IMPACT OF AUDITING IN GOVERNMENT PARASTATALS: A CASE STUDY OF ENUGU STATE AGRICULTURAL DEVELOPMENT PROGRAMME ENUGU CHAPTER ONE INTRODUCTION 1.1 BACKGROUND OF THE STUDY
The primary goal of any business entity, whether private or public, is to make profit. Profit is made only when the total revenue exceeds total cost, and loss incurred when the reverse is the case. A breakeven situation occurs when total revenue is equal to total cost. Since excess of income over expenditure is profit, there is the need for any business entity to exercise full or at least reasonable control over cost so as to make profit or breakeven, but with the high and disgusting rate of losses and eventual failures of public enterprises in spite of government annual grants and subventions, one is inclined to ask questions as to whether some reasonable control is exercised over public enterprises. The ineffectiveness of government parastatals does not only affect the government, but also the entire economy.
Government participation in business (through public enterprise) unlike every other private enterprise has not yielded the desired result in terms of social, economic and political considerations. It is against this backdrop that this study seeks to examine the effectiveness of audit in government parastatals. Nevertheless, the economic consideration as a major business objective of any enterprise, be it, public or private will dominate other considerations in this study. Thus, the economic considerations of government establishing public enterprises are to fulfill her social responsibilities to the masses.
Profits are needed from the government parastatals not only for sustaining the existing parastatals but also for establishment of new ones. Government does not have in mind to establish parastatals for profit making but intervenes where the system of perfect competition has broken down. Nevertheless, we are primarily concerned with mobility of public enterprises in Nigeria to at least breakeven vis-à-vis some of their private counterparts that make surplus profits. There could have been no better time for this study than now when government debts are accumulating daily and foreign exchange earnings declining. These points to the fact, why government wants their parastatals to generate enough profit to at least pay for their consumables and argument on their salaries where possible. No wonder the government stance on public enterprises tagged “privatization”.
The term auditing came into use when accountants have to add to their existing function. It is not new though the interest shown in it is of relatively recent origin. Auditing particular task is to provide information to managers, shareholders and investors on the outcome of turnover rate in an organization.
Auditing is a broad based subject drawing upon relevant Laws and Cases, financial account, taxation, costing and management accounting. It could be reasonably assumed that if there is a sound auditing department in an organization or parastatals is bound to financially perform well, if such information gotten is effectively and efficiently utilized.
The extent of which the above assumption is true using the Nigerian parastatals as the subject of the study. It is my ultimate desire as a researcher that at the end of this thesis I should be able to show the impact of auditing in government parastatals. Hence auditing is one key to the success of any parastatal set-up.
According to Okorie Onovo’s book (2011) he views auditing as the expression of an opinion on the financial statement of an organization or parastatal within recording principles. While in NWEKE and UNEGBU (2011), views auditing to be a form of stewardship where the messenger is expected to account for what was left under him by the shareholders so as to know, if it actually increased, or reduced and if they were the way they gave it to them, just as the case in, in the Holy Book of Matthew Chapter 25:14-30.
Many Directors and Managers are better and stronger when they have good idea of the actual work of auditing in what have been under their care. Their performance and reward are determined by the correctness of the shareholders during the annual general meeting of the organization or parastatals. It is however assumed in this thesis; that it is an efficient and effective auditing system that is the only high cause of financial performance in parastatals.
.