Chapter One

1.1 Background of the Study

Introduction An organization operates as a complex system with a primary aim of achieving specific objectives. The effectiveness and efficiency of an organization are contingent upon a structured plan and process. As businesses grow in size and complexity, the personal supervision by owners becomes impractical, necessitating delegation to management. These managers are then accountable to the owners or capital providers and must report on the operations of the business.

The growth and complexities of business organizations require the safeguarding of capital providers’ interests, who need assurance that the business is run effectively and efficiently. This need has given rise to the independent examination of accounts and management reports, revealing the financial position of the business organization to the capital providers. Auditing, therefore, emerged as an essential function to ascertain the accuracy and reliability of the accounts and records of the business organization.

In the commercial world, established organizations—private or government-owned—often have an internal audit department tasked with examining the organization’s accounts and records. However, the internal audit’s effectiveness can be limited by management’s control. This limitation necessitates an independent third-party expert to audit the organization’s operations and express an opinion that enhances accountability and aids the organization’s members in appraising performance.

Statutory audit, as mandated by laws such as the CAMA 1990, is carried out to ensure the truth and fairness of the financial records. This research work aims to thoroughly examine the importance and relevance of statutory audit in government establishments and how it can aid in achieving their pre-determined goals or objectives.

1.2 Statement of the Problem

Auditing, when functioning effectively within an organization, can be perceived differently by staff. Some view the auditor as a nuisance, interfering too much in day-to-day affairs, while others see auditing as a vital aid to management, providing assurance to shareholders that the business is well-managed.

This research will identify the relevance of statutory audit in government establishments and provide answers to the following problems:

1. What is the main purpose of an audit?
2. What qualifications should a statutory auditor possess?
3. What is the relationship between the internal and statutory auditor?
4. What qualities are required of a statutory auditor?
5. What are the rights and duties of a statutory auditor?

1.3 Objectives of the Study

The objectives of this study are:

1. To highlight the significant role played by statutory audit in assisting management.
2. To examine how the interests of business owners can be safeguarded by statutory audits.
3. To clarify the roles and duties of practicing statutory auditors within any organization.

1.4 Significance of the Study The study is intended to benefit organizations that view statutory audit merely as a checking function. It aims to dispel misconceptions and establish the necessity for an audit department in all organizations, whether government or private.

Additionally, the study will help the organization under study by pointing out weaknesses in their control systems and suggesting improvements. It will contribute to mitigating fraud and misrepresentation resulting from ineffective internal control systems.

This project will be immensely helpful for directors to understand the importance and relevance of statutory audits. Students will also find this research a valuable reference, providing a clear understanding of the concept, relevance, services, and importance of statutory auditing in any organization.

1.5 Research Questions

The research methodology involved personal interviews with employees of the establishment (INEC) to gather relevant data and facts. This approach was chosen to manage financial and time constraints that might arise from distributing and collecting questionnaires. Additional data was gathered through the researchers’ knowledge of public sector accounting and auditing and consultation of relevant textbooks.

1.6 Organization and Plan of the Study

The study is structured into five chapters for a systematic presentation of facts and figures. Chapter One provides an introduction, outlines the research problems, states the purpose, significance, and questions, and includes the organization and plan of the study and definitions of terms used.

Chapter Two reviews literature on the origins and development of auditing, its main purpose, the qualities of a statutory auditor, the relationship between internal and statutory auditors, and their rights and duties.

Chapter Three describes the research methodology, including design, sample techniques, data collection methods, procedures, challenges encountered, and the historical background of the case study.

Chapter Four presents and analyzes data on the functions of statutory audit, making returns, accountability, record-keeping, and financial statement preparation.

Chapter Five concludes with a summary, recommendations, limitations of the study, and a bibliography.