ABSTRACT
The belief that whenever an auditor is engaged with any business organization, the objective(s) of such organization are likely to be achieved, seems not to stand the test of time, considering the rate of business failures and the inherent loss of economic resources resulting from such failures by the stakeholders.
Financial statement is one of the tools which companies employ to present and ex-ray their performance or position over a period of time. It is the duty of Auditors to examine these financial statements and ensure that what companies claim to have, really exists. Stakeholders place their reliance upon these audited statements for their economic decisions. Surprisingly, some of these financial statements that have been reported to have shown a true and fair view and complied with relevant statutes by an auditor, turns out to be a reverse.
It is on the premise of the above, that this research project was set out to actually position. Those factors, which are responsible for the unreliable reports that subsequently lead to business failures, have been unraveled. The researcher also went ahead to portray the impact of these unreliable company financial statements in economy and the possible panacea.
Primary and secondary sources of data were employed, questionnaires were served to company Directors, Financial controllers and senior Accountants engaged with the selected organizations. These companies are manufacturing industries, financial institutions and trading concerns that prepares annual financial statement. On collection of the information (data) from the respondents, they were analyzed using tables, percentages, bar charts and chi-square (X2).
Discoveries were made at the end of the study as follows: That business organizations don’t achieve their objectives with the engagement of auditors, irrespective of the fact that these auditors certify the financial statement after a thorough examination. This unreliable report from corporate auditors goes a long way in misleading the shareholders, government and the entire society leading to the rampart business collapse in the recent time. It was also discovered that the non-independent of auditors and their dual role (e.g. being financial adviser and auditor at the same time) to a company, influences them to give a misleading report.
After the above findings, recommendations were made, thus: Different arms of the law, including Banks and other Financial institutions Board (BOFID), Companies and Allied Matters Decree (CAMD), According Professional Bodies and other regulatory agencies should step in through educating all the concerns, instituting monitoring teams that will ensure compliance to all the laws enacted.
These steps if followed, will no doubt, restore reliance and accountability in relation to the company financial statements in one hand, and the auditors’ report in the other hand.
CHAPTER ONE
1.1 INTRODUCTION
1.2 BACKGROUND OF THE STUDY:
The origin of auditing is as a result of the separation of ownership from control. It is instituted to protect the interest of the owners by ensuring that financial statements are justifiable. Because of the separation of ownership from control, it becomes necessary of those managers entrusted with the owners of financial and economic resources to present their financial reports to their employer. The reports presented might contain errors, omission, and frauds or even refuse to disclose relevant information. For these reasons, the owners may hold some reservations about the credibility of the managers’ reports.
For the owners to be satisfied and even for the managers to be justified to establish and maintain their integrity, it becomes necessary to invite an independent party, one who is not involved with either party to examine the reports for the purpose of expressing an opinion as to the truth and fairness of the reports. The independent party’s duty is not just mere examination of the accounts from which the financial statements were prepared, rather, it include collection of all relevant information thought necessary to satisfy section 360 (3) of companies and Allied Matters Decree (CAMD) 1990. It is obvious that
In the past, investors rely solely on the advice given to them by their financial consultants rather than analyzing the financial statements by themselves. Today there has been a great change on that direction. Many stakeholders including the Government focuses on the financial statements as one of their most reliable source or instrument of assessing the viability or otherwise of companies......
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Item Type: Project Material | Size: 91 pages | Chapters: 1-5
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