1.1 BACKGROUND TO THE STUDY
The work of an auditor in any organization cannot be looked beyond or
over emphasized. This is because in earlier years when there was no
auditor to take proper care of the organizational financial statement,
many organizations like small scale business organization, manufacturing
companies and even private companies suffered frauds and errors in
The enterprises that existed at the time were mostly joint ventures
with a limited life. In such cases, the ascertainment of profit was
simple. It was equal to the surplus of cash in hand at the end of the
venture. One should also remember that where audits were conducted at
this time, it was not because of any statutory provisions, and that
responsibilities and duties of an auditor had not been clearly defined.
Most of fraud is being committed by the staff of those organizations
especially small-scale business organization because of this, there is
need for auditing and investigation in small scale business
Since small scale business is a business that has little fund and
materials. It is very crucial to employ the service of an auditor. The
auditor is concern merely to ascertain the correctness of sums of money
received and disbursed, checking the accuracy of individual entries in a
cash record and verifying the balance of cash in hand at a particular
point in time. In so doing, frauds, and errors can be easily detect and
An auditor is the only person authorized by law to conduct auditing
and investigate on any financial matter concern organization (including
small scale business).
Investigation is a special inquiry into the financial affairs of a
business. An auditor need proper investigation to help him carryout his
Finally, the major important need for auditing and investigation in
small scale business organization is to make sure that the business grow
with its little financial back up coupled with total minimum of frauds
and errors. Auditing help in ensuring that o material, financial or
otherwise is misused.
1.2 STATEMENT OF THE PROBLEM
Problem arise in the application of normal auditing principles and
procedures to audits of small scale business organization employing a
smaller number of administrative staff.
Substantial domination of the accounting and financial management
functional by one person is also one of the major problem that the
organization is suffering from.
Limitations on the effectiveness of internal control owing to the
small number of employees. Thus, the provision of check whereby the
work of one person is proved independently (or is complementary to the
work of another) be absent to a considerable extent. Whilst internal
control including internal check may be effective for its primary
purpose as a check on management itself.
Inadequate management support for internal auditing is also one of
the major problem the organisation is encountering. We had to assume
that the management and auditor were in conflict then the task of the
auditor would not be able to rely in any way on the explanations and
information given to him by management. He was likely to be false and
the audit process would become both costly and detailed.
The organization is also suffering from inadequate accounting records
since one person is handling the financial management function, we find
out that frauds and errors can be easily committed by that person.
1.3 PURPOSE OF THE STUDY
The purpose of this study is
- To find out the extent of substantial domination of the accounting
and financial management function by one person affect the
organization’s internal control system.
- To ascertain the extent of limitation on the effectiveness of internal control owing to the small number of employees.
- To find out if proper auditing and investigations were made by the
auditors by all the information and explanations obtained to the best of
their knowledge and belief were necessary for the purpose of their
- To determine to what extent the organization suffered from inadequate accounting records.
- To ascertain the extent of inadequate management support for internal auditing.
1.4 THE SCOPE OF THE STUDY
Considering the circumstance and predicaments of business, it is
apparently obvious that there is no business that can survive without
encountering one kind of problem especially in small-scale business
organization. According to James Bades, all firms’ faces risk but they
are proportionally greater in the small firm.
The failure of a production batch in small firms may spell disaster while a similar failure or problem in a large organization.
Causes of frauds and errors by the management staff are one of the major problems that the organization is encountering.
Financial problem is a major problem for small-scale business
organization in Nigeria sources of fund for this category of business.
Inability to borrow is difficult because of the small amount of asset
The organization is also seriously suffering from marketing problems
due to lack of experience in the field, poor human relations, unable to
meet customer’s demand.
Since the organization is operating with small amount of fund and
asset they are suffering from production problem due to lack of
production facilities, insufficient of raw materials for production,
poor product planning, lack of purchasing policy and sources of supply
and also lack of ware housing.
The organization is seriously suffering from research problems such as illiteracy and human behaviour.
Major weaknesses in the system of internal control is minor errors
which is caused by the management staff of the organization by not
keeping the appropriate financial statement due to false manner of
entering accounting transaction.
1.5 THE SIGNIFICANCE OF THE STUDY
The relevance of the study cannot be over emphasized as a successful completion of this study.
The need for auditing and investigation in small scale business
organization help the organization to employed a qualified auditor to
enable the management staff of the organization to keep adequate
accounting record. So that the financial statements prepared by the
management can only be accurate and reasonable. If the organization
employed a qualified auditors it will help the organization to detect
and prevent errors and frauds easier.
Finally, the need for auditing and investigation will help for survival and substantial growth of the organization.