CHAPTER ONE                                     INTRODUCTION 1.1 BACKGROUND OF THE STUDY. At the beginning of the century, most businesses are small and sole-operated. The owners/managers are overly involved with most of the decision making. As business grows in size and complexity, professional managers take position of the owners and the operators.   Consequently,  they  rely  heavily  upon  streams  of  accounting  and statistical report which summarizes current happenings and  conditions in the enterprise.  The  information  carried  by  these  streams of  report enables management  to  control  and  direct  the  enterprise in  order  to  assure management  that  the  information  received  are  both  reliable  and  accurate.  A system of internal audit is developed to monitor the activities of the company.  The  need  for  maintaining  the  adequate  efficient  and  effective  internal audit,  therefore  cannot  be  overemphasized  especially  in  days  when  Nigeria’s economy still is witnessing depression and every company is  making effort in ensuring  that  wastage,  pilferage,  misappropriation  are  checked  or  avoided, and to ensure that assets are being secured.  Some  problems  were  noticed  during  the  cause  of  this research; problems  within  the  company,  these  problems  necessitate  this  work.  The

researcher  noticed  that  there  was  ineffective  co-operation  between  the internal audit and management, audit reports were sometimes ignored by the management.  The  relationship  between  the  internal  auditor  and  external auditor was strained making work harder for the external auditor. The lack of internal  audit to  prevent  pilferage  and  fraud  within  the  company  thereby preventing an error free working condition. 1.2 STATEMENT OF PROBLEM Often,  management  and  internal  audit  department  function  were  seen  as contradictory rather than complementary. Internal audit department is  setup to  ensure  adherence  to  management  policy  but  this  objective  cannot  be achieved  because  of  interference  and  undue  influence  by  the  top management.