CHAPTER ONEINTROUCTION1.1 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. Asbusiness grows in size and complexity, professional managers take position ofthe owners and the operators.Consequently, they rely heavily upon streams of accounting andstatistical report which summarizes current happenings and conditions in theenterprise. The information carried by these streams of report enablesmanagement to control and direct the enterprise in order to assuremanagement that the information received are both reliable and accurate. Asystem of internal audit is developed to monitor the activities of the company.The need for maintaining the adequate efficient and effective internalaudit, therefore cannot be overemphasized especially in days when Nigeria’seconomy still is witnessing depression and every company is making effort inensuring 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. Thepg. 12researcher noticed that there was ineffective co-operation between theinternal audit and management, audit reports were sometimes ignored by themanagement. The relationship between the internal auditor and externalauditor was strained making work harder for the external auditor. The lack ofinternal audit to prevent pilferage and fraud within the company therebypreventing an error free working condition.