The Role Of Internal Auditors In Stock Taking (A Case Study Of 7up Bottling Company Plc)


The Role Of Internal Auditors In Stock Taking (A Case Study Of 7up Bottling Company Plc)

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Due  to  irregularities often  encountered in the public  enterprises  and  private  establishments,  this  research  project  is  designed  for  the study  of  the  internal  auditor  in stock taking  especially as  a case study  of  7up  bottling  company  plc  9th  mile  corner Enugu.

Internal auditing and stocktaking in recent time has proved to be a hard nut which auditors have not find easy it crack  7up bottling company is  an  enterprise, which concentrated much on the marketing of favorite  brands  of  soft  drinks products.  These  brans  are  popular  and  widely consumed  across  the  length and  breadth  of  Nigeria .  seven – up bottling company  plc is  one  of the largest  manufacturing  companies  in  Nigeria.  This work comprises of five   chapters

Chapter one of this work gives a general introduction of the work which  includes  the  background  of the study,  statement  of the problem,  Objective  of the study,  research  questions,  significance  of the  study, scope  of the study  and  limitation of the study etc.

Chapter two comprises the review of related literature  and  assertions by accounting  icons and  intellectuals  in the field.

Chapter three is made  up  of research  design  and methods, Area  of study, Population study, Sampling  methods, Research  instrumentations,  Validity  and  reliability  of research  instruments,  source  of data and  methods of  investigation  etc.

Chapter  four  contains the  presentation and  analysis of  data  and  lastly.

chapter five contains  findings,  conclusion,  Recommendations  and  bibliography  reference,  Appendix,  as shown in  7up  bottling  company  plc  9th  mile  corner  Enugu.

Efforts  were  also  made  to  make  this work  interesting  and  it  is  hoped  that  it  will be  of  great  help  to  anyone  that comes  across it.



1.1        Background of the study

1.2        Statement of the problem

1.3        Objective of the  study

1.4        Research  questions

1.5        Significance of the study

1.6        Scope  of the study

1.7        Limitation  of  the  study.


2.1      The role of internal auditor under the law statute

2.2      Internal auditing

2.3      Stock taking


3.1      Research design

3.2      Area of study

3.3      Population

3.4      Sample and sampling techniques

3.5      Instrument for data collection

3.6      Validity of the research instrument

3.7      Reliability of research instrument

3.8      Method of collecting data

3.9      Method of data analysis



4.1      Data analysis and presentation

4.2  Summary of results


5.1      Discussion of results/finding

5.2      Conclusion  of  result

5.3      Recommendation

5.4      Implication of the research findings

5.5      Suggestions for further research

5.6      Limitation of the study




The role of internal auditor

The regulation of stock taking

The effect of internal auditor

The positive change in stock taking



Auditing  system has been  known as  a  major  factor  to  which  good  or poor  performance  of a  manufacturing   company  can  be  attributed

Most  people think to seriously that auditing is a subdivision of accounting, probably that is how it was introduced to us and because every auditor is an accountant but every accountant is not an auditor. Auditing has its root elsewhere. The relationship of auditing and accounting is close, but they are not the same. There are business associates.

One may ask “ What  is accounting?”  accounting  has  been  defined  in many ways  by different authors.

Accounting to Eneje (2006) accounting is a service activity which provides and financial information about economic activity that is intended to be useful in making economic decisions”   It involves the measurement and communication of business events and conditions as they affect the peculiar enterprises or entity. The task of accounting is reduced a tremendous mass detailed information to manageable and understandable proportion. Nevertheless auditing does more of these things.

Auditing to Nwabueze C.C (1997), “auditing is an independent examination by a statutory  appointed person  called the  auditor  to  investigate  an  organization, its  records  and  the  financial  statement  prepared  from  them, and  thus  form  any  opinion  on the  accuracy  and   correctness   of  the  financial  statement , hence  the role  of  the internal  auditors  in stocktaking

Auditing is analytical not constructive. It is critical, investigative and concerned with the basis of accounting measurement and auditing emphasis it’s proof of correctiveness

Auditing is also concerned with adequacy in design, effectiveness in operation and consistency in application of such proceessings.

The researcher  will  also  examine  the  effects  of  these  aspects  of  the  role  the internal auditor  in stock  taking.

It is aimed at forming opinion on the truth and fairness of the transaction of an enterprise and also has its principles, rules not on accounting, which is learns for ideas and methods.

Auditing is therefore a discipline independent on logic with accounting as art of its utilities.

The  use  of  internal  auditors controls  the  measures and  its effects on a manufacturing  company,  hence  the establishment of the auditing  department will also  been show. The  effects of  these  aspect  of  auditing  in stock taking  is  The  objective  of this  work,  hence  the research  topic  “The  role  of  internal  auditors in stock  taking” (A case  study  of 7up bottling company plc 9th mile   corner  Enugu).


7up  bottling  company  was  founded  by  Mohammed  El – Whalil in the  year  1960. 7up  bottling company  was  incorporated in Nigeria  in the  year  1959 and finaly came to  Enugu in 2003. in  1959  it  was  incorporated  as  a private  limited  liability  company  under  the name  7up   limited  and  its  name  later  changed  the   limited  and  its  7up  bottling  company plc in  1991  to comply  with  the company and  Allied  matters act  1990, to  become  one of the Nigerians  most  admired  companies.

Seven – up bottling  company plc  is one  of  the largest  manufacturing  companies in  Nigeria. They produce  and distribute the  favourite brands  of  soft   drinks. Such as pepsimirinda, seven consumed up  and mountain  dew. These   brands are  popular  and  widely consumed  across   length and breadth of Nigeria.

They have  nine  bottling    plants  with state  of the  manufacturing facilities  located.  Strategically acorss the country. Seven – up  bottling  company  has  a well co – ordinated distribution network  with  an  extensive network  of over  200  distribution  centres  located  acorss  Nigeria.

Neverthless the  auditor  had  the account   read  to  him  since the term  audit originated from  the  latin  “audire”  meaning  to  hear. The  origin  of  an  audit  can be  traceds to  the  ancient  times  in  Britain  when  landowners allowed  tenant  farmers  to   farm  on their  land. The landowners  did not  involve  themselves  in  the cultivation of the land  or  in the supervision of  these  tenant farmers.

After  Luca  pacido  published  his  book in the  15th  century,  the work  of  auditor  became  more  involved  but  today,  the  increased  complexity  of  business  units, either  by   the  scope  of its  own  operation  or  by  amalgamation,  has now  forced the auditor   to  adopt  new  methods of   approach  to  his  work the  role  of  auditors  in stock  taking.

The auditors  duty in respect to stock  taking  is  often  is  often regarded as  fully  expressed in the  case  of  “re Kingston  cotton  mill  co. ltd” , (1896)  in  which   Lindly  L.J.  stated  that  it  was  “on  part  of  the  auditors  duty  to  take  stock” .  But later  in the  united  states,  it  is  recognized  duty of the  auditor  to  make  physical  stock chedes that  is  stock  taking,  this  duty  having  been  imposed  upon  him  after   much  defalcations  has  took  place  in  case  of “ MC”  Kasson  V-  Robin” (1940) whereby  fictitious  record  affecting  purchases,  sales  and  stocks  enabled  various  responsible  officials   working  in  collusion  to  over  state to  over  state  the  assets  on the  balance  sheet  by  sum  of  21000, 000  dollars.

On  the  other  hand,  stock  taking  or  physical  verification  of  stock  by  means  of fully  counted  or  measurement  incase  of bulk  stock  tally  with  the  bin  card  records  stock  taking  could   be  done  in  three  ways  stated  below:

(a)       Counting of  stock  at  the end  of  the year  or  before  the  year ends  or  after  the  year ends.

(b)     Counting of the  part  of  stock  by  means   of  interpolating  the total  statistics.

(c)      By  means  of using  continuous stock  records

It  should  be  known that  where stocks  are  material  in  the  enterprises. Financial  statement  and  the  auditor is  placing  reliance upon  management  stock  – take  in other  to prate  evidence  of  existence, the auditor  should  attend  the stock  taking. This  is  because  attendance  of  stock  taking  normally is  the  best  way  of  providing evidence  of the  proper  functioning   of  the management   stock  –  taking . procedure  and  the existence  of stock  and  their  conditions.

The  company,  7up  bottling  company  plc is  known  for  their  good  auditing  principles  till  date.


The nature of the product of   seven up bottling company  plc   particularly liquids such  as  pepsi, mirinda, selen – up and   mountain dew  makes it very difficult to effectively conduct stock – taking at any point in time and also to determine the extent to which internal auditors are involved.

The statement of the problem was discovered as a result of the researchers enquiries.

1)         7up Bottling company plc  has been going under services of financial problem due to the internal control where not effectively used.

2)         The staff do not know whether internal control will regulate the financial constraints of the company.

3)         7up Bottling company does not know whether internal activity stocktaking will make good or loss.

4)         The staff of  seven – up Bottling  company  plc  do  not  know  the  present effectiveness  and  how  efficiency of stock  talking  method  will be

5)         The existing  auditing  system  in the  manufacturing  company  does  not   comply  with  the  generally  accepted  accounting  principles.

6.     There is incomplete  recording  of  stock  in most  manufacturing  companies in Nigeria, thereby  not  obeying  the  principle


The main purpose or objective of this study is to determine whether persons in position of fiscal responsibility in government and limited liability companies and organization  seven – up  bottling  company  report in time and fair manner. This can take place because the Internal auditing is becoming increasingly important in large enterprise.

An organization like seven – up  Bottling  company plc  Enugu that has so may district branch offices through the state and because of this they need the service of many people who are not supervised directly. It is also the same like ownership of a co-operation often it is scattered widely, and individuals who has  little or no proprietary interest in firm, are employed to run it.

Separation of ownership from the active management of an enterprise is a common phenomenon. Such a situation presents an urgent need for special safeguard to promote the  efficiency in the operation of a business and to assume accuracy in the financial records hence internal auditing.

The objective of this study is also to stressing  the importance of an organization to be aware of its stock position at all times since stock is as important as cash in an organization.

The researcher also wish to put across how internal auditing in seven – up  Bottling  company plc  has improved management information system and type of activities performed by the Internal auditors.


1)   To what extent can the role of Internal auditing in stocktaking in seven – up  Bottling  company plc  effecting  be determined?

2)   Can internal auditing in Total Nigeria Limited regulate its stocktaking?

3)   How does internal auditing effect stocktaking in seven – up  Bottling  company  plc?

4)   Will Internal auditing in seven – up Bottling company plc change the stocktaking methods positively?

5)   Do  internal  auditors  in  seven – up  Bottling  company  plc attend  company  board  meetings  personally  or  by  proxy?

6)   In  what  ways  does  the staffs  and  board  members  contribute  in the  discipline  of  erring and  bad  stock keeping?

7)   Does your firm prepare budget?

8)   Would  you  suggest  that  the  firms   profits  since  the   introduction  stock  taking  system  has  been

(i)                 Improving?

(ii)               Fluctuating?

(iii)             Declaiming?


This study is believed will not only be useful to the company where it is carried out but also to other companies that carryout the same type of business not only that, since seven – up  Bottling  company is  prelate limited  liability company, there is need to know its internal auditing system and how it has helped the efficiency and proper usefulness of accounting records.

The  study  of  auditing  in  manufacturing  companies  will  enable  them  to  identify  areas  were  their  accounting  system inadequate.

The  study  will  also  provide  information  on  management  to  accomplish  its  objectives.

These  research  work  will  help manufacturing  companies  know  how controls  can  be  applied  with regards  to  inventory  and why  this  is necessary.

Researchers,  students  and  teachers  will  also  gain  from  the  techniques  and  methods  of  good   auditing  system  exposed  in  this  work.  Government will equally benefit through increased revenue from higher   profits.

The society  at  large  will  benefit  through  facilities  provided  from  increased  revenue  accruing   to  government  as well  as  higher  expenditure  votes to  social  responsibility  functions  by these  companies as  a result  of  higher profits.

Shareholders  and  infestore will  benefit  from  the  study  by  higher  dividend,  dividend  yield  resulting  from  better auditing records.


Through the study received the internal auditing in companies the investigation carried out by the researcher covered only seven – up  Bottling  company  plc at mile cornch Enugu which was used as a case study.


To ensure a proper understanding of what the study is all about, some unfamiliar words to those who are not in the same filed are defined as they appear in the project.

a)    Internal Auditing: Internal Auditing is an independent appraisal activity within an organization for the review of accounting, financing and other operations as a basis for services to management. It is a managerial control, which functions by measuring and evaluating the effectiveness of other control.

b)    Internal Control : Internal control is the whole system of controls financial and other wise established by management in order to carry on the business of the enterprise in orderly and efficient manner, ensure assess and secure as far as possible the completeness and accuracy of the records.

c)    Internal Auditor:        Internal Auditor is the person that does the above mentioned job.

d)    Stocktaking: Stocktaking is counting and checking the price and physical qualities of goods or items in the store by selected officials of the company in order to know whether the physical numbers and prices tally with what is written in the bin cards.

e)    Bin cards: Bin cards are cards that contain the descriptions of an items, the receipts issued and as well as the balance of the items in question.  The bin cards are used not only for detailing receipts and issues of materiel but also to assist the storekeeper to control the stock.

f)     External or Independent Auditing: This is an independent examination of the financial statement of an enterprise conducted with view to the expression of an opinion on whether or not those statements show a true and fair view of the enterprise by a professional practitioner who engaged as an independent contractor.

g)    Watch dog: This is a dog trained and kept to guard property of various kinds, homes and offices. In this context, the term watchdog refers to the internal auditor.

h)    Vouching Approach: Vouching approach is typified by checking and ticking the quantities of transaction and documents to ensure that they have been recoded accurately and correctly.

i)     Verification Approach: Verification approach this concerns the direct verification by independent means of assets, liabilities, income and expenses  and other mattes that is  concern to the auditor.

j)     Jetty: Jetty is a place in the seaport where tankers carrying soft  drinks  products berth.



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