AN EVALUATION OF AUDITING AND ITS IMPORTANCE IN THE AUTHENTICATION OF FINANCIAL STATEMENT OF BUSINESS ORGANISATION IN NIGERIA
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BACKGROUND OF STUDY
The notion of auditing data dates back to ancient times, with the oldest signs of its existence discovered among major landowners of the Middle Ages in Italy and Egypt.
However, according to afounka (1993), statutory auditing, which happens to be the major focus of the research, "arose as a result of the formation of the company form of business in the 17th century for commerce and other purposes."
This advancement enabled investors to commit capital to a corporation without necessarily being engaged in its administration and management. With the passage of time, this method was further adjusted to the point where there was a complete separation of ownership and management, such that while share holders kept ownership, the board of directors changed management. This structure requires management to report back to the owners of the business they hold in trust at regular times. However, there is a potential that such a stewardship report would contain mistakes, be intentionally deceptive, or fail to disclose key information. As a result of this information, it follows that these possibilities will naturally provide management monthly reports insufficient trust.
As a result, it is such a possibility that underpins the need of auditing and exercise carried out in compliance with the law to provide "a stamp approval on the stewardship report" the requirement for auditing is mainly based on the fact that by justifying stewardship accounts, consumers of accounting information, namely: Shareholders, investors, employees, and government agencies such as accountants, economists, and so on can rely on such reports to make informed economic decisions. This knowledge is what compelled the government to make auditing mandatory for all corporate organizations on an annual basis through legislation such as the business and associated matter degree 1990. Unimagination powers and rights are granted to auditors in order to guarantee that they carry out this task effectively and competently.
1:2 HISTORICAL BACKGROUND OF NIGER GAS LIMITED
Niger gas ltd. Commenced operation in 1962 following it official commissioning by government of the then eastern Nigeria.
However due to change in the political structure of Nigeria occasioned via states creation, 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 eighty (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 are 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 owo (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 give period, the society’s objective is that the audit objective should be concerned with establishing whether a fraud have 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 have been conniving with auditors to defraud the establishment at the expense of the investing public.
1:4 STATEMENT OF PROBLEM
All types of investors (individuals and governments) make capital budgeting decisions primarily for the profits they anticipate would flow from such undertaking, which is to say that "investments are not done just for the sake of investing, but in expectation of a return."
However, the level to which the above concept is adhered to in our own setting, particularly after the re-regulation of the economy in 1986, does not appear to be factory.
As a result, breaking even for most businesses has become a fantasy, let alone fulfilling the clientele effect of most investors.
This current, unusual circumstance demanded demands to assemble and reflect on how to restore the diminishing fortunes of this once thriving city. "In a time of economic crisis, the necessity for responsibility becomes more evident." As a result, the issue of effective auditing is worth investigating in the Nigerian setting.
Though the employment of auditors is expected to completely quadrants and protest the interests of shareholders and other third parties over the economic cycle, there is growing debate about how effectively these presumed watchdogs of the investing public have done.
These fears are validated as management continues to complain about low capacity utilization, poor turnover or high turnover but with ridiculously high cost of sales—all implying no returns on investment—while auditors continue to repeat their jargon. In our opinion, the financial statements as examined by us present a true and fair view of the state of affairs and profit, as well as the source and application of funds as of 31ST DECEMBER 1900.
The issue has resulted in suspicions that auditors are colluding with management to withhold information from investors that they should have. This explains why there has been an increase in lawsuits against auditors in the courts.
It has also resulted in a significant loss of trust in such body corporate, its management, and, above all, auditors by everyone and Sunday, little won 1BB (1990) carried out stating.
"However, 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 important of this research will rest squarely on the fact that through it 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 on their reports.
(2) if enumerated will show that the accusation are in founded, and thus based on the blatant refusal of auditing and
(3) if indicated, will serves as 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 RESEARCH QUESTIONS
The following research questions will be answered in this study.
- Has there been any need to reorder the priority of auditing as is being propounded by owo (1992)?
- Has auditing been serving its principal objective of re-enforcing public confidence in the stewardship reports of management?
- Has the management for whatever reason have been conniving with auditors to defraud the establishment at the expense of the investing public?
1.7 SCOPE OF THE STUDY
This study will be critically analyse the importance of auditing in the authentication of financial statement of business organization. This study will also be looking at whether there has been a need to reorder the priority of auditing, if auditing has been serving its principal objective of re-enforcing public confidence in the stewardship reports of management, and ascertain if the management for whatever reason have been convincing with auditors to defraud the establishment at the expense of the investing public.
Finally selected senior and junior staff from Niger gas Limited will form the population of this study.
1.8 LIMITATIONS TO THE STUDY
This study will be limited to critically analyzing the importance of auditing in the authentication of financial statement of business organization. This study will be carried out in Niger Gas Limited and as such the results of this study cannot be used anywhere else until further research is carried out.
1.9 DEFINITION OF TERMS
Analysis: Analysis is the process of breaking a complex topic or substance into smaller parts in order to gain a better understanding of it.
Auditing: conduct an official financial inspection of (a company or its accounts).
Authentication: the act of proving an assertion, such as the identity of a computer system user. In contrast with identification, the act of indicating a person or thing's identity, authentication is the process of verifying that identity.
Financial statement: Financial statements are formal records of the financial activities and position of a business, person, or other entity. Relevant financial information is presented in a structured manner and in a form which is easy to understand
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