CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Auditing has been a very important aspect of the accounting profession since the statement of business activities from a sole proprietorship to large public enterprises. Experts rank, if the number one instrument of financial reporting. It forms the bedrock of placing reliance on the report presented by the stewards of companies on the state of affairs of the companies.
Many groups are interested to be assured of their interests being protected in the business organizations. The owners of the business (shareholders) having been concern to be guaranteed the management is performing its duties effectively and efficiently. Their ultimate aim is to receive as much returns as possible from the capital they invested in the business.
On its own part, the government is interested in knowing whether the profit & loss shown in the financial statement is correctly done for the purpose of tax assessment.
The companies advisers (the legal, financial analysts) also make use of the auditors report to advice the management. The legal adviser interprets the legal implications of some information disclosed in the financial statement. Also, the financial analyst uses the result shown by the auditors to advise the clients on the best source of fund to embark on, where to invest and how much to invest in each alternative. The competitors may also be attracted to merge with the auditors clients through the report issued by him.
However, the auditors can always be seen as the watchdog of the entire economy by representing the interest of all these groups. Their peculiar position therefore calls for a conducive atmosphere, but, it is unfortunate that most external auditors face serious problems in performance of their duties. In any case, this research work tends to investigate into the nature and causes of these problems and also solutions to them.
1.2 STATEMENT OF PROBLEMS
There are many problems facing external auditors in Nigeria. Auditors in Nigeria, even the most successful ones find it very difficult to audit Nigerian companies as a result of business activities, illiteracy, moral laxity lack of adequate technical skill and training. This work studies these problems, their causes, effect and remedies.
1.3 PURPOSE OF THE STUDY
The aims of embarking on this study are:-
1. To ascertain the nature of the problems the external auditors encounter in auditing Nigerian companies.
2. To identify the causes of these problems
3. To ascertain the effects of these problems on the work of auditors.
4. To recommend measures that could enable external auditors to overcome the problems identified.
5. To recommend measures to be adopted by Nigeria to enhance the auditing of their business organizations.
1.4 RESEARCH QUESTIONS
In carrying out this work, the following questions were in the mind of the researcher.
1. What is the nature of the problems of external auditors in auditing Nigerian companies?
2. What are the causes of these problems?
3. What are the effects of such problems in the work of external auditors?
4. What are the possible measures to be taken to overcome these problems?
1.5 RESEARCH HYPOTHESIS
There are different opinions about the problems of external auditors in auditing Nigerian companies. Some experts are of the view that they do not have any problems in auditing Nigerian companies while others contend that they do have. As a result of these opposing ideas, two types of hypothesis were employed to facilitate this research work. They are started as follows:
i. Null hypothesis (H0) external auditors do not have problems in auditing Nigerian companies
ii. Alternative hypothesis (Hi) external auditors have problems in auditing Nigerian companies
1.6 SIGNIFICANCE OF THE STUDY
It is a true saying that people can suffer for lack of knowledge. If auditors are not aware of the problems they will encounter in the performance of their duties they will invariably not be able to guard against them. This work saves as an eye opener to draw their attention to these problems and the ways to tackle them.
Again, it enables the government to know how it can play its role in crating better auditing atmosphere in the Nigerian companies.
Furthermore, it is expected that this should study the contributions of directors of the Nigeria business enterprise towards a better auditing environment in their companies.
This study will also form a good reference material for any other student who wants to write on a related topic in future.
1.7 SCOPE AND LIMITATION OF THE STUDY
The study does not exceed the problems encountered by external auditors in auditing Nigerian companies and their effect on the work of auditors.
The auditors considered here are those in all the different forms of business organizations in Nigeria. There were, however, a lot of constraints facing the researcher who is doing her study. They include:-
a. Time factor:- The period of time available for carrying out this research was very short. Moreover, the short period is filled with other academic programmes.
b. Shortage of finance:- Some research procedures, techniques, methods and processes will not be applied in this work because of the cost involved. There is no sufficient funds to meet up with them.
c. Scanty of local data:- Most of the texts that deal with the problem under review are foreign texts and are not current. There are only few local material available. This makes the collection of data not to be easy.
d. Non-response problem:- Inspite of all explanations as to the purpose of this study, some people can still refuse to answer the research questions that will be passed across them. This will make some questionnaires to be returned blank.
1.8 DEFINITION OF TERMS
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