ABSTRACT
This study delves into the pivotal role of auditing in
shaping the financial performance of organizations, with a focus on First Bank
PLC. Through a survey research design, utilizing structured questionnaires and
personal interviews, primary data was collected from a sample size of 36
respondents comprising managers and operational staff of First Bank PLC. The
primary objective was to ascertain the influence of auditing practices on the
financial performance of the bank.
The findings of this study reveal a significant
relationship between auditing and financial performance within the context of
First Bank PLC. Utilizing simple regression analysis, the study uncovers
critical insights into how auditing practices impact various aspects of
financial performance, including profitability, liquidity, and overall
stability.
The research highlights the importance of robust
auditing practices in enhancing transparency, accountability, and risk
management within First Bank PLC. Furthermore, it underscores the role of
auditing in fostering investor confidence, which in turn positively affects the
bank's market performance and stakeholder relations.
Moreover, the study sheds light on the challenges and
opportunities associated with auditing processes within the banking sector. It
identifies areas where improvements in auditing methodologies and procedures
can lead to more effective risk management and financial decision-making.
Overall, this study contributes to the existing body
of knowledge by providing empirical evidence of the significant role played by
auditing in driving financial performance within the banking sector,
specifically within the context of First Bank PLC. The findings underscore the
importance of continuous evaluation and enhancement of auditing practices to
ensure the long-term sustainability and success of financial institutions.
TABLE OF CONTENTS
CHAPTER
1
INTRODUCTION
1.1 Background
to the Study
1.2 Statement of the Problem
1.3 Objectives
of the Study
1.4
Research Questions
1.5 Research
Hypotheses
1.6 Significance
of the Study
1.7 Scope
of the Study
CHAPTER
2
REVIEW
OF RELATED LITERATURE
2.1 Conceptual
Framework
2.1.1 Concept of Auditing
2.1.2 Audit
committee quality and internal control
2.1.3 Audit committee characteristics and quality of earnings
2.1.4 Audit Quality definition, Framework and Indicators
2.1.5 Internal
Control system and Financial Performance
2.1.6 The concept of Internal Audit
2.1.7 Scope and Objective of Auditing
2.1.8 Benefits of Auditing
2.1.9 Internal Audit and Management
2.1.10 Concepts of Financial Control
2.1.11 Concept of Internal Control
System
2.1.12
Qualifications of the Chief Audit Executive and Firm
Performance
2.1.13 Auditing Classification
2.1.14 Objectives of Audit in Banking
Sector
2.1.15 Roles of Auditing in Banking
Sectors
2.1.16 Need for Effectiveness and
Efficiency of Audit
2.1.17 Factors Militating against
Effective and Efficiently of an Audit
2.2 Theoretical
Framework
2.2.1 Agency
theory
2.2.2 Stewardship
theory
2.2.3 Stakeholders
Theory
2.3 Empirical
Review
CHAPTER
3
METHODOLOGY
3.1 Research
Design
3.2 Area
of the Study
3.5 Methods
of Data Collection
3.5.1 Personal
interview
3.3.2 Questionnaire
3.3 Population
of the Study
3.4 Sample
Size and Sample Size Determination
3.6 Validity
of instrument
3.7 Reliability
of the instrument
3.5 Method of Data Analysis
CHAPTER 4
DATA
PRESENTATION, ANALYSIS AND DISCUSSION OF RESULTS
4.1. Presentation of Data
4.2. Analysis of Data on
Hypothesis one
4.2.1. Test of
hypothesis one
4.3. Analysis of Data on
Hypothesis two
4.3.1. Test of
hypothesis two
4.4. Analysis of Data on
Hypothesis three
4.4.1. Test of
hypothesis three
CHAPTER
5
SUMMARY,
CONCLUSION AND RECOMMENDATIONS
5.1 Summary
of Findings
5.2 Conclusion
5.3 Recommendations
REFERENCES
APPENDIX A Questionnaire
APPENDIX B: Regression Data
CHAPTER 1
INTRODUCTION
1.1 Background to the
Study
Auditing
serves as an important link in the business and financial reporting processes
of corporations. Auditors play a key role in monitoring a company’s risk
profile and identifying areas to improve risk management. The aim of auditing is to improve
organizational efficiency and effectiveness. The turbulent effects of the
global financial crisis have highlighted the critical importance of credible
high quality financial reporting.
Achieving quality financial reporting depends on the role that the
external audit plays in supporting the quality of financial reporting of quoted
companies.
Auditing
is the examination of accounting records with a view to ascertaining their
accuracy and compliance with relevant statutory provisions, accounting
standards, professional pronouncements, and the organizational policies. It is
an important part of the regulatory and supervisory infrastructure and thus an
activity of significant public interest. Audit quality is one of the most
important issues in audit practice today. Several individuals and groups; both
internal and external, have an interest in the quality of audited financial
information (IAASB, 2011; Heil, 2012).
The
financial statement audit is a monitoring mechanism that helps reduce
information asymmetry and protect the interests of the various stakeholders by
providing reasonable assurance that the management’s financial statements are
free from material misstatements. The societal role of auditors should be a key
contribution to financial performance, in terms of reducing the risks of
significant misstatements and by ensuring that the financial statements are
elaborated according to preset rules and regulations. Lower risks on
misstatements increase confidence in capital markets, which in turn lowers the
cost of capital for firms (Heil, 2012; Watts and Zimmerman, 1986).
External
financial statement users, including current and potential investors, creditors
and others need reliable financial information on which to base their resource
allocation decisions. When the financiers of organizations have confidence and
trust in the audited financial report of an organization, they are bound to
pour in more funds into the organization, which in turn results in increased
financial performance. Regulators and standard setters can increase the
effectiveness of quoted companies by promulgating rules and regulations that
help ensure that audits improve financial information quality. Internal
financial statement users such as management, audit committees and board of
directors have an interest in quality audits, for example; to help reduce the
cost of capital (Miettinen, 2011).
Audit
quality plays an important role in maintaining an efficient market environment;
an independent quality audit underpins confidence in the credibility and
integrity of financial statements which is essential for well functioning
markets and enhanced financial performance.
External
audits performed in accordance with high quality auditing standards can promote
the implementation of accounting standards by reporting entities and help
ensure that their financial statements are reliable, transparent and useful.
Sound audits can help reinforce strong corporate governance, risk management
and internal control at firms, thus contributing to financial performance
(Internal Audits Board, 2011).
The
statutory audit can reinforce confidence because auditors are expected to
provide an external, objective opinion on the preparation and presentation of
financial statements. Auditors need to be independent in the opinions they
express, while the work they have to do to form their opinions is highly
dependent on and rooted in the real world and may become challenging in some
business environments such as the cement industry. It is against this
background that this research work is carried out.
There
have been concerns about audit quality in the present environment, where severe
failures have come to light, for example; Enron scandal of 2001; Parmalat in
2003; Cadbury Nigeria Plc in 2006 and Afribank Nigeria Plc in 2009 (Ajani,
2012; Miettinen, 2011).
It
has been found that the perceived reliability of audited financial information
has declined. In contrast, the perceived relevance of audited financial
information has increased. The effect of audit quality on financial performance
has recently received attention from researchers in the western world. Studies
have shown that auditing has an impact on the financial performance of an
organization (Beasley, 1996; Heil, 2012; Miettinen, 2011).
1.2 Statement of the Problem
There
is a general consensus that any organization without an internal control system
in place is generally exposed to several threats that are capable of crumbling
the organization in less or no time. Prominent amongst such threats are:
Problem of incorrect financial statement and /loss of the company’s’ assets;
stealing and miss-management of organizational vital documents which may be
done by an employee to take undue advantage. There is also the issue of
incorrect and unreliable financial records which may lead to loss of
organizational integrity; non implementation of accounting policies in
consistent with the applicable legislation appropriate in presentation of
financial statement as well as non-adherence of annual budgets and
implementation of planning policies (Ajani, 2012).
1.3 Objectives of the
Study
The
general objective of the study is to examine the effect of auditing on
financial performance of an organization. However, the specific objectives of
the study includes:
(i)
To determine the effect of auditing on fraud detection,
prevention and control.
(ii)
To examine the effect of auditing on accountability of an
organization.
(iii)
To determine the effect of auditing on reliability of
financial statement
1.5
Research Questions
(i)
What is the effect of auditing on fraud detection, prevention
and control?
(ii)
What is the effect of auditing on accountability of an
organization?
(iii)
What is the effect of auditing on reliability of financial
statement?
1.5 Research Hypotheses
For
the purpose of the study the following hypotheses was tested in null form
H01: Auditing
has no significant effect on fraud detection, prevention and control.
H02:
Auditing has no significant effect on accountability of an organization.
H03: Auditing
has no significant effect on reliability of financial statement.
1.6 Significance of the
Study
The
study will benefit the following group of bodies;
Audit unit/department:
Findings from the study will adequately reveal the strengths and weaknesses of
auditing unit in carrying out their functions.
Banking sector:
the study will enable Nigeria banks to know the effectiveness of auditing and
its role in controlling and safeguarding the resources against fraud and
irregularities. It will help them in their proper financial management and book
keeping for effective performance of their business.
General public:
This study is also important to the public since audit helps in financial
management and it also helps in detection and prevention of fraud.
Researchers/students:
The study would therefore be of immense value as it will contribute to the
existing literature and motivate researchers who may be interested to carry out
similar study on the effect of auditing for efficient financial management of
an organization.
1.7 Scope of the
Study
The
scope of the study is the effect of auditing on financial performance of an
organization. The study was carried out in using First bank Plc for data
generation. The study focused more the effect of auditing on fraud detection,
prevention and control, effect of auditing on accountability and the effect of
auditing on reliability of financial statement.
Click “DOWNLOAD NOW” below to get the complete Projects
FOR QUICK HELP CHAT WITH US NOW!
+(234) 0814 780 1594
Login To Comment