AN APPRAISAL OF AUDITORS INDEPENDENCE IN NIGERIA ( A CASE STUDY OF ENUGU STATE).
The fundamental requirement of the public Accountant or Auditor appointed to carryout a reporting function for a client is that he must maintain an independent position while carryout the necessary enquires and examinations of the accounts presented to him and hence forth form his report. The appraisal of independence of Auditors in discharging their professional duties has always been considered in this context of profession. There is always a feeling that the independence of Auditors is being and ermined in some quarters thus this study looks into the effect the provision of management Advisory services (MAS) by Auditors the issue of amount of fees charged by the Auditors has on the auditors independence. In conducting this study the researcher make use of questionnaires personal interviews, and other related literature necessary to provide the requirement data for the study. It has been discoursed that most protecting accounts at times do not follow some of the ICAN recommended procedures in the determination of the audit fees.
The practicing accountants and the third parties who are users of financial statements have different views as to the effect the provision of management Advisory services has on auditor’s independence. Furthermore, form the analysis of the practicing accountants and the third parties respondent groups replies to questionnaires, it was observed that these respective groups have different judgments of the effect of MAS on auditor independence.
Based on the analysis of the date, the conclusion is that the issue of MAS and audit fees do not affect the auditors independence. Finally, the accountant in many situations where others think that independence would not be possible.
However, would want to recommend that ICAN should provide guidelines on the type of MAS to be rendered by professional Accounts and this should take greater account of the users of financial statements, the people who, after all, the auditors are trying to convince that they are independence.
1.1 BACKGROUND OF STUDY
It has been observed that in every business organization most wealthy individuals have found is necessary to record their daily transaction in a book, and the Account of any organization, whether sole trade, partnership, limited liability companies or government is responsible for the financial transaction in the organization. This department is concerned with proper recording, classifying, analysis and reporting of information that are necessary and controlling of the operations of the business. TO PLACE AN ORDER FOR THE COMPLETE PROJECT MATERIAL, pay N3, 000 to: BANK NAME: FIRST BANK ACCOUNT NAME: OKEKE CHARLES OBINNA ACCOUNT NUMBER: 3108050531 After payment, text the name of the project, email address and your
names to 08064502337
TO PLACE AN ORDER FOR THE COMPLETE PROJECT MATERIAL, pay N3, 000 to:
BANK NAME: FIRST BANK
ACCOUNT NAME: OKEKE CHARLES OBINNA
ACCOUNT NUMBER: 3108050531
After payment, text the name of the project, email address and your names to 08064502337
The Accountant has the responsibility of furnishing important information to the firms management. The manager or Director of a business often wants to know from the Accounting department the financial standing of the enterprise at any particular time. He will like to know how much was realized as per soles revenue or expenditure with in a given interval. The accountant provide these information to enable management to make effective and efficient planning and controlling of the firms operations.
It is utmost important that every business organization has project maximization at, the peak of its hierarchy of goods, there is always a need for a qualitative and financial record to be kept to enable the organizational state, how much losses or profits it is making. It is the responsibility of eh accountant to prepare the final accounts (that is the trading, profit, and loss account also balance sheet) of the organization which will show its profit or loss at any period.
The question that has always arisen from interested third parties has been how reliable is eh final accounts prepared by the accountant of a firm? In order to safe guard the interest of outside parties and to increase the reliability of final accounts by financial statement users, the development of a new branch of the accountancy profession called auditing emerged. Here the need for independent audit examination to provide added credibility that third parties seek the principal reason for the development and growth of the public accounting profession.
Further more, the auditor is called upon to prepare the accountant and is entitled to a fee for this work over and above the remuneration agreed upon for the audit work. Auditing as defined by Ariyo, is “The process of verifying the authenticity of claims made by the management as contained in the financial statement. Auditing therefore, involves the independent examination of the complete records and the subsequent commission of a report by the auditor as to the true and fair view of the records.
The performance of the auditing function is the sole responsibility of a public accounting firm (Auditors). In simple terms, an auditor is a professional qualified accountant who is required to give an expert and an independence opinion on the credibility of the financial information contained in financial statements prepared by the company management on behalf of share holders. The picture of whom the auditor is in relation to what he is expected to do when we consider the essential feature of an audit as set out in the institute of chartered. Accountant in England and Wales statement on Auditing is as follows:
- To make critical review of the system of book keeping accounting and internal control.
- To make such texts and enquires as the Auditor consider necessary to help him form an opinion.
- To compare the profit and loss accounts and balance sheet with the underlying records in order to see whether they are in accordance there with.
The need for auditing as mentioned earlier is to increase the reliability and confidence of outside interest (Third parties) on the financial statement prepared by mismanagement on by the many rulings of professional by mismanagement on by the many rulings of professional bodies on this incase the their behalf. It is stated that one of the main values of an audit to users of financial statement is increased confidence in those statement because management representations as to its performance and stewardship are review and reported on by some one independence of the control of management.
Nevertheless, for the auditor to carry out his report. The autonomy of Auditors in the performance required of their professional duties has always been considered as a cornerstone of the profession. There are however, that the autonomy of auditors is being undermined. This is shown elaborates rules of conduct designed to strengthen autonomy, many articles in professional journals devoted to this subject, and even by the coming of special term to devoted this problem “Independence”. This problem of independence of auditors is the main subject of this study.
The institute of chartered Accountants in England and wales in its ethnical guide statement stated that “a fundamental requirement of the public accountant retained to carry out a reporting function for a client or a third party is that he must be objectives in forming and expressing opinion. Further, independence, is the principal factor contributing to that objectivity and that in order that should be and appear to be independent a public Accountant should have no interest and be subjected to no influence which might conflict either with an objective approach the professional opinion he forms for instance the institute of chartered Accountant in England and Wales (ICANW) has specified various guideline relating to the conduct of Auditors in Britain. The institute outlined some areas or relationship in which the auditor’s independence might be seen by the public to be in doubt. These include the issue of audit fees. Chargeable personal and / or blood relation with client and conflict of interest where non Audit services are rendered.
The stock market crash in 1927 was one of the major factors that has contributed greatly to the development of accounting profession, the recognition in the stock exchange that public confidence in security markets and business report had been shaken due to the cash, lead to series of conference with the American Institute of Accountants. The development of accounting profession can be trace back to the 19th century, how ever the double entry book-keeping techniques of the accounting were known in the fifteenth (15th) century but not with the characteristic, what it has come to be known today.
As Brown put it based on the history of accounting much of the initial stimules for the development of the profession, case out of economics disaster. The south se Bubble fraud of muti-million in 1920 was a case study which according to him required the talents of account for investigation. The rapid development of the centrieth centuries was attributed to the industrial activities during and after the second world war.
The development of the accounting profession Nigerian was influenced greatly by the British Colonial masters. Before the establishment of institute of chartered accountant of Nigeria (ICAN) a group of British trained accounts inspectors, (now know as Registered Accountants in Nigeria were responsible for carrying out public accounting function. Auditing being the best known function of the accounting profession has became the tools used by firms and third parties in order to determine level of performance hence the need to appraise the independence of auditors based on their importance to the users.
1.2 STATEMENT OF PROBLEMS:
There is an increasing awareness recently of the fact that auditors provide a large variety of management advisor service (MAS) in addition to auditing services. The fact that great concern has been shown by the government accountancy bodies and individual researcher in a pointer to the importance of the subject matter. Ariyo, explained that “most people believes that certain degree of incompatibility is inherent in a situation in which management Advisory services are offered in conjunction with auditing services, since the definition with auditing implicitly incorporates the need for independence on the part of the auditor who at the same time advises management on how to improve operational efficiency.
The problem them is whether the shareholders and the other interested third parties appraise the auditor as being able to obtain (attain) a reasonable degree of independence when he provided MAS as well as. Auditing services to the particular alient. In other words, the issue involves the determination of the extent to which the provision of MAS happened or may be seen to unpaid auditors objectivity in forming audit opinions.
The study found that most of the respondent believed that public accounting firm (PAF) could render MAS to audit client without impairing audit independent. They believed that the auditors professional integrity will ensure that independence is maintained.
However, it is obvious that no person other than the auditor will be aware of the extent to which he has managed to preserve this independent. For this reason, it is vita to the credibility of the accounting information, that the auditor is not only independent but is also seen to be independent. This problem of independence in appearance by auditors remains vital since it is visible that share holders and other interested persons will look for when deforming the degree of independence to be attributed to the auditors.
In this study, therefore, the researcher strive to arrive at a broad determination of the opinions of third parties and charted accountants on the issue of auditors independence in Nigeria. Essentially, the study examined the appraisal of different respondent groups of the effect of two variable on auditors independence.
Thus, the study provide answers to the following research question.
- Does the amount of fees charged for audit services in anybody affects the auditors independence status?
- What is the nature and type of MAS rendered by public Accounting firms in Nigeria?
- Does the provision or rendering of MAS to audit clients in any way affects the independence station of the auditors.
1.3 PURPOSE OF THE STUDY
The main purpose of this study is to arrive it a broad determination of the opinion of third parties and chartered accountants, on the issue of auditors, independence in Nigeria.
The study examined the effect of the provision of management advisory services and audit fees on the appraisal of independence of auditors.
The question of whatever an auditor should also provide MAS to a client has been extensively debited. The problems which has always existed when managers report to owners, can the owners believe the reports?
Such report may contain.
- Undisclosed misleading
- Inadvertently misleading
- Deliberately misleading
- Fail to disclose relevant information.
The solution to this problem of credibility in reports and accounts lies in appointing an independence person called an auditor to investigate the accounts and report on his findings.
The importance of this study needs to be emphasized further, since it has not been established in Nigeria that the value of auditing services depends upon the fundamental assumptions that the company auditors are independents of their clients. The main objectives include the following:
- To determine the third parties and/ or financial statement user’s appraisals of auditors independence in Enugu.
- To ascertain the nature and type of management advisory services rendered in Nigeria.
- To ascertain empirically whether the provision of management advisory services influence the third parties appraisal of auditors independence.
1.4 SIGNIFICANCE OF THE STUDY:
Several empirical studies have been carried out on auditors independence in US, and UK, but only very few studies have been done in Nigeria. The few researchers have concentrated their studies on the need and importance of auditors independence and have been often concluded by enumerating some variable or factors which have been identified by studies in US and UK as being capable of impairing Auditors Independences.
However, this study examined empirically the influence of some of these independent variable on auditors independence in Enugu. The findings of survey reveal the following;
- Be in a position to asses the validity in Nigeria of these factors which have been identified in literature as factors. Which impair auditors independence.
- Be aware of the nature and non auditing services rendered by auditors in Nigeria in order to improve investors understanding of the various roles of independence auditors.
- To enable investors to form an opinion on auditors independence based on the nature of non-audit fees.
- Be in a position to achieve investors and other financial statement users on their extent of reliance on audited accounts.
1.5 RESEARCH QUESTION/ HYPOTHESIS
The following assumptions were made in this study;
- that accounting information in a company financial statement to share holders lack sufficient credibility without an independent auditors.
- That the information can be satisfactorily verified and attested to.
1.6 LIMITATIONS/ SCOPES OF THE STUDY:
The main limitations of this study was the lack of relevant literature on the subject matter based on Nigeria (Enugu) environment.
This studies in US and UK were extensively reviewed. There was also a limitation in the difference between respondent and subject who did not respond to the questionnaire.
Another research constrain related to the research design concerned with the situation which were selected for this study. The as a result of limited number of issues include in this research there exists a constraint which concerns the generalize ability of the conclusion drawn here to other independence decision situations.
Also times and finance poses a major constraint to this study. Although the above limitations may appear to have adversely affected this study, yet they do not right the significance of the result. It is hoped that a further research on this work would help to appreciate the significant of auditor’s independence.
1.7 DEFINITION OF OPERATIONAL TERMS:
Business Organization: Is a group of people that involves in the activity of buying and selling goods and services, or a particular company that does this, or work you do to earn money.
Sole trade: an individual that involve in a particular business or industry or the people who work in a particular business or industry or in the same one.
Limited liability company: some or specific legal company, which is share holders numbers are specified.
Auditor: To make an official examination of the accounts of a business.
Auditing: is the process of verifying the authenticity of claims made by the management as contained in the financial statement. It involve the independent examination of the complete records and the subsequent commission of a report by the auditing as to the true and fair view of the records.
Accounting: is the activity of keeping records, analyzing, collecting, classifying, processing, interpretation economic and financial data.
Account: is a written or spoken description of data.
Accountant: some one who keeps or examines the records of financial or economic data, which may be paid or owned by a company or individual. Who’s accountantship is obtained by professional knowledge.
ICAN: Institute of A chartered Accountants of Nigeria.
Public Accountant: group (s) or individual who are involved with examination the records of financial or economic data of the masses firm, company, bank (s), organization, co-operate bodies etc.
ICANW: Institute of Chartered Accountants in England and Wale.
Stock Market: a situation that permitted the buying and selling of share from the stock exchange market.
Security Market: is situation or an environment where investment in a company or in government debt which can be trade on the financial markets and which produces an income for the investor.
Fraud: is as intentional falsification of the books of account and other records of the business organization.
MAS: Management Advisor services.
ANAN: Association of National Accountants of Nigeria.
PAF: Public Accounting Firm
Client: are individual or organization who receives services from the auditor.
Independence: is the freedom from influence of control of a client to its auditor.
Dependence: is influence or control of a client to its Auditor.
General Audit Report: as a written document addressed to the owner in which the auditor expresses his opinion on the truth and fairness of eh financial statement.
Statutory Audit Report: as a detailed account of an independent examination of and expression of an opinion on the financial statement of an enterprise by an appointed auditor in pursuance of that appointment and in compliance with only legal or statutory obligation.
Qualified Audit Report: is an auditor’s pessimistic report on the financial statement of a particular firm after his thorough and careful scruting and examination from their books of account and other records.
Unqualified Audit Report: is seen as an auditor’s optimistic report on the financial statement or better sill the balance sheet and profit and loss account after his thorough scruting and examination.
Errors: is a non-intentional wrong addition of figure or financial statement from the auditor
US: United State
UK: United Kingdom
————- this is an incomplete article ———– it’s a product of a high quality project researched work.
Project topic: AN APPRAISAL OF AUDITORS INDEPENDENCE IN NIGERIA ( A CASE STUDY OF ENUGU STATE).
To access the complete project material pay a sum of 3,000 naira to the following account numbers:
ACCOUNT NAME:OKEKE CHARLES OBINNA
ACCOUNT NUMBER:3108050531 —–And
ACCOUNT NAME: OKEKE CHARLES OBINNA
ACCOUNT NUMBER: 1475680026
Then send your name, topic of interest, E-mail address, teller number as a test message to 08064502337 or Email :email@example.com
The complete material will be forwarded to you immediately
Thanks and God bless
bravoprojecthelp.com has one of the best researched project material in all areas of academic discipline.
can mainly serves as a guide by providing materials which can aid your research work. We do not encourage any form of plagiarism or the paper produced herein for cheating.
…..some related project topics and materials.
———–THIS ARTICLE IS NOT COMPLETE————
To purchase complete Project Material, Pay the sum of N3, 000 to our bank accounts below:
BANK NAME: FIRST BANK
ACCOUNT NAME: OKEKE CHARLES OBINNA
ACCOUNT NUMBER: 3108050531
BANK NAME: FCMB BANK
ACCOUNT NAME: OKEKE CHARLES OBINNA
ACCOUNT NUMBER: 1475680026
After paying the sum of N3, 000 into any of our bank accounts, send the below details to our Phone: 08064502337
- Your Depositors Name
- Teller Number
- Amount Paid
- Project Topic
- Your Email Address
Send the above details to: 08064502337 on/before 24hours of payment. We will send your complete project materials to your email 30 Mins after payment.
bravoprojecthelp.com will only provide papers as a
reference for your research. The papers ordered and produced should be
used as a guide or framework for your own paper. It is the aim of
bravoprojecthelp.com to only provide guidance by which the paper should be
pursued. We are neither encouraging any form of plagiarism nor are we
advocating the use of the papers produced herein for