The Effect of Risk-Based Auditing on Financial Performance in Nigeria: A Case Study of Oando Plc
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Background of the Study
Risk-based auditing (RBA) has emerged as a modern auditing approach focusing on identifying and prioritizing organizational risks during the audit process. By concentrating resources on high-risk areas, this approach ensures greater audit efficiency and enhances financial performance (KPMG, 2024). In Nigeria, businesses in volatile sectors, such as oil and gas, face significant operational and financial risks, making RBA particularly relevant.
Oando Plc, a leading oil and gas company in Nigeria, operates in an industry characterized by fluctuating oil prices, regulatory pressures, and environmental risks. The adoption of RBA in auditing Oando Plc's financial practices offers an opportunity to assess its impact on financial performance, including cost management, revenue assurance, and compliance. This study examines the relationship between RBA and financial performance in Oando Plc.
Statement of the Problem
Despite the advantages of risk-based auditing, its adoption in Nigeria faces challenges such as insufficient expertise, resistance to change, and limited understanding of its benefits. In industries like oil and gas, where financial risks are substantial, the lack of effective RBA implementation can hinder financial performance and increase exposure to risks.
This study investigates the effect of RBA on the financial performance of Oando Plc, identifying its effectiveness and areas for improvement in the Nigerian context.
Objectives of the Study
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To assess the impact of risk-based auditing on financial performance in Oando Plc.
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To identify the challenges of implementing RBA in the Nigerian oil and gas sector.
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To recommend strategies for enhancing RBA practices to improve financial outcomes.
Research Questions
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What is the impact of risk-based auditing on financial performance in Oando Plc?
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What challenges affect the implementation of risk-based auditing in the Nigerian oil and gas sector?
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What strategies can improve the adoption of RBA to enhance financial performance?
Research Hypotheses
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H₁: Risk-based auditing positively impacts financial performance in Oando Plc.
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H₂: Challenges such as limited expertise hinder the effective implementation of RBA in Nigeria.
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H₃: Enhanced training and stakeholder engagement improve the effectiveness of RBA in Nigerian organizations.
Scope and Limitations of the Study
The study focuses on Oando Plc, analyzing the effects of risk-based auditing on financial performance from 2023 to 2025. Limitations include restricted access to proprietary data and variations in industry-specific risks.
Definitions of Terms
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Risk-Based Auditing (RBA): An audit approach that prioritizes high-risk areas to maximize efficiency and effectiveness.
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Financial Performance: The ability of a company to generate revenue, manage costs, and achieve profitability.
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Oando Plc: A Nigerian multinational energy corporation operating in the oil and gas sector.
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