This study was carried out with the aim of appraising non-audit services, audit tenure and independence of the auditor in Nigeria. In order to actualize the objectives of the study, various literature and theoretical issues were discussed. The instrument used for the purpose of this research was gathered through primary source. The mass of information generated from the questionnaires was summarized in form of table and analyzed using simple percentage. The researcher administered one hundred (100) questionnaires to respondents, out of which ninety-five (95) were retrieved for the purpose of presenting and analyzing responses to issues raise in the questionnaires. The data collected was analyzed using Z-test statistical tool. The findings from analysis revealed among other things that the provision of non-audit service significantly affects auditors’ independence in Nigeria. We therefore recommend that, non-audit services (NAS) should not be allowed for audit clients and safeguards should be undertaken to maintain the independence of the external auditor in Nigeria.
Background to the Study                
Statement of the Research Problem                    
Objectives of the Study                        
Hypothesis of the Study                        
Scope of Study                            
Significance of the Study                        
Audit Tenure: Concept and Issues                        
The Meaning and Types of Auditors Independence             
Theoretical Review of Auditor Independence        
Auditor Independence: A Review of Empirical Studies     
Determinants of Auditor Independence                
Non Audit Services and Auditor Independence                 
Non-Audit Services and Regulatory Framework in Nigeria         
Research Design                                
Population of the Study                    
The Sample Size                            
Data Collection Method                        
The Research Instrument                        
Data Analysis Method                                
4.1    Introduction                                    
4.2    Descriptive Statistics                             
4.3    Test of Hypothesis                             
5.1    Introduction                                 
5.2    Summary of Findings                             
5.3    Conclusion                                
5.4    Recommendations                        
Until now, the auditor is an important element in the financial statement because the audit subjects financial statements, which are management’s responsibility, to scrutiny on behalf of shareholders and creditors to whom management is accountable. The auditor is the independent link between management and those who rely on the financial statements for the decision-making. In that role, the auditor evaluates the judgments made by management in applying standards for the presentation of the financial information. Hence the audit profession, through its independent audit function, has playing an important role in enhancing a financial reporting process that facilitates the effective functioning of business environment (Salehi, 2009). He added that, the public confidence in the reliability of issuer’s financial statements that is provided by the programme of independent audits encourages investment in securities issued by companies. This sense of confidence depends on reasonable investors perceiving auditors as independent professionals who have neither, mutual nor conflicting interests with their audit clients. Accordingly, users of financial statements expect auditor to bring to the financial reporting process technical competence, integrity, independence, and to prevent the issuance misleading financial statements. But because of recent audit failures surrounding such as Enron, Waste Management, Cendant, Sunbeam and others, the audit practice is undermined.
Globalization, the complexity of the business environment, the spread of Multinational Companies (MNCs) and the advances in information technology have resulted in the global entry of audit firms and an increase in the scope of services offered by them, along with audit services, in order to provide a full service to their clients. Certified Public Accountant (CPA) firms are responding by offering such varied services, called non-audit services (NAS), such as investment banking, strategic management planning, human resource planning, computer hardware and software installation and internal audit outsourcing services. Some NAS require the auditors to provide some sort of independent attestation about the accuracy of some representation or the functioning of some process other than correspondence of financial statements to GAAP. Other NAS involve some form of consulting (e.g. information system design, tax advice, and bookkeeping).
Antle et al. (1997) observed that accounting firms earn substantial and growing revenues from supplying NAS. There is a strong intuitive case for economies of scope (cost efficiencies obtained by delivering multiple services through one firm) between auditing and non-audit services. However, the US Securities and Exchange Commission (SEC) believes that a basic conflict exists in providing both auditing and consulting services to a client that may undermine the integrity of audits (Palmrose and Saul, 2001). The SEC first voiced concerns in the late 1950s when its chief accountant commented on the possibility of auditors becoming so deeply involved in performing managerial services for clients that they would lose the objectivity needed for an audit. The continuing growth of the revenue mix of the largest firms towards consulting services intensified the debate on auditor independence.
Audit tenure is critical variable that have been placed on the pedestal of auditing and accounting researchers. The potential of this variable in influencing the independence of the auditor and consequently the financial reporting process, justifies the enormity in the level of interest that the variable have stimulated across an eclectic range of researchers, policy makers, academics and management practitioners. Auditors have a statutory duty to report on the truth and fairness of the stewardship report prepared by the management to the owners of the business. Further, stakeholders such as investors, financial institutions, governments and employees are often guided in many ways by the reports provided by the management in respect of the firm’s financial position as certified by the auditor (Francis, 2004, KPMG, 2008). Consequently, auditor’s independence is fundamental to public confidence in the reporting and auditing process as well as the reliability of the auditor’s report. A discourse on the conceptual underpinnings of the variables; audit tenure and auditor independence, reveals that with regards to audit tenure there is a growing body of literature indicating that the length of time spent by an auditor with a client has implications on the independence and objectivity of the auditor and indeed the audit process (Johnson, Khurana and Reynolds 2002; Gosh and Moon 2003). Though the arguments are at polarity, two major schools of thoughts have emerged and thus provide explicit evidence on the theoretical divergences. On school of thought argues that short auditor tenure has negative effect on the quality of the financial reporting process as a lack of client-specific knowledge in the early years of an audit and inferred that mandatory auditor rotation between audit firms may result in lower quality of audits owing to short audit-firm tenure.
Jenkins and Velury (2008) also argue that longer auditor-tenure improves audit quality as auditors may need to gain expertise in the business they audit and acquire client-specific knowledge over time.  
In Nigeria, auditors play an important role as ‘gatekeepers’ to public capital markets. By attesting to the accuracy of a company’s financial statements, the auditor lends his credibility to that company and its financial health as he expresses a professional opinion on whether the financial statements give true and fair view and are properly prepared in accordance with Companies and Allied Matters Act 1990 (as amended). The question of auditor independence has received increased attention from regulators, academics and practitioners around the world in recent years due to highly publicized audit failures (Hope and Langli, 2009). This is not surprising since the fact that auditors receive their fees from their client firms clearly creates the potential for an independence problem. The impact of a lack of auditor independence can be extremely great to the audit process; this has affected audit quality (Abdullah, 2003). Several countries moved swiftly to pass legislations to curtail or eliminate many auditor-provided non-audit services and imposed compulsory auditor rotations. Gul, Basioudis and Ng (2011) argue that such legislations have, in effect, reduced the auditor-client relationship, although it may potentially raise the cost to an auditor of expressing an independent opinion. It is a general regulatory belief that non-audit services provided by auditors to their audit clients compromise audit quality and audit independence.
On one hand, in furtherance of the requirements of Section 201 of the Sarbanes Oxley Act of 2002, the American Securities and Exchange Commission adopted final rules prohibiting accounting firms from providing non-audit services to their audit clients that are SEC reporting companies . The prohibition of specified non-audit services is predicated on three basic principles; (i) an auditor cannot function in the role of management; (ii) an auditor cannot audit its own work; and (iii) an auditor cannot serve in an advocacy role for its client.
However, the validity of such position is yet to be verified in Nigeria, hence the need for this study. The current study intends to bridge the research gap on this issue by using Nigerian data.
Today’s auditing and accounting firms also performs other accounting related services, such as tax services, and provide a wide array of non-accounting and non-auditing services, such as management advisory or consulting services. Because of those services, serious questions were raised concerning the activity and accountability of auditor’s performance. These questions arose in large part from a series of unexpected failures of large companies as well as disclosure of questionable and legal or illegal payment to auditors as well as non-audit services.
Auditor independence is the cornerstone of the audit function (Lowe, Geiger & Pany, 1999). As such, auditor independence gives the public assurance that the audited financial statements are reliable and trustworthy. This logic cannot exist unless rational financial statement users perceive auditors as independent and expert professionals who have no personal interests in their audit clients (Securities and Exchange Commission (USA SEC) 2000). A great deal of research have been conducted on the topic of auditor independence and challenges of provision of non-audit services, however, the bulk of these studies have been conducted on the major economies of the Western industrialized countries such as United States of America, United Kingdom, New Zealand and Canada.
For the purpose of this study, the following research questions are raised:
Does the provision of non-audit service significantly affect auditors’ independence in Nigeria?
Is there significant relationship between audit tenure and auditor independence in Nigeria?
Is there relationship between board size and audit independence in Nigeria?
The objective of this study is to empirically examine Non-Audit Services, Audit Tenure and Independence of the Auditor in Nigeria.
The specify objectives are:
To examine if the provision of non-audit service significantly affect auditors’ independence in Nigeria.
To determine if there is significant relationship between audit tenure and auditor independence in Nigeria.
To verify if there is a relationship between board size and audit independence in Nigeria.
The hypotheses for this study are:
Hypothesis I
Ho:    The provision of non-audit service does not significantly affect auditor’s independence in Nigeria.
Ho:    The provision of non-audit service significantly affects auditor’s independence in Nigeria.
 Hypothesis II
Ho:    There is no significant relationship between audit tenure and auditor independence in Nigeria.
H1:    There is a significant relationship between audit tenure and auditor independence in Nigeria.
Hypothesis III
Ho:    There is no relationship between board size and audit independence in Nigeria.
H1:    There is a relationship between board size and audit independence in Nigeria.
This research work is to empirically examine Non-Audit Services, Audit Tenure and Independence of the Auditor in Nigeria.
The population of the study is the entire banks currently quoted in the Nigeria Stock Exchange, while the sample size will be restricted to some selected banks quoted in the Nigeria Stock Exchange.
The length of period covered by the study was five (5) years (2007 – 2011).
Geographically, the study will be conducted in Benin City, Edo State.
This study will place emphasis on non-audit services, audit tenure and independence of the auditor.
It will enlighten the general public, auditors and management of corporate organization on non-audit services, audit tenure and independence of the auditor.
It would also add to the available literature on the area of study while also providing a platform for other students and researchers who may want to further this study.
Due to the vastness of the topic, this study is limited to investigate Non-Audit Services, Audit Tenure and Independence of the Auditor in Nigeria.
This research cannot be regarded as perfect and hitch free as some difficulties were encountered in the course of the study.
Some of the limitations are:
Smallness of sample size: It is interesting to emphasize that the findings of this empirical research are not to be generalize for all industry, since our limited to a number of companies.
The inability to obtain a completely random sample.
Imprecise measurement of variables.
Inappropriate test statistic.
However, strenuous effort has been made to mitigate the effects of these constraints in order to come out with an effective work.
Abdullah, D.F. (2003). “Auditor Independence Debate: A Critical Review of the UK and the US Responses and Proposed Reforms to Strengthen Auditor Independence in the Wake of Enron-Anderson Scandal”. Unpublished MSc Thesis. University of Essex.
Antle, R., Griffin, P., Teece, D. and Williamson, O. (1997) `An economic analysis of auditor independence for a multi-client, multi-service public accounting firm', this paper appears as Appendix B to Serving the Public Interest: A New Conceptual Framework for Auditor Independence, a White Paper submitted to the Independence Standards Board on behalf of the AICPA.
Francis, D. F. (2003), “Auditor Independence Debate: A Critical Review of the UK and the US Responses and Proposed Reforms to Strengthen Auditor Independence in the Wake of Enron-Anderson Scandal”. Unpublished MSC Thesis, University of Essex.


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