CHAPTER ONE

GENERAL INTRODUCTION

1.1 Background Information

In the yester – years business sectors at the infant stage needed not a sophisticated internal control system as the idea of fraud, errors irregularities, and material misstatements were minimal.

The emergence of the industrial revolutions of 1970 coupled with capitalization drastically change and affected the scale of business operations and financial reporting culture of the various economic actors and various industries. Preparations and presentation of financial reports became difficult to manage and vulnerable to fraud and material misstatement (Struab and Attner, 1988).

After Luca Pacioli published his famous treatise “Summa de Arithmetica, Geometrica, proportioniet and proportionalita” which became subsequently known as “double entry book keeping” in the 15th century, a tremendous impetus to the development of ancient auditing evolved. During this period of business history notably commencing with the era of great commercial capitalism, owners of business have al at their disposal but lack the technical ability to manage this resources. They were bound to appoint persons on to whom they entrusted the management of their estate called “stewards”. The practice whereby productive resources (human, material and financial) owned by an individual or group  are managed by another person is known as STEWARDSHIP.

Today, the process by which managers or directors of an entity accounts or report to the owners of the entity on the state of affairs of the business is known as “STEWARDSHIP ACCOUNTING”. This Accounting and reporting on the state of affairs of the business is usually done by means of financial statement i.e. corporate report.

The control system of most entities today depends on the corporate report structure. The central point to good corporate reporting is to ensure that talented individuals  are rewarded for their efforts and skills while acting in honesty to protect the best interest of the company and its stakeholders.

The company Act of 1985 made it crystal – clear for which entities appoint independent auditors who were to subject the financial statements (corporate reports) of an entity under detail scrutiny so as to express an audit opinion . Fuamenya Francis (2005) financial statement from organizations in Cameroon, Tropical focus, Lagos and the Federal Republic of Nigeria. The audit opinion being influence by the entity having the ideal control system to enable the auditor lends his credibility on the corporate Reports presented by management to shareholders.

1.2 Problem statement

Corporate reporting is a tool for socio – economic development. Therefore, an ideal corporate reporting structure should be put in place to ensure proper accounting to shareholders and to bestore trust and confidence in the corporate report presented by management to other stakeholders.

The company Act of 1900 first made it clear for companies to appoint auditors, but could not ensure and ideal corporate report because those auditors so appointed were some of the shareholders who lack the technical ability to carryout their audit responsibilities. The stakeholders mostly shareholders at a time, were either satisfied or dissatisfied with the report presented to the by management on the notion that the results were free or not of material misstatement and doubted if the report could:

–           Be deliberately misleading

–           Failure to disclose relevant information,

–           Facilitate major changes in ownership it past account contains an unqualified audit opinion.

–           Present a true and fair view of the state of affairs of the entity.

The solution to this problem were made by the issuance of the company Act of the 1985 stating which company should appoint independent auditors to carryout independent verification and express an opinion, A.H Millichamp (1993). With these in mind, the following questions could be asked by management of most entities to better tackle the problems relating to control systems

–           What are the various control internal systems  which can be set up?

–           Is the internal control system set up been implemented?

–           If so, are the internal control system revised?

–           To what extend are the internal control system applicable?

–           How often is the internal control system revised?

–           What measures are taken to prevent distortion of the internal control procedures?

–           How does the implementation of the of an internal control system act as a spring board of the auditors responsibility to the corporate reports?

1.3 Objective of the Stud

1.3.1 Main Objective

The main objective of the study is to know how control system act as influential force on external organizational performance audit for corporate reporting.

1.3.2 Specific Objectives

The specific objective is to identify the different external control structure of companies in Cameroon how they affect the external organizational performance audit for corporate reporting. This will be divided as follows:

1. Evaluating the applicability of control system in Union Bank Cameroon (Buea council)
2. To access the periodic review of the internal control system of Union Bank Cameroon PLC (Buea Council). Investigating on the measures taken to prevent distortion on the set up of the internal control system of Union Bank Cameroon PLC.
3. A general review to he contribution of the internal control system to the smooth running and prevention of material misstatement in the financial statement (corporate report) of Union Bank Cameroon PLC.