THE EFFECT OF AUDITING ON THE PERFORMANCE OF BUSINESS ORGANIZATION (A CASE STUDY OF HAMDALA HOTEL, KADUNA)
1.1 Background of the Study
The dynamic nature of business environment growth and increasing complexity of business has made it imperative for management to seek for more avenues of control, which has resulted internal audit which serves as a control measure in both public and private sector.
It is now rare indeed to find an enterprise of any size which does not have an internal auditing function. In many cases internal has eclipse other management services to become efficiency, effectiveness and economy. The need for internal auditing in business organization cannot be ruled out.
As business expands and the level of transaction increases there had been cases of frauds, misappropriation of cash and other irregularities, which if not checked will obviously not be interested of the organization, that is why internal auditing must be introduced in every form of business organization be it large or small to check such irregularities.
Internal audit functions are performed by employees of organizations functioning in a staff capacity and reporting to a high level officer in the organization.
Internal audit is essentially an appraisal activity within organization for the review of accounting, financial and other operation as a basis for services to management. Auditing is the examination of certain statement covering the company’s business transactions over a period of time and the financial position of an organization on a certain date in order that true auditor may issue a report on them. They also make sure that the final statement is true and fairly viewed. There are more involved definition, such as that issued by the consultative council of the accountancy bodies (CCAB). This body defined auditing as “The independent examination of an expression of opinion on the financial statement of an enterprise by an appointed auditor in pursuance of that appointment and in compliance with any relevant statutory obligation”.
The statement adds that the responsibility for the preparation of the financial statement and the presentation of the information included in rests with the management of the enterprise (in the case of a company the director).
The auditor responsibility is to report on the financial statement as presented by the management. The auditor’s duties do not require him specifically to search for fraud unless require by the statute or on the specific terms of his engagement. However, the auditor should recognize the possibility of material irregularities or fraud which could unless adequately be disclosed or state of affairs shown by the financial statement.
Auditor therefore examines the financial transaction to test they are in compliance with the generally acceptable accounting principles and that of the financial statement are true and fair.
Setting up an internal audit department to a large extent help in ensuring that operational activities comply with management policies and other related standards. These will give no room for any form of irregularities.
Setting up an internal audit department to a large extent help in ensuring that operational activities comply with management policies and other related standards. These will give no room for any form of irregularities. The basis of this study is to inform organizations on the necessity of internal auditing and how it can be properly implemented.
1.2 Statement of the Problem
Inspite of the existence of internal audit department/section in business organization, it is often argued that the rate of fraud in the organization of the economy is still on the increase.
By delaying payment vouchers, some people argue that the internal auditors are creating more problems than they are solving. Others even see internal auditors as mere tools to witch-hunt and therefore see them as unnecessary evils. An attempt would be made in this study to properly educate other operational managers (who see internal auditors as constituting a nuisance to them) on the proper functioning of internal audit department. The wrong impression held by non audit staff will be eliminate, that internal auditors are merely to detect fraud and therefore must not be concerned with their normal operations.
The research questions therefore are in the problem of this research work which is restricted to the following: does internal auditing play a role in accomplishing true and fair presentation of statement of profit and loss account and balance sheet? Does internal auditing enhance internal control leading to efficient running of enterprise?
1.3 Objectives of the Study
The objective of the study is to determine the benefit that could accrue to business organization through auditing with specific reference to Hamdala Hotel Kaduna.
The study will further bring into highlight the importance attached to the auditing system adopted by business organization whether it satisfied their present and future needs.
It will also show whether the limited liability companies are among the beneficiaries of auditing system.
1.4 Research Hypothesis
This sub-chapter has an important attribute in any research work. In order to come out with a meaningful conclusion at the end of the research works, the researcher postulates the following hypothesis:
1) H1: That auditing is effective and efficient in business organization.
H0: That auditing is not effective and efficient in business organization.
2) H1: That auditing eradicate total fraudulent act in the business organization i.e. auditing represents tool for controlling frauds on resources in an organization.
H0: That auditing does not eradicate total fraudulent act in the business organization i.e. auditing does not represent a tool for controlling frauds in resources in an organization.
Infact, the researcher is concerned with the examination of empirical evidence to test the efficiency of this hypothesis to examine the evaluation and also use of auditing in business organization. It is hope that by the end of the exercise the writer should be able to outline the importance of auditing in business organization.
1.5 Significance of the Study
The major significance of the study is to enlighten the public on the need to adopt the usefulness of auditing in business organization. Business organization are facing serious problem due to lack on internal auditing. If more attention is given to it, it will contribute greatly towards the development of the organization as a whole. It is significant to study the importance of auditing in business organization in Nigeria and by so doing it gives management a better insight as to know how to operate with the auditors in order to make the objective of the organization or company.
To the management/directors, the benefit from this system will help in terms of internal control and the prevention of fraud that may occur in the organization. It would also show the importance attached to audited account made by auditors to the management and external users is financially sound and having met up with the requirements of the information.
As the organization /company continues to exist and make profit, management will now know that auditing is good in term of financial statement given by the auditor that the account is true and fair. In addition, it widen the knowledge of the researcher, in the course of study and other researchers can go through it for further knowledge of gathering relevant facts.
1.6 Scope of the Study
Judging from the fact that auditing has contribute in measurable to organization in enhancing their efficiency, productivity as well as profitability. The study is focused on the following as an acid test of auditing relevance to organization and company: examining the existing auditing in the organization; method of appointing removal and remuneration of auditors as well as the operation of internal control in Hamdala Hotel, Kaduna.
1.7 Historical Background of the Case Study (Hamdala Hotel, Kaduna)
Hamdala Hotel Kaduna is one of the international Hotels, which is solely owned by the New Nigeria Development Company Limited (NNDC). It is managed by Arewa Hotel Limited, which also manages a number of other hotels.
As the oldest hotels in Northern Nigeria, it was officially opened in January, 4th 1961, by the late Sir. Ahmadu Bellow then Sardauna of Sokoto, Premier of Northern Nigeria. It was commissioned to promote tourism and provide up to date services in Kaduna and the neighboring states.
The decision to construct such on ultra modern international hotel in Kaduna was to provide standard accommodation and catering service for other government functionaries on official visit to Kaduna.
Being the first international hotel in Kaduna the one hundred and ninety four bedroom hotel has been playing an important role in solving accommodation problems for both government and the private companies who may like to accommodate their visitors by giving them accommodation for brief period. The hotel is widely recognized.
Handala hotel is located along Mohammed Buhari way and it is opposite Murtala Muhammed square polo field and the Kaduna club among others.
The Hotel is made up of six (6) departments and cursory look into the several organization and chart shorts that it consists of the following departments:
• Food and beverages department
• Accounts department
• Personnel department
• Front office department
• Maintenance department
At the top of the organizational chart is the chief executive with the rank of managing director, who is responsible for the smooth running of the affairs of the hotel. Next to him is the general manager then the departmental managers, like housekeeping. The house keeping department is in charge of keeping the surrounding clean and keeping the rooms tidy ready for a quest check in.
The food and beverages, the chief is in charge of kitchens affairs and these are other mangers assisting the food and beverages because of the sub-section under 17, example, banqueting handed by the banquet managers and other important department as mentioned above.
Hamdala hotel has contributed in one small measures to the development of business more especially in the times of seminars, launching, rather, symposium, training, end of the year parties, wedding reception and many more people comes from far and near to share common views for the purpose of business transaction and individual needs. Many organization also use the hotel for holding meetings and even launching of new products and for with worthwhile activities that have impact on the society.
1.8 Definition of Terms
Fictitious Account: They are account that does not exist. There are the types that stolen money is usually lodged.
Irregularities: This can be defined as the act of doing something in such a way that gives against the usual way.
Forgery: According to the website dictionary forgery is the falsification or counterfeiting which involve the making of false document writing knowing it to be false and with the interest that is acted upon as genuine.
Audit: Accounting to Webster business dictionary is an examination of accounting document and of supporting evidence for the purpose of reaching propriety fairness, consistency and conformity with accepted principles.
Internal audit: This refers to the institutionalized examination of accounting procedures with an organization.
Financial regulation: these are rules, regulations and guideline governing financial transition.