EXTERNAL AUDIT AND PUBLISHED ACCOUNTS (A CASE STUDY OF SOME SELECTED LIMITED LIABILITY COMPANIES IN RIVERS STATE) - Project Topics & Materials - Gross Archive
EXTERNAL AUDIT AND PUBLISHED ACCOUNTS
(A CASE STUDY OF SOME SELECTED LIMITED LIABILITY COMPANIES IN RIVERS STATE)
ABSRACTThe purpose of this research project was to find out external
another and published accounts. A study of some selected limited
liability company in rivers states.
The method used to carry out
this research is primary data which is questionnaire distribution to
the respondents. The research design used is quasi-experimental design.
Yaro Yamen’s formula used to determine the sample size. 50
questionnaires distributed and 48 of them were duly returned. The
statistic tools used is chi-square the three hypotheses were accepted
because they meet the necessary requirement for acceptance of an
alternate hypothesis.
It was found out that the reliability of
published accounts affect investment decision. Finally, from the
analysis we saw that firms evaluate the work done by the external
author.
Based on the analysis, we conclude that the published
accounts have a significant relationship with the true position of the
enterprise.
Finally, we recommended the external auditors and
management relationship should be at arm length to ensure adequate
degree of independent work and only competent external auditors should
be engaged to prepare financial report
TABLE OF CONTENT
CHAPTER ONE
1.0 Introduction - - - - - - -
1.1 Background of the Study - - - - -
1.2 Statement of the Problem - - - - -
1.3 Purpose of Study - - - - - - -
1.4 Objective of Study - - - - -
1.5 Research Question - - - - -
1.6 Hypothesis - - - - - -
1.7 Significance of the Study - - - - -
1.8 Scope of the Study - - - - - -
1.9 Limitation of the Study - - - - -
1.10 Definition of Terms - - - - - -
1.11 Organization of Study - - - - -
References
CHAPTER TWO
2.0 Literature Review - - - - - -
2.1 Introduction - - - - - - -
2.2 Nature of Audit and External Auditors
Independence - - - - - --
2.3 Published Financial Statement - - - -
2.4 Published Financial Statement Disclosure - -
2.5 Basic Content of the Audit Report - - - -
2.6 Opinion of External Auditor’s and Financial
Statement User - - - - - -
2.7 Unqualified Opinion - - - - -
2.8 Opinion Based in Part on Report of
Another Auditor - - - - - -
2.9 Departure from recognized Accounting Standards -
2.10 Emphasis on a Matter - - - - -
2.11 Qualified Opinion - - - - - -
2.12 Uncertainty - - - - - - -
2.13 Disagreement - - - - - - -
2.14 Materiality and Fundamentality - - - -
2.15 Limitation on Scope of Examination - - -
2.16 Qualified Audit Report - - - - -
2.17 Auditors Report to the Members - - - -
2.18 Major Uncertainty Affecting a Clients Business -
2.19 Qualification as to Accounting
Procedure and Disclosure - - - - -2.20 Adverse Opinion - - - - - -
2.21 Disclaimer Opinion - - - - - -
2.22 Restriction imposed by Client - - - -
CHAPTER THREE
3.0 Research Methodology - - - - -
3.1 Research Design - - - - - -
3.2 Sampling Procedure - - - - - -
3.3 Determination of Sample Size - - - -
3.4 Data Collection Method - - - - -
3.5 Primary Data - - - - - - -
3.6 Secondary Data - - - - - -
3.7 Questionnaire Design - - - - - -
3.8 Operational Measure of Variables - - - -
3.9 Data Analysis Techniques - - - -
References - - - - - - -
CHAPTER FOUR
4.1 Introduction - - - - - -
4.2 Return of Questionnaires - - - - -
4.3 Testing Hypothesis - - - - - -
CHAPTER FIVE: FINDINGS, DISCUSSION, CONCLUSION & RECOMMENDATION
5.1 Finding - - - - - - -
5.2 Discussion - - - - - - - -
5.3 Conclusion - - - - - - - -
5.4 Recommendation - - - - - -
Bibliography - - - - - - -
Appendix - - - - - - - -
CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Recent business failure involving or caused by inaccurate published Accounts or Financial Reporting have focused worldwide attention on the external auditors. Roles and responsibilities with respect to his ability to separate himself both physically and mentally from the clients company. It is important to note that, in obtaining a general understanding of the external Auditor (the legal and regulatory framework applicable to the entity and industry) and how the entity and industry complies with that framework. The external auditor is in a better position to cause operations or call into question the entity continuance as a going concern, thus the external auditor can achieve on a strict basis of being independence.
The need for financial information cannot be over-emphasized. This was noted by Asechemie [1994] that a lot of money is spent on setting up and operating managerial accounting systems in the hope of making available useful information in the management process. But why information at all? Can managers not operate without information? Why is it important? Three identifiable conditions exist for the explanation of the importance of information.
These are the off the scene condition, uncertainty condition. This in effect, point to the fact that society would integrate without information and information would help in creating awareness about the unknown.
Information as an important component that leads to social economic and political development of society needs to be regulated especially those that are financial in nature so as to deduce relevant information. Lee [1982] states that the complexity or an economic structure regulates the types and amount of information which flows through the system.
However, the identity of such information depends not so much on its volume as on its quality. Its user must be confident of its reliability and credibility. This quality basically explains the importance of information to a society. The problem associated with the financial information and external Auditor’s independence is unique that a basic understanding of auditor’s role and duties will help to clear the puzzle that surrounds the audit function.
In addressing the issue, Lee [1982] noted that the degree of confidence held in the Auditors opinion and in the annual financial statement he is attesting by the shareholders and other users of the statement varies directly with his ability, physically and mentally to disregard and to disassociate himself from the client company and its management.
Published Accounts should be studied carefully by users before making use of it. He went further to say that the particular use will determine the method of analysis to be used in evaluating the published accounts.
Auditing as a concept can be defined as an independent examination of an expression of opinion on the financial statement of an enterprise by an appointed auditor and in compliance with any relevant statutory obligation. Audit can also be defined as an independent review and investigation of the Financial Statement of the underlying transaction with a view to reporting thereon.
Eton (1996) states that Audit given credibility to accounts and third parties tend to rely more on audited accounts than unaudited accounts especially where finance is being sought or business is being offered for sale.
Also, he said that it is not the main purpose of audit to detect errors and fraud. It is the director’s task to device procedures to minimize such risk and discover them as they occur.
However, the fact that an audit is regularly undertaken will act as a moral detriment against fraud, while persistent error or serious fraud should be discovered if a reasonably competent audit has been conducted. In this context an external auditor is the appointed person by shareholder management of the company to carry out an audit function.
This study is aimed at reviewing, evaluating the roles of external auditors in the public accounts of some selected Limited Liability Company in Rivers State.
1.2 STATEMENT OF THE PROBLEM
Corporate organizations in recent times have faced a lot of constraints. Some of these constraints are as a result of lack of independent of external auditor which had led to inaccurate published accounts.
Most people argued that external Auditors should be held responsible for any misconception created by the published accounts.
This issue becomes more prominent when despite the health position presented by the published accounts; still the business may be operating in trouble order. Most investment analysts argues that the role of external auditors in published accounts should be reviewed and addressed properly. According to them, some of the investment advice and constitutional services made, using the published accounts turned out to be failure.
The imperial evidence to the problem under study can be found in the recent banks distress that arise after these banks financial statement were adjudicated as given a true and fair view of the state or affairs of the bank.
They went further to state that their reliance on the financial accounts prepared by professional accountants has cost so many positions in the business of investment and consultancy services. Accountants on their own argue that the accounts prepared according to the requirements of law and based on the financial records kept by the corporate organization can be said to be or a true and fair view. The researcher decided to carry out the study on external Auditors and published accounts.
1.3 PURPOSE OF STUDY
The aim of the study is to examine the role external Auditors play in published accounts. The purposes of the study are stated as follows:
(i) To ascertain the reason for lack of credibility in published accounts.
(ii) To investigate the role of external auditor in published accounts.
(iii) To determine how far these roles have contributed to the credibility of published accounts.
(iv) To find out how one can determine the extent of credibility of the published accounts.
1.4 OBJECTIVES OF THE STUDY
The objective of this study is to examine the role external Auditors play in published accounts.
(i) To find out how one can determine the extent of credibility of the published accounts.
(ii) To evaluate the responsibility of external Auditors to third parties making use of the published accounts.
(iii) To determine the importance of independence in general audit work.
(iv) To find out the role of accountancy bodies in published accounts.
(v) Finally, to give useful suggestions, recommendation that will serve as a foundation for enforcing the credibility of published accounts by Accountants and Accountancy bodies.
1.5 RESEARCH QUESTION
The study will attempt to answer the following questions and others as they may arise:-
(i) Does reliability of Published Accounts affect investment decision?
(ii) What is the reason for appointing an external Auditor?
(iii) How can you evaluate the work done by the external Auditor?
(iv) In what ways can you determine the credibility of published accounts?
(v) What are the factors militating against the credibility of published accounts?
(vi) What are the role published accounts has to play on investment analysis?
(vii) How would one evaluate the trueness and fairness of published accounts?
1.6 HYPOTHESIS
For effective administration of this research work, the following hypothesis are formulated and stated in the null forms:
(i) The Published Accounts has no significant relationship with the true position of the enterprise.
(ii) There is no significant relationship between the reliability of published accounts and the independence of external Auditors.
(iii) There is no significant relationship between the reliability of published accounts and effectiveness of investment decision by users of financial report.
1.7 SIGNIFICANCE OF THE STUDY
It is hoped that this study would help in educating and highlighting the benefit of credible published accounts. Again the researcher is hopeful that this work will serve as a foundation for enforcing the credibility of published accounts by Accountancy bodies. It will also highlight the consequences of an incredible in published accounts for both the public and users.
The study will go further to show that published accounts, if more credible will contribute to the over-all performance of the investment sector.
The study will show to Accountants and Accountancy bodies how they should present the true position of the enterprise and their present position of published accounts.
1.8 SCOPE OF THE STUDY
This study is restricted to the following corporate organizations such as:
(a) Akintola Williams Co., Port-Harcourt Branch
(b) K.P.M.P. Audit, Port-Harcourt Branch
(c) Institute of Chartered Accountants of Nigeria,
Port-Harcourt Branch.
(d) Okonkow & Okonkwu & Co., Port-Harcourt Branch
(e) Union Dicon Salt Plc, Port-Harcourt Branch.
(f) Nigeria Flour Mills Plc, Port-Harcourt.
(g) First Aluminum Plc, Port-Harcourt.
In order to ensure that adequate and authenticated information is gathered from these corporate organizations Questionnaires will be administered to the employees of these organizations.
1.9 LIMITATIONS OF THE STUDY
This research work was limited by the following:
(i) Respondent Attitude:
There was problem of lack of information from respondents, managers refused to give information which they regard confidential.
(ii) Inadequacy of Materials:
Being only human, the researcher was not able to get all the relevant and available materials needed for the study.
(iii) Finance
There was problem of finance on the researcher’s side as she is just but a poor student, and a research of this nature needs heavy finance.
(iv) Time:
The researcher was constrained by time as he carried out the study concurrently with his lectures, and other academic activities.
1.10 DEFINITION OF TERMS
In carrying out this research work, the researcher used different terminologies, and it is the essences of this section to define these terms as used in the study.
(i) External Auditor:
An independent Accountant appointed to carry out an independent examination of an expressing of opinion or the financial statement of the enterprise.
(ii) Published Accounts:
This is a financial statement published by an external Auditor(s).
1.11 ORGANIZATION OF STUDY
The research work is organized as follow:
Chapter One (1) covers Statement of the Problem, Purpose of the Study, Scope, Limitation etc.
Chapter Two (2) covers Literature Review which involve what others have done, as it relates to the subject areas.
Chapter Three (3) covers the research methodologies used in the study.
Chapter Four(4) covers the Presentation of Analysis and Interpretation of data obtained from the population of interest while Chapter Five (5) covers findings, Conclusions and recommendations for further study.
R E F E R E N C E S
Aven, A. and Lee becke, K.J. [1991] Auditing An Integrated Approach.
Prentice-Hall Eagle Wood Cliefs, New Jersey.
Asechemie, D.P.S [1995] Amatomy of Public Sector.
Nigeria Surrey Books Limited, Port-Harcourt.
Lee, T. [1982] (Company Auditing
Gee and Co Publisher Limited Scotland.
Eton. O.E. [1996] Unpublished Manual on Taxation, Uniport.
Meigs, Ashittington and Meigs [1982] Auditing Practice and Principles.
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