Auditing as an Aid to Accountability

Auditing as an Aid to Accountability

AUDITING AND ACCOUNTABILITY DEFINED – Auditing is regarded as one of the more recently established professions born out of the complexity of the modern business word. Stewardship is the practice by which productive resources owned by one person or group of persons is being entrusted under the care of person appointed by them to look after property.The process by which the manager accounts or reports to the owners of the business is called stewardship accounting. This reporting and accounting is usually done by means of financial statements. In order to verity the true and fairness of the report it has to be examined by an independent person an auditor.    

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Various delimitation of auditing have been promulgated by different authors and accounting bodies among which areas.
a. Auditing is an examination and evaluation of the authenticity and therefore the reliability of an organisation business documents and records. It also involves making inquiries to ascertain that the financial statement on which the auditor is reporting on and which has been prepared from these record display a true and fair view of the financial result for the period under review, and also the true and fair view of the states of affairs of the organisation at the year end.
b. Auditing is an examination of the books, accounts and vouchers of a business as will enable the auditor to satisfy himself that the balance sheet is properly drawn up so as to give a true and fair view of the state of the affairs of the business and to state whether the profit and loss for the financial period according to the best of his information and explanations given to him and as shown by the books, and if not, in what respect is he not satisfied.
c. Auditing is the examination by the auditor of a balance sheet and profit and loss accounts proper by others so as to ascertain to be able to know if the accounts are properly drawn up to show a true and fair view of the state of affairs and of the results of the particular concern and comply with the relevant statutes.
Another definition is contained in the auditing standard and guidelines of the combined councils of the accounting bodies (CCAB) issued in April, 1989 and is as follows, ‘an audit is the independent examination of an expression of opinion of the financial statement of an enterprise by an appointed auditor in pursuance of that appointment and in compliance with any relevant statutory obligation’. This definition was approved by the council of the association of certified accountant s, the institute of chartered accountant of England and Wales. The institute of Chartered accountant of Scotland and institute of chartered accountants of Ireland.
According to leslie, R. Howard ‘an audit is the  investigation of a statement in figures which involves the examination of certain evidence which the object of the investigation is to enable the auditor to make a report on the statement.
Auditing therefore involves a complete examination of a period of transaction of business and the manner in which the transaction are recorded. How far such an examination must extend will depend upon the individual circumstance of the case, but the auditor should obtain relevant and reliable audit evidence therefore. The audit evidence is a written report signed by the auditor and addressed to the person(s) to whom he is to report to. According to Leslie R. Howard, “no investigation may be termed an audit unless a report is ultimately provided. The report is usually set out at the foot of the st so that it is clearly identified with the information to which it refers. In the case of limited liability companies this method of presentation is laid down by the companies Act of 1986 but in other cases the report may be issued separately from the financial statement.

In this article 3. C Ibezue said “accountability in my mind is ant just stewardship of returning what is entrusted to the manager but is associated with the profitability and growth terrified or five – fold within a specified period”. in other words, it implies prudent employment of scare renouncement, machinery, material, money and moment which have counter varying claims to obtain optimum reward. Also C. O. Akuanyinwu distinguished accountability in terms of:
i.     Expenditure of funds and procedures by which that expenditure is accounted for. This is seen as finical or fiduciary accountability defined interms of how the public fund entrusted under the care of post primary school management board is safeguarded. Expended and accounted for.
ii.      Capacity to achieve results for the give expenditure of resources
and the degree of success in the achievement of the goal. This is called efficiency /effectiveness associated with how productive the post primary school management board are and results derived from funds invested and the degree of success achieved from project embarked upon by government”. Accountability should also be seen as responsibility for achieving social objective as expressed in the directive principle of state policy.
In Nigeria today when one talks of accountability the thought travels readily on the path of financial accounting. the government provides the law guiding the management for joint stock companies, industrial and provident societies, clubs, co-operative, trade unions and in every instrument setting up state stature corporations, for maintenance of specified financial records and for the review of periodic financial reports usually for the interest of the owners, the investing public and for he control by the state government as the case may be.
Accountancy in the post primary school management board can therefore be briefly described as the efficient implementation of government polices spearheaded by top officer through the proper utilization of management system and techniques in the administration of human, martial and financial resources. Furthermore, it should be understood that the public servants husband the resources. As such the public servants in whatever unit they may find themselves hold their post in apposition of trust. Therefore, they must render account of their trusteeship to the citizenry to whom the government business services. The giving of account by the post primary school management board of their stewardship of government resources placed under their trust is accountability.
In this article, “new direction in Government auditing” Yeo Pee Pine said, ‘the concept of public accountability has expanded to encompass the following elements.
a.     Fiscal accountancy: Which includes fiscal integrity, full disclosure and compliance with applicable laws and regulation.
b.    Managerial accountability: Which is concerned with efficiency and economy in the use of public founds, properly, personnel and other resources.
c.     Programme accountability: Which is concerned with whether government programmes and activities are achieving the objectives established for them with due regard to both costs and results.
From all these definitions and explanation of accountability, one can see that accountability has a board meaning and it all depends on what one has in mind when using the term. For the purpose of this research the attention is laid on fiscal and managerial accountability.

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In his paper presented to the association of students accountants, of the institute of management and technology (IMT) Enugu on Tuesday 5th May 1984, Mr. Uchendu categorized the development of auditing into three broad stages as follows:
i.     Post;         Phase I period before 1844
Phase 2 period from 19844 to 1960
ii.     Present:    Period from 1961 to 1984
iii.     Future:     Period from 1985 to 2000
post phase 1 period before 1844
Before 1340 ADEQUATE the earliest instance of the use of Double Entry system of bookkeeping. There was some system of check upon persons whose business it was to record to financial transactions on behalf of their masters. As soon as a coherent organisation was acquired by uncient expires and states Egyptians, Greeks and Romans system of checks and counter check were applied. The person who had the responsibility of making such as an examination of account was know as the auditor. The word “audit” was derived from the Latin word “audine” meaning “to hear”. At that time the parties to the accounts used to appear before the auditor who heard their accounts.
By 1494, great impetus was gevin to trade and commerce by the Italians. This give rise to the evaluation of accounting system as evidenced in Kuca Paciolo’s treatise – DE computerate scriptures” (or reckoning and writings) in his book ‘summary de arithmetical, geometria, proportione et proportions everything about arithmetic’s, geometry proportions). This treatises revolutionaries accounting thought in Europe and New World (America). This also generated a potent factor in the evaluating of a more perfect system of ‘checking”, then “hearing” the account.  The accountancy profession was yet in embryonic stage and degree of care and the skill required of the auditor was such that would enable him to go through the books of account with a view to ensuring that they were in order and that frauds and error were not perpetrated by the stewards or employers before he would express his opinion.

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Post phase ii period from 1844 to 1960
1844 witnessed a momentous event in the history of accountancy and auditing. The joint stock Act of the year which made possible the separation of ownership and management also crated a new dimension in e requirements for periods financial statements. The shareholders needed improvement as to the security of their investments. The act regulated joint stock companies and stipulated that “ FREE AND FAIR VIEW’ of the companies activities, should be given to the shareholders annually in the companies balance sheet.
In 1888, the act of that year created the auditor. The aim was to reduce the opportunity for management to lead shareholders. Thus it was made compulsory that auditors with sound financial training should examine the companies books and accounts impartially an behalf of the shareholders. In 1908, the provisions of the 1888  Act became binding on all limited liability companies.
Apart from statutes, this period under review witnessed unprecedented upsurge of judicial decisions which helped in no small measure to shape the procedures, methods, and practice of auditing. Some of the cases have binding forces of procedure, some persuasive and some not effecting auditors directly provided fertile ground for reasonable inference to be drawn therefrom.
This is a period when the accountants/auditors can be said to have recognized their duties and responsibilities in the auditing areas as well as in the area of reported financial statement.
The period has seen in the world at large in these veine.
i.     Establishment of consultative committee of accounting bodies in U. K. (CCAB) and similar body in USA (AAB).
ii.     Establishment of international federation of accountants (IFA) and its offspring’s, international auditing practice committee.
iii.     Judicial reversal of earlier decisions affecting auditors and accountants.
iv.     The challenges to accountants/auditors of the computer revolution.
v.    African association of accountants.

In addition to the above, this country has witnessed the establishment of the institute of chartered accountants of Nigeria by an Act of parliament in 1965, the companies Act of 1968 as (amended), 1990, the banking decree of 1969 as (amended), the productivity prices and income decree No 30. of 1977 (as amended), the Nigerian accounting standards board and the Nigerian stock exchange. These among others are aimed in part in regulating and improving the standard of reporting. Specific sections are devoted to auditing requirements.

The proceeding paragraph dealt with auditing from “hearing” stage to the stage the auditors gives visible evidence. According to Mr. Uchendu, the future (1985 to 2000) my feature the stage where the auditors may use his own computer and from his own end of terminal interrogate the clients computer. It will hopefully be a time when the computer of the auditor in his absence can interrogate the clients computer and extract information from him. The future, as is anticipated will deal more of ‘current phase” them “past  phase” auditing. In his paper, Mr. Ucheudu emphasized the need for the institutions of higher learning offering courses at undergraduate level on computerization. He also suggested that in future, department of accountancy in our polytechnics universities should after courses at Higher National Diploma and degree on computer, accounting and auditing.
In the same vein, lesie R. Howard in his book principles of auditing said, “the work of auditor is portrayed in ancient Egyptians will painting and their activities are recorded in the working of the early Roman Empire’. He want on to say that an independent party was engaged to have the record of the transactions read to him which signified auditing. Later, due to increase and complexity of trade and commerce there arose and need for more accurate method of recording business activities. However, as bookkeeping is not an exact science there is still need to ensure that final records provided an accurate view of what had actually transpired between parties. This leads to the enacting of legislature to project the right of interested parties. As result of this, the work of auditor today is influenced by the legal aspect of his duties.
As we know that Enugu state post primary management board is one of the above sub-topic, I can say, although an average Nigeria makes no distinction between the public service and the civil service, there is still some elements of difference between the two. the public service covers a wider range in the civil service. in a lecture entitled the civil service, the challenges of 1990 and beyond delivered by G.A.E Longr, the then secretary to the government of the federation under a military regime, during the orientation and training programme for senior management personnel in the public service held on 27th November 1996, he sated among other in section 227 of the constitution of the federal republic of Nigeria 1999 as service in any capital in respect of the government including service in the Para states, the armed forces and the public judiciary and educational institutions established by the government.
The civil service in its turn is defined essentially in terms of service in any capacity as staff of ministries and non-department  including the judicial department but excluding the paroids under the supervision of the various ministries. The section 206 of the constitution states civil service of the state ion a civil capacity as staff of the office of government, the Deputy of the government or a ministry or department of the government state assigned with
responsibility for any business of the government of the state.

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As already pointed out, public fund is the revenue and expenditure of the government and the adjustments that must be made in order to achieve the desired goal which the government has set for itself. Public expenditure helps for the provision of public goals and services. Public functionaries must exercise prudence in the distribution of public fund as there is no alternative to this:
According to Patrice Emekekwe, item of public expenditure include:
1) Fund for the upkeep of the head of state and the president of a country.
2) The administration of justice.
3) Expenditure in respect of education, health, pension and gratuity benefits.
4) Maintenance of the machinery of government keeps them functional.
5) Expenditure to potential and propagate industrial and commercial venture.
6) Expenditure to help in stabilization of the economy.
7) Expenditure of government in trying to achieve more equitable distribution by making payments to people in lower income group.
8) Money spent by government in making transfer payment such as interest payment on government securities.
Auditors school exercise great care to ensure the compliance of these expenditure. In some areas, public fund are being diverted for selfish purposes.

The accounting procedure in government is guided by a series of law. Every establishment in the accounting procedure should receive, According to K. Oshisami and E.O Fadipe, government accounting procedure is categorized into
i) Constitutional requirement
ii) Legislative and other policy
iii) Administrative and other policy requirement

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