Abstract
Auditor’s
independence is the bedrock of the reliance of any form of audit report in
accounting profession and is a major attribute to ensuring accountability
however. The ultimate aim of this research work controlled or censored auditing
is to assist owners of business the true and fair view of the financial
statement as well as give insight into how its independence to have a positive
correlation on the report they give which is being relied upon by users. The researcher employs primary
data (questionnaire and personal interview) in its data collection. It was discovered or found out
that closeness in terms of giving management decisions can impair an auditor’s
independence. Conclusion was made that Independence has been noted is at the
core of the accounting profession, the very essence that gives an auditor’s
work its value. It was as well recommended amongst others that seminars and
lectures should be con-ducted for auditors to enable them appreciate their
profession the more to maintain their personal integrity despite the advise
situation in the country, knowing fully well that a good name is better that
riches.
TABLE OF CONTENTS
Title
Page i
Certification
ii
Dedication
iii
Acknowledgements
iv
Abstract
v
Table
of Contents vi
Chapter One:
Introduction 1
1.1
Background to the Study 1
1.2
Statement of Problems 2
1.3
Research Questions 3
1.4
Objectives of the Study 3
1.5
Statement of Hypothesis 4
1.6
Significance of the Study 5
1.7
Scope of the Study 5
1.8
Limitations of the Study 6
1.9
Definition of Terms 6
Chapter
Two: Review of Related
Literature 8
2.1
Introduction 8
2.2 What is
Auditing? 9
2.3 Reasons
for Auditing 12
2.4 Objectives
of Audit 13
2.5 The
Detection of Errors 14
2.6 Types of
Audit 15
2.7 Audit Risk 17
2.8 Limitation
of Auditing 18
2.9 Types of
Auditors 19
2.10 Qualities of an Auditor 20
2.11 Auditors Qualification 22
2.12 Auditors Appointments 24
2.13 Auditors Remuneration 24
2.14 Rights of an Auditor 25
2.15 Auditors Duty 26
2.16 Auditor’s Liability 28
2.17 Types of Independence 33
2.18 Audit Independence 35
2.19 Perceive
Independence 35
2.20 Independent
and Management Advisory Services 35
2.21 Auditors Independence it’s Effectiveness 36
Chapter
Three: Research Method and Design 38
3.1
Introduction 38
3.2
Research Design 38
3.3
Description of Population of the Study 38
3.4
Sample Size 39
3.5
Sampling Techniques 39
3.6
Sources of Data Collection 39
3.7
Method of Data Presentation 41
3.8
Method of Data Analysis 41
Chapter
Four: Data Presentation, Analysis and Interpretation
4.1 Introduction 43
4.2 Data Presentation and Analysis of Data 43
4.3 Hypothesis Testing 48
Chapter
Five: Summary of Findings, Conclusion and Recommendations 52
5.1
Introduction 52
5.2 Summary of Findings 52
5.3
Conclusion 54
5.4
Recommendations 56
References 58
Appendix
I 59
Appendix
II 50
CHAPTER ONE
INTRODUCTION
1.1
Background to the Study
The
independence of an auditor is one of the fundamental concepts of the accounting
profession.
Auditing
as a profession arose primarily because of separation in the ownership as well
as the administration of the company, we therefore have to employ a
professional manager whose responsibility is to utilize the shareholders
resources and produce a quantitative statement. This statement is referred to
as stewardship account, in order to make the owners of the business place
reliance on members of management as regard the true and fair view of the
financial statement, the shareholders appoints an auditor to produce on audit,
reports.
Independence
is often an altitude of the mind characterized by integrity and objectively to
professional works. In May, 2000, the Institute of Chartered Accountant of
Nigeria reviewed an existing document issued in November, 1979 embodying a code
of conduct for the members. This document titled ‘rules of professional conduct
for members” because of the essential part of the rules to incoming members;
the essential part of the rules is majorly on
Independence of an auditor definitely must have a direct impact in the audit
report. This therefore means that if an auditor’s independence is effective,
what we should be expecting qualified report. The importance of the
independence to an auditor cannot be over emphasized owing to the fact that it
forms the crux of the profession and can be likened to the part of the auditing
profession.
1.2
Statement of Problem
The
concept of independence is cornerstone of the accounting profession. The main
aim of employing the services of an auditor to financial statement is to
produce a report that will add credibility to financial statement but in
practical terms, the independence is not in place. This research is to carryout
an investigation to ascertain the effect of auditor’s independence on
management decision making process and to proffer solutions on the ways forward
to enhance auditor’s independence in Nigeria.
1.3 Research
Questions
Below
are research questions meant to direct the study.
i. Does the degree of auditor’s independence
have an impact on the report given?
ii. Does the increase in credibility on the
financial statement have an impact on user?
iii.
Do auditors know and appreciate
relevance of independence?
iv.
Can one appraise the areas of weakness
and strength with a view to making recommendation on possible improvements
where necessary?
v.
Is the provision by statutory bodies
and standard on auditor’s independence?
1.4
Objectives of the Study
The
level of reliance on the audited financial statement by the users is not that
encouraging due to the ineffectiveness, of auditor’s independence. The objective
of this study are:
i.
To evaluate the impact of auditors
independence on audited report.
ii. To find out if increase credibility on the
financial statement affect the users.
iii.
To ensure that auditors know and
appreciate relevance of independence
iv.
To appraise the areas of weakness and
strength with a view to making recommendation on possible improvements where
necessary.
v.
To assess relevance of provision by
statutory bodies and standard on auditor’s independence and as certain how
credible it has been. If not to evaluate and give necessary suggestions that
will help appraise the system.
1.5
Statement of Hypotheses
In
order to achieve the objective of this study, the following hypotheses were
formulated.
Hypothesis
One
Ho: Auditors’ independence does not have a direct
impact on the auditor’s report.
HI:
Auditors independence have direct
impact on the auditor’s report.
Hypothesis Two
Ho: There
is no significant relationship between the provision of statutory bodies and
auditors independence.
HI: There is significant
relationship between the provision of statutory bodies and auditors
independence.
1.6
Significance of the Study
This
study aims at evaluating the impact of auditor’s independence on audited report
and gives insight into the effect to the users of such reports. It is also to
assess relevant provision by statutory bodies and standard on auditor’s
independence and ascertain how credible it has been.
1.7
Scope of the Study
This
research focuses on the independence of auditors and its impact on audit report
in accounting and its scope is centered on selected audit firms in the country
using some audit firms in Benin City, Edo state as case study. The study covers the range between
2010 – 2015 and the sample size of 30 is used for the population.
1.8
Limitations of the Study
The
limitation of this study was the difficulty in getting relevant journals that is
related to the area of study.
1.9
Definition of Terms
Audit:
it
is a process carried out by suitably qualified auditor where the accounts of
business entities, including limited companies, charities trusts and
professional firms are subjected to scrutiny in such details as will enable the
auditor.
Auditing:
It
is defined as the process by which a competent qualified independent person
accumulates and evaluates evidence about quantifiable information relating to a
specific economic entity for the purpose of ascertaining the compliance with
any relevant statutory obligation.
Auditor:
Is
an auditor as an expert accountant who makes an examination of accounting data
in order to form his opinion as to the reliability of those data.
Independence: This is the independence of the auditors mind in order to
form an objective opinion of the financial statement examined by him without
any direct interference from his client.
True
and fair view: This means accounts prepare in
accordance to the generally accepted accounting principles.
Audit
Report: This is the opinion of the auditor after due
examination of the financial statements. Audit report is a written summary of
the findings of the auditors during their audit work along with their opinion
on such findings. The report may either be the domestic report also called
letter of weakness addresses to owners of the organization (in case of
company’s shareholders).
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