+234 813 0686 500
+234 809 3423 853


  • Type:Project
  • Chapters:5
  • Pages:75
  • Format:Microsoft Word
(Accounting Project Topics & Materials)


2.1 Introduction
Over the past decade, increased instigation as well as criticism of auditors has left little room for doubt that auditors are facing a liability and credibility crises in their profession. The reputation of accountancy profession comes under question for the reliability of their services (Adhikari, 2011). 
Similarly, failure of business in which deficiencies of financial reporting and corporate disclosure have figured prominently are not new phenomena however, high profile cases of recent past such as Enron, Worldcom, Global crossing, Adelphia communication and most recently, Royal Ahold and Health South together with a host of small-scale example worldwide such as Cadbury, Oceanic bank and Intercontinental Bank Plc. in Nigeria, have drawn for greater attention to this area.
At the same, there has been evidence of an increased frequency of re-stated financial statements. All these have had a negative cumulative impact on the way informed opinions views the quality of financial reporting. This loss of credibility has been wide spread across capital market.
A key factor in the scale of the problems was the unprecedented high level of share price in many markets. Maintaining these price levels was a top management objective and when it became clear that the supposed level and trend of profitability justifying the level has not existed, the fall in share prices was accentuated by a major re-rating of the shares.
This impacted share in similar companies (ICAN Study Pack, 2009:252). Be that as it may, the quest over the year has been how confidence and credibility in audit and financial reporting (both in internal and external auditing) can be improved and sustained.
Adequate literature review has shown that effectives of the audit process, the auditor’s personal qualities and skills as well as the discipline from the audit profession have significant relationship with the achievement of public confidence and credibility. For instance, independence is fundamental to the credibility of auditors’ reports. Those reports would not be credible, and investors and creditors would have little confidence in them. If auditors were not independent in both fact and appearance. To be credible, an audit opinion must be based on an objective and disintegrated assessment (Olagungu, 2011).
It is on the basis of the issue raised above that this research work aims a presenting confidence and credibility in audit report as reliable approaches to maintaining and improving audit competence.
Meanwhile, the next literature review will include the overview of the concept of credibility and confidence in audit reports, the factors responsible for loss of credibility and confidence, the drivers and indicators of audit quality as well as suggestion to improve credibility and public confidence in audit reports.

  1. Overview of the Concept of Credibility and Public Confidence in Audit Reports

Credibility in this usage means that the financial statements can be believed, that is, they can be relied upon by outsiders, such as trade creditors, bankers, stockholders, government and other interested third parties (www.crfonline.org/cro/cro-11.html).
On the other hand, confidence according to the Oxford Advanced Learner’s Dictionary of English, 5th edition, is defined as “the feeling that you can trust, believe in and be sure about the abilities or good qualities of something or somebody”.
Again, the public relates to the stakeholders of the professional accountant who have varying interest uses and expectations from the financial statement prepared by directors of the company. The stakeholder of the professional accountant includes and is not limited to the following.

  1. The general public
  2. Shareholders-potential and existing
  3. Government at various level
  4. Creditors
  5. Debtors
  6. Employees
  7. Management
  8. The international community
  9. Donor agencies
  10. Multilateral institutions
  11. The institute
  12. Regulatory authorities

(ICAN Study Pack 2009:133)
The basic objective for preparing financial statement is to provide information useful for making economic decisions. The functions of auditing is to lend credibility to the financial provide information useful for making economic decisions. The functions of audition are to land credibility to the financial statements.
According to Olagunju [2011], for an audit to credible, and reliable, it must be performed by someone who is independent and can be influence by position and power which will affect its own position. In the work of Olagungu [2011], he recommended that for auditors to remain strictly independent and credible, they should not allowed to provide audit clients, with any other advisory or non audit services in order to safe guard the audition from self review threat.
To this end, the over view of the concept of credibility and confidence has shown that the concept has relationship with many factors exerting influence on its achievements.      
2.3 Factors Responsible for Loss of Confidence and of the Cause of Loss of Public Confidence and Credibility include:

  1. Window dressing or creative accounting: Okolie [2007:187] defined the term as all action taken to hide unpalatable facts about the company from its creditors, bankers, and general public. Some of such action include frequent revaluation of land and building, inflation of stock values, lower depreciation charges, capitalization of revenue expenditures liked repairs and maintenance expense upon the above manipulation, the company obtains an unqualified audit report despite the truth that the trues financial position has been hidden for years from the investing public being and the various stakeholders of the company.

b. Corporate governance failure: ICAN STUDY PACK [2009:240] provide a list of factors responsible for many of the corporate governance failure:
i. poorly designed remuneration package 
ii. Excessive use of share options among top management 
iii. When trading failed to earn the targets of earnings manipulation of accounts set in.
This case was very apparent in the case of companies like Ahold, Enron, WorldCom and zerox.
c.     Auditors compromising fundamental principles: 
Most times because of the closeness or familiarity between the auditors and clients the risk of losing big clients, auditors favour their client and themselves during financial auditing and reporting to the disadvantage of the investors. Such principle usually breached includes independence, objectivity and integrity.

Share This


Type Project
Department Accounting
Project ID ACC1342
Price ₦3,000 ($9)
Chapters 5 Chapters
No of Pages 75 Pages
Format Microsoft Word

Leave a comment...


    Type Project
    Department Accounting
    Project ID ACC1342
    Price ₦3,000 ($9)
    Chapters 5 Chapters
    No of Pages 75 Pages
    Format Microsoft Word

    Related Works

    ABSTRACT Auditing therefore, is one of recent professions established as a result of complexity of modern business people have entered into contractual relationship with one another the desire to ensure and accuracy and reliability of the financial statement has always existed the divagation of public treasure and the collapse of business being to... Continue Reading
    ABSTRACT This study was carried out with the aim of examining users’ perception of audit report in published financial statement. In order to actualize the objectives of the study, various literature and theoretical issues were discussed. The instrument used for the purpose of... Continue Reading
    CHAPTER ONE INTRODUCTION 1.0 BACKGROUND TO THE STUDY In the wake of the financial crisis of 2007–2009 and the failure of a number of global corporate entities, investors, analysts and regulators continue to wonder exactly what happened, what could have prevented it, and... Continue Reading
    Abstract The study examined the role of public relations in enhancing peace in higher institutions particularly in Osun State Polytechnic, Iree. Public relations has remained a powerful tool in building and maintaining mutual understanding in every organization including creating and maintain good rapport between and among its various public. It... Continue Reading
    ABSTRACT This study is motivated by a desire to examine the corporate governance and audit report lag. In light of the empirical review and other discussions, a number of questions arose as to whether there is positive relationship between corporate governance and audit report lag. Using the... Continue Reading
    (A CASE STUDY OF POWER HOLDING COMPANY OF NIGERIA) ABSTRACT The purpose of this research work is to identify strategies for the minimization of financial audit problems in the public sector. The researcher addressed the under listed problems in the process of the research.... Continue Reading
    ABSTRACT This is a research work that is carried out on the impact of audit report on organizational performance, Ughelli Branch. This study explains what audit is all about, stating clearly that it is a written report about... Continue Reading
    (A CASE STUDY OF UNTH, ENUGU) ABSTRACT The proper management and utilization of financial resources has over the years been the bed rock of growth, expansion and continual existence of the world most popular industries and business organizations. In... Continue Reading
    EFFECT OF AUDIT ROTATION AND AUDIT COMMITTEE ON THE QUALITY OF FINANCIAL REPORTING ABSTRACT The major objective of the study is to examine the impact of audit committee to financial reporting in Nigeria, using some Nigerian quoted companies. However, the specific objectives are to: Find out whether audit committee has any significant relationship... Continue Reading
    AUDITORS REPORT ON CORPORATE GOVERNANCEIN NIGERIA NON-FINANCIAL INSTITUTION A case study of Guinness Nigeria Plc Abstract The major corporate collapses and related frauds which occurred in Nigeria and around the world have raised doubts about the credibility of the operating and financial reporting practices of companies in Nigeria. This stirred a... Continue Reading