TABLE
OF CONTENTS
CHAPTER
ONE:
INTRODUCTION
1.1
Statement of the problems
1.2
Aims and objectives
1.3
Scope and constraints of the study
1.4
Significance of the study
1.5
Plan of the study
1.6
Definition of terms
CHAPTER
TWO: LITERATURE REVIEW
2.1
Meaning of financial statement
2.2
Information to be disclose in financial
statement
2.3
Function of financial statement
organization decision making
2.4
Uses of financial statement
2.5
Meaning of auditing
2.6
Duties and responsibilities of an
auditor
2.7
Auditor’s independence
2.8
Reference
CHAPTER
THREE: RESEARCH METHODOLOGY
3.1
Brief history of case study
3.2
Organizational function of the company
3.3
Membership and organizational structure
of the case study
3.4
Sources of data collection
3.5
Method of data collection
3.6
Population of the study
3.7
Limitation of the methodology
CHAPTER
FOUR: DATA PRESENTATION, ANALYSIS AND PRESENTATION
4.1
Analysis of data
4.2
Formulation and testing of hypothesis
4.3
The internal control of the case study
4.4
Analysis of annual report
CHAPTER
FIVE: SUMMARY, CONCLUSION AND RECOMMENDATION
5.1
Summary
5.2
Conclusion
5.3
Recommendation
Bibliography
CHAPTER ONE
1.0 INTRODUCTION
In the contemporary
business world, there should be a good communication method between the
management and the providers of capital otherwise called the owners of
shareholders. Usually, the shareholders appoint expertise as managers/ director
to run the business on their behalf.
This occurs when the shareholders do not have the technical
know-how or have limited time to manage the business. The manager communicate
the stage of affairs of the business to them (the owners) at the end of each
financial year through the preparation of financial statement.
The financial statement of a company are the annual reports
and accounts prepared by the company. The sole responsibility of preparing
financial statements of a company of the activities for an ontity for a
particular reporting period. The main objective for an entity for a particular
for the preparing the financial statement are to show the financial position
and state of operations of a company to the relevant users of financial statements,
especially shareholders. The financial state of a company is often displayed in
the income statements. Balance sheet, cash flow statements, notes to the
accounts and other statements, and explanatory materials which form part of the
financial statements, which are prepared from the receipts, vouchers, documents
and records of a company, the financial statements is mainly designed by the
manager to give report of their stewardship to the shareholders.
However, the shareholders may found the financial statement
difficult to believe. This occurs as a result of the problems of trust between
the owner and manager, as is usually the case when somebody entrusts one’s
resources into the hands of other people. The suspicion of the ownener are
usually based on the presupposition that the report either contains errors, is
misleading, failed to discbse fraud and or relevant information.
Hence, there is the need to employe somebody who is
independent of the report prepared by the manager/ directors. This person is called
an auditor. He is appointed to examine and verify the organization, its records
profit and loss account shows the trust and fair view of operations.
The auditor’s opinion helps establish the credibility of the
financial statements.
In a nutshell, the roles that auditors play in reporting of
financial statement of a company cannot be over-emphasized. The various uses of
financial statements ranging from the shareholders, mangers, competitors,
banker, labour union, financial analysts, tax practitioners government,
creditors etc. depend on his/her state of mind before they can use the report
to arrive at any statements is prone to wrong decision making by the financial
statements users.
1.1 STATEMENT OF THE PROBLEM
Basically, the
financial statements are prepared to show the state of affairs of company at
the end of a reporting period. Also, it is prepared to satisfy the interests of
the relevant users of financial information such as share holders, competitors,
bankers, tax practitioners, analysts, etc. hence, the impact of a auditor in
reporting of financial statement of a company had given rise to the problems
highlighted below.
1.
What brings about the involvement of an
auditor in the reporting of financial statement of a company? The proble of
trust between the owner of the business and the directors had led to the
employment of an auditor in reporting financial statement of a company. This
simply helps to satisfy the shareholders inrerests and justify the integrity of
the directors managers.
2.
What is the impact of auditor’s independent
in reporting og financial statements of a company? The degree of auditor’s independence
determines to a large extent the accuracy and correctness of financial
statement.
3.
What are the problems faced by the users
of financial information in the interpretation of financial statements? The
ability of various users of financial information to interprete the financial
statement correctly helps them in arriving at a fair decision making. This is
achieved through the acquisition of relevant knowledge of interpreting accounts
such as ratio analysis.
4.
What are the impacts of using the
financial statement of a company to compare that of another company in the same
industry? This is applicable to competitors as one of the users of financial
statement: the companies that are similar insize and structure should be
compared with one another to enable reasonable comparism judgments to be
concluded
5.
What are the limitations of financial
statements of the performance evaluation of a company? The financial statements
show a limited picture of operation of the firm. As such , it cannot used in
determining the efficiency of routine aspect of an organization
The aforementioned
points are some of the problems observed in process of seeking solution to the
general problem of the study.
1.2 AIMS AND OBJECTIVES OF THE STUDY
This research work is
mainly embacked upon to identify the impacts or roles of an auditor in
reporting of financial statement of a company. The users of financial
statements rely on the auditor’s opinion before they can use the report for
decision making. The following are some of the reasons for embarking on this
research exercise.
This study is made to examine the necessity of auditors in
the reporting of financial statement for instrance, the duties of an auditor in
ensuring that there is effective and efficient accounting system is observed.
This is to see whether the supervision of an auditor on the accounting system would
help the disclosure of relevant information in the financial statement of a
company.
Similarly, this research work is done to ascertain wether
olushola Adekanola and company (chatered accountants) usually conforms with the
provisions of auditing standard and professional in the performance of his
duties
Moreso, this study is undergone to know hoe the independence
of an auditor is maintained in the course of assessing and verifying the
organization, books and records of his/her client.
Finally, this research work is done to ascertain in the
various services which the case study i.e. Olushola Adekanola and company also
render independently to their clients involving government parastatals and
private companies. As a result, the modern way of auditing is also examined to
see the additional duties of auditors in the reporting of financial statements.
1.3 SCOPE AND CONSTRAINT OF THE STUDY
This project is
designed to examine the roles performed by an auditor in reporting of financial
statement of a company. Also, it is made to consider the problems faced by the
users of financial statement as well as information’s to be disclosed in the
financial statements.
More so, this research work considered the various functions
or services rendered by the case study i.e. Olushola Adekanola and company, to
its numerous clients and the organizational structure of the case study is
examined as well.
However, in the course of seeking solution to the problems of
the study, these are some of the problems encountered. They include Vi2;
i.
Financial
constraint: There is unavailability of enough mnoney
to check for more information on the internet and for frequent consultation of
the case study.
ii.
Lack
of Adequate time: There is also lack of adequate time for
the collect of necessary data from the case study, Olushola Adekanola and
company. This is due to the fact that the case study is a large auditing firm
having limited, time to attend to people other than its clients.
1.4 RESEARCH METHODOLOGY
This
study is carried out with the use of both primary and secondary sources of data.
The
primary data employed include questionnaire and interview while secondary data
include textbooks, internet, etc.
The
secondary data were predominantly used in this project. This is because of some
limitations such as time, distance and financial problem.
1.5 PURPOSE OF THE STUDY
Once
again, this project is mainly executied to know the part an auditor plays in
the reporting of financial statement of a company. Similarly, it’s undergone to
seek solution to the statements of the problem attributed to the subject matter
of his project. This project is at the same time intended to know the duties
role of auditor’s opinion on the users of financial statement of a company.
1.6 SIGNIFICANCE OF THE STUDY
The research work is
examined in an attempt to know the duties of auditors in reporting of financial
statement of a company. On the existing literature on the duties role of
auditor’s opinion on the users of financial statement of a company.
The performance of auditor duties will help add credibility
to the financial statement and satisfy the interest of the users or such report
as well as justify the integrity of the directors \managers
The study will also state the advantages of audited financial
state to the company and user of the financial state to the company general
public will be more enlightening one the various services rendered by an
auditor to its clients.
1.7 PLAN OF THE STUDY
This protect has been
divided into five chapters for ease presentation of the fact and observations
is collected.
Chapter one contains the introduction, statement of the
problem, aims and objective, scope and constraint, research methodology,
purpose of the study, significance of the study, plan of the study and
definition of the terms.
Chapter two consider the past and current literature review
which include meaning of financial statement in organizational decision making,
uses of financial statement. The meaning of auditing/ auditor, duties and
responsibilities of an auditors independence.
Chapter three highlights research methodology and case study
effort on the topic which include brief history of the case study, membership
and organizational structure of the case study, organizational function of the
case study, population of the study and limitation of the study.
Chapter four discusses the presentation and analysis of data
collected. Internal control of the case study and analyses of annual report.
Chapter five throw light on the findings, summary, conclusion
and recommendation for further study.
1.8 DEFINITION OF TERMS
The concepts employed
in this research work clearly explained below.
1.
Shareholders:
This
are the owner of the business they are member who has pooled their resources
together to establish a company and therefore bear the ultimate risk if the
business should fail.
2.
Directors:
These
are the technical know hoe required to manage the business of the owners. They
are otherwise called professional managers. Also, they usually produce annual
financial statements a particular financial year.
3.
Financial
statement: This refers to the means of
communicating about the resources and performance of the reporting entity of
enterprises to those having reasonable right to such information.
4.
Auditor:
An
auditor means professional or an experienced accountant that checks the
financial statements of a company wether it shows that truth and fair view of
the state of affairs.
5.
True
and fair view: This is the concept mirostates that the
true position of a company at a reporting date. This implies that the company
account may show a trive and fair view while the company is making losts or
having a going concern problem. Therefore, it is the factual presentation of
financial information and meany of selecting the relevant accounting bases for
the presentation of financial statement.
6.
Opinion:
In auditing, this simply means the state of mind of an auditor in reporting on
the financial statement whether it shows the true picture of company’s
operation.
7.
Report:
this
is the product of an audit exercise. It is used to express the opinion of an
auditor whether the accounts and balances examined display the true and fair
view of the state of affairs.
8.
Fraud
and error: In auditing, the term “error) refers to
unintentional mistakes in financial statements. It is a regrettable act and
every human being is capable of committing error. On the other hand, the term
“fraud” refers to international misrepresentative of financial information by
one or more individuals among management employees, or third parties. It
involves the use of criminal deception to obtain an unjust or illegal financial
advantage
9.
Irregularities:
This
concept simply means intentional distortion of financial statement for whatever
purposes.
10.
independence:
this
is usually used in relation to the auditor. It simply implies the attitude of
mind of an auditor which free in from prejudice or bias.
11.
Client:
This
is referred to as the party appointing the auditor to carry out audit on its
financial statements. The party may be an individual in the case of sole
proprietorship or partnership audit or corporate bodies in the case of
companies audit.
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