THE IMPACT OF AUDIT COMMITTEE ON FINANCIAL MANAGEMENT OF AN ORGANIZATION(A CASE STUDY OF 7UP BOTTLING COMPANY PLC 9TH MILE CONNER ENUGU)
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THE IMPACT OF AUDIT COMMITTEE ON
FINANCIAL MANAGEMENT OF AN ORGANIZATION(A CASE STUDY OF 7UP BOTTLING COMPANY
PLC 9TH MILE CONNER ENUGU)
ABSTRACT
The impact
of a Good Audit committee on the financial management of an organization can
not be over emphasized. This is because internal control is the bedrock of any
organization that wants continuity in the existence of the organization. The
problem facing 7up bottling company plc is that the do not have an internal
control system and also they lack organizational control. I make use of primary
and secondary source of data collection, Oral interview, questionnaire,
Newspaper etc. and found out that loses occure on daily bases due to there is
no relationship between 7up company plc and audit committee. Then I came to a
conclusion, therefore it is conclusively to say that the financial management of
an organization via internal control system may never be possible if the board
and senior managements are not committed in providing well planed internal
control system.
CHAPTER ONE
1.1 BACKGROUND OF THE STUDY
According to
Orjih John (2001:2) every business organization profit making has objectives
and goals in mined to achieve their goals. It is to satisfy the social need of
the citizens, and in the achievement of these purpose supervisor more often
than not its activities, play a document role. The size and scope impossible
for the executors to exercise personal and first hand supervision of
operations. It is in this light that audit committee, financial or otherwise
established by management is initiated.
By section
360 of the companies and avoid matter act 2004, the auditor is expected to
carry out investigations as would be necessary to enable him from a opinion. It
follows from above, that even the law does specify the extent of the
examination to be carried out by the auditor. This is left to the director of
the auditor. This decretion is not abused by the auditor. In practice he goes
beyond the legal requirement in discharging his duties and his primary focus is
to plan for the projects to be audited and how each project it’s the
organization’s needs. This brings to bear on his job a very high standard of
professional practice and considerations.
An auditor
will therefore involve for distinct practice and procedures via:
Ascertain
the validity of original transactions.
Confirming
the completeness and accuracy of the recording of these transactions.
Ensuring
that the financial statements have been prepared from and are in agreements
have been prepared from and are in agreements with the record and
Confirming
that the financial statements conform to the relevant status and accounting
standards.
According to
Chambers Andrews (1974), a complex organization needs an auditor as an
extension of the eyes and ears of management who however effective the
organization might be unable to inspect the work of their subordinates whose
stewardship is dilegated to them.
Internal
control system can be broadly divided into two main categories.
1. Administrative control
2. Accounting or financial
It is the
accounting or financial control function that internal audit, audit committee,
internal checks and other accounting policies and systems built into the
initial control network to promote and encourage the attainment of the
objectives of the firm.
Initial
audit is an initial function which means that it is conducted by the employers
of an organization specially designed for this purpose.
It is an
organization management responsibility to establish the department not to do
so.
The
objective of audit committee as internal auditing is to assist all members of
management in the effective discharge of their responsibilities, by furnishing
them with analysis, appraisal, recommendation and pertinent commentary in the
activities reviewed.
To attain
such overall objective, initial audit involves such activities as:
1. Reviewing and apprasing the soundness,
adequacy and application of accounting, financial and other operating controls
and recommending effective control at a reasonable cost.
2. Ascertain the reliability and relevance of management
data development within the organization.
3. Appraising the quality performance in
carrying out assigned responsibilities.
Where an
internal audit department operates the statutory auditor pays particular
attention to its activities as these will have a direct bearing on the scope
and depth required by members.
According to
Onovo (2011:282), the auditor should consider whether analytical procedures
that are perform at or near the end of the audit when forming an overall
conclusion as to whether the financial statement as a whole are consistent with
the audit’s knowledge of the business indicate a previously unrecognized risk of
material misstatement due to fraud. Determining which particular tends and
relationships may indicate a risk of material misstatement due to fraud require
professional judgment.
Material misstatement of financial
statement due to fraud offer involved the manipulation of the financial
reporting process by recording inappropriate of unauthorized journal entries
throughout the year or at period end, or making adjustments to amounts reported
in the financial statements that are not reflected in formal journals entries,
such as through consolidating adjustment and reclassifications.
1.2 STATEMENT OF PROBLEMS
It has been
stated earlier that the duty of detecting frauds and irregularities lies with
the management.
This could
only be done through effective and efficient audit committee of the internal
control system in an organization. But even with the presence of the internal
auditor some problem are still inherent in organization that interfere with
goal attainment.
These
include:
Stock
disappears in large numbers on their daily basis.
Assets are
either misappropriated or not accounted for.
Those names
appear in large numbers on payroll and are undetected for at longtime.
Physical
cash are stolen while signatures are forged in cheques also to steal cash
frauds perpetuated are only being discovered after longtime.
This project
is intended to find out with the above or other problem. If any, is caused by
lack of good internal control system by the audit committee in an organization.
1.3 OBJECTIVE OF THE STUDY
The
objective of the study are as follows:
1. To find out the impact of audit committee on
financial management in bottling company.
2. To ascertain whether audit committee on
financial management of an organization is effective.
3. To evaluate the profitability of audit
committee on financial management in achieving organizational objective.
4. To find the strategies adopted by 7up
bottling company in achieving financial objectives.
1.4 RESEARCH
HYPOTHESIS
The results
of the research hypothesis of the study are as follows:
1. Ho: There is no relationship between audit
committee and financial management.
Hi: There is
relationship between audit committee and financial management.
2. Ho: There is no relationship between
profitability of audit committee in achieving organization objective.
Hi: There is
a relationship between profitability of audit committee in achieving
organization objective.
3. Ho: There is no relationship between
effective internal control system improvements in profitability.
Hi: There is
relationship between effective internal control system improvements in
profitability.
1.5 RESEARCH
QUESTIONS
From the
above objective of the research study, the research questions are as follows:
1. Is there any relationship between audit
committee and financial management?
2. How does effective audit committee improve
profitability?
3. How dos application of audit committee
techniques improve effective profit?
4. Is there any relationship between committee
and financial management in 7up bottling company?
1.6
SIGNIFICANCE OF STUDY
No internal
control system never elaborate could be completely water tight, but a good
audit committee operated in a company is an indispensable aid to efficient
management, in that it assures management of the reliability of decisions taken
by them and that these decisions are in line with goals to be attained.
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