This research work is designed for the study of the role of internal auditors in stock taking as it affect Total Nigeria Limited. Internal auditors may be defined as in house approval activity which provide services to management by examining the application and effectiveness of system and controls within the organization in a manner that is independent of those operations, systems and controls.
In embarking on this project work, efforts should be made to limit the research to the areas of study which is hinged on their roles in stock taking activity in business organization. In chapter one, this work deals with the general introduction of the work by describing both auditing and stock taking. It also entails statement of problem, purpose of the study, significance, scope, limitation and statement of hypothesis and most of the terms used were defined in this chapter.
Chapter two gives the review of the related literature and studies. Also, the role of internal auditor under the law, internal auditing, stock taking, structure of Total Nigeria Limited and its operation, position of the internal audit department in Total Nigeria Limited, functions of the department, an example of internal auditors report, importance of effective communication among and with the internal audit unit, and stock taking of black and white products were reviewed also in this chapter.
Chapter three of this work deals with the research design and methodology.
It also showed the sources of data and the sample used.
Chapter four showed how the data collected was presented and analyzed using a simple or percentage analysis on the hypothesis.
Finally, chapter five which is the last chapter of this work contains the summary of findings, conclusion and recommendations.
2.2 Internal Auditing
2.3 Stock Taking
2.4 Structure of Total Nigeria Limited and its operation
2.5 Position of the Internal Audit Department in Total Nigeria Ltd.
2.6 Functions of the Internal Audit Department
2.7 An example of the internal auditors report
2.8 importance of effective communication among and with the internal audits
1.9the role of internal auditors in total Nigeria Limited
1.10Presentation of the role of internal auditors in total Nigeria Ltd.
1.11Reporting and its effect
2.12 Stock taking of black and white products
1.2Test of hypothesis
5.2 Conclusion
5.3 Recommendations
BIBLIOGRAPHY
REFERENCES
1.0 INTRODUCTION
People tend to erroneously think that auditing is a sub-division of accounting probably because that is how it was introduced to them and every auditor as we know is also an accountant. But, every accountant is not an auditor. Auditing has its roots elsewhere. The relationship of auditing and accounting is close but they are not the same.
Accounting is concerned with the collection, classification, summarization and communication of financial information. It involves the measurement and communication of business events and conditions as they affect the particular enterprise. The task of accounting is to provide a detailed financial information that will be manageable and understandable about an enterprise. Auditing does more of these things.
Auditing is the independent examination and expression of opinion on the financial statements of an enterprise by an appointed or employed auditor in pursuance of that appointment and in compliance with the relevant statutory obligation, hence the role of internal auditors in stock taking. It involves critical and thorough investigation of the financial books prepared by the accountants as to whether those financial statement show a discipline department on logic and accounting is part of its utilities.
An auditor must exercise reasonable care and skill in carrying out his audit work of stock taking.
This was fully stated in the case of RE KINGSTON COTTON MILL (1896). This case considered the degree of care and skill required of an auditor. It stipulated than an auditor is a watch dog and not a blood bound. That, it is the duty of an auditor appointed to carry out the work of stock taking to ensure that skill, care and caution which a reasonable, competent, careful and cautious auditor will use has been applied in stock taking. The auditor has to ensure in stock taking or physical verification of stock either by full count or measurement as incase of bulky stock taking that the stock taking with the bin card record.
Stocktaking could be done in three ways namely:
It should be known that where stock are materials in the enterprises financial statement and the auditor is placing reliance upon management stock-rate in order to provide evidence of existence, the auditor should attend the stock taking is normally the best way of providing evidence of proper functioning of the management stock taking procedure and also, the existence of stock and their conditions.
In the case of Re Kingston Cotton Mill Co., Ltd., it was decided in 1896 that it is not the duty of the auditor to take stock. But the practice in the accountancy profession has been improved and as a matter of general practice, the auditor Is now required to:
The auditor has to look into valuation of stock also to ensure the following:
i. That the same method of valuation is adopted from one period to the other
1.1 STATEMENT OF THE PROBLEMS
The nature of the product of Total Nigeria limited particularly liquids like kerosene, petrol, diesel and oil made it very difficult to effectively conduct stock taking at a point in time and also to determine the extent to which internal auditors are involved.
The problem emanates from the fact that it is not easy to measure or determine the quantity of oil or gas, petrol or kerosene in the storage tanks, pumps etc. This is because as ales are made, the tanks are refilled immediately. This peculiar situation makes it very difficult for the internal auditor to reutilize the process of stock taking.
Another problem is that the enterprise has a single internal audit department which is not adequately staffed to carryout the routine internal audit functions not to talk of engaging actively in stock taking in the area offices and the various rattail outlet (services station) through out the country.
Finally, since sales are made through out the year, period for stock taking will be a problem. This is because, before a stock taking will be carried out in the company, there must be a stock taking procedure where by there will be no purchases and sales of the company’s products for at least one or two days to enable the auditor and other staff concerned to carry out the stock taking properly and as needed.
1.2 PURPOSE OF THE STUDY
The main purpose or objective of the study is to determine whether persons in position of fiscal responsibility in government and limited liability companies like total Nigeria Limited do act and report in a trade fair manner. This is because internal auditing is becoming increasingly important in large business enterprises where the owner can keep close personal contact with all the phases of his business. He may not need an elaborate office or organization and extensive internal control. But, such situation can be found only in a relating small establishment and not in a larger enterprise that comprises many people who customarily are not supervised directly by the owners. The ownership of such enterprise may be scattered widely and an individual who own little or has no proprietary interest will be employed to run the enterprise. Separation of ownership from detailed supervision and even from the active management of an enterprise is a common phenomenon.
Such a situation present an urgent need for special safeguard to promote honesty and efficiency in the operation of the business and to ensure accuracy in the financial records hence internal auditing.
The purpose of this study is also to stress the importance for an organization to be aware of its stock position at all times since stock is as importance as cash in a business. The research also wish to across how internal auditing of Total Nigeria Limited has improved management information system and the type of activities performed by the internal auditor.
1.3 SIGNIFICANCE OF THE STUDY
It is believed that this study will not only be useful to the company where it is carried out but also to the companies that carry out the same type of business. Not only that Total Nigeria Limited is a commercial oil company, there is need to know its internal auditing system and how it has helped the efficiency of the accounting records again, this study will add tot he advancement of knowledge in the field of internal auditing in the company to the future researchers in the area. external auditors as well as internal auditors will benefit immensely from this work.
1.4 STATEMENT OF HYPOTHESIS
Hypothesis serve as guides for the researcher in the entire process of research endeavour and also, trim the main line of his study. They assumed answer to the principal question of the study, the correctness of which the researcher assess I the course of this study.
Hypothesis are either proved or disproved, accepted or rejected, that depends on the future. In order world, hypothesis interpose between a statement of the problem and the solution of the problem.
The importance of hypothesis to the course of this study are listed here under:
1.5 SCOPE OF THE STUDY
The researcher wants to examine in detail the role of internal auditor in stock taking.
Although, the study reviewed the internal auditing in companies but the investigation carried out by the researcher covered only Total Nigeria Limited which was the case study of this research.
There was a plan by the researcher to administer questionnaires to all branches of total Nigeria Limited in the country but confined most of this to only few branches due to financial problems.
1.6 LIMITATIONS OF THE STUDY
The limitations of this study is due to many factors like problems on interview meetings and that of conviction of officials taken as specimen.
Some of the personnel encountered could not pay attention tot he researcher and as a result a lot of explanation and persuasion is a result a lot of explanation and persuasion is needed to get the maximum co-operation of some respondents.
Also, inadequate fund and time factor necessary to cover some parts of the branched of Total Nigeria Limited coupled with the indifferent attitude of some audit clerk to reveal certain vital information for confidentiality purpose constitute to the limitations of this study.
Another problem encountered in the study by the researcher centered on the absence of the internal auditors to carry out the research work as required in the branche
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