INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Many people tend to seriously think that auditing is a subdivision of accounting, probably that is how it was introduced to us and because every auditor is an accountant but every accountant is not an auditor. Auditing has its root elsewhere. The relationship of auditing and accounting is close, but they are not the same. There are business associates.
Accounting is concerned with collecting, classification, correction, summarization and communication and financial information. It involves the measurement and communication of business events and conditions as they affect the peculiar enterprises or entity. The task of accounting is reduced a tremendous mass detailed information to manageable and understandable proportion. Auditing does more of these things.
Auditing is an independent examination and expression of opinion on the financial statement 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 the internal auditors in stocktaking.
Auditing is analytical not constructive. It is critical, investigative and concerned with the basis of accounting measurement and auditing emphasis is to proof of corrective ness
Auditing is also concerned with adequacy in design, effectiveness in operation and consistency in application of such proceedings.
It is also aimed at forming opinion on the truth and fairness of the transaction of an enterprise and also has its principles, rules not on accounting, which is learns for ideas and methods.
Auditing is therefore a discipline independent on logic with accounting as art of its utilities.
Historically, the auditor had the accounts read to him since the term audit originated from the Latin ‘audire’ meaning to hear.
After Luca Pacido published his book in the 15th century, the work of the auditor became more involved, but today, the increased complexity of business units, either by the scope of its own operation or by amalgamation, has now forced the auditor to adopt new methods of approach to his work – the role of auditor in stocktaking.
The auditors duty in respect to stock taking is often regarded as fully expressed in the case of re-Kingston Cotton Mill Co. Ltd, 1896 in which Lindly L. J. stated that it was “no part of the auditors duty to take stock”. But later in the united States, it is the recognized duty of the auditor to make physical stock checks – that is stocktaking – this duty having been imposed upon him after much defalcations as took place in the cause of MC Kesson V Robin (1940) whereby fictitious records affecting purchases, sales and stocks enabled various responsible officials working in collusion to overstate the assets on the balance sheet by some 21000,000 dollars.
On the other hand, stocktaking or physical verification of stock may by means of full count or measurement in case of bulk stock tally with the bin card records stocktaking could be done in three ways stated below: -
a. Counting of stock at the end of the year or before the year ends or after the year ends.
b. Counting of the part of the stock by means of interpolating the total statistics.
c. By means of using continuous stock records.
It should be know that where stocks are material in the enterprise’s financial statement and the auditor is placing reliance upon management stock – take in order to prove evidence of existence, the auditor should attend the stocktaking. This is because attendance of stocktaking is normally the best way of providing evidence of the proper functioning of the management stocktaking procedure and the existence of stock and their conditions.
REVIEW OF LITERATURE'S
In this chapter, the follow issues are to be discussed
2.1 The role of internal auditor under the law statute
2.2 Internal auditing
2.3 Stock taking
The company and allied matters Decree 1990 section 359, sub section 1 states that the auditor of a company shall make a report to its members on the account and on all group financial statements copies of which are to be laid before the company in a general meeting during the auditors tenure of office and section 360, subsection 1 states that it shall be the duty of the company’s auditors in preparing their report to carry out such investigation as may enable them to form an opinion as to the following matter whether.
a) Proper accounting records have been kept by the company and proper returns adequate for their audit having been received from the branches not visited by them.
b) The company’s balance sheet and (if not considerate) its profit and loss account are in agreement with accounting records and returns.
Subsection 3 states that auditor of company shall have a right of access at all times to the company’s books, accounts and vouchers, and entitled to require from the company’s office such information and explanations as the thinks necessary for the performance of the auditor’s duties.
