THE ROLE OF INTERNAL AUDITORS IN STOCK TAKING
(A CASE STUDY OF 7UP BOTTLING COMPANY PLC)
Due to irregularities often encountered in the public enterprises and private establishments, this research project is designed for the study of the internal auditor in stock taking especially as a case study of 7up bottling company plc 9th mile corner Enugu.
Internal auditing and stocktaking in recent time has proved to be a hard nut which auditors have not find easy it crack 7up bottling company is an enterprise, which concentrated much on the marketing of favorite brands of soft drinks products. These brans are popular and widely consumed across the length and breadth of Nigeria . seven – up bottling company plc is one of the largest manufacturing companies in Nigeria. This work comprises of five chapters
Chapter one of this work gives a general introduction of the work which includes the background of the study, statement of the problem, Objective of the study, research questions, significance of the study, scope of the study and limitation of the study etc.
Chapter two comprises the review of related literature and assertions by accounting icons and intellectuals in the field.
Chapter three is made up of research design and methods, Area of study, Population study, Sampling methods, Research instrumentations, Validity and reliability of research instruments, source of data and methods of investigation etc.
Chapter four contains the presentation and analysis of data and lastly.
chapter five contains findings, conclusion, Recommendations and bibliography reference, Appendix, as shown in 7up bottling company plc 9th mile corner Enugu.
Efforts were also made to make this work interesting and it is hoped that it will be of great help to anyone that comes across it.
TABLE OF CONTENTS
CHAPTER ONE: INTRODUCTION
1.1 Background of the study
1.2 Statement of the problem
1.3 Objective of the study
1.4 Research questions
1.5 Significance of the study
1.6 Scope of the study
1.7 Limitation of the study.
CHAPTER TWO: REVIEW OF RELATED LITERATURE
2.1 The role of internal auditor under the law statute
2.2 Internal auditing
2.3 Stock taking
CHAPTER THREE: RESEARCH DESIGN METHODS
3.1 Research design
3.2 Area of study
3.4 Sample and sampling techniques
3.5 Instrument for data collection
3.6 Validity of the research instrument
3.7 Reliability of research instrument
3.8 Method of collecting data
3.9 Method of data analysis
CHAPTER FOUR: PRESENTATION AND ANALYSIS
4.1 Data analysis and presentation
4.2 Summary of results
CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION, RECOMMENDATIONS
5.1 Discussion of results/finding
5.2 Conclusion of result
5.4 Implication of the research findings
5.5 Suggestions for further research
5.6 Limitation of the study
LIST OF TABLE
The role of internal auditor
The regulation of stock taking
The effect of internal auditor
The positive change in stock taking
Auditing system has been known as a major factor to which good or poor performance of a manufacturing company can be attributed
Most people think to seriously that auditing is a subdivision of accounting, probably that is how it was introduced to us and because every auditor is an accountant but every accountant is not an auditor. Auditing has its root elsewhere. The relationship of auditing and accounting is close, but they are not the same. There are business associates.
One may ask “ What is accounting?” accounting has been defined in many ways by different authors.
Accounting to Eneje (2006) accounting is a service activity which provides and financial information about economic activity that is intended to be useful in making economic decisions” It involves the measurement and communication of business events and conditions as they affect the peculiar enterprises or entity. The task of accounting is reduced a tremendous mass detailed information to manageable and understandable proportion. Nevertheless auditing does more of these things.
Auditing to Nwabueze C.C (1997), “auditing is an independent examination by a statutory appointed person called the auditor to investigate an organization, its records and the financial statement prepared from them, and thus form any opinion on the accuracy and correctness of the financial statement , hence the role of the internal auditors in stocktaking
Auditing is analytical not constructive. It is critical, investigative and concerned with the basis of accounting measurement and auditing emphasis it’s proof of correctiveness
Auditing is also concerned with adequacy in design, effectiveness in operation and consistency in application of such proceessings.
The researcher will also examine the effects of these aspects of the role the internal auditor in stock taking.
It is aimed at forming opinion on the truth and fairness of the transaction of an enterprise and also has its principles, rules not on accounting, which is learns for ideas and methods.
Auditing is therefore a discipline independent on logic with accounting as art of its utilities.
The use of internal auditors controls the measures and its effects on a manufacturing company, hence the establishment of the auditing department will also been show. The effects of these aspect of auditing in stock taking is The objective of this work, hence the research topic “The role of internal auditors in stock taking” (A case study of 7up bottling company plc 9th mile corner Enugu).
1.1 BACKGROUND OF THE STUDY
7up bottling company was founded by Mohammed El – Whalil in the year 1960. 7up bottling company was incorporated in Nigeria in the year 1959 and finaly came to Enugu in 2003. in 1959 it was incorporated as a private limited liability company under the name 7up limited and its name later changed the limited and its 7up bottling company plc in 1991 to comply with the company and Allied matters act 1990, to become one of the Nigerians most admired companies.
Seven – up bottling company plc is one of the largest manufacturing companies in Nigeria. They produce and distribute the favourite brands of soft drinks. Such as pepsimirinda, seven consumed up and mountain dew. These brands are popular and widely consumed across length and breadth of Nigeria.
They have nine bottling plants with state of the manufacturing facilities located. Strategically acorss the country. Seven – up bottling company has a well co – ordinated distribution network with an extensive network of over 200 distribution centres located acorss Nigeria.
Neverthless the auditor had the account read to him since the term audit originated from the latin “audire” meaning to hear. The origin of an audit can be traceds to the ancient times in Britain when landowners allowed tenant farmers to farm on their land. The landowners did not involve themselves in the cultivation of the land or in the supervision of these tenant farmers.
After Luca pacido published his book in the 15th century, the work of auditor became more involved but today, the increased complexity of business units, either by the scope of its own operation or by amalgamation, has now forced the auditor to adopt new methods of approach to his work the role of auditors in stock taking.
The auditors duty in respect to stock taking is often is often regarded as fully expressed in the case of “re Kingston cotton mill co. ltd” , (1896) in which Lindly L.J. stated that it was “on part of the auditors duty to take stock” . But later in the united states, it is recognized duty of the auditor to make physical stock chedes that is stock taking, this duty having been imposed upon him after much defalcations has took place in case of “ MC” Kasson V- Robin” (1940) whereby fictitious record affecting purchases, sales and stocks enabled various responsible officials working in collusion to over state to over state the assets on the balance sheet by sum of 21000, 000 dollars.
On the other hand, stock taking or physical verification of stock by means of fully counted or measurement incase of bulk stock tally with the bin card records stock taking could be done in three ways stated below:
(a) Counting of stock at the end of the year or before the year ends or after the year ends.
(b) Counting of the part of stock by means of interpolating the total statistics.
(c) By means of using continuous stock records
It should be known that where stocks are material in the enterprises. Financial statement and the auditor is placing reliance upon management stock - take in other to prate evidence of existence, the auditor should attend the stock taking. This is because attendance of stock taking normally is the best way of providing evidence of the proper functioning of the management stock - taking . procedure and the existence of stock and their conditions.
The company, 7up bottling company plc is known for their good auditing principles till date.
1.2 STATEMENT OF THE PROBLEM
The nature of the product of seven up bottling company plc particularly liquids such as pepsi, mirinda, selen – up and mountain dew makes it very difficult to effectively conduct stock – taking at any point in time and also to determine the extent to which internal auditors are involved.
The statement of the problem was discovered as a result of the researchers enquiries.
1) 7up Bottling company plc has been going under services of financial problem due to the internal control where not effectively used.
2) The staff do not know whether internal control will regulate the financial constraints of the company.
3) 7up Bottling company does not know whether internal activity stocktaking will make good or loss.
4) The staff of seven – up Bottling company plc do not know the present effectiveness and how efficiency of stock talking method will be
5) The existing auditing system in the manufacturing company does not comply with the generally accepted accounting principles.
6. There is incomplete recording of stock in most manufacturing companies in Nigeria, thereby not obeying the principle
1.3 OBJECTIVE OF THE STUDY
The main purpose or objective of this study is to determine whether persons in position of fiscal responsibility in government and limited liability companies and organization seven – up bottling company report in time and fair manner. This can take place because the Internal auditing is becoming increasingly important in large enterprise.
An organization like seven – up Bottling company plc Enugu that has so may district branch offices through the state and because of this they need the service of many people who are not supervised directly. It is also the same like ownership of a co-operation often it is scattered widely, and individuals who has little or no proprietary interest in firm, are employed to run it.
Separation of ownership from the active management of an enterprise is a common phenomenon. Such a situation presents an urgent need for special safeguard to promote the efficiency in the operation of a business and to assume accuracy in the financial records hence internal auditing.
The objective of this study is also to stressing the importance of an organization to be aware of its stock position at all times since stock is as important as cash in an organization.
The researcher also wish to put across how internal auditing in seven – up Bottling company plc has improved management information system and type of activities performed by the Internal auditors.
1.4 RESEARCH QUESTIONS
1) To what extent can the role of Internal auditing in stocktaking in seven – up Bottling company plc effecting be determined?
2) Can internal auditing in Total Nigeria Limited regulate its stocktaking?
3) How does internal auditing effect stocktaking in seven – up Bottling company plc?
4) Will Internal auditing in seven – up Bottling company plc change the stocktaking methods positively?
5) Do internal auditors in seven – up Bottling company plc attend company board meetings personally or by proxy?
6) In what ways does the staffs and board members contribute in the discipline of erring and bad stock keeping?
7) Does your firm prepare budget?
8) Would you suggest that the firms profits since the introduction stock taking system has been
1.5 SIGNIFICANCE OF THE STUDY
This study is believed will not only be useful to the company where it is carried out but also to other companies that carryout the same type of business not only that, since seven – up Bottling company is prelate limited liability company, there is need to know its internal auditing system and how it has helped the efficiency and proper usefulness of accounting records.
The study of auditing in manufacturing companies will enable them to identify areas were their accounting system inadequate.
The study will also provide information on management to accomplish its objectives.
These research work will help manufacturing companies know how controls can be applied with regards to inventory and why this is necessary.
Researchers, students and teachers will also gain from the techniques and methods of good auditing system exposed in this work. Government will equally benefit through increased revenue from higher profits.
The society at large will benefit through facilities provided from increased revenue accruing to government as well as higher expenditure votes to social responsibility functions by these companies as a result of higher profits.
Shareholders and infestore will benefit from the study by higher dividend, dividend yield resulting from better auditing records.
1.6 SCOPE OF THE STUDY
Through the study received the internal auditing in companies the investigation carried out by the researcher covered only seven – up Bottling company plc at mile cornch Enugu which was used as a case study.
1.8 DEFINITION OF TERMS
To ensure a proper understanding of what the study is all about, some unfamiliar words to those who are not in the same filed are defined as they appear in the project.
a) Internal Auditing: Internal Auditing is an independent appraisal activity within an organization for the review of accounting, financing and other operations as a basis for services to management. It is a managerial control, which functions by measuring and evaluating the effectiveness of other control.
b) Internal Control : Internal control is the whole system of controls financial and other wise established by management in order to carry on the business of the enterprise in orderly and efficient manner, ensure assess and secure as far as possible the completeness and accuracy of the records.
c) Internal Auditor: Internal Auditor is the person that does the above mentioned job.
d) Stocktaking: Stocktaking is counting and checking the price and physical qualities of goods or items in the store by selected officials of the company in order to know whether the physical numbers and prices tally with what is written in the bin cards.
e) Bin cards: Bin cards are cards that contain the descriptions of an items, the receipts issued and as well as the balance of the items in question. The bin cards are used not only for detailing receipts and issues of materiel but also to assist the storekeeper to control the stock.
f) External or Independent Auditing: This is an independent examination of the financial statement of an enterprise conducted with view to the expression of an opinion on whether or not those statements show a true and fair view of the enterprise by a professional practitioner who engaged as an independent contractor.
g) Watch dog: This is a dog trained and kept to guard property of various kinds, homes and offices. In this context, the term watchdog refers to the internal auditor.
h) Vouching Approach: Vouching approach is typified by checking and ticking the quantities of transaction and documents to ensure that they have been recoded accurately and correctly.
i) Verification Approach: Verification approach this concerns the direct verification by independent means of assets, liabilities, income and expenses and other mattes that is concern to the auditor.
j) Jetty: Jetty is a place in the seaport where tankers carrying soft drinks products berth.
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