Auditors Independence and Its Influence on Audit Quality: An Empirical Study on Selected Manufacturing Firms in Nigeria

Auditors Independence and Its Influence on Audit Quality: An Empirical Study on Selected Manufacturing Firms in Nigeria

Chapter One

OBJECTIVES OF THE STUDY

The primary objective of audit function and the resultant  audit  reports in Nigeria  is to help the manufacturing comoanies to increase their values and outputs, while  interested parties should be able to be better informed towards making investment  decisions. Auditing is thus aimed to help companies to create values and increase their capacity to earn more income which will result in improving their performance and also the living condition of the interested parties. In the light of the above, the main objective of the research is to assess the auditors’ independence and auit reports in Nigeria. Specifically, efforts would be made to:

• Determine whether auditors’ independence in Nigeria has improved the level and contents of audit reports (opinions) and the credibility of  financial
• Find out whether or not the external auditors are free from all external influences in the course of carrying out their professional duties to their
• Establish whether or not audit reports (opinions) meet the expectations of the external users of the financial
• Determine whether audit reports given to manufacturing comoanies in Nigeria by external auditors have been given serious attention or
• See if there are likely factors that hinder the independence and the professional reports (opinions) of external
• Provide suggestions (where possible) on how to improve and enhance auditors’ independence and audit reports (opinions) in Nigeria

CHAPTER TWO

LITERATURE REVIEW

HISTORICAL BACKGROUND OF AUDITING

According to Bigg (1969:1) and Woolf (2017:1), the practice  of auditing had its origin in the necessity for the Institution of some system of check upon persons whose business it was to record  the receipt  and  disbursement  of money on behalf of others. In the early stages of  civilization  the  methods  of account were so crude, and the number of transactions to be recorded so small, that each individual was no doubt able to check for himself all his transactions,  but as soon as the ancient States and Empires acquired the coherent organization, systems of check were applied to their public accounts, as evidenced by extant records. The ancient Egyptians, the Greeks, and the Romans, all utilized systems of check and counter-check as between the various financial officials.

They further stated that the ancient records of auditing were confined principally to public accounts. But there was clear indication that from an early  date it was customary for an audit of the accounts of manors and estates to be performed. The person whose duty it was to make such an  examination  of accounts became known as the auditor, the word being derived from the Latin word, “audire”, which means “he hears”. Originally, the accounting parties were required to attend before the auditor who heard their accounts by having them called out by those who had compiled them to the auditor who was in authority.

According to them, it was not until the fifteenth century that the great impetus given to trade and commerce generally by the renaissance in Italy led  to the evolution of a system of accounts which was capable of recording completely all kinds of mercantile transactions. The principles of double entry were first published in 1494 at Venice by Luca Pacioli, although the system  had  been more or less utilized during  the preceding century.  It thus became possible to  record  not only cash transactions, but all transactions involving matters of account, and  the duties of the auditor correspondingly increased.

The increase in volume of trading operations, necessitating  the  use  of more capital than was at the disposal of the average trader  induced  him  to combine in partnership with others for the purpose of obtaining  the  requisite funds, and this tendency was a potent factor in the evolution of a more perfect system of accounts.

In the same way, no doubt, it had a material effect on the practice of auditing. But the audit of business accounts did not become common until the nineteenth century. The enormous increase in trade in that period, which was fostered by the discovery of steam power and by mechanical inventions generally, led to the formation of numerous joint stock companies, and other corporate undertakings, involving the use of large sums of capital under the management of a few individuals. Under these conditions, the advantages to be obtained from utilizing the services of auditors became apparent  to  the  commercial public generally, and a great increase in the practice of auditing resulted.

At the present day, it forms the most important part of a professional accountants’ practice.

The nature of every auditing exercise as opined by Bigg (1969:2) will depend upon the individual circumstances of each case, and must be decided  by the exercise of the auditor’s judgement. It is sufficient  here to say that whatever  the extent of the examination, it must be such as will satisfy the auditor, having regard to whether he is acting under the direct instructions of his clients or under statute.

The objective of the audit, therefore, as stated by Cooper, (2015:1) is to, “enable the auditor to report on the truth and fairness of the financial position shown by the balance sheet and of the profit or loss shown by the profit and loss account. The auditor is required to state unequivocally in his audit report whether  or not, in his opinion, the accounts show a true and fair view. Where  he cannot  give an affirmative opinion in this respect he must, of necessity, qualify his report in such a way as to show quite clearly why he considers that a true and  fair  view  is not presented and, where applicable, in what respects and to what extent he considers the accounts to be misstated.”

Dunn, (2016:19) added that the objective of an audit is  aimed  at  enhancing “the credibility of the financial statements by providing reasonable assurance from an independent source that they present a true and fair view”.

The reason why there is a need for an audit has been identified by Millichamp, (2013:1). He stated that, “the problem which  has  always  existed when managers report to owners is; can the  owners  believe  the  report?  The report may:

1. (contain errors
2. (not disclose fraud
3. (be inadvertently misleading
4. (be deliberately misleading
5. (fail to disclose relevant

The solution to this problem of ‘credibility’ in reports and accounts lies in appointing an independent person called an auditor to investigate the report and report on his findings”.

DEVELOPMENT OF AUDITING IN NIGERIA

“The history of the audit profession in Nigeria spans  some  forty-nine years. It was in 1951 when the firm of Cooper brothers & Co. (now Coopers & Lybrand) did feasibility studies for a jute and Cotton Mill at Onitsha. Then, in 1952, ECN (now NEPA) approached Cooper Brothers to ask for help in the preparation of its first annual accounts. Thus started the relationship between Auditing and Economic development of Nigeria.

The early accountants/auditors in Nigeria were mainly Britons. The first indigenous firm of Akintola Williams & Co. Came on the scene in  May 1952. Since then the audit firm of Akintola Williams & Co. had contributed to our economic development by serving on the Gill Job Evaluation and Regrading Committee (2010/71) and in 2014/75, the firm was chairman of Williams & Williams Salary Review Committee to correct anomalies in the Udoji salary awards” Edun (2015:130).

Also, according to Osisioma (2021:7), in Nigeria, the  University  of Nigeria, Nsukka was the first to offer accounting as a degree course in 1960. Today, practically every University and Polytechnic in the country, offers degree and diploma courses in accountancy.

He further stated that the history of accountancy profession in Nigeria is closely linked with our colonial heritage as a commercial and administrative outpost of the British government. In southern Nigeria, increasing  contacts between British merchants of the Royal Niger Company and  the  natives,  had given rise to a measure of application of British government  fiscal  policy measures in the area now called Nigeria.  Between  1890  and  1914,  these increased trading and administrative activities had led to the introduction  of  British coinage, the establishment of British banks, first, the Bank of British Bank of Nigerian and the transplanting of British system of bookkeeping to Nigeria. These business and commercial contacts led to the emergence of a crop of indigenous business men. Such firms as the United Africa company, UAC, John Holt, of AO and SCOA established in Nigeria, and brought with them, advanced European accounting systems. The retailed  accounting  records  occasioned  by this emerging economic trend, followed the pattern transplanted from Europe.

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CHAPTER THREE

RESEARCH METHODOLOGY

INTRODUCTION

The advent of large business organizations with  the unique characteristic  of joint ownership by many individuals has actually brought a new dimension to  the world of business. Of a particular note, is the divorce of ownership from management. But with the possibility of making auditing at all levels adequate, effective and efficient enough by the  introduction of auditing professional bodies in Nigeria, an ever expanding demand would be made on the auditing system in Nigeria, not only in terms of quantity but also in terms of the quality of auditing process and products. From now on, there will be  a  greater  need  for  more reliable knowledge concerning auditors’ independence than had hitherto been the case in Nigeria and above all there will be an ever increasing pressure for the relevancy of audit reports to be used at all levels of Nigerian economy. The issue here about the external auditor’s report, however, is whether it is meeting the expectations of the users of financial statements. In  other  words,  is  the  perception of the users of financial statements about auditor’s report in conformity with that of the auditor?. And in particular, is external auditor really independent in the Nigerian environment?.

Appropriate research methodology has to be used to find answers to the above questions. This chapter deals with the research methodology used in conducting this study.

RESEARCH METHODS

Asika(2011:2) defined research as, “any organized enquiry that aims at providing information for solving identified problems”.

Osuala(2021:1) stated that in the social sciences, the  application of the  term “research” is restricted to  activities designed  to promote the  development of a science of behaviour.

Research therefore, can be conducted by using various methods as can be seen below.

Scientific Research Method

Osuala (2021:18) defined science as, “an organised body of knowledge as well as a method and system of deriving truth”.

While Ndagi (2019:12) pointed out that scientific research  could  be defined as, “a systematic, controlled empirical and unbiased investigation of the hypothetical propositions about the presumed relationships between the variables that create a particular state of affairs”.

The Historical Research Method

According to Osuala (2021:162), historical research method may be considered as embracing the whole field of human past as broad as life itself, although the data must be viewed with historical perspective as  part  of  the  process of social development rather than as isolated attitudes, events, or facts.

Ndagi (2019:93) looked at the historical research method on the other side and said that historical research deals with determination, evaluation, and explanation of past events essentially for the purpose of gaining a better  and clearer understanding of the present, and making a more reliable prediction of the future.

Historical research, therefore as he concludes, involves critical and objective methods of inquiry with generalizations made from organized  knowledge.

The Descriptive Research Method

Ndagi (2019:108) expressed that the descriptive research method is concerned with the collection of data for the purpose of  describing  and interpreting existing conditions prevailing practices, beliefs, attitudes, on-going process etc. However, the central purpose of descriptive research is not just the description of what is, but the discovery of meaning.Osuala (2021:201) added that the descriptive research method is that research which specifies the  nature  of given phenomena.  The  specification can  be simple or it can be complicated. Descriptive research gives a picture of a situation or a population.  Any consideration of phenomena  generally begins  with a full understanding (description) of the phenomena. Accurate descriptions are imperative for making a wide range of policy decisions.

CHAPTER FOUR

DATA PRESENTATION AND ANALYSIS

INTRODUCTION

For an auditor, independence of mind is an attribute highly prized by the society. Auditors are expected to take note of this fact while they perform their audit task. Therefore, in this chapter, every effort will be made  to  assess  the  extent to which auditors are independent in issuing their audit reports as practiced in Nigeria today; and to facilitate the understanding of the users of the financial information regarding Auditors’ Independence and Audit Reports in Nigeria.

The questionnaire was designed and used to collect appropriate data from the research population; but generally combined to source information from External Auditors, Manufacturing comoanies and members of the Public general. On the whole, three hundred(300) copies of questionnaires  were  distributed.  Two hundred and seventy (270) were returned duly filled by the respondents. The remaining thirty(30) were not returned.

CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS

SUMMARY

This study was conducted to make an assessment of auditors’  independence and audit reports in Nigeria. The main objective was to assess the auditors’ independence and audit reports in Nigeria. The Scope of the study was limited to external auditors, Public Limited Companies, the interested Parties and users of financial statements in Nigeria.

The researcher conducted an extensive review of related literature in order to assist with updated knowledge in carrying out the research.

The research methodology used was survey research method and the descriptive research method.

Appropriate data was collected by making use of the data collection methods. That is, questionnaire and personal interviews. The relevant data was presented and analysed which enabled the researcher to come out with significant findings from the study. From the findings, the researcher would be able to  arrive at appropriate conclusion. Suggestions and Recommendations would also be brought in at the remaining part of this Chapter.

CONCLUSION

Based on the findings of the study the following conclusion were reached:

The value of auditing depends heavily on the public’s perception of the independence of auditors. Auditors’ independence is most desired by all the users of financial statements that they reported And the higher the level of independence of an auditor, the more reliable, true and fair his audit  opinion. It is not surprising therefore, that independence is the first subject addressed in the rules of conduct.

It is also established that both accounting professional bodies and statutory provisions in Nigeria helped to strengthen the independence of the But a casual glance at the city pages of any newspaper will reveal abuse of power by dominant chief executives, unexpected  company failures,  changes  of auditors, disputes over accounting policies, excessive remuneration and redundancy pay, companies desperate to sell off companies  they purchased only a short time before, excessive borrowing etc. Thus, the widespread news  of financial scandal, unauthorized securities trading and falsified financial reporting has not only cast organizational controls and auditors in  poor light, but also undermined the confidence of the public in the profession to  detect  and prevent corporate abuses.

Common question often asked include: How could one person cause such a huge loss to occur?. Almost as frequently, there is  an embarrassing silence or an inadequate response. For example, the auditors’ defence is mostly that the auditors are not responsible for detecting frauds and errors. In spite of the auditors’ defence and the managements’ defence, the shareholders, depositors and most of the general public still feel bitter about auditors.  According  to them  if the collapse of many companies,  banks and  firms proves anything, it  is that auditors’ safeguards are worthless. Furthermore,  what  is  the  value of an audit that cannot detect the thievery or wide scale fraud that characterized the wonder-banking era, or better put, what is the value of a watchdog that cannot

Again, the auditors’ reports made no mention of financial statements being  free of only material unintentional errors. Perhaps that is  why the  court  and the public did not agree with the auditors’ defence. Thus, the public held the auditors to a higher Hence we have what is generally called audit expectation gap.

Already, there have been improvements in the areas of repealing the Companies Acts from 1844 Act to Companies and Allied Matters  Act  (CAMA) 2010, with the whole panoply of regulation of auditors and  setting  up of the financial Reporting council with the Accounting Standards  Board,  the Urgent Issues Task Force and the Financial Reporting Review Panel. But still there are so  many areas to be criticized such as the preparation and audit  of financial information are complicated by the fact that there is no cohesive theoretical framework for accounting. The collapse  of several  large companies without warning. The auditor does not have a  specific  responsibility by statute or the operational standard to consider internal controls.

It is also clear that the existing standards and provisions in Companies and Allied Matters Act (CAMA) 2010, regulating the preparation and presentation of financial statements do not as yet tell the accountants how  to report upon  all possible situations and secondly, for all pairs of alternative accounting standards, accountants do not prefer one to the other nor are they indifferent between them. Besides, it appears the inclusion of the audit committee in Companies and Allied Matters Act of 2010, cast doubt on the professional performance of the auditor. The audit committee  was  introduced  to  review the work of the external auditors before reporting to the Unfortunately, the composition of audit committee in many  companies  is  made up of those without accounting and auditing knowledge, so  what  are they reviewing? This reveals that the whole concept is not appreciated. This means that the audit committee has not been effective and might not be  carrying out the functions set out in section 359 subsection 3-5.

When the auditor judging the type of frauds and errors feels that management could be implicated, to date, however, he has been given little guidance by the professional accountancy bodies on how he should act rather than to state it or to say

Throughout the statutory duties of the auditors, there is lack of a clear indication in the Companies and Allied Matters Act of 2010, that the auditor had a duty of care to individual shareholders, and moreover, it does not, however, define the term “true” and “fair”.

The auditors also face a problem of the suitability of company accounting policies and apparently excessive directors’ pay, the rates of which seem to be fixed by the recipients

There is a feeling by the shareholders and the interested parties that auditors are too close to their clients Companies rather than to interested parties and shareholders as a result of carrying out much non-audit

The auditors’ standard report uses standardized language. This reduces the report to a symbolic document, rather than a means of  communication between auditor and the reader. Technical terminology is also used. This is regarded as unclear or ambiguous to average

Above all, one further constraint affecting the present usefulness of audit reports is that the auditor has no legal responsibility to ensure  that  management has paid any attention to  his comments.  So  long as the  content of the management letter has not caused the auditor to be dissatisfied with the truth and fairness of the annual financial statements, management  is  not obliged to pay any attention to it. Therefore, as  the practical developments have indicated a lot of threats to auditors’ independence in Nigeria as well as other parts of the world, to this end, all hands must be on deck to correct the situation.

LIMITATIONS OF THE STUDY

During the course of this study, certain problems were encountered by the researcher which formed the basis of the

1. First and foremost, the time available for the research is short considering the geographical spread of the
2. Most of the background data especially those required for literature review are not readily available. The basic statistics that form the bedrock of research are often not available. Where available, they are very scanty or by no means

• Many people and organizations tend to have a special liking for secrecy. Even information that otherwise would be for public consumption is considered secret, and individuals dislike any activity that appears as nosing around or trying to probe

1. The fourth one is that there were cases of poor resources due to the failure of respondents to return some of the questionnaires, some failed to fully complete the questionnaires. While others bluntly refused to complete it at all for  their  personal  various reasons. Illiteracy remains the most serious problem facing the people. It  is difficult for people who cannot read and write to appreciate the need to supply relevant research information. Effective communication is also a difficulty and there exists an apparent inability to complete research questionnaire blanks and this  will  make  it  difficult to obtain pertinent data from
2. In the case of interviews administered on persons, that is, the directors and managements of the manufacturing comoanies, the firms of external auditors and the general public who are also known as interested parties, having access to them was very difficult. As directors and firms of external auditors are always  very busy people,  repeated  calls had to be undertaken to their offices and sometimes to their personal houses to book appointments. Even when the appointments are granted, usually the  time of discussion  was limited to only some few minutes. Therefore, the  interview took the unstructured  form asking only important questions from such busy there
3. In the last but not the least, the current economic hardships had its effect in terms of the financial resources that could be committed  to  this  study especially  transportation cost in addition to cost of materials and the cost of processing this

RECOMMENDATIONS

Finally, it is therefore necessary that the conclusion drawn from the findings  are applied with due cognizance of these limitations. And it is hoped that the research  study has analyzed and assessed the auditors’ independence and audit reports in Nigeria despite all these limitations faced by the researcher

In view of the fundamental importance of auditors’ independence and audit reports to professional practice, efforts to ensure continuing relevance, given the ever changing socio-economic landscape, must comprise in the main, seeking  out  newer  and  newer ways to improve and adopt the scope, content and methodologies of the discipline to the prevailing forces of pressures that hinder the auditors’ independence and audit reports (opinions) in Nigeria which exist must be recognized, and efforts must be made to minimize their effect in order to prevent any uncertainties arising about it which could reduce the credibility of the accounting information the auditor is attesting.  Because, failure to tackle the problems that militate against the auditors’ independence and audit reports (opinions) in Nigeria could further reduce the general confidence in the audit profession and could lead to legislative interference which may be detrimental to the development of the profession. There is need, therefore, for us and especially accounting professional bodies to take measures to re-establish general confidence in audit and the accountancy profession. It is essential therefore, that  the  auditors’  independence  and audit reports both in  its mental and  physical forms, is  such that all report users can rely  on it with complete confidence.

To improve the auditors’ independence and audit reports (opinions) in Nigeria, therefore, the following points are recommended:

1. Appointment by government or a government agency. Because, it has been suggested that the auditors’ appointment, etc. by the shareholders implies a certain lack of independence, first, because it appears to ignore the interests of other important users of company financial statements; and secondly, because it tends to  cause company directors to be the employers of the auditor, with the shareholders merely endorsing prior recommendations. It has therefore been proposed that the auditor should be appointed by a government agency, such as the Department of Trade and Industry, or by a specially constituted State Auditing Board. The audit fees could be paid by this  body out  of levies on companies based on their past fee    The  main argument for this suggestion is that it would give the  auditor security  for employment and leave him free to  give a totally objective opinion on the accounting information in the company’s financial statements.
2. Disclosing financial interests and personal relationships. One of the most obvious pressures against the appearance of independence is the auditors’ (or their immediate families’ or staff’s) present abilities to hold financial interests in a client company. At the present time, there are no legal requirements that they should even  disclose  these interests. In order to make their position clear, the auditors should be required to disclose full details of any shares, etc. they (or  their  families or staff) might have in a client company. This would undoubtedly clear away any uncertainty there might be as to whether the auditors had financial interests or not in a company they are  auditing and whether or not they had complied with the provisions of the Ethical

• Legal prohibition of financial interests. One way to improve the situation of auditors’ independence and audit reports would be either legally to prohibit the holding of financial interests, etc. or legally to require the auditor to disclaim an opinion if he continued to be so interested in the

1. Rotation of auditor appointments. It has been suggested that the long- term nature of the company audit engagement tends to create a loss of auditors’ independence, due to an increasing familiarity with the company’s management and staff, which works against the shareholders’ and the public’s interests. For this reason, it has been argued that there should be a rotation of the audit appointment every few years, allowing several firms of professional accountants periodically to conduct the engagement, and thereby preventing any unnecessary loss of physical independence which the present situation is thought to
2. The audit court should be It has been suggested that the auditors’ independence has been eroded beyond repair in many cases, mainly because of the apparent lack of independence in their position when they are permitted to own shares in a client company, conduct management services on its behalf, and be effectively employed by the company’s directors. Because of these factors, it is argued that the task of independent audit judgement should be removed from the auditors and given to a judicial audit court where eminent professional accountants would be appointed to judge the suitability of the accounting practices utilized by the company in producing its annual financial statements. The auditors in this situation would act as an evidence gatherer, responsible only for presenting the accounting facts to the court for its judgement and opinion.
3. The government should enact an Act  of  Professionals  corrupt practices Act to guide practitioners and  enforce  their responsibilities  to third parties and to the public in

• The accountancy and legal professions should consider further the question of illegal acts other than frauds. Illegal acts are now easy to commit inadvertently as well as with moral turpitude in many fields as employment, health and safety and in the environment. Therefore, the auditor ought to investigate the fraud or error personally rather than leave it to management, especially the case when the matter may have been perpetrated by the management, because management is responsible for detecting and preventing fraud and error,  but  yet  it may be the guilty
• The government should consider introducing legislation to extend to  all companies the statutory protection already available to auditors in the regulated sector (financial service companies) so that they can  report reasonable suspicion of fraud freely to the appropriate investigatory authorities. Auditors who report reasonable suspicion of fraud currently direct say to the police lay themselves open to legal action for defamation. Therefore, auditors will only be  truly independent if they can be protected from unfair removal from office. And also, the shareholders must always be free to select the most appropriate firm of accountants to conduct the audit for

1. The accountancy professional bodies should draw up  guidelines  on the rotation of audit partners, because it would however, be unrealistic to give auditors a permanent position with the company as this would reduce the incentive for them to provide an efficient service at a reasonable cost. Audit firms should also review on an  annual basis every client to determine if it is proper to accept or continue an audit engagement bearing in mind actual or apparent threats to audit independence and objectivity. The rules of the financial services Act must always be
2. There is a need for a conceptual framework because there is  an absence of agreement on the fundamental principles of accounting and reporting.
3. The professional bodies should leave fee determination to market forces. And fees paid to audit firms should be fully disclosed with the intention of disclosed with the intention of disclosing the relative significance of audit work as against non-audit

• The listed companies should adopt a code of
• Listed companies should include in their reports and accounts a statement about their compliance with the code of practice with  reasons for any areas of non-compliance.
• The statements of compliance should be reviewed by the auditors before publication. Only areas which can be objectively  verified should be covered. The nature of such a review will need  much  thought and some

1. Directors’ service contracts should not exceed three years without shareholders’

• Interim reports should be extended to providing balance sheet information and perhaps cash flow    Interim  reports should not be subject to a full audit but it should be reviewed by the auditors. The  form of interim  accounting needs to be considered by the Accounting standards Board and the Stock Exchange and the auditors’ review by the Auditing Practices Board.
• Directors should report on the effectiveness of their system of internal control and the auditors should report on their statement. There will then be a need for some criteria for assessing effective systems of internal control and guidance for companies and
• The directors should state in their reports and accounts that their business is a going concern with supporting assumptions as necessary and the auditors should report on this statement. Once again there is a need to develop guidance on this for directors and
• With current experience of several financially distressed businesses, may be it is time to review, and may be re-define the attest function of the audit

1. The audit reporting should be more widely directed than only to the members or shareholders of the So  that it will be described as totally independent when looked at from the point of view  of  persons other than the shareholders, such as the company’s debenture- holders. And also there is a need for auditors  to  extend  the  audit report so that the extent of their responsibilities will be more clearly defined.

• The auditors should be expected to detect those frauds that  the  exercise of professional skill and care would normally uncover. The auditors should also pay careful attention to the controls within the company’s system and ensure that steps are taken to eliminate any weaknesses which could be   The  auditors  should  always pay attention to the effectiveness of their tests and  to  the  availability of new methods.
• The law of joint and several liability should be changed. The auditor can be sued and forced to bear the entire burden of the plaintiff’s loss, even if the directors or other parties were partly to blame, so that the liability could be distributed more
• The companies and the various groups both existing and potential  users of the audit reports should pay much attention to the auditors’ reports and make effective use of them. Because, it appears in general that the extent to which the audit report is read and understood by the various groups of potential users and companies commands less attention than any other section of the annual report and is misinterpreted by many of its
• There is need for the professional bodies to take  measures  of educating the various groups of both existing and potential users of audit reports and the Readers can, however, educate themselves by obtaining copies of the professional standards and guidelines and referring to text books. Even professional readers may have difficulty in distinguishing niceties of expression which the  auditor relies on to absolve himself of certain legal responsibilities.
• There should be meetings between auditors and small shareholder- elected panels to discuss issues arising from the
• There should be reporting on Summaries of directors’ Principal assumptions and judgements made when preparing the financial statements.
• There should be acceptance by auditors of wider responsibilities than those currently dictated by statue or case law. In particular,  by  altering their focus from past to future performance of client
• Above all, the professional bodies need to change the current position regarding auditors’ liability for the detection of frauds and This is because the incessant occurrence of large scale management fraud is enough to attract auditors’ attention towards that direction. Our audit philosophy should, therefore, focus on detecting fraud, irregularities and errors. We cannot run away from that big responsibility if our audit services are to remain relevant in the present day Nigeria. In the area of going concern, auditors’ duties have to be extended to a more thorough assessment of the appropriateness of the going concern assumption and  over a longer time period.  They need   to stress that auditors must examine an entity’s ability to continue as a going concern by evaluating a company’s continued viability in every audit. Furthermore, there is need for auditors’ independence  at  all times so as to ensure a thorough and unbiased appraisal  of management. This is because users believe that the auditor has a duty  of care to anyone who relies upon his opinion.

Thus, the above recommendations will enhance the quality and credibility of audited financial report.  Credibility  of financial statement is highly desirable as it facilitates economic decision. For example, the investor making a decision to buy or sell securities, the banker deciding whether to approve a loan, the government  in obtaining revenue from income tax return etc, are better served with a reliable and dependable audited financial report.

Finally, the recommendations will also help to re-establish general confidence in the audit profession and  enhance the patronage  of its services.

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