Auditing Efficiency As A Tool For Improving Company’s Performance


With regard to coverage to this study, the research intends to review the following, historical background of auditing, historical background of Nigerian breweries plc, Aba purpose of auditing, planning for audit, audit of management, collection and evaluation of evidence, evaluation of internal control system selection of auditors internal importance, procedure for efficiency in auditing reliance on other auditors, role of auditing in companies.


Auditing as we know it today is a relatively new art. It has grown in an erratic manner, by leaps and bounds under outside influence.

During the nineteenth century investors in the United Kingdom discovered that the industrial revolution in the United States had created a good climate for investments. However, absentee ownership caused some concern to protect this investment and to observe the progress, accountants from English accounting firms came to United States principally to New York to perform such auditing as was required by overseas investors. These accountants with formed new firms or established branches of English firms. In 1896 the first certified public accountancy laws were pusses in New York State. The next major impetus in this development of auditing and the growth of the profession was the enactment of income tax laws following the adoption of the sixteenth amendment to the constitution of United States in 1913. Meanwhile, corporate growth continued and public became involved in vesting in major enterprises. Depending upon management policy, auditors were engaged and annual report issued without any rules or regulation other than that certified public accounts could impose upon their clients with assistance from the New York stock exchange. At the request of the federal trade commission a pamphlet with the title “A memorandum on balance sheet audit was prepared in 1917 by the American institute of accountants and latter reissued as uniform accounting. A sequential proposed submitted by Federal Reserve board. It was reissued in 1981 as approved methods for the preparation of balance sheet statements. In 1929, an updated version was issued under the auspices of the Federal Reserve board with the title verification of financial statement.


Then came the crash of 1929 stock prices plummeted in stock exchange and over the counter as part of program of the new deal, regulations were impose upon stock exchange, stock brokers, stock under writers and corporate issues of marketable securities through the enactment of the securities act of 1933 and securities exchange Act of 1934 and the establishments of the securities exchange commission (SEC). The Mick son and Robbins scandal of 1939 created a climate for intensifying audits of publicly held corporations. This encouraged the committee on auditing procedures, created by the American institute of certified public accountants in 1938 to start issuing accounting research bulletins (ARB), establishing accounting principle. As these bulletins became accepted, the auditing committee of the AICP issued its tentative statement of auditing standards (October 1947) establishing general accepted auditing standard (GAAS).

As successors to the auditing committee the (AICP) created the accounting principles board (APB) which issued opinions from 1959-1973. in 1973 the financial accounting standards board (FASB) was  created as an independent body to study accounting principles and issue accounting standards.


Nigerian brewery as it was at the beginning was founded to be a manufacturing company to produce beer in Nigeria founded as it was in 1946. It must be reckoned among the earliest manufacturing industries in Nigeria. That in itself entitles it to a recognition which few companies in Nigeria can claim for themselves.


As early 1953, the demand for one of their product “star” was such that the first brewery at Igammu has to be expanded. When star won the first price within its class at the common wealth beer competition that established the brand as a first class product in the eyes of the public. Demand for it increased more. Consequently NBL decided that there was the need to build a second brewery in the country.

The place chosen was aba in them eastern region. Its location had enabled the town to establish itself as a great commercial centre with an increasing population. Construction work on the Aba brewery begins in 1955 and star beer was produced for first time at the aba brewery in May, 1957. In view of this, the name of company was changed to Nigerian berries limited in that same year. Even though with a year of its completion, the Aba brewery was producing at full capacity.

Together, they have facilitated a strong leadership position in the total brewed product market in Nigeria. Their outstanding quality and consumer franchise complement other company value and capabilities to set Nigerian breweries apart as the house of quality and consumer franchise complement other company and capabilities to set Nigerian breweries apart as the house of quality. The house that star built. The establishment of this industry in the eastern part of Nigeria has greatly improved the economic life of the regional community as well as in the federal. Nigeria brewery in Ama is one of the largest brewery companies in Nigeria today as the chief employer of labour.

The main product lines of the company are

  1. Star and Gulder Lagers.
  2. Multina and Amstel Malta
  3. Legend extra stout

Raw material source include:

  1. Maize and Sorphum 100% obtained locally.
  2. Cowpea, Soya beans and rice-100% obtained locally.
  3. Barely malt- previously imported but now substituted with sorghum.

Also, it is worthy to mention that the company leads others in Nigeria today in terms of quality.



An audit does not entail the preparation of the accounts at all, but denotes something much wider, namely, the examination by the auditor of a balance sheet and proffer and loss account prepared by others, so be to express an opinion that such a balance sheet and profit and loss account have been proverb drawn up to show a true and fair views of the state of the affairs and of the particular concern, and comply with the relevant statutes. This then, is the main object if an audit in accordance with the companies act 1967, to report whether in their opinion that the balance sheet and profit and loss account give a true and fair view. In making this report, they are also required by 14(4) to form an opinion.

  1. Whether proper books of account have been kept by the company and proper returns adequate from their audit have been received from branches not visited by them.
  2. Whether the company’s balance sheet and profit and loss account are in agreement with the books of account and returns.

In addition, if the auditors fail to obtain all information and explanations which to the best of their knowledge and belief are necessary for the purpose of their audit, they shall state the fact in their report (section)



Pursuant to the companies act, 1948 and 19667, every company in this country is required to the accounts audited by professionals. The selection of auditors has important roles to play as it is being considered by the public stockholders and companies. The design ability of a competent independent auditor is widely recognized. There are many methods of selecting an auditor. Some corporation delegate the selection to the board of directors, some corporations has the board of directors to nominate the auditors, followed by the stock holder election for the appointment of an audit committee from the board of directors.


The choice of the auditors should be made early in the fiscal year and the auditors should be given access to the record so that work should be performed efficiently.



The duty of the audit under management audit is to evaluate the efficiency of management out all levels throughout an organization with a view to recommending improvement in areas where effectiveness is not ensured. The auditors should assume a greater responsibility in determining that the principles followed by the management are the best in the circumstances. The auditor should also examine the management with the objective of preventing illegal or in authorized operations.



Audit evidence is defined as any information which has an impact upon the audit decision process. During the engagement, the auditor should gather evidence through a variety of technique that will persuade the auditor either that the assertions concerning financing statement and records are valid or that are invalid. The evidence gathering function concerns the mechanism that creates the financial statement which is composed of the input phase. A process phase and output phase. The auditor should review all these three element of the accounting system and gather evidence to an extent sufficient for formulation of an opinion. Evidence could be gathered through two sources.


Evidence that consist of general and special journals, general subsiding ledgers, reconciliation analysis, allocating accounting data to the proper period, and any other records or analyse that substantiate the data appearing in financial statement. The evidence is generated by management even through it is helpful to the auditor but this must be validated by the auditor.


Corroborative evidence provides the auditor with information to determine whether a transaction is authentic, properly processed and properly recorded.


This also includes any procedure performance personally by the auditor. The evidence must have to be competent. This could be achieved by obtaining evidence matter from independent source outside the enterprise, development of accounting data, record an financial statement under satisfactory condition of internal control, direct personal knowledge of the audit obtained through physical examination, observation and inspections.


The auditor in achieving efficiency in auditing should involve himself in following evidence methods.

Physical evidence: This is one of the observe the items to validate their existence. An example is an auditor having a physical inspection of the inventories to determine its existence.  While physical evidence substantiates the existence of items, it does not satisfy other audit objectives. For these reasons, it is necessary for the auditor to gather other types of evidence to satisfy other audit objective which includes:

Computational evidence: The auditor’s recompilation of the client’s original calculation is absolute proof of accuracy or inaccuracy of the mathematical only to arithmetic process, for it not validates the authenticity of the underlying data used in calculation. To achieve this, the auditor must gather additional evidence which include:

Documentary evidence: A typical audit relies heavily on documentary evidence to corroborate data presented in financial state. Documentary evidence because it varies considerably depending upon the source of document and root it follows, should not be considered accurate until it is reviewed by the auditor.


The auditor can identify areas that need to be investigated. If the auditor observes personnel who are doing a poor job or by asking questions to the personnel discovers resentment on the part of most of the personnel are the auditor modifiers the audit approach accordingly. The most two required character needed of an auditor, are ability to be observant and to be inquisitive.


For efficiency in gathering evidence, some techniques must be applied which includes:

Observation: The audit will gain personal knowledge about the existence of an asset by also use the techniques of counting.

Confirmation: This evidence of collecting technique is very persuasion if collected under the proper circumstances. The use of this technique is required mostly in the audit if accounts and now receivable, although it can be used in other areas.

Vouching: This refers to auditor’s inspectors of documents that support on accounting transactions but the authoritativeness of this technique depends upon the adequacy of internal control system and the nature of the documentation.

Re computation: This involves the auditor’s independent verification of arithmetic computation performed by the client. It is an indispensable tool in auditing. Evidence gathered by re computation is always very competent.

Inquiry: Essentially, the auditor should ask questions to provide direction to the detailed audit. The enquiry may be of a general nature or may be very specific.

Consistency of data: The auditor should plan his audit so that areas which appear to have to have the greatest audit right receive the most attention. Risk cannot be removed in auditing profession, but can only be overcomed by the auditor analysis of the consisting of the consistency of data includes the comparism of account balance. The auditoria’s analysis of the consistency of data provides excellent basis for determining audit approach. However the technique is not only used at the beginning of the audit.



The auditor should study and evaluate the internal control system to determine the nature extent and timing of audit procedures to be used during the examination of the records and accounts.


Internal control, comprises of the plan of orgainsation and all the coordinate methods and measure adopted with a business to safeguard it’s assets, check the accuracy and reliability of its accounting data promo9tes operational efficiency and encourages audience to prescribed managerial policies.

Administrative controls: This is the internal control that relates to the promotion of operational efficiency and encourage adhere to managerial policies. Management primary objective, as it is believed, s the maximization of profit. The auditors primary objective should be to determine whether management financial statement are prepared in accordance with generally accepted accounting principles, in the case of capital budget preparation, the auditor should be concerned with capital projects in process. The auditor may use clients to monitor the project for possible cost over runs which may necessitate a write down of the cost incurred for the cost incurred for the project.

Accounting controls: This is concerned with internal control that relate to the safeguard of assets and the reliability of financial records. The accounting controls designed to safeguard assets project the client from incorrectly accounting for the movement of assets. The auditor is concerned with the accounting controls for the physical protection of cash supplies inventories and other assets, procedure should designed to ensure that the initial recording of sale of scrap, such accounts as cash, inventory and gain or loss accounts for the disposal of assets may not be in error.


Internal control system should be designed to provide reasonable assurance that:

  1. Transactions are executed with management’s general or specific authorization.
  2. Access to assets is permitted only in accordance with management authorization.
  3. Transactions are recorded as necessary to permit the preparation of financial statement in conformity with generally accepted accounting principles and to maintain accountability for assets.
  4. The recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate actions taken with reference to any differences.

For efficiency in accounting control in the evaluation of internal control system the auditor should consider at is a responsibility to review or audit the following.

  1. Auditing of cash.
  2. Auditing of credit sales system.
  3. Auditing of property, plant and equipment
  4. Auditing of inventory system.
  5. Auditing of investment
  6. Auditing of liability
  7. Auditing of stock and owners equity
  8. Auditing of nominal accounts.



Before the formation of an opinion on the financial statement and records, the auditor should gather evidence to determine whether the cash account is fairly stated in accordance with generally accepted accounting principles. The auditor should study, evaluate and test two systems, cash receipt disbursement “A” may have a variety of sources of cash including cash sales, dividend income, and proceeds from sale of p0lant assets.


The internal control system for cash receipt should be designed in a manner that will ensure that only authorised transactions are processed, consistence with corporate policies. The auditor should endure that cash receipts are deposited promptly, at least once a day. Such procedures will minimize the possible of loss or misplacement. All cash should also be deposited in the bank and not used to pay invoices or meet cash disbursement such procedure would help to protect against the possibility of recording data on net basis, which is violation on generally accepted accounting principles. The auditor should understanding of the system. This would enable the auditor to evaluate the strengths and weak ness of the system and to determine the audit procedure.

Cash disbursement: This includes payment to render employees and a variety of creditors. The auditor study of the cash disbursement system begins with the understanding of the system, after which, the auditor should evaluate its adequacy.



The credit sales system is a vital part of the overall internal control system in most companies. This system encompasses the receipts of an order from a customer of the delivery of goods and services to that customer. The processing of credit sales transaction has a significant impact upon the financial statements of the customer. Such importance affects the auditor’s design of the audit plan. To fight against this, an appropriate audit effort should be devoted to study and evaluate the credit sale system. Also the audit might find it houseful to construct an internal control model that can be used as a norm for the evaluation of an accounting system. Since several authorization take place before a transaction can be processed the authorization should be for each individual.



Inventory is defined as goods held for resale, or for use in the manufacture of goods to be sold. Major accounting objectives, is the valuation of ending inventory and the measurement of the cost of goods sold. In the allocation process of inventory, whether done. In the allocation process of inventory system or by perpetual inventory system the auditor should ensure that the cost pool is a proper representation of historical products, and that this cost is allocated between the balance sheet and the income statement consistent with generally accepted accounting principles.


The auditor in auditing the inventory should review the accounting system to determine if the internal control system is adequate. The proper execution of a transaction in the inventory purchase actual receipt of inventory and the receipt of an invoice from vendor.


The auditor should therefore review document that exhibit specific authorization to obtain reasonable assurance that the transaction is executed as authorised.

The auditor should have a review that transactions which have been executed and recorded in their proper account, in their correct account and in the appropriate accounting period.


Transaction                                                    accounting entry

Acquisition of goods                                               purchase N0

Account N0

Sale of goods                                                          receivable N0



Property, plant and equipment of fixed assets that from the productive capacity of a company. These assets are not acquired for the resale but rather are used in the operations of a company’s business. Their lives may extend over several years. Their the auditor should study and evaluate the fixed asset internal control system.


In designing an adequate internal control system for fixed assets, it is important to separate the authorization responsibility, the recording responsibility and the custodial responsibility. The auditor should review whether these responsibilities were separated. The auditor should review whether any transaction outside those with proper approval were processed. The authority to purchase fixed asset even though they may decided to delegate the authority. The auditor should also review to ensure whether the disposal by the corporate officials.

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