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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.

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