THE PROBLEMS ASSOCIATED WITH CO-OPERATIVE AUDITING
(A CASE STUDY OF CO-OPERATIVE MOVEMENTS IN NSUKKA LOCAL GOVERNMENT AREA OF ENUGU STATE)
ABSTRACT
Co-operative Audit is one of the statutory duties of the Co-operative director, is the act of examining the account book of co-operative societies to insure accountability in the management of co-operative fund. This aspect of the duties of co-operative director is very essential to the viability of co-operative societies towards the attainment of co-operative objectives. Inspite of the importance of co-operative auditing to the development of co-operative it has been observed that there are many problems associated with co-operative auditing. This have propelled the researcher to embark in the project works. This project work covers the problems associated with Co-operative Auditing (A case study of Nsukka L.G.A). This work will be in five chapters: Chapter one deals with introduction, background of the study, statement of the problems, objectives of the study, significance of the study, scope and limitations of the study. Chapter two examines the past related literature to the topic of the project and relates them to the study on hand for sure that the process adopted in this study is right. Chapter three deals with the design of this study, methods and procedure used in collecting data and the method of data analysis. Chapter four deals with data presentation, analysis, and interpretation of the findings of the research work. Chapter five, covers the recommendation and conclusion of the research project based on the outcome of the research work.
TABLE OF CONTENTS
Cover page i
Title-page ii
Approval-page iii
Dedication iv
Acknowledgement v Abstract vi
Table-of-Contents vii
CHAPTER ONE
Introduction
1.1 Background of the study 4
1.2 Statement of the problems 6
1.3 Objective of the study 8
1.4 Significance of the study 9
1.5 Research Questions 10
1.6 Scope and Limitations of the study 11
1.7 Definition of term 12
CHAPTER TWO
Review of Related Literature
2.1 Need for Auditing 16
2.2 Features of Co-operative Audit 18
2.3 Problems of Co-operative Audit in Enugu State 19
2.4 Importance of Audit to Co-operative Society 24
2.5 General Principle of Auditing 28
CHAPTER THREE
Research Design and Methodology
3.1 Population 33
3.2 Research Sample 33
3.3 Survey Method 36
3.4 Research Instrumentation 36
3.5 Questionnaire Administration 37
3.6 Method of Data treatment and Analysis 38
CHAPTER FOUR
Presentation and Interpretation of Data 39
CHAPTER FIVE
Summary of Findings, Recommendations and Conclusion
5.1 Summary of Findings 47
5.2 Conclusion 49
5.3 Recommendations 50
Bibliography 52
Appendix 53
Questionnaire 54
INTRODUCTION
An audit is an independent examination and expression of opinion on the financial statement of an enterprise by an appointed auditor in pursuance of that appointment and in compliance with any role statutory obligation. An audit involves an examination or investigation of the statement in figure from relevant evidence with the objective of enabling the auditor to make a report on the state of statement. Also is the examination of business transactions with a view of ensuring that the balance sheet and the Profit and Loss account give a true and fair view of the financial statement, that is, the examination of accounts to see that they are in order.
Auditing is of two steps: The first being the process of gathering evidence relating to transactions, and the other being the function of reporting to the members of the enterprise as to whether the financial statements show a true and fair view of the state of affairs of the enterprise and the profit or loss for the year ended on that date. In the case of a statutory audit, the matters to be reported upon are laid down in the companies act or in other relevant legislation. Coming to non-statutory audit, the matters to be dealt with in the report should be agreed in writing between the auditor and his client. The engagement letter should explain the scope of the audit and state that the auditor will review the accounting systems in order to assess their adequacy as a basis for this preparation of the financial statements. Furthermore, the letter should state that the auditor will need to obtain relevant and reliable sufficient to enable him to reach reasonable conclusions there from. The latter should state also that if the auditor plans to place reliance on any internal controls, he will ascertain and evaluate these controls and perform tests on their operations. In this respect, reference should be made to the auditor reporting to the management on any significant weakness in organization’s system which comes to the auditor’s notice and which he thinks should be brought to the notice of management. The auditor will carry out his work and make his report in accordance with approved auditing standard, where appropriate, will have regard to international standard when reviewing the financial statement it should make it clear, that the client not the auditor is responsible for the preparation of financial statement giving a true and fair view and for maintaining proper accounting records and a system of internal control which is appropriate to the enterprise. Auditing can also be defined as embracing:
1. An examination of the records of an under-testing in order to assess the reliability of the information contained therein.
2. An examination of the documentary evidence from which the records are written up in order to assess validity.
3. As consequences of (1) and (2) above, the reduction and prevention of fraud and errors.
4. It is a general examination of financial statements (balance sheet and profit and loss account) prepared by an enterprise to ensure that a true and fair view is given of the financial position at a specified date and transaction at a specified period.
1.1 BACKGROUND OF THE STUDY
One of the major problems that have placed or rubbed co-operative societies of the goals is the fact that the management of co-operative societies is coals accountability the principle of democratic member control as outline as the second principle of I C A principles of 1995 was to insure that the management of co-operative does not mislead the members and therefore prevent it from attaining its goal.
To further ensure accountability in co-operative, the law permits the co-operative director to audit the account of co-operative. This involves the systematic examination of the account and financial transactions of co-operative societies to avoid misappropriation of co-operative funds.
In spite of the struggles by various co-operative societies to organize a noble society, it is discovered that these societies die prematurely. This is as a result of poor co-operative auditing. This as a matter of fact has discouraged many people from joining co-operative society since they do not see co-operative as business organization that can last like any other business organization.
Unlike in other forms of business auditing in co-operative faces many problems ranging from the attitude of co-operative members who see auditors as government agents who have come to reap their rewards. The attitude of the auditors who at times give up the aim of their task to their personal interest and the problem of illiteracy among the members of co-operative and lack of facilities to facilitate co-operative auditing. These have necessitated these problems and proffer a lasting solution to them.
1.2 STATEMENT OF THE PROBLEM
Audit is one of the instruments used by the director of co-operative as well as the members of co-operative to know the financial stand of a co-operative society. It has been established that finance is the wire of every business organization. This every co-operative society is audited to insure that the management of co-operative justifies the usage of any finance sourced by co-operative society.
Obviously, this audit is a veritable instrument for ensuring the efficient and successful running of a business enterprise. In spite of the importance of this audit to the co-operative growth and development, it’s practice has faced many problems which prevent co-operative from satisfying the needs of it’s members and as well adding to the growth of the economy at large.
What could be these problems associated with co-operative auditing? Could it be that the members of co-operative societies do not like co-operative auditing which makes them to feel that co-operative auditing is a way of pippin into their account or that illiteracy has made the members not to keep a proper record of their financial transaction, this making it impossible for the external auditor to lay hold of any needed document to carry out the works? Could it rather be that the external auditors are not competent enough to carry out real audit that could make co-operatives grow in this nation? These have caused the researcher to carry out this project work.
1.3 OBJECTIVE OF THE STUDY
1. To detect fraud and errors in posting books and records of enterprise.
2. To ensure the reliability of the annual account. This is because an audited account shows a true and a fair view of the enterprise.
3. To reinforce the confidence of the members in co-operative societies.
4. To know the financial state of the business enterprise, that is when an enterprise engaged in trade relationship or credit transactions.
5. Audited Account helps in taxation.
6. To determine whether the audited entity is keeping effective control over revenue, expenditure, assets and liabilities. Whether it is properly accounting for resources, liabilities and operation.
7. To determines whether the audited organization is complying with the requirements placed upon it by patent laws and regulation.
8. To find out whether the audited entity is being carried out. It’s responsibilities in giving due attention to conservation of it’s resources and minimum expenditure of efforts.
1.4 SIGNIFICANCE OF THE STUDY
At the completion of this project work, if the action thereof is implemented, the researcher is optimistic that this research project is going to be of important to the case study organization (Co-operative Societies in Nsukka Local Government Area) in the sense that their co-operative societies will have a new breath of effective and progressive co-operative audit.
To the members of co-operative societies, this project work is going to be of importance because their needs (Economic) is going to be net as the co-operative societies thrive as a result of effective auditing of co-operatives which will be insured by this work.
The researcher and the research institution will also benefit from this study hence the study will expose the researcher to so many literatures in this field of study and insures the advancement of the researcher’s knowledge of the same time the researcher’s institution will be made proud of successful completion of this study.
This society as a whole will benefit from this as it will increase the national income through co-operative development.
1.5 SCOPE AND LIMITATION OF THE STUDY
The study covers the auditing of co-operative society in Enugu state determining or eliciting the problems facing co-operative auditors for the entire localities. The co-operative auditor in the area will be the main focal point. In an attempt to produce this work, the researcher face several handicaps which include inadequacy of data, non-co-operative attitude of some officials visited resulting in their failure to deluge some vital information about their societies and how society do carry out their operations. It was not easy to contact some officials of the local government council co-operative division whose experiences would have helped the researcher in developing a broad approach. Even when contacted, they failed to give some needed information when not offered bribe. Finance was problem when nearly hundred the completion of this research. It limited our traveling to the specially sampled co-operative societies and other research centers within our coverage. So we had to use the material within our reach.
1.6 RESEARCH QUESTIONS
1. Is there a bad attitude of Co-operative members towards external auditors?
2. Do the members of Co-operative embrace external auditors?
3. Do the external auditors have the required skills for carrying out their duties?
4. Are there necessary documents needed for effective co-operative audit made available to the external auditors?
5. Is there enough fund for necessary facilities for co-operative audit?
6. Can there be a lasting solution to the problem associated with co-operative auditing?
1.7 DEFINITION OF TERMS
Audit: An audit is independent examination and expression of an opinion on the financial statement of and enterprise by an appointed auditor in pursuance of that appointment and in compliance with any role statutory obligation.
Financial statement: A financial statement of financial report is a formal record of the financial activities of a business, person or other entity. Relevant financial information is presented in a structured manner and in a form easy to understand.
Audited Account: Audited account is a fundamental feature of good governance. It is statement of account which haven passed through the process of audit presented to show a true and a fair financial position of a firm usually annually.
Taxation: Means by which governments finance their expenditure by imposing charges on citizens and cooperate entities.
Co-operative Director: Director of cooperative is an officer responsible for coordination and management of cooperative societies within a state. Whose one of the statutory duties is to audit the cooperative societies.
Co-operative Principle: Co-operative principle is guidelines by which cooperatives put their values into practice. These principles are fundamental ideology, concept, values, and beliefs which serve as a focal point guiding cooperatives. These principles include:
1. Voluntary and open membership
2. Democratic member control.
3. Member economic participation.
4. Autonomy and independence.
5. Education training and information.
6. Cooperatives among cooperatives.
7. Concern for community.
Accountability: in ethics and governance, accountability is answerability, blameworthiness, liability, and the expectation of account-giving. Accountability is the acknowledgement and assumption of responsibility for action, products, discussions and policies including the administration, governance, and implementation within the scope of the role or employment position and encompassing the obligation to report, explain and be answerable for resulting consequences.
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