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THE
IMPACT OF LEGAL AUDIT REQUIREMENTS ON THE AUDITORS PERFORMANCE IN NIGERIA
ABSTRACT
This study is intended to find out the
impact of legal audit requirements on the auditor performance in Nigeria
context specifically. The literature review described the various audit
requirements in conjunction with the professional standards and how they are
applied to secure the auditor competence an independence that are vital
to the auditors if they are to effectively execute their responsibilities to
their clients.
The arrangement of this topic discussed
in reviewing the literature was designed to support the hypothesis which form
the basis of the study.
TABLE OF CONTENT
CHAPTER ONE
INTRODUCTION
1.1
Statement of the problem
1.2
Purpose of the problem
1.3
Significance of the study
1.4
Statement of hypothesis
1.5
Scope of the study
1.6
Limitation of the study
1.7
Definition of terms
CHAPTER TWO
Literature
review
2.1
The concept of auditing and the auditors environment
2.2
Classification of auditing
CHAPTER THREE
3.0
Research design and methodology
3.1
Research design
3.2
Survey of existing document
3.3
Questionnaires
3.4
Oral interviews
3.5
Sample design
3.6
Sources of data
3.6i Primary
data
3.6ii. Secondary data
3.7
Statistical techniques
Chi- square test
Rank correlation
Sing test
Reliability
CHAPTER FOUR
4.0
Data presentation and analysis
4.1
Tabulation and interpretation of data form- questionnaires
4.2
Test of hypotheses
CHAPTER FIVE
5.0
Summary of finding conclusion and recommendation
5.1
Findings
Conclusion
Recommendation
Bibliography
Appendix
(questionnaires)
CHAPTER ONE
1.0
INTRODUCTION
“Business without auditing stifles
public confidence and auditing without law is force”
(Emile wolf)
Auditing occupies a very critical
position in the business life of any society both industrialized and non
industrialized countries like Nigeria and other west African countries.
This implies that auditing plays a critical and improtant role in the economic
development of any nation.
This is more importance as business,
which is the mainstay/ bedrock of the economy is fast growing. It has
grown beyond what may be described as “purely personal management that were
common in the olden days. Such business establishments are small in
size personally owned financed and managed by the owner.
However there is changed situation in
this modern time. The hallmark of most business is no longer owners
management. The owner and financers are separate person (shareholders and
investors) and controlled by outsiders (director and managers) because of the
increase in size and company of business activities. This practice is
know as “stewardship” the entrails as its foundational feature that
shareholders and other parties to the business will like to know how their
resources entrusted in the care of management are being used to achieve the
corporate aim. This is therefore done by employing the services of person’s who
are professionally qualified and referred to as independent public auditors to
attest on the effective utilization or otherwise of the financial resources
after examining the account prepared by the management. It was this
motive that gave rise to the birth of the profession auditing with vital role
and heavy responsibilities.
It would be right to stress that the
down auditing era is the wake into consciousness and disciplines in business
operations the quest to maintain sanctity in the conduct of business.
But to have auditing profession void of
legal backing is a despicable attempt to accord the practice a persuasive
influence but not authoritative status.
Auditing without the law is a force a
contraction on terms. To this extent the law become a fundamental aspect of the
profession and practically speaking too bears conspicuous implications.
For example in performing the attest functions problem and hardships may arise
and both the law and the professional body are not silent on these effect.
It is therefore the legal prescriptions
and their consequences on auditing that constitute the terms of reference of
this research work. The legal framework presently applicable to auditing in
Nigeria is the companies and allied matters act (CAMA) 1990. This is normal
reviewed in the light of the regulatory codes issued of the authorities in
auditing profession both within and outside Nigeria. This the
investigation with expose any difficulties in the legal environment of auditing
which the law can solve and suggest ways of improving the deficiencies.
1.1
STATEMENT OF THE PROBLEM
In this system we shall examine the
situation which exist in the Nigeria auditing scene as he basis for the problem
which has been chosen for investigation. These problem are summarized below.
Auditors have been found to negate the
spirit of the legal requirements for various reason which revolve around
maintaining a cordial relationship with the directors management who they
are specifically appointed to check.
Comments made by some auditors made the
researchers believe that the legal audit requirements especially on the areas
of appointment removal of auditor to more to stile rather than enhance their
independence auditors sometimes change their negative opinion so as to retain
their appointments as auditors. This situation apart form as implications to
the profession will mean that company financial position could be worse as the
would be no pressure from uniformed shareholder and the general public to apply
the corrective measures. These seems to be lack of appreciation of the
auditors roles in companies management hence the staff of companies generally
see auditing work as a disturbance to the normal running of the business
which make them give only minimal co-operation to auditors.
For companies registered under the
companies act there is more pressure to issue an unqualified and positive
opinion on the truth and fairness of the financial statements.
In the course of audit the auditors may
not feel secured to face-up-to-the unpleasant facts relating to the company.
Emotions could be aroused and
objectively clouded by sentiment just to avoid stepping on the sore toes of the
management.
In the view of these foregoing
vitiating factors in the Nigeria auditing context the following questions are
contemplated or framed.
Do the legal audit requirements apply
to the practical situation of companies in Nigeria?
Do auditors comply with the legal
audit requirements in performing their duties in Nigeria?
To what extent do the legal audit
requirements provision influence the auditor opinion in Nigeria.
Do auditors who comply with the legal
audit prescription perform better than those who do no?
These problems will be the basis for
the research
questions
1.2
PURPOSE OF THE STUDY
The principles purpose of this research
work is to critically examine the legal audit requirements that are currently
applied to the practice of auditing in Nigeria so as to ascertain the extent to
which these requirements influence the auditor in the performance of their
duties.
Some of the problems plaguing the
practice of the profession have been identified in the proceeding
section. This study attempts to find the causes of these problems
and to proffer measure that will remedy the ailing situations.
Although the research exercise is
basically academic but its findings are expected to the applied by both the
auditors and
lawmakers
1.3
SIGNIFICANCE OF THE STUDY
The Nigeria auditing practice is
fraught with risks and problems. We are not unaware of the increasing case of
fraud and misappropriations on the part of directors and staff of companies
cases of supporting and abetting crimes as well as professional negligence
arising from pressures on auditors to issue unqualified report. These circumstance
led to an erosion of confidence the public at large consequent delay of the
professional standard.
This significance of this study stems
form the need to ameliorate or avert this worsening situation especially as
there are many interested parties in the report of auditors paramount
among these interested parties is the auditor that issues the report. This
research work recognized that and for the auditors to find ways of protecting
themselves form the large wave of current ligitiaiton arising form
a numerous and often cute liabilities placed on them by the
shareholders or third parties. Measures will be prescribed to guide against
these problem. Shareholders and the investing public are in some occasion
disgruntled with the auditors certification as emotions and sentiments
interfere with objectivity and sound judgment as to the truth and fairness of
the financial statements which the auditors are appointed to examine. The
shareholders and third parties who rely on the technical advice of the auditors
will be benefited by the findings of this study government agencies that have
interests in the audited accounts of various companies for various reasons
including taxation and lawmaker whose interest is in the area of legal audit
prescription will also have relevance to this research project.
The significance of this investigation
into the impact of legal audit requirement on he auditor performance is
inexhaustible and the research in doubtful believe that with all finding the
stature of the auditing profession will be
improved.
1.4
STATEMENT OF HYPOTHESES
The aim of hypothesis is to provide a
logical ground for developing the research work. The hypothesis serves or
provides as possible answers to the chosen problems and further research will
provide imperial basis of the acceptance or otherwise the reception of
the hypothesis.
For the purpose of this stuffy the
hypothesis shall be stated under two categories:
The sub-hypothesis and the main
hypothesis and each category shall comprise the null hypothesis (H0) and the
alternative hypothesis (HAIR).
SUB HYPOTHESIS
H0: There
is no relationship between practical effectiveness and theoretical
Correctness as regards the efficiency
of legal and it requirements in Nigeria
H1: There
is no relationship between practical effectiveness and theoretical
Correctness as regards the efficiency
of legal and it requirements in Nigeria
H0:
Auditors have not been complying with the legal audit requirements in
Material aspects
H1:
Auditors have been complying with the legal audit requirements in
Material aspects
MAIN HYPOTHESIS
The legal audit requirements in Nigeria
have negative effect on the auditors performance.
The legal audit requirement in Nigeria
have positives effect on the auditors performance.
1.5
SCOPE OF THE STUDY
This research study is confined
to auditors in Nigeria. The legal provision considered are those given by
the companies and allied matters act (CAMA) 1990 questions will therefore be
directed towards findings out how the auditors carryout their normal audit work
as required for companies registered under the co-operate affairs commission
(CAC)
1.6
DEFINITION OF TERMS
This provide the contractual meaning of
certain terms used in the study.
Impact:
This
means the effect of or influence.
Legal:
This means in accordance with or authorities by the law
Audit:
Independent
examination and expression of opinion on the validity and deepened ability of
financial statements prepared by management.
Legal Audit
Requirement: The
provision of the law that guide the conduct of audit.
Auditors:
The
accountant who performs the audit work/professional accountant (ICAN holed).
Shareholder:
The
investing public who own shares in a company.
Client: A
customer to the auditor the business entity which employed the service of he
auditors.
Third Party: A
person or an institution who has financial interest in out no contractual
relationship with the business.
Contract:
An
agreement between two or more person which has legal backing and connotation.
Financial Statement and
Account: All
the financial accounting records used by a business entity.
Limited Company: A
body establishment by law in public companies composed of non executive
directors and auditors for the purpose of reviewing the financial statements
and audit findings recommendation of auditors and appointment and remuneration
of auditors and performing other possible related functions.
Negligence:
A commission or omission in the performance of an act arising out of
carelessness which a reasonable and prudent man in the circumstance would have
avoided.
Compliance Test: Those
test which seek to provide audit evidence that the internal control procedure
are being applied as prescribed.
Substantive test: Those
tests of transactions and balance and other procedure such as analytical review
which seeks to provide audit evidence as to the completeness accuracy and
validity of the information contained in the accounting records or in the
financial statement.
Audit risk: This
is the chance of causing damage to an audit firm as a result of giving a wrong
opinion under a circumstance.
Tort: An
act which causes harm to a determinate person. It is a breach of duty arising
out of a person relation or contact and which is either contrary to the law or
an omission of a specific legal duty or violation of an absolute right.
Internal
Cheek: The allocation of
authority and work in such a manner as to afford checks on the routine
transaction of to day work by means of the work of one persons being prove
independently by another of the work of a person being complementary to
that of another.
Ameliorate: To
lessen the effect of something
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