The aim of this study is to appraise audit report and its impacts on the activities of business entities in Nigeria. The question is does the audit report have an impact on business forms and what are these impact (if any). For the purpose of this, relevant literature were reviewed ranging from text books, journal and different materials relating to audit report. Data were collected through primary and secondary sources, specifically questionnaire and documentation respectively. Tables and percentages were used in organizing and presenting the data collected. Data collected through questionnaires were analyzed and the result of the analysis led to our findings. In the findings it was discovered that audit reports do not have a 100% impact on the business entities because – the financial statements do not always satisfy the information needs of some of its users e.g the employers and that audit reports have impacts (negative or positive) on the activities of business entities, auditors are responsible to share holders rather than management. Recommendations were made based on the findings that apart from the value added statement, the employment report and a statement of money exchange with the government should be included on the financial statement and it is necessary for share holder to appoint independent auditors to examine these financial statement and testify its fairness and truthfulness.
1.1 Background of the study
The objectives and concept that guides present day audit were almost known in the early days of the 20th century because the accounting professions responds to the demand of the new business environment of development. Formally audits were performed mostly at the request of business owners who wish to be answered that the financial statement of their business was handed accurately and all each appropriately accounted for.
With the existence of partnership audits became also necessary in evaluating the profit to be shared to the partners. The main objective of auditing is the investigation on the financial statement to know if they present a true and fair view as well as the auditor report.
The industrial revolution brought with it large scale enterprise that needed not only owners capital but also outside supplement in order to acquire costly machines available from then third parties became unvalued in the provision of resources for business unit. Now the direction of audit work has moved from fraud detection to the new goal determining whether financial statement give a true and fair view of financial position and operating results and analyzing thereafter the effect or the impact of such change in the financial position of the firm. This new dimension was in response to needs of new business development and involvement of third parties. It was at this point that the objectives of independent auditing became clear because during the industrial revolution as business concern grew in size their owners began to use the services of hired managers with the separation of the ownership and management groups. The “absentee” owner turned increasingly to be auditions to protect themselves against the danger of fraud by both managers and employees. The financial account of what a business has done over a period of time is revealed through financial statements based on the records maintained by the employees of the business. Under certain conditions, there is the probability of results being affected by ignorance, carelessness, personal bias, self-interest dishonesty. For instance an oversight on the part of an accountant might be responsible for an omission from the financial statement or in another way, the reluctance of management in implementing strict debt recovery measures reduces both cash and inventory in most case.
Due to the situations established above, the company’s act 1968 as amended with the CAMA 1990 deemed if necessary for shareholders to appoint independent professional accountants to examine these financial statements and report its fairness and truthfulness
1.2 STATEMENT OF THE PROBLEMS
Audit report which is the end product of an external auditors in-depth examination on the financial report of a business is the subject matter of the study, the problem of fraud, errors and irregularities in the books and accounts of a company despite the presence of the internal audit department is a concern to company.
The problems are that:
a. There is inadequate audit report in the business form in Nigeria.
b. Audit reports in some case mislead in decision making and hence no longer a useful tool for business decision making in Nigeria
c. Audit reports sometimes contain fouls when drawing up and such tools may not be corrected when final report is made.
1.3 OBJECTIVES OF THE STUDY.
The purpose of this study is to investigate into audit reports and their likely impact on business form the specific objectives is to.
a. To find out the extent of persistence in the above of the method of auditing.
b. To make recommendations on how audit report affect employer’s, creditors, government and the general public.
c. To find out the problems encountered by auditors in the performance of their duty.
d. To find the extent of compliance by management with financial regularities and relevant states.
e. To find out the audit of a firm’s activities
1.4 RESEARCH QUESTIONS
The following research questions are relevant to the study and it provided the basic of evaluating the research problems.
1. What roles do private auditors play in the review and examination of the financial statement of a business form?
2. What roles of do auditors play in the detection and prevention of fraud irregularities?
3. What problems to the auditors in the discharge of their duties encounter.
4. What extent do management of business firms complies with financial regulations and relevant statues of the land.
5. What punishment awaits the private auditors negligence.
1.5 RESEARCH HYPOTHESIS
Based on the problems and objectives the following research hypothesis are formulated. It is a presupposition made by a person about particular event. It is the prediction or a conjecture stated well in advance of observation, about what can be expected to occur in a given condition. Accounting to Okeke (2005) Hypothesis is defined as a statement or assumption about a population parameter. It is preposition put forward by a researcher in under to direct his work for effective implementation of this shady, the following hypothesis have been formulated.
Null hypothesis denoted as “Ho” and alternative hypothesis demoted as “It1”
1. Ho:- A qualified audit reports leaves doubt to the readers mind as to its implications for an understanding of the financial system .
Hi:- A qualified audit report leaves no doubt to the readers mind as to its meaning and its implication for an understanding of the financial statement .
2. Ho:- The auditor expresses an unqualified opinion on the clients financial statements when there has been an irresolvable restriction on the scope of examination.
3. Hi:- The auditor expresses an unqualified opinion on the clients financial statement where there has been no irresolvable restrictions on the scope of the examination.
1.6 SIGNIFICANCE OF THE STUDY
The importance of audit report in the business form cannot be over emphasized. It is generally agreed that audit report at times serve as a letter of attestation on the financial statement presented by the implications of having adverse, disclaimers and subject for reports and these, recommend to management on how best to qualify reports.
A critical analysis of they research study will be of immense importance to the following:
1. To the school: this work will be of importance to student who may wish to take up auditing as career in the accounting profession and also a stepping stone for student researchers who may use the work as reference materials.
2. To the company: This work will enable the organization to critically enhance the expectation of his client in making their business more accountable and result oriented.
3. To the state or nation: it will help the government to know the extent of compliance of private business to relevant statues.
4. Potential investors:- The study will be of great significance of intending investors and shareholders of both public and private forms who may be desirous to know how efficient their resources are being managed.
1.7 SCOPE AND LIMITATION OF THE STUDY
As the adage goes everything has a limit. In this paper, apart from the envisaged limiting factors inherent in the writing of such papers, we are going to limit our study in terms of concept to be covered and those which are not to be covered in this paper
The study will not discuss the audit report of some business firm such as sole proprietorships and partnerships. In fact, we are limiting our study to the report of public limited companies.
In the same view, our study will not cover the audit report of the co-operations of government parastatals. Our study will equally deal on the impact of such classified type of audit – whether qualified or unqualified on business forms.
The quality and size of this research study have been limited by the following:
Time: Time was not on the side of the researcher to extent the scope of this study to a wider coverage the researcher was not given adequate co-operation by the staff of the organization. The first request to grant researcher an interview was turned down in addition some of the officials exhibited non-challant attitude in disclosing certain relevant information for this research study.
The inability of the management to divulge certain information which they consider sensitive, the publication of which might be detrimental to their operation proved to be a limitation during the study.
1.8 DIFINITION OF TERMS
1. Accountability: This is the duty to reveal, give reasons for and explanation of action taken in respect of responsibility given resources entrusted.
2. Audit report: auditors report is a clear expression of opinion based on review and assessment of the conclusion drawn from evidence obtained in the course of the audit.
3. Effectiveness: The level of correspondence between established objectives and actual resulting or the consideration of the alternative which might yield the desired objectives at lower cost.
4. Auditor: A person who conducts an audit with the aim of issuing a report of his opinion on the items audited.
5. Auditing: The in-depth examination made in accordance with generally accepted standards into the accounting records, internal control system and others auditing procedures necessary for the formation of an independent opinion.
6. Independence: The freedom from influence and situation that can pair objectives judgment.
7. Embezzlement: This is the deliberate conversion of money or property entrusted to one person advantages
Okeke N.B (2005) Rudiments of inferential statistics published July 2000 by computer edge publishers a subsidiary of amazing printing and publishing limited Enugu.
Agwu (A)(1990) Management: An introduction on the Nigeria perspective, Enugu Sunshine press.
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