THE EXTENT OF AN AUDITORS INDEPENDENCE. AN EMPERICAL INVESTIGATION
ABSTRACT
An auditors independence cannot be over-emphasized. It is considered as the bedrock on which any audit work rest.
However, this project work tends to determined if auditors are really independent or if they apply independence in practice and how the laws guiding them have ensured this. In doing this, the primary source of data collection was used to get relevant information from selected audit firms. Even with this, auditors are still rated professionals with high esteem and integrity, who do their job without fear or favour, abiding by the laws guiding them. Regardless of this, it is recommended that auditors should not allow themselves to be influenced or used by anybody through any means which will impair their independence in the course of their audit work.
TABLE OF CONTENT
CHAPTER ONE
1.0 INTRODUCTION
2.0 1.1 Background of the study
1.2 Statement of problems
1.3 Objective of the study
1.4 Significance of the study
1.5 Research Hypothesis
1.6 Research Methodology
1.7 Scope of the study
1.8 Plan of the study
CHAPTER TWO
2.0 LITERATURE REVIEW
2.1 Introduction
2.2 The concept of independence
2.3 The Company decree and independence
2.4 provision of the companies and Allied matters Decree in Ensuring Auditors independence
2.4 Rules of professional Ethics in Ensuring Auditor’s independence
2.6 The Audit committee and the future of
independence
2.7 Professional Responsibilities of an Independent
Auditor
CHAPTER THREE
3.0 RESEARCH METHODOLOGY
3.1 Introduction
3.2 Research Design
3.3 Population and sample
3.4 Sources of Data collection
3.5 Data Analysis Techniques
CHAPTER FOUR
4.0 DATA PRESENTATION AND ANALYSIS
4.1 Introduction
4.2 Results presentation
4.3 Test of the Hypothesis
CHAPTER FIVE
5.0 SUMMARY, CONCLUSION AND
RECOMMENDATIONS
5.1 Introduction
5.2 Summary
5.3 Conclusion
5.4 Recommendations
Bibliography
Appendix
Research Questionnaire
CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND OF THE STUDY
In auditing the financial statement of an organization, everything necessary must be done to avoid any contradiction of opinion to be formed by the auditors.
Literally, from the dictionary, an audit is defined “as an official examination and verification of account and records especially financial accounts” or “official examination of accounts to see that they are in order”.
Also Izedonmi (2000) defined auditing “as an independence examination of the financial statement of an enterprise prepared by the management of the enterprise by an appointed person called auditor, in order to express a professional opinion whether or not those financial statement show a true and fair of the enterprises affairs as at the end of the financial period in accordance with the auditor’s term of engagement as well as other relevant statutory and professional regulations”.
It was also seen and defined by many “as a review of a statement of account prepared by the appointed officer of an organization by some other person” (Okolo 2001). In order words, an auditor’s objectivity must be beyond question when conducting an audit. Hence the approach of an audit work must be with integrity and objectivity and spirit of independence of mind.
Research has shown that many questions have risen concerning auditors independence and how far and how well do auditors work under this umbrella “Independence”.
An auditors independence implies the ability of an auditor to perform his audit work in accordance to his judgment free from any influence and without being biased (Izedonmi, 2000). Professional an auditors independence is fundamental in the accountancy profession in general and auditing work in particular. This is essentially an attitude of mind characterized by integrity and objectivity in the approach to professional work. In other words the value of an audit work depends to a large extent on public confidence; he should not only be independence but also seen to be independent. In this regard, an auditor must not be interested in running the affairs of his client covertly (secretly) or overtly (openly).
It will be worth solute to note that these questions as to auditors independence started when company form of business come into existence and increased in number as a result of increasing complexity of the modern industrial world with more emphasis on accountability. It has also been noted that these question could arise due to the following:
- Auditor’s relationship with his client
- Auditor’s interest in his client’s shares
- Acceptance of gift from client’s staff or directors etc.
1.2 STATEMENT OF THE PROBLEM
As earlier said, most audit works fail or do not tell the truth of what a financial statement of an organization is, as a result of the auditor not been independent. This has led to problems, which have been existing and still exist.
Among this problems are:
- The dissolution or liquidation of organizations, which have been certified healthily auditors.
- Misleading the user of the report made by the auditor on the financial statement of an enterprise.
- Discouraging these same users of the report from investing in that organization or any other audited by the same auditor etc.
In the course of this study, these problems will be looked into for possible solutions.
1.3 OBJECTIVES OF THE STUDY
This study aims at:
i. Determining the extent of how auditor’s independence is applied in practice.
ii. Determining how company land has ensured auditors independence.
iii. Determining the role accounting bodies play in ensuring auditors independence.
iv. Examining the type of relationship that should exist between auditors and their client when conducting an audit.
v. Determining the role played by audit committee to ensure auditors independence.
vi. Making recommendations on how to auditors independence.
1.4 SIGNIFICANC E OF THE STUDY
With regard to the expectation of the users of audit report and regulatory bodies of auditing, this research work tend to make know that, through auditors independence cannot be fully ensured in all cases of audit works except a few. However, in the course of this work, recommendations and suggestions will be made on how to restructure the rules and regulations guiding the auditor in the course of his audit work, to make more standard and possible rigid that they cannot be bend, so as to enhance auditors independence.
1.5 RESEARCH HYPOTHESIS
In the course of this study, the following hypothesis will be formulated and empirically tested and their result will form the basis of the conclusions and recommendation.
NULL HYPOTHESIS (Ho)
1.5.1 There are loopholes in the law governs auditors independence.
1.5.2 Auditors are dependent on directors for continued appointment and good remuneration.
1.5.3 The introduction of audit committee is not a positive measure towards
1.5.4 Auditors are not truly independent in the course their work.
1.6 RESEARCH METHODOLOGY
This study will employ the use of primary source of data collection. In using this, questionnaire and interview shall be used, to collect the primary data. The data collected in this study will be presented in simple percentage and analyzed using chi-square.
1.7 SCOPE OF THE STUDY
The scope of this study is limited to appraising thoroughly. The theoretical foundation, on which the
actual practice of auditing is built, so as to be well acquainted with the basic facts about the significant of independence in auditing.
However, to successfully do this, information will be extracted from the staff of Giwa-Osagie and company (chartered Accountants), Abdulkerim and company (Chartered Accountants) Spiropoulous, Adiele, Okpara and company (chartered accountants) and Femi Ajiagala and company (Chartered Accountants).
1.8 PLAN OF THE STUDY
Chapter one of this research work deals with the background of the study, the problem which led to the choice of this topic, the objectives of the study, the significance, the scope of the study, the research hypothesis and the plan of the study.
In chapter two, literatures and contributions from different views, which are relevant to this study, are reviewed.
Chapter three deals with the research methodology, which companies the source of data collection, method of presentation and analysis.
The presentation, analysis and interpretation of data collected are lighted in chapter four.
Finally chapter five summaries, concludes and makes recommendations based on the findings of the study.
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