internal control system is very important in parastatals. The internal auditor should be reminded of their roles to the institution.

Lastly, parastatals and their workers should see themselves as partners in progress. They should work hand in hand and eliminate any loupe hole that will lead to unrest among workers.

Auditing – The Impact On Government Parastatals

To place an order for the Complete Project Material, pay N5,000 to

GTBank (Guaranty Trust Bank)
Account Name – Chudi-Oji Chukwuka
Account No – 0044157183

Then text the name of the Project topic, email address and your names to 08060565721.  

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