Abstract
This study dwells
extensively on the efficiency and effectiveness of audit tenure in relation to
investors’ confidence on audit report in Nigeria. Auditing has become the
objective of attention in most organizations. This study examines the
relationship between the duration of the audit client, on the other hand and
the relationship between auditor and investors confidence on the report in the
other hand. A 14 item questionnaire was administered for the study survey.
Interview was also conducted together information. Simple percentage was used
to present and analyze the data. Chi-square was used for the hypotheses
testing. The analysis and test reveal that there is a significant relationship
between the audit tenure and the reliability of financial statement. It was
recommended among others that organizations need to constantly review and
update their internal control and management should give maximum attention to
the internal audit department’s request and demand to enhance the effectiveness
of the auditor on financial reporting, so that investors will have confidence
on the audit report.
TABLE OF CONTENTS
Title
Page i
Certification
ii
Dedication
iii
Acknowledgements iv
Abstract
v
Table
of Contents vi
Chapter One: Introduction
1.1
Background to the Study 1
1.2
Statement of Problem 3
1.3
Research Questions 4
1.4
Objective of the Study 5
1.5
Statement of Hypothesis 5
1.6
Significance of the Study 6
1.7
Scope of the Study 7
1.8 Limitations of the Study 8
1.9 Definition of Terms 9
Chapter Two: Review of Related Literature 11
2.1
Introduction 11
2.2
Objective of Financial Statement
Reporting 12
2.3
Functions of the Internal Auditor 13
2.4 Attributes
of the Internal Auditor 14
2.5
Auditing and the Problem of Independence 15
2.6
Internal Audit as a vital concept of ensuring
organization
accountability 20
2.6.1 Internal Check and Internal Audit 21
2.7 Distinguishing
Between Internal and External Auditing 23
2.8 Responsibility for Detection and Prevention of Frauds 25
2.9 Common
Areas of Frauds 27
2.10 Delegation
of Audit 29
2.11 Professional Ethics and Practice 31
2.12 Auditors Tenure and Perceived Credibility of
Financial Reporting 32
2.13 The Final
Review of the Financial Statements 34
Chapter
Three: Research Method and Design
3.1 Introduction
36
3.2 Research
Design 36
3.3 Description
of Population of Study 36
3.4 Sample
Size 37
3.5 Sampling Technique 37
3.6 Sources
of Data Collection 38
3.7 Method
of Data Presentation 38
3.8 Method of
Data Analysis 39
Chapter Four:
Data Presentation, Analysis and Interpretation
4.1 Introduction
40
4.2 Presentation of Data 40
4.3
Data Analysis 40
4.4 Hypothesis
Testing 51
Chapter
Five: Summary of Findings, Conclusion and Recommendations 56
5.1 Introduction 56
5.2
Summary
of Findings 57
5.3
Conclusion 57
5.4
Recommendations 59
References 60
Appendix I 61
Appendix II 62
CHAPTER ONE
INTRODUCTION
1.1
Background
to the Study
The
study dwells extensively on the audit efficiency as if affect investors’
confidence. Auditing has become the object of attention in most organizations.
The key in the field of auditing and assurance is to recognize that auditing
can be of great value if it looks beyond the traditional financial issues and
focuses on issues that matter to a wider range of stakeholders and the public.
Errors,
irregularities, mismanagement and fraud are common occurrences in most
organization and require care and skills to actually detect. To carry out this
duty effectively, organizations required a body within to serve as a check on
employee and management activities; this is where auditor comes in (Matcher,
2003).
If
the financial statements of business organizations are properly audited, error
and irregularities can be detected at an early stage and corrective action will
be taken thereby saving millions of naira which can he ploughed back unto the
business for investments that will yield high returns and increase growth and
values of the organization.
Since
audit function cannot thrive without an adequate system of internal, me role of
one seem to complement that of the other, internal audit concept will be
critically assessed in relation to audit in this piece of research work, it is
in this respect that we will attach some recognition to these concept as they
reflect in the complexities and sophistication of modern business either in profit
making type of business or non-profit making types. Modern organization tend to
have large multinational activities hence preparation of accounts of such group
can be cumbersome as it involves bringing together and summarizing of accounts
of subsidiaries with differing conventions, legal system and accounting control
system. Financial statements are also required to conform in detailed with
complex requirement of the General Accepted Accounting Principles (GAAP).
1.2 Statement of Problem
Audit
can be likened to a life-wire of any organization. Quite a number of
organizations have been forced into voluntary liquidation due to mismanagement
of the financial and material resources.
Timeless
is an important qualitative attribute of financial statement which requires the
information to be made available to the users as rapidly as possible. The
increase in the reporting lag reduces the information content and the relevancy
of the document. The delayed in disclosure may encourage certain unscrupulous
investors to acquire costly inside information and exploit the private
information at the expenses of less informative investors.
The
proponents of mandatory auditor rotation have general been concerned with
eroding auditor independence, and its effect on audit quality as the length of
auditor tenure increases. The length of time that audit firms maintain clients
has long been an issue of debate and that auditor may be influenced more by the
management of a newly acquired client that for a client that has been audited
for a longer period.
The
result are consistent with the position that auditor may be more influenced by
their newly obtain client in the earlier year of the engagement and do not
support the argument of those who propose that rotation made mandatory is
necessarily to improve auditor quality. The audit report is the final output of
the auditing process, and is the only external communication of what the
auditor has done and concluded during the audit, the decision on what type of
audit report to render to the client is the final cumulative audit decision,
and is subject to a consideration amount of professional judgement and
negotiation with the client.
1.3
Research Questions
The
following research questions will aid the researcher in carrying out this
research work.
i. How does audit tenure affect investor’s
confidence on audit report in Nigeria?
ii. How does audit tenure affect the
credibility and reliability of financial report in Nigeria?
iii. How does audit tenure has influence the role
of financial reporting of an organization in Nigeria.
1.4
Objective of the Study
The
broad objective of this study is to investigate the impact of audit tenureship
and investor’s confidence on audit report in Nigeria. The following purposes
are also included;
i. To ascertain if audit tenure has positive
impact on investor’s confidence on audit report in Nigeria
ii. To ascertain if audit tenure has impact on
the credibility and reliability of financial report in Nigeria
iii. To examine if audit tenure has significant
influence on the role of financial reporting of an organization in Nigeria.
1.5
Statement of Hypotheses
The
following hypotheses will be tested in this work;
Hypothesis One
HO: Audit tenure does not
have positive impact on investor’s confidence on audit report in Nigeria.
HI: Audit tenure has positive impact on
investor’s confidence on audit report in Nigeria
Hypothesis Two
HO: Audit tenure has no
impact on the credibility and reliability of financial report in Nigeria.
HI: Audit tenure has impact on the credibility
and reliability of financial report in Nigeria
Hypothesis Three
HO: Audit tenure has no
significance influence on the role of financial reporting of an organization in
Nigeria.
HI: Audit tenure has
significant influence on the role of financial reporting of an organization in
Nigeria.
1.6 Significance of the Study
The
importance of auditing cannot be overemphasized. Every organization is
concerned with need to organized its affairs efficiency and safeguard its
asset.
Investors: External
audit is a vital tool that when properly applied would be of immense benefit to
the organization. Investors of immense benefits to the organization, investors
in today’s market are looking at accountants to provide greater information on
a more timely basis.
Auditors: Information
technology is dramatically reducing the time it takes to close a company’s book
and prepare financial statements. As a result of these trends, auditors are
under increasing pressure to reduce the time it takes to complete the year-end
audit.
Management: It
will serve as a reference in establishing a very functional audit report lag
system towards achieving goals.
Finally,
audit reports increased when consulting service are offered. It would however
serve different purpose for different people and organization depending on
their needs and view.
1.7
Scope of
the Study
This
study examines how audit tenure and investor’s confidence affect audit report
in Nigeria. In view of the diverse and wide nature of this research work, the
researcher has focused his research study within geographical area of Edo
State, Nigeria. The scope of this study also covers other issues as to examine
the association between the duration of the auditor/client relationship. More
so, it interests the researcher to critically examine the length of time that
audit firms maintain with clients which has long been issue of debate. A time
frame of 5 years will be used (2011 to 2015) with both years inclusive. For
effective study, a sample size of 90 was used.
1.8
Limitations of the Study
There
are many constraints, which often hinder the successful completion of a
research work. In carrying out this work however, it is designed only to
provide reasonable assurance but not absolute assurance in regards to
accounting for and safe guarding of asset, the reliability of financial
information and the compliance with law and regulations.
In
view of’ these, there is lack of adequate data on specific areas of
investigation this cause some limitations to the researcher. Unwillingness of
staff to release some vital information due to the overriding duty of secrecy
militated against the intellectual ability of very low and often at times vague
and distorted information, this is because of what staff regard has
confidential.
1.9 Definition
of Terms
1. Audit: Is the
examination of all relevant records and reports of a company in order to check
that what is provided is relevant and accurate
2.
Auditor: This is the person(s) who
examine all relevant document, reports and records of finance prepared by the
company’s accountant or department to verify the reliability, adequacy and
accuracy of the reports prepared by the department.
3. Investigation:
This is the act of caring out finding to ascertain the correctness of a report
or statement.
4. Reporting:
Is
the act of relating or interpreting the finding gathered from the investigation
of a given phenomenon or statements.
5. Directors:
These
are a group of senior managers who run a company.
6. Internal
Control: Internal control is the examination, monitoring and
analysis of activities related to a company’s operation, including its business
structure employee behaviour and information systems.
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