The Role of the Auditor and His Influence on the Decisions Made by Users of Financial Statement
CHAPTER ONE
OBJECTIVES OF THE STUDY
This research work is aimed at achieving the following:-
1. To identify the causes of fraud in private enterprises.
2. To examine the statutory principle of auditors in relation to fraud.
3. To seek how the scope of present day audits can be entered to include prevention and not only discovery of fraud.
4. To suggest solution for combating fraud in private companies.
CHAPTER TWO
REVIEW OF RELATED LITERATURE
The Roles of Auditors
The role of the auditor in the business and economic life of the society is very important. Modern business enterprises are quite large and mostly in corporate form, wherein the shares are owned by thousands of people (shareholders). Generally, these persons (shareholders) are not involved in the day to day running of the business, and they appoint Directors to run and manage the entity. It therefore becomes desirable that such business enterprises should produce accounts which will indicate the true financial position and how successfully these enterprises are operating. Owners of these businesses do expect their Directors / Managers to prepare true and fair accounts, but because the Directors or the Managers themselves prepare these, they may either deliberately or unintentionally produce accounts which are false and or are misleading. Naturally, therefore, shareholders wish to have these accounts examined by an independent competent person who can assess and then attest how well the management have discharged their functions. An auditor provides this assurance to them. He therefore is not an employee of the company or the servant of the Directors but is appointed by the company (shareholders), to check and report his findings on the statements of account prepared, which by the nature of things is an assurance function, while at the same time it brings to light how well or how badly the entity has functioned. CAMA requires an auditor to state in his report whether in his opinion the financial statements: · Show a true and fair view or · Comply with the requirements of relevant statutes. This requirement implies that the short statements of the auditor are merely an expression of opinion and not a certificate. The auditor equally has the duty of objectivity in verifying all facts about the current assets like cash, treasury bills, treasury certificates and loans in the case of a bank. In forming his opinion, he must obtain adequate information on all the resources of the fixed assets of the bank and claims against them. In considering the statutory responsibilities of auditors, decided cases require the auditor to exercise reasonable ‘care and skill’ but what constitutes skill and care have not been determined. Equally, the law requires auditors to express trueness and fairness of the financial statements; but the extent of the job to carry out before such opinion could be expressed is never stated. This makes the auditor’s statement a mere opinion but he must be honest in his professional job.
CHAPTER THREE
RESEARCH METHODOLOGY
INTRODUCTION
In this chapter, we described the research procedure for this study. A research methodology is a research process adopted or employed to systematically and scientifically present the results of a study to the research audience viz. a vis, the study beneficiaries.
RESEARCH DESIGN
Research designs are perceived to be an overall strategy adopted by the researcher whereby different components of the study are integrated in a logical manner to effectively address a research problem. In this study, the researcher employed the survey research design. This is due to the nature of the study whereby the opinion and views of people are sampled. According to Singleton & Straits, (2009), Survey research can use quantitative research strategies (e.g., using questionnaires with numerically rated items), qualitative research strategies (e.g., using open-ended questions), or both strategies (i.e., mixed methods). As it is often used to describe and explore human behaviour, surveys are therefore frequently used in social and psychological research.
POPULATION OF THE STUDY
According to Udoyen (2019), a study population is a group of elements or individuals as the case may be, who share similar characteristics. These similar features can include location, gender, age, sex or specific interest. The emphasis on study population is that it constitutes of individuals or elements that are homogeneous in description.
This study was carried to examine the role of the auditor and his influence on the decisions made by users of financial statement. MTN State form the population of the study.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
INTRODUCTION
This chapter presents the analysis of data derived through the questionnaire and key informant interview administered on the respondents in the study area. The analysis and interpretation were derived from the findings of the study. The data analysis depicts the simple frequency and percentage of the respondents as well as interpretation of the information gathered. A total of eighty (80) questionnaires were administered to respondents of which only seventy-seven (77) were returned and validated. This was due to irregular, incomplete and inappropriate responses to some questionnaire. For this study a total of 77 was validated for the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to ascertain the role of the auditor and his influence on the decisions made by users of financial statement. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of the role of the auditor and his influence on the decisions made by users of financial statement
Summary
This study was on the role of the auditor and his influence on the decisions made by users of financial statement. Four objectives were raised which included: To identify the causes of fraud in private enterprises, to examine the statutory principle of auditors in relation to fraud, to seek how the scope of present day audits can be entered to include prevention and not only discovery of fraud and to suggest solution for combating fraud in private companies. A total of 77 responses were received and validated from the enrolled participants where all respondents were drawn from MTN, Lagos. Hypothesis was tested using Chi-Square statistical tool (SPSS).
Conclusion
There is lack of adequate public enlightenment and education on the duties, roles, responsibilities, powers and right of an auditor, the appointment and dismissal of an auditor, level of assurance of audit report and independence of auditors in the performance of their duties, which shows why users of audited accounts have a wrong perception of auditors. · The users of audited accounts have a non-challant attitude towards relevant statutes, statutory pronouncement and audit guidelines which relates to the duties, roles, appointment, independence of an auditor, which makes the users to be misinformed and misled and have a wrong perception of auditors
Recommendation
Professional bodies in collaboration with auditors should organize symposia to educate the audited account users on the duties and responsibilities of an auditor, so that the performance gap can be bridged.
The users of audited accounts should familiarize themselves with the laws, statutes and standards that regulate and stipulate the duties of an auditor so as to know what to expect of the auditors in order to bridge the performance gap.
In order to reduce the misinterpretation and misunderstanding of audited account by the users, management should try and present audited financial statements in a way that it would be easily understood by users of audited accounts so as to bridge the communication gap that exists.
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