This work “THE IMPACT AND CHALLENGES OF INTERNAL AND EXTERNAL AUDITOR IN MANUFACTURING COMPANIES” was chosen by the researcher so as to enable and prove the essence why auditors are needed in companies. The study is  aimed at investigating the behavior of both workers, auditors, employees, managers in the auditing of manufacturing companies. The study is divided into five (5) chapters. The first chapter is the introductory chapter which gave definitions of auditing, manufacturing companies, internal auditor and external auditor. Chapter two gave us more about auditors i.e their qualification, impact, problems and challenges, their work with the law and companies. While chapter three gave practical example with data collection and illustrations and also chapter four, finally chapter five gave concluding remarks.


Title page                                          i

Approval page                                   ii

Dedication                                        iii

Acknowledgement                              iv

Abstract                                           v

Table of contents                               vi


  1. Introduction                               1
    1. Statement of research problem     3
    2. Research questions                      5
    3. Objectives of the study                7
    4. Significance of the study              8
    5. Scope of the study                      9
    6. Limitation of study                      10
    7. Definition of terms                      11


  • Literature review                                             16
    • Concept of auditing                                          16
    • Nature of internal and external auditing              20
    • Methods of audit approach                                21
    • The necessity of external and internal auditors     23
    • Auditors and the law                                        24
    • Audit report                                                    32
    • Auditors liability                                               39
    • The importance of audit in manufacturing companies 44
    • Role of an auditor in a manufacturing company    45
    • Principles of auditing                                        46


  • Methodology                                                   49
    • Introduction                                                    49
    • Research design                                              50

3.3  Rational for choice of variables                          50

3.4  The methodology                                             52

3.5  Data  selection of analysis                          53


  • Presentation and analysis of data                55
    • Introduction                                             55
    • Data presentation, classification and calculations  55
    • Interpretation of result                              61


  • Summary, recommendation and conclusion    63
    • Summary of findings                                 63
    • Recommendation                                      64
    • Conclusion                                               66

Bibliography                                             68

Appendix                                                        69

Questionnaire                                           70



Manufacturing companies are companies that transform raw materials or semi finished goods into commodities, goods usable by humans. Manufacturing companies are companies that produce commercially. Their main aim is to produce goods and render services to members of the public at a minimum cost to maximize profit.

In manufacturing companies, some various items of expenditure are allocated to sub division of the final account in accordance with the principles which govern cost accounts. However, when a manufacturing company produces more than one particular product, different accounts are to be prepared by the different departments.

In manufacturing company, company established by law  is treated as a separate legal entity different from shareholders or subscribers. The owners or shareholders of a manufacturing company present their account to the auditors who audit and report if the account shows a true and fair view before it is been presented to the directors of the company. Without the report of the auditor in a manufacturing company the shareholders i.e the owners of the company finds it hard to accept the account given to them by the directors.

The auditors both internal and external auditors at times have problem in computing accounts and giving reports because it involves the strenuous method of bringing together all accounts of the company and summary of these accounts and control system.

An auditor is said to be an accountant who undergo a recognized professional course and a member of one of the recognized account bodies resident in Nigeria and who is carrying out a professional accountancy practice. For an auditor to audit a company account he must not be an employee or a body corporate of the company been audited. An auditor should be recognized in the context of the institute of chartered accountants of Nigeria.

An external auditors are auditors that are independent of the  organization that are auditing. External auditors can be government auditors or an independent public accounting firm. They report to the company’s shareholders. They provide their experienced opinion on the truthfulness of company’s financial statements and perform work on a test basis to monitor system in place.

Internal auditor is an auditor that work within an organization and report to its audit committee and directors. They help to design the company’s organizing systems and help develop specific management policies. They also ensure that all policies implemented for risk management are operating effectively the work of the internal auditors tends to be continuous and based on the internal control system of a business of any size.

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