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Auditing is an objective and systematic examination of accounts of an organization as to enable an auditor to make a report on the balance sheet and or other statements, which have been extracted therefore to those whom he is appointed to report. The selected co-operative societies were critically examined with a view to finding out the role of auditing as essential, tool for effective management and control of cooperative businesses. Data was collected the use of questionnaire, personal interviews and observation; the data were collected and analyzed with the use of the table and percentages. In this research, it was discovered that (1) Cooperative auditing is an essential tool in effective management of co-operative businesses (2) Though auditing is adopted in virtually of all the cooperative societies, it’s practices and application is hampered by the problems of inadequate auditors as well as poor cooperative extension services. On the basis of the above findings, the following recommendations were made to enhance the performance of cooperative auditing in Aninri Local Government Area (i) Training and retaining of cooperative officers as well as societies, secretaries should be intensified. (ii) Primary societies need to affiliate to secondary unions to ensure provision of auditing facilities. With the above recommendations, it is hoped that the performances of cooperative business enterprises will improve tremendously, especially in the area of auditing and international control.



TITLE PAGE                                                             i

APPROVAL PAGE                                                     ii

DEDICATION                                                           iii

ACKNOWLEDGMENT                                               iv

ABSTRACT                                                               v

TABLE OF CONTENTS                                             vi

LIST OF TABLE                                                        ix



1.0.  INTRODUCTION                                               1

1.1.  BACKGROUND OF THE STUDY                       4

1.2.  STATEMENT OF THE PROBLEM                     7

1.3.  RESEARCH QUESTIONS                                 8

1.4.  OBJECTIVES OF THE STUDY                  10

1.5.  SIGNIFICANCE OF THE STUDY                       11


1.7.  DEFINITION OF TERMS                                   13



2.0.  LITERATURE REVIEW                                     14

2.1.  MEANING OF AUDITING                          14

2.2.  DISTRIBUTION BETWEEN AUDITING AND ACCOUNTING                                                       16


2.4.  VARIOUS FORMS OF AUDITING IN COOPERATIVE SOCIETIES                                                      19


2.6.  AUDIT REPORTS AND OPINIONS                    25

2.7.  INTERNAL CONTROL SYSTEM IN COOPERATIVE BUSINESSES                                                     27



3.1.  RESEARCH DESIGN                                        30

3.2.  AREA OF THE STUDY                                      30

3.3.  POPULATION OF THE STUDY                  30

3.4.  SAMPLE SIZE DETERMINATION                     32

3.5.  SOURCE OF DATA                                           33


3.7.  SAMPLE SIZE DISTRIBUTION                 34


4.1.  DATA PRESENTATION ANALYSIS AND INTERPRETATION                                            37



5.0.  SUMMARY OF FINDINGS, RECOMMENDATIONS AND CONCLUSIONS                                         43

5.1.  SUMMARY OF FINDINGS                                 43

5.2.  RECOMMENDATIONS                                     45

5.3.  CONCLUSION                                                  46

BIBLIOGRAPHY                                                47

APPENDIX                                                       48

QUESTIONNAIRE                                             49


Table 4.1: Prevalence of fraud in cooperative societies  37

Table 4.2: Measures adopted to check fraud                  38

Table 4.3: Benefits from the adopted measure to check 39

Table 4.4:  Verification of fraud in the financial statement   39

Table 4.5: Perpetrators(s) of the fraud                            40

Table 4.6: Action of the society to the fraudster(s)          40

Table 4.7: Impart of auditing as a management and control tool                                                            41

Table 4.8: Problems of cooperative auditing                   42



The quest of man for economic survival and self-relevance over the years led to new ways of doing business through combined effort. Under this business organization, interested persons pool their resources both human and material together for the attainment of a pre-defined goal. This business unit called cooperative business has remained a vital source for community development; here the unprecedented has spread across the globe.

With the collapse of the pre-Rochdale cooperatives initiated by Robert owen and Dr. Willian king a vacuum was created. The suffering workers were yet to find a solution to their pitiable conditions. This did not happen until 1844; when a group of twenty-eight (28) working class persons mostly weavers formed the first ever successful co-operative society in a small village of Rochdale in Manchester, England. Subsequently, the ideas of co-operatives grow in other countries like; France, Germany, Sweden, India, Italy and China.

Modern co-operatives in Nigeria started in 1935 with the enactment of cooperative societies ordinance of 1935. Prior to this in 1934, the then government of Nigeria requested for an expert to advise them on the possibility of introducing co-operatives in Nigeria. A cooperative expert working in India, Mr. C.F.I Strickland was therefore commissioned in 1935 to study the working of the West African cooperatives. Upon this report, the first cooperative ordinance was enacted.

Cooperative business requires individual or member participation however, no larger societies, management committee are entrusted with the management function of planning, coordinating, directing and marketing etc.

In other words, majority of the member-owners may not be involved in the management of the business. They therefore need to be assured that their pool of resources will be properly harnessed to obtain the required refunds. Hence, they need to take steps to guide the business activities so that predetermined goals and standards are achieved. That is control. One of the controlling measures which is an essential tool for effective management and control of cooperative business is auditing.

According to Leshie (1974), auditing prevents fraud and errors, but by deterrent and moral effect of an auditor. Section 40 of the Eastern Nigerian cooperative societies law and Rules, cap 28 of 1963, demands that there should be an annual audit in every cooperative societies.

Auditing reinforces the confidence of the members in cooperative societies. They feel that somebody is there as a watchdog. As frauds and errors in posting of book and records of cooperative business enterprise are discovered during auditing, reliability of find or annual account is assured.




The concept of auditing dates back from antiquity in the middle ages great land-owners gave their lands to their stewards, serfs to manage and render accounts. Auditors were appointed by their landowners to ensure that revenues realized are properly accounted for. The join stock companies act of 1844, which made possible the separation of ownership and management was also created, a dimension in the requirements for periodic financial statements.

Under the co-operative form of business organization, the member owners (shareholders) as a body entrust the management committee or board of directors in secondary societies. Periodically it submits to the shareholders, the members may be enabled to see the financial position and profit or loss of the undertaking in which they are interested. In these circumstances, the need arose for some means by which the shareholders of a cooperative business might be enabled to feel assured that the accounts presented to them by their management committee did show an objective view of the cooperative business. For this reason, auditors were appointed to verify on behalf of the shareholders (member-owners) the accounts of the management committee and the report them to the shareholders.

Obviously, it is practicable if not impossible for every shareholder to examine the books and records of the cooperative business, hence auditors were appointed to act for them. An auditor does not act for the management committee at all, but is appointed to act as a check upon them and to ensure on behalf of the member-owners of the cooperative business, that the management committee carry on the undertaking honesty and for the benefit of the member-owners and render to them true and fair account.

To some persons, membership of a cooperative society is an avenue to partake in sharing the national cake. This mortality has continued to breed dishonesty, distrust, financial mismanagement and gross indiscipline amongst directors or management committees of co-operative organization. To this effect therefore, and contrary to the provision of regional cooperative laws (which vested the power to appoint an auditor on the directors or management committees), the current Nigeria cooperative societies decree 1993, section 36 includes;

  1. Rest the power of audit in the general meeting of the registered society. It is therefore necessary that a regular audit of cooperative businesses be carried out in order to instill discipline and prudent management of the societies resources and sustain the interest on members who in one way or another transacts business with society.

The conduct of audit in cooperative society is a statutory function, which must not be avoided. It is upon this background that the researcher had the interest and curiosity to research on the topic; auditing: An essential tool for effective management and control of cooperative businesses.

Due to the inability of the researcher to carry out this study in the entire Enugu State, the study is restricted in Aninri Local Government Area, Enugu State. So as a matter of fact, my data collection will depend primarily on the information supplied by Aninri cooperative societies during the interview and administration of questionnaire.



Auditing has been regarded as a medium through which some of the problems facing the effective management and control of cooperative businesses can easily be dealt with. The likely problems are:

  1. Misappropriation of funds
  2. Misappropriation of goods
  3. Wrongful manipulation of accounts with the intention to conceal previous misappropriation.
  4. Errors both technical and problems to see.

There is need to consider these problems to see how auditing can be employed to help solve them. These problems should not be thrown to government as if it should be the sole player to the effective management and control of cooperative business effort, while individuals, auditors and all institutions sit on the fence without questioning or making contributions. The researcher in line with the problems listed above, looked at the communities that made up Aninri Local Government Area of Enugu State and attempted to access the level of auditing and their role in the effective management and control of the cooperative businesses.



The researcher applied questions as a guide in his research for the solution to the research problem and research hypothesis. The research questions are:

  1. To what extent has auditing been applied by Aninri cooperative societies as an essential tool for effective management and control of cooperative businesses?
  2. What are the various types of audit adopted by cooperative societies?
  3. How does fraud and poor accounting practices affect cooperative businesses?
  4. What is the possible ways fraud can be perpetrated in cooperative societies.
  5. How essential is auditing in the management or co-operative business in Aninri Local Government Area?
  6. To what extent has the government and cooperative unions (secondary societies) assisted the primary societies in carrying out the auditing work?
  7. Could it be that management committee influences the opinion issued by the auditor at the end of auditing exercise?
  8. What are the various problems of cooperative business, did auditing act as moral deterrent to the cooperative officers?



In carrying out the study on auditing as an essential tool in the effective management and control of cooperative businesses in relation to the Aninri Area, the researcher has the following objectives:

  1. To examine the essentiality of auditing in all cooperatives in Aninri Local Government Area of Enugu State.
  2. To determine whether auditing has helped in minimizing problems of cooperatives in Aninri Local Government Area.
  3. To determine to what extent auditing has been able to sensitize cooperators.
  4. To make suggestion on how auditing will help in ensuring the effective management and control of cooperative business.
  5. To profer solution to cooperative societies in Aninri Local Government Area.



  1. This study is expected to contribute substantially to the already existing knowledge of auditing, an essential tool in the effective management and control of cooperative businesses as well as the general readers on the subject.
  2. It will guide the investors who may wish to operate along cooperative lines.

iii.    The study will provide an aid to some people that decided not to belong to cooperatives because of high level of illiteracy.

  1. The study will also uplift the level of operation of cooperation to the cooperative movement.
  2. It will be a database for further researchers and would be a useful addition to the already existing materials.
  3. Finally, it will assist in providing solution to some problems associated with cooperative and other organizations in general.



The study covers a brief origin of auditing and will end up in Auditing; An essential tool in the effective management and control of cooperative  businesses. The study is limited to cooperatives in Aninri Local Government Area in Enugu State. The studies also include the problems facing cooperative societies in Aninri Local Government Area and some possible suggestion for the problems. It will also take time because some textbooks and other materials will be reviewed for effective results.

It also required money that the researcher will be using to transport himself to various places to ascertain information and finally the study is basically map out to know how auditing will be an aid to effective management and control of cooperative businesses.



Auditing: This is an independent examination of books of accounts and records of business organizations so as to enable the auditors to express an opinion as to whether the statements gives true and fair view of the organization.

Essential: This means what is extremely important absolutely necessary in the examination of books and records of co-operative.

Effective: This means producing the desired result, output and product or intended result.

Management: In this context, it means managing the affairs of the society.

Control: In this context, this is organizing and arranging the activities of the cooperative societies.  


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