THE OBSERVANCE OF PROFESSIONAL ETHICS BY AUDITORS IN NIGERIA CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
In the awake of financial crises in late 1990s, the international community emphasized the major role that the observance of international standards and codes of best practices can play in strengthen national and international financial systems. The international community called for the preparation of reports in the observance of standard and codes (ROSC) an assessment of the degree to which an economic observes internationally recognized standards and codes. Auditing, as a professional body of auditors, has its own ethics, which specify the acceptable code of conduct, behaviour or action expected of the members in their interactions and dealings with one and another and with other members of the society in which they operate. In recent times there have been a scandalous failures of corporate giants and professional bodies which clearly shows the absence of integrity, objective and independence in the audit profession which has lead to lost confidence in the minds of the public by the true auditors function.
These failures have resulted to scrutiny of work of an auditor and the ethical issues raised concerning the work of an auditor both within and outside the profession. Following the collapse of the U.S giant company through unethical accounting practices. In the case of Enron in the United States, a top accounting firm. Andersen consulting was indicted for having contributed to the collapse of the giant company. The auditor’s themselves became subjects of audit and there were wide allegations of conflict of interest. It acquired world wide relevance in an editorial entitled “Enron’s collapse and accounting profession”. The Nigeria Tribune in its edition of February 8, 2002 and also, in the early part of 2003, the Auditor General of the Federation, Vincent Azie had released an audit report in which he indicted various departments of state for sordid financial practices. The report pointed to leakage, wide spread corruption and failure of accounting officers in reporting finacial activities. Also, in Nigeria, the African Petroleum, Union Dicon Salt and Nicon Insurance case in 2002, the Institute of Chartered Accountants of Nigeria (ICAN) had a case to query two auditors in respect of work done for these three companies namely African Petroleum (AP) Union Dicon Sale and Nicon Insurance. The privatization of the AP had generated so much public uproar when it was discovered that the company owed a debt of N26 billion which the external auditors had failed to disclose. The auditors had however sought to shift the blame to the directors of the affected company alleging that they failed to make necessary facts available to the auditors.
It is worth noting for years, accountants have been routinely held responsible for the distress in the banking and manufacturing sectors. Despite favourable reports by auditors, companies still go down, raising ethical questions about the work of accountants. The widespread downturn of fortunes within the Nigeria economy has brought the auditors under a different search light. However, ICAN’s response with condemnation of unethical practices has been to define the integrity of its members, it has had cause to argue that over 90 percent of the causes resulting in distress were outside the purview of the auditors. The challenge is for ICAN to strengthen its regulatory and disciplinary functions, and ensure adequate commitments to international accounting standards.
Auditors as professional men and women whose calling demand placing public interest above personal interest can only be achieved when auditors adhere strictly to the basic fundamental and ethical standards that regulates their relationship with the public as well as the company being reported. This will enhance public confidence in the reports given by auditors. The regulating bodies in an attempt to guarantee this, has made compliance with ethical standard compulsory and had also designed complaints and disciplinary process to deal with any errant member who violates the member codes of conduct. All recognized professions have developed codes of professional ethics. The fundamental purpose of such codes is to provide members with guidelines for maintaining a professional attitude and conducting themselves is a manner which will enhance the profession stature of their discipline. Professional ethics as a public accounting as in other profession has developed gradually over the years and still in a process of change as the practice of auditing itself changes. To be effective, a body of professional ethics must be attainable and enforceable. It must consist not merely of abstract ideals but of attainable goals and practical working rules which can be enforced.
1.2 RESEARCH QUESTIONS
This study is designed to find solutions to the following questions:
1. Are the codes of conduct for professional auditors effective?
2. How effective is the enforcement mechanism of the codes of conduct by the regulatory bodies?
3. Do pressure and undue influence undermine ethical moral value of auditors and their independence?
4. Are the audit practice in Nigeria regulated by laid down ethic rules?
1.3 OBJECTIVES OF STUDY
The objectives of this study is to assist us:
1. To know the effectiveness of the codes of conduct for professional auditors.
2. To know the effectiveness of the enforcement mechanism by the regulating bodies.
3. To know whether pressure and undue influence undermine ethical moral value of auditors and their independence.
4. To know whether audit practices in Nigeria is regulated by laid down ethical rules.
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