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The Impact Of Process Auditing On Production And Profitability In Manufacturing Company
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CHAPTER TWO
LITERATURE REVIEW
2.0 Introduction
This part of research work will comprises of three major aspects which are the conceptual literature, empirical literature and theoretical literature. The conceptual literature review aspect will be base on the views of past researchers on the key words of this research work. The empirical literature review will be base on the contribution of past researchers inline with this work. And the theoretical aspects of this research will be reviewing various theories which has help past researchers in their work.
2.1 Conceptual Literature Review
According to Manasseh (2000), auditing is an independent examination of book of accounts and the voucher of the business, with a view of forming an opinion as to whether those have been kept properly according to the companies’ act and as to whether the statements drawn from the books of accounts portray a true and fair view of the company’s state of affairs at a given date.
According to Flint (1988), audit is a social phenomenon which serves no purpose or value except of its practical usefulness and its existence is wholly utilitarian. Flint (1988) further explains, the audit function has evolved in response to a perceived need of individuals or groups in society who seek information or reassurance about the conduct or performance of others in which they have an acknowledged and legitimate interest.
According to Jean (2014), auditing in its modern concept is a systematic, intelligent, scientific, critical and thorough examination of books of accounts of the organization by an independent person or body of persons with the help of vouchers, documents, information and explanations received from the authorities, for the purpose of ascertaining whether the transactions entered in the books of accounts are genuine and have been entered with proper authority.
Ezeani and Oladele (2012) opined that auditing as a profession can be defined as “an independent examination of 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 relevant statutory obligation. On the other hand, performance audit is defined as an objective and systematic examination of evidence for the purpose of providing independent assessments for the public sector organizations, programme, projects and service delivery. Also, it outlines the assessment of the financial efficiency and effectiveness with which the resources of an entity had been used in achieving results. However, for auditing to be a tool for effective and efficient management it has to identify the functions, evaluate and monitor some specific controls within the bound of internal control system. Ezeani (2011) citing Ezinando (2005) emphasized that one basic principle of auditing is that it must serve as a tool for better performance.
2.2 Theoretical Literature Review
2.2.1 Clark Theory of Profitability
Clark begins his theory with an analysis of a profit -less economy and taking into account its key futures. The profit less economy is compared with a profit -generating economies and significant differences were identified to indicate the causes of profit. This theory was adopted in a study by Schumpeter and Knight. According to Kamath, Khaksari and Hylton (1985), the profit- less economy is refer to as ‘static state’, in which all factors are constant and not subject to change, the market is assumed to be perfect; hence the absence of monopoly and entrepreneurial efforts are rewarded according to management wage levels. There is perfect mobility and flow of all economic units in a frictionless environment; in short all impediments to perfect competition are dissolved. The society acts and lives, but does so in a changeless manner (Siddiqi, 1971). Any change in these factors will produce a tremor in the system but the economy will adjust and settle at new equilibriums.
2.2.2 Agency theory
This theory was propounded by Adams (1994) is one of the theoretical framework that guided this study. Agency theory is extensively employed in the accounting literature to explain and predict the appointment and performance of external auditors and financial consultants. He argued that, agency theory also provides a useful theoretical framework for the study of internal auditing function. He also proposed that agency theory not only helps to explain and predict the existence of internal audit but that is also helps to explain the role and responsibilities assigned to internal auditors by the organization and that agency theory predicts how the internal audit function is likely to be affected by organizational change. He concludes that agency theory provides a basis for rich research, which can benefit both the academic community and internal auditing profession. This theory no doubt relates to this study as it helps to explain the role and responsibilities of internal auditors which if methodically applied would help to improve financial performance in tertiary institutions in Nigeria.
According to Anderson (1993), Agency theory describes firms as necessary structures to maintain contracts, and through firms, it is possible to exercise control which minimizes opportunistic behaviour of agents. In order to harmonize the interest of the agent and the principal, a comprehensive contract is written to address the interest of both the agent and the principal; they further explain that the relationship is further strengthened by the principal employing an expert to monitor the agent. Other related reviews include the Sarbanes-Oxley act of 2002 (SOX) which requires companies to report on the effectiveness as part of an overall effort to reduce fraud and restore integrity to the financial reporting process.
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ABSRACT - [ Total Page(s): 1 ]ABSTRACT IS COMING SOON ... Continue reading---
APPENDIX A - [ Total Page(s): 1 ]APPENDIX QUESTIONNAIRE ON THE IMPACT OF PROCESS AUDITING ON PRODUCTION AND PROFITABILITY IN MANUFACTURING COMPANIESDear Respondents, I am final year student of Kwara State Malete writing a project titled “impact of process auditing on production and profitability in manufacturing companiesTherefore, I would be most grateful if the questionnaire is treated well by providing adequate, correct and honest answers to the questions asked in it. The privacy of your answers is guaranteed as nobo ... Continue reading---
CHAPTER ONE - [ Total Page(s): 2 ]CHAPTER ONEINTRODUCTION1.1 Background Of The StudyThe turbulent effects of the global financial crisis have highlighted the critical importance of credible high quality financial reporting. Achieving quality financial reporting depends on the role that the external audit plays in supporting the quality of financial reporting of manufacturing companies. It is an important part of the regulatory and supervisory infrastructure and thus an activity of significant public interest. Process auditing ... Continue reading---
CHAPTER THREE - [ Total Page(s): 2 ]CHAPTER THREEResearch Methodology3.1 IntroductionThis chapter looked at the research methodology that will be use in the study. This chapter will be presenting the following; research design, the population of the study, the sample and sampling techniques, instruments for the study, validity of the instrument, reliability of the instrument, procedure for data collection and method of data analysis.3.2 Research Design This study used survey research design. Ogutu (2012) posits that a survey resea ... Continue reading---
CHAPTER FOUR - [ Total Page(s): 10 ]Hypothesis Ho: process auditing has no impact on production and profitability in manufacturing companiesH1: process auditing has impact on production and profitability in manufacturing companiesDecision Rule: Accept H0if P-value is greater than 0.05, reject if otherwise ConclusionSince the P – value is (0.000) is less than 0.05 we reject H0, we therefore accept H1 and conclude that there is significance relationship between process auditing and production and profitability in manufacturin ... Continue reading---
CHAPTER FIVE - [ Total Page(s): 1 ]CHAPTER FIVESUMMARY, CONCLUSION AND RECOMMENDATIONS5.1 IntroductionsThis chapter of this research gives an overview of the whole research work as this starts with the summary of the work from the first chapter to the last chapter, the findings and the conclusion of this research work, recommendations that were proffered by the researcher as a way by which more research will have a benchmark or point of reference after this research work as to what is expected from them, suggestions were al ... Continue reading---
REFRENCES - [ Total Page(s): 1 ]REFERENCESAdams, M.B. (1994). Agency Theory And The Internal Audit, Managerial Auditing Journal, On Line Http://Www.Emeraldinsight.Com. Aguola, O. (2002). Fundamentals Of Auditing, 2nd Ed. Meridian Associates. Enugu. Anderson, D; Francis, J.R. and Stokes, D.J. (1993).’Auditing, Directorship And The Demand For Monitoring: Journal Of Accounting And Public Policy.Bala, S.K. And Yusus, M. A. (2003). “Corporate Environmental Reporting In Bangladesh: A Study Of Listed Public Limited Com ... Continue reading---
