A CRITICAL ANALYSIS OF THE IMPORTANCE OF AUDITING IN THE AUTHENTICATION OF FINANCIAL STATEMENT OF BUSINESS ORGANISATION

Amount: ₦5,000.00 |

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1-5 chapters |




CHAPTER ONE
INTRODUCTION

1.1   BACKGROUND OF STUDY

The concept of auditing data back to eighties, the earliest traces of its existence was found in Italy and Egypt amongst great landowners of the middle ages. However, according to funk (1993), statutory audit which incidentally forms the main thrust of the research “arose sequel to the inception of company form of business in the 17th century for trading and another purpose”.  This development made it possible for an investor to commit their resources in business without necessarily getting involved in the administration and management of such business. With the passage of time, this practice was further modified such that there was a total split between the ownership and management thus, while shareholders retained ownership, the board of director took change of management . under this arrangement it is required that the management should report back to predetermined intervals to the owners of the business they hold in trust. But there are chances that such a stewardship report might contain errors, misleading by deliberately or failure to disclose relevantly. Information, it then follows that these possibilities will naturally give management periodic report insufficient credibility. Therefore, it is such probability that underscores the essence of auditing and exercise carried out in accordance with the law to give ’´a stamp approval on the stewardship report”  the need for auditing is heavily on the fact that by giving justification to he accounts of stewardship, users off accounting information namely. Shareholders, investors, employees, government agencies such as accountants, economists e.t.c. can conveniently rely on such reports for sound economic decision making. It is this understanding that necessitated the making of auditing very imperative to all corporate bodies on an annual basis by such government legislations as a company and allied matter degree 1990to ensure that auditors discharge this responsibility efficiently and satisfactorily, they are given unimaginative powers and rights.

1.2  HISTORICAL BACKGROUND OF NIGER GAS LIMITED

Commenced operation in 1962 following its official commissioning by the government of the then Eastern Nigeria.   However, due to change in the political structure of Nigeria occasioned via state creation, the Enugu state government at present holds controlling shareholding interest with others S.O ALINTA, E.M MICHILLETLE, AND CENTRAL INVESTMENT COMPANY LIMITED (C.I.C) ENUGU CONSTITUTING THE MINORITY SHAREHOLDERS.   The company was established to manufacture and at the same time market industrial and medical oxygen. Thus staff strength of the company presently is put at one hundred and eight (180) employees. Twelve (12) of them belonged to senior management staff with the rest forming the junior and medium level manpower.

1.3  OBJECTIVE  OF THE STUDY

The objective of this research is not for fetched especially when the provisions of section 359 (2) of the companies and allied matter decree 1990 which made it compulsory that auditors, is brought to bear.   Among other things, therefore, the main focus of this research will include the following:-
1.  To ascertain whether there has indeed become the need to reorder the priority of  auditing as is being propounded by two (1992) in the following words:  considering the emergent business environment in this country, it has become extremely unavoidable now to re-order the audit objective is that of establishing the truth and fairness of which the books and accounts for the company have reflected its transactions within a given period, the society’s objective is that the audit objective should be concerned with establishing whether a fraud has accrued or not.
2.  To determine if auditing has been serving its principal objective of re-enforcing public confidence in the stewardship reports of management.
3.    To ascertain if the management for whatever reason has been convincing with auditors to defraud the establishment at the expense of the investing public.

1.4  STATEMENT OF PROBLEM

Primarily, all categories of investors (individuals and government) make capital budgeting decisions chiefly for the profits they expect will accrue from such venture that is to say that, “investments are not taken for the simple reason of investing but in anticipation of a return”   However, the extent to which the above principle is maintained in our own context, especially since the re-regulation of the economy in 1986 appear not to be stares factory. Consequently breaking even to most business enterprises have become an illusion not to talk of satisfying the clientele effect of most investors.   This prevailing thought, abnormal situation necessitated calls to rally together and deliberate on how to salvage the dwindling fortune of this once very vibrant. Really “in a period of economic crisis, the need for accountability becomes more pronounced. The question of the effective audit is, therefore, worth examining in the Nigeria context. Though in the business cycle, the appointment of auditors is assumed to fully quadrants and protest the interest of shareholders and other third parties, there is ever-increasing doubt as to how well these presume watchdog of the investing public has fared. Credence is given to these fears as management keeps complaining of low capacity utilization, poor turnover or high turnover but with ridiculously high cost of sales-all depicting no returns on investment and yet auditors keep repeating their jargon in our opinion, the financial statements as examined by us present a true and fair view of the state of affairs and the profit and the source and application of funds as the year needed 31ST DECEMBER 19XX. The aftermath of forgiving is accusations that auditors are colliding with management to hold back form investors’ knowledge that they should have. This explains the basis for the intensified litigations in law courts against auditors. It has also lead to a gross loss of confidence in such body corporate, its management and above all auditors by all and Sunday,  little won 1BB (1990) carried out saying.   “However upon all these enumerated scared requirements of your (auditors) duty our experience in this country has been that in both public and private sectors of our economy there have been fraudulent transactions, cover-up of tax evasion and some inexplicable losses of physical assets”   “ultimately, it is such accusation as carrying out audit evidence and of being deliberately misleading” that informed this research work.

1.5  SIGNIFICANCE OF THE STUDY

The importance of this research will rest squarely on the fact that through its solutions and controversies that surround the concept of auditing in it entirely put differently, the outcome of this endeavor will,
(1)   Either role in auditors, the more on the ground that they eroded rather dangerously public confidence in their reports.
(2)    If enumerated  will show that the accusation is in founded, and thus based on the blatant refusal of auditing and
(3)    If indicated, it will serve as a warning signal to all classes of users of accounting information while at the same time calling for an in-house-mending by the relevant accountant regulatory bodies in Nigeria.

1.6  SCOPE AND LIMITATION OF THE STUDY

Auditing as a practice applying to virtually all organizations and institutions where financial matters arise. It applies to profit-making organizations as well as to non-profit making organizations like churches, club, and co-operative societies.   For the sake of adequate coverage, the researcher had wished that information was sourced from a cross-section of these organized bodies. However, owing to constraints researchers could not cover Enugu-State talkless of Nigeria as a whole in pursuance of the objectives of this research. As a result, the work is limited not just to Enugu State but further to Niger gas ltd.   In the process of trying to realize the only aims of this research, some difficulties were experienced by the researcher’s such setbacks include:-
1)    Time:- Naturally, a task as demanding as this one requires a lot of time, but in our context, such academic exercise is hardly given enough time. Consequently, the researcher had to battle seriously with time in a bid to meet up.
2)    Finance:- It is a truism that enormous funds are needed to see through every research process, but in the face of galloping inflation as our economy is currently experiencing the situation is made more pathetic. Thus, it was not easy to control the costs of transportation, typing, and binding, as they charge on hourly bases. Finally, and more importantly, is the reluctance of most respondents in giving honest feedback for fear of being accused of releasing classified information to competitors and even tax authorities.



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A CRITICAL ANALYSIS OF THE IMPORTANCE OF AUDITING IN THE AUTHENTICATION OF FINANCIAL STATEMENT OF BUSINESS ORGANISATION

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