THE SIGNIFICANCE AND OBJECTIVES OF SOURCE DOCUMENT IN AUDIT INVESTIGATION

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THE SIGNIFICANCE AND OBJECTIVES OF SOURCE DOCUMENT IN AUDIT INVESTIGATION

CHAPETR ONE

1.0 INTRODUCTION

1.1 Background of the study

1.2 Statement of problem

1.3 Objective of the study

1.4 Research Hypotheses

1.5 Significance of the study

1.6 Scope and limitation of the study

1.7 Definition of terms

1.8 Organization of the study

CHAPETR TWO

2.0 LITERATURE REVIEW

CHAPETR THREE

3.0 Research methodology

3.1 sources of data collection

3.3 Population of the study

3.4 Sampling and sampling distribution

3.5 Validation of research instrument

3.6 Method of data analysis

CHAPTER FOUR

DATA PRESENTATION AND ANALYSIS AND INTERPRETATION

4.1 Introductions

4.2 Data analysis

CHAPTER FIVE

5.1 Introduction

5.2 Summary

5.3 Conclusion

5.4 Recommendation

Appendix

Abstract

The concept “source documents” is a familiar term with those involved in keeping accounting records or watch dogs of limited liability and public liability companies and organizations from time to item, most often on annual basis, the independent Auditors call to review the accounting records kept by their clients. This they do by studying and evaluating the internal control systems in the company. This approach makes it possible for lapses, discrepancies, deficiencies and bottlenecks to be discovered if any do exist. However, most people do not really understand the role of the auditors in public practice. To the layman, it’s a matter of detecting for fraud, which is more or less a secondary object f audit.

CHAPTER ONE

INTRODUCTION

Background of the study

Every business entity, be it profitable or non profitable, have goals and objectives for which they were established example, most liability companies are established for profit optimization and charitable or non-profit organizations, example, government parastatates reestablished to subsidize costs to the governed. However, its pertinent to note here that whether upon profitable or non profitable basis, its relevant that accounting records must be maintained Accounting is broadly defined as a process of recording analyzing and interpreting at business transactions in such a systematic and concise manners as to give full and detailed explanation to related parties who are interested in the financial statement. In every business organizations, it’s the duty of the chief accountant to keep records of all business transactions of the organization. However if thus records must be kept, it must follow norms principles, conventions and standards et out by various professional accounting bodies. In Nigeria, the Nigeria accounting standard board (NASB) is in charge of this duty. Subject to the foregoing, section 357 of the company and allied matters decree. Makes it mandatory for every limited liability company to appoint an Auditor to examine its accounts. This now brings us to the question, who is an auditor? With reference to Walter N. Bigg, he sees an auditor as a person appointed by the directors (Shareholder authorize the directors to appoint) of a company to examine its books of account and stake whether it gives a true and fair view of the financial position of the entity and also see that there is compliance with statute and that accounting standard are strictly adhered to. In the light of the above, the auditor should be a professional and used in the accounting field, with high integrity profile and must be a member of a recognized professional body and must be licensed to practice. In Nigeria today, the institute of chartered accountants Nigeria takes care of this. If the auditor as a professional is aware of the fact that his work is relied upon by related third parties, he owes it a duty to the reasonable care and skill in the discharge of his duty so as not to expose himself to liabilities associated with negligence out of misfeasance proceeding. In the light of the above, for the auditor to accept assurances or to give in opinion, he must certify himself beyond all reasonable doubt that the presentation made to hi gives a true and fair view of the financial position of the entity as at the date of his audit. In these regards, he has access to all the company books and has unreserved rights as to question any maladministration, and gather all such information that would assist him in his work. However, for the auditor to formally accept assurances, has basis of acceptance must be dependent on the availability of reliable source of documents and explanations produced by the entity in question. At diverse levels of investigation Associate source documents checks and test are applied and evidences shown must be very authentic and satisfying. For example where bank balances are investigated, for the auditor to accept the stated figures, the certifying evidences should be, bank statements, check stamps, cash books, authorization vouchers, etc and all such reconciliation that would enable him accept the presented bank balances as shown on the account. It is pertinent to note that the presentation and figures without satisfactory evidence, or source document is like a student graduating without a certificate and thus bring us to one of the objectives of this text. The investigation process involves making independent confirmation, example circulation of debtors, creditors and other related third parties to the entity in question. Generally the process of audit investigation is limited by so many factors which includes: cost consideration, time factors, unavailability of data. Distance and prevailing socio-economic and political climate, in as much as thus factors are political climate, in as much as thus factors are highlighted a noted, the auditor must not fail to certify himself beyond all reasonably doubts. This should be done by disclosing all lapses and discrepancies and must not fail to give qualifications when need be. In all circumstances, he, the audit should try to avoid damages associated with negligence as number of cases related to auditors liability has been recorded some of the case includes: CAPRO industries Vickman (1989) see SCDH. Group VMC farlance (1972) see JEP Fasteners Vmarts Bloom and Co (1981) also see security pacific business credit V peat MARWICK MAL & CO (1992).

THE FIRM

This study is designed to examine the activities, responsibilities and legal framework under which the auditor in public practive operates. This is with the appraisal of a relatively small firm of charterd accountants in Nigeria today, Orji Chukwu and co. with Head Office at 57 Chime Avenue New haven Enugu and other offices in Enugu state and Lagos. Orji chukwu and Co is a relatively small firm of chartered accountants, founded in Nigeira in the year 1987 as a partnership between Orji Orji Chukwu L and Onyemelukwe C. The firm today has offices in about three states of the federation and efforts are made to erect more offices in other stated. In its early years, its main objectives, was centered on Financial management consultancy and audit and investigations, but today it has grown broth in size and scope it services rendered. It is interesting to know that the following range of services are now available at Orji Chukwu and co-chartered accountants.

Tax consultancy

Information technique Enlargement

Business advisory services.

STAFFING

In each state, the firm is headed by

Resident partner (a qualified accountant) and two assistants also qualified person

4 senior audit staffs

3 junior audit staff

Corpers

Industry trainees

Office assistants.

In the whole, the firm has about 32 staffs and efforts are onto recruit more employees to enable the firm meet with increasingly client ship.

STATEMENT OF THE PROBLEM

As has been mentioned earlier, there is a legal dimension to the auditor’s job. The duties of the auditors are outlines in section 360 (I) of the company and Allied Decree 1990). Any contravention of the requirement of this section of the decree attracts a penalty. Again the report of the auditor as an important document, not only, to the shareholders of a company, but also to related third parties. Cases have been recorded, where auditors have been convicted by courts of law for negligence resulting from misfeasance proceedings. Consequently, it is very important that an auditor should exercise due professional care in the discharge of his duties to minimize his exposure. The problems now faced by the auditors in public practice, is how they can attain this standard required of them, and also the needs of other parties who may be interested in the financial statements they are auditing. This study aims at striking out the various source documents. Tests and checks to be applied during the investigation on process. So as to guarantee the completeness of the audit investigation and the financial report three-on.

OBJECTIVE OF THE STUDY

The objectives is to form an opinion as to whether

1. The share capital has been properly classified and described in the account

2. The reserved have been properly described and only applied for the purposes permitted by the company’s articles, or companies Act.

3. Movements on reserves are correctly stated in accordance with the appropriate resolutions

Dividends paid and payable are correctly states in accordance with the appropriate resolutions

Director’s remuneration is correctly disclosed in the accounts, and is in accordance with the articles, Board and members resolutions, or any service agreements, that is, (PPIB).

The information required by companies act has been correctly recorded in the statutory books kept by the company for that purpose

7. Resolutions are in accordance with the articles and the accounts reflect the decisions.

1.4 RESEARCH HYPOTHESES

For the successful completion of the study, the following research hypotheses were formulated by the researcher;

H0: The share capital has not been properly classified and described in the account

H1: The share capital has been properly classified and described in the account

H02: Dividends paid and payable are correctly not states in accordance with the appropriate resolutions

H2: Dividends paid and payable are correctly states in accordance with the appropriate resolutions

1.5 SIGNIFICANCE OF THE STUDY

The study will give a clear insight on the significance and objectives of source document in audit investigation. The study will be beneficial to students, organizations and the general public. The study will serve as a reference to other researchers that will embark on this topic.

1.6 SCOPE AND LIMITATION OF THE STUDY

The scope of the study covers the significance and objectives of source document in audit investigation. The researcher encounters some constrain which limited the scope of the study;

a) AVAILABILITY OF RESEARCH MATERIAL: The research material available to the researcher is insufficient, thereby limiting the study

b) TIME: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.

c) Organizational privacy: Limited Access to the selected auditing firm makes it difficult to get all the necessary and required information concerning the activities.

1.7 DEFINITION OF TERMS

SIGNIFICANCE: the quality of being worthy of attention; importance.

OBJECTIVE: relating to or denoting a case of nouns and pronouns serving as the object of a transitive verb or a preposition

SOURCE DOCUMENT: A source document is the original record containing the details to substantiate a transaction entered in an accounting system. For example, a company’s source document for the recording of merchandise purchased is the supplier’s invoice supported by the company’s purchase order and receiving ticket.

AUDIT: an official inspection of an organization’s accounts, typically by an independent body.

INVESTIGATION: the action of investigating something or someone; formal or systematic examination or research.

1.8 ORGANIZATION OF THE STUDY

This research work is organized in five chapters, for easy understanding, as follows

Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study. Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding. Chapter five gives summary, conclusion, and recommendations made of the study

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