Significance of External Auditors on the Examination of Financial Statement.
ABSTRACT
This study was to assess the significance of external auditors‟s in the examination of the financial statements of the first Bank of Plc., Enugu.
The banking sector in Nigeria and elsewhere in recent times have become so diversified, challenging, highly competitive and has been characterized by persistent, fraud, errors, and misappropriation of funds in the bank.
The impact of which has undoubtedly shaken the whole economy of the nation.
For this work to be effectively and efficiently carried out the use of primary and secondary methods was adopted for the collection of data, wherein primary data, the researcher designed and advanced questionnaires to first Bank Enugu for collection of primary data while secondary data was gotten from textbooks, journals, manuals lecture notes, etc.
The data collected from the questionnaire was analyzed in tables with simple percentages and interpreted for the understanding of the study the formulated hypothesis were tested using Z – test formula.
The result of the study shows that, external auditors’ examination of first banks financial statement or records aids in checking and monitoring as well as stopping frauds errors, misappropriation of funds in the Banks. Recommendations were made to the management of First Bank of Nigeria Plc, Abuja.
TABLE OF CONTENTS
Approval Page i
Dedication ii
Acknowledgments iii
Abstract iv
CHAPTER ONE:
1.0 INTRODUCTION 1
1.1 Background of Study 1
1.2 Statement of the Problem 3
1.3 Objectives of Study 4
1.4 Research Questions 4
1.5 Research Hypotheses 5
1.6 Significance of Study 6
1.7 Scope/ Limitations of Study 6
1.8 Definition of Terms 7
Reference 10
CHAPTER TWO
2.0 REVIEW OF RELATED LITERATURE 11
2.1 The Concept of Auditing 11
2.2 Extent of an Auditors investigation Responsibilities
of Audit organizations 17
2.3 Responsibilities of Audit Organizations 18
2.4 Evaluating the Significance of an External Auditors 19
2.5 External auditors Role in Detecting Fraud 20
2.5.1 Types of Fraud 22
2.5.2 Weakness in the Internal Control System and
Lack of Co-operation by Client Staff 32
2.5.3 Lack of Monitoring System in the Organization 35
2.5.4 Unexplained Discrepancies in Accounts 35
2.5.5 Tolerance of Accounting Errors and Differences 36
2.5.6 Document of Unique Reliance on the Staff 37
2.2.7 Chaotic Accounting System 37
2.6 External Auditors Role in Ensuring the
Keeping of Proper Accounts 38
2.7 The Significance of External Auditors in Reporting to
the Shareholders (Public Limited Companies) 39
Reference 41
CHAPTER THREE
3.0 RESEARCH DESIGN AND METHODOLOGY 42
3.1 Research Design 42
3.2 Sources of Data 42
3.3 Research Instrument 44
3.4 Reliability/Validity of Research Instrument 45
3.5 Population 46
3.6 Sample Size and Sample Techniques 46
3.7 Administration of Research Instrument 50
3.8 Method of Data Analysis 50
3.8 Decision criterion for Validation of Hypothesis 51
CHAPTER FOUR
4.1 Data Presentation and Analysis 52
4.2 Testing of Hypothesis 65
CHAPTER FIVE
5.0 SUMMARY OF FINDINGS, CONCLUSIONS
AND RECOMMENDATIONS 72
5.1 Summary of Findings 72
5.2 Conclusion 73
5.3 Recommendations 74
Bibliography 76
Appendix 78
INTRODUCTION
It is obvious that enormous resources of money and material are being utilized by corporate organizations. In recent years the numbers and monetary values of public sector activities have increased substantially.
This increase in activities has brought an added demand for accountability. Auditing is one of the elements of accountability.
Shareholders and government are responsible for ensuring that appropriate audits are made and reports are therefore acted upon. Financial auditing contributes to public accountability since it provides an independent report or whether the financial information represents a true and fair view of the organization‟s financial stand, the internal controls, and the compliances with laws and regulations.
As an external auditor, his auditing exercise embraces the examination of the financial report of the organization in order to see whether the account has been prepared in accordance or in compliance with generally accepted accounting principle (GAAP) and applicable laws, ethics and regulations and in the process errors or fraud may be detected (mill-champ 1990).
Since huge monetary resources are utilized by the financial institutions of public organization, errors which tend to lead fraud may exist and is not disclosed in the report may contain errors or mistakes that cause it to be deliberately misleading or the report may fail to disclose relevant information.
All these may be revealed through audit work done by the external auditor since he is independent of management.
The responsibility of external auditors for ensuring high ethical standards with an organization as a lesser one than internal auditors, for the year only occasional visitors to the company and can only look at a fraction of numbers of transactions that internal auditor will not normally be directly involved in the establishment of the policies within an organization which would include policies of an ethnic nature.
Therefore, their ability to shape the ethical nature of an organization is critically affected by the attitude of the management. If the management is prepared to establish procedures demanding the highest ethical standard from employees, and demonstrates that themselves to this standard, then the ability of external audit to help enforce ethical standards is greatly enhanced.
Based on these factors, it interests the researcher to know the place of external auditors on the examination of the financial statement.
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