The Role Of Auditors In Public And Private Companies
(A Case Study Of Inalcon Nigeria Limited Enugu)
Auditors play a fundamental role in both public and private companies, ensuring financial integrity, compliance, and transparency. In public companies, auditors are tasked with verifying financial statements to provide assurance to investors, regulators, and stakeholders regarding the accuracy and reliability of the company’s financial information. This involves conducting comprehensive audits, assessing internal controls, and identifying any discrepancies or irregularities. Similarly, in private companies, auditors fulfill a crucial function by assessing financial records, identifying potential risks, and providing valuable insights to management for decision-making and risk mitigation. Additionally, auditors in both sectors help uphold regulatory compliance, mitigate fraud risks, and enhance financial accountability. Their role extends beyond mere validation to fostering trust and confidence among stakeholders, thereby contributing to the sustainability and credibility of the business entity.
This work examines the roles auditors play in public and prelate companies WALCON Nig Ltd is benign used as a case study because it happens to be a company with an audit department and also ahs grid reliance on the work of both the internal and external auditors. The sample for this work includes some library materials and also source data were collected through responses to the questionnaires distributed to staff of the company.
The findings show that auditors have made a very good impact in most companies and there is no don’t that moral companies will recommend the performance of the auditors. The finding also show that in future more companies will require the services of auditor and third parties liabilities on auditors will be few.
This work also points out the hindrance which the auditors encounter in their bid to carry out the duties and responsibilities given to than by the act and also made some recommendation on some measures to be taken to solve the problems.
Cover page
Title page
Approval page
Dedication
Table of contents
List of tables
Abstract
CHAPTER ONE
1.0 Introduction
1.1 Background of the study
1.2 Statement of the problem
1.3 The purpose of the study
1.4 Scope or delimitation of the study
1.5 Research question
1.6 Significance of the study
1.7 Definition of terms
CHAPTER TWO
2.0 Review of literature
CHAPTER THREE
3.0 Methodology
3.1 Research design
3.2 Area for the study
3.3 Population for the study
3.4 Sample and sampling procedure
3.5 Instrument for data collection
3.6 Validity of the instrument
3.7 Reliability of the instrument
3.8 Method of administration of instrument
3.9 Method of data analysis
CHAPTER FOUR
3.0 Date presentation and results
Summary of result finding
CHAPTER FIVE
5.0 Discussion implication and recommendation
5.1 Discussion of result
5.2 Conclusion
5.3 Implication of research result
5.4 Recommendation
5.5 Suggestions of further research
5.6 Limitation of the study
Reference
Appendices
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The origin of auditing had its roots in the necessity for the institution of some system check upon persons whose business it was to record the receipt and payment of money on behalf of other. In any stages of civilization the method of account were crude and transactions small individuals were able to check their transactions. But as soon as ancient states and emprise acquired coherent organization records were found of system of checks being applied to public accounts.
The ancient Egyptians the geeks and the roans utilized system of checks and counter checks as between various financial officials. The ancient record of auditing were confined primarily to public account. But there are indication that it was customarily for the audit of accounts of memories and estates to be performed. The person whose duty it was to make such examinations of the accounts became known as the auditor
With industrial revolution their was increase in business truncations and there emerge partnership and joint stock companies. The evolution of mechanized industries involved the provision of finance for in excess of what it used to be. Business became more complex and required more formal and improved accountability.
Under the company of organization the shareholder as a body delegated the management of the undertaking to a board of directors and periodically the board submitted to the shareholder the accounts of the company in order that the member might be enabled to see a true and fair view of the financial position and the profit and loss of the undertaking in which they were interested.
In these circumstances the need arose for some means by which the shareholder as a body might be satisfied that the accounts presented to them by their board of directors did in fact show a true and fair view of the financial position and earning of the company. It was for this reason therefore that the practice developed of appointing auditors whose duty it was to verify on behalf of the shareholder the account of the directors and to report thereon to the shareholders.
It was the British company act 1906 which first made it legally compulsory for every company to appoint independent auditors as we now know them and provided for their remuneration. In Nigeria
1.2 STATEMENT OF PROBLEM
Auditing has been a very important factors in the life orgnaization but the major problems facing most companies is that most of these auditors seems to deviate from their rights and duties. As a professional body with professional ethics greater efficiency and accountability is required form them.
Again the auditing problem can be traced down to the accountants shareholders and directors of the company. The auditors is meant to go through the work of the accountant to find out if there is anything questionable if there is he may decide to protect the interest of the accountant thereby deviating from his roles. The auditors is not answerable to the directing loans from the company or its directors can make him to abide to their auditors.
Finally another problem that cannot be overbooked is the auditor’s concerning the financial statement of the company. This may be altered in the sense that he would not give the true nature of the report. This increase the auditor liability when persons who depended on the report of the auditors suffers a financial loss.
1.3 PURPOSE OF THE STUDY
The objective of this study is as follows:
1. To find out the relative importance of each of the roles of the auditor
2. To determine how improper management can affect the roles of auditors
3. To ascertain the extent at which the company’s objective has been achieved as it relates to audit.
4. To find out situation and circumstances where the roles of auditors is mostly applied.
1.4 SCOPE OR DELIMITATION OF THE STUDY
The study is limited based on the fact that there is no time to go round to some of these private and public companies. The study is also limited to Enugu metropolis and findings may not actual reflect to situation in other parts of the country but to a greater extent will show it’s relevance on the public and private companies in Nigeria.
1.5 RESEARCH QUESTIONS
The research question to the study is as follows;
1. Is auditing districts from accounting?
2. Is auditing of any advantage to public and private companies.
3. Are there rights duties and responsibilities expected from auditors
4. Can be company auditors be dismissed
5. Are there codes of professional ethics expected from auditors
6. Is the concept of true and fair view improatnt in auditors report
7. Can auditors opinion be a base for decision making
8. To what extent can an auditors detect fraud in companies.
1.6 SIGNIFICANCE OF THE STUDY
This study which examines the role of auditors in public and private companies will help in accessing correctly the participation of the audit department of NALCON NIG Ltd Enugu in improving the company’s image by it’s effect on the management of the company. It will also help in finding out the most effective mode of transacting with the creditors through the accountability of the accountant.
Another benefit to be derived from this study is that it will help to find out how errors in financial statement’s came to being. Generally it will help other companies that does not have the existence of audit department to create one as this study will show them it’s importance to every company that is incorporated.
1.7 DEFINITION OF TERMS
1. Auditor: This is an accountant who has undergone a recognized professional carouse and is a member of one of the recognized accoutnign bodies resident in Nigeria and who is carrying out a professional accountancy practice.
2. Ethics: These are general rules or proper standards of professional conducts which are expected from members of a profession
3. Auditor’s Report: This is the end result of the audit exercise whereby the auditors states whether the fiancnail statement show a true and fair view of the profitability and state of affairs of company.
4. Auditor’s Opinion: The auditors opinion is the auditors judgment resulting from his investigation of the accoutnign records returns from branches the balance sheet and profit and loss account.
5. Auditor’s Liability: This is a situation whereby the auditor is held liable for professional misconduct under either statue or common law.
6. Incorporated Company: This is a company registered under the law by the corporate affairs commission (CAC) making it to be distinct form the owners
The Role Of Auditors In Public And Private Companies:
Auditors play a crucial role in both public and private companies by providing independent and objective assessments of their financial statements and internal control systems. Their primary responsibility is to enhance the credibility and reliability of financial information, which helps stakeholders make informed decisions about the company’s financial health and performance. Let’s delve into the roles of auditors in both public and private companies:
Public Companies: Public companies are those whose shares are traded on stock exchanges and are accessible to the general public. In this context, auditors perform the following key roles:
- Financial Statement Audit: Auditors examine the company’s financial statements, including the balance sheet, income statement, and cash flow statement, to ensure they accurately represent the company’s financial position, results of operations, and cash flows. The goal is to verify that the financial statements adhere to relevant accounting standards and provide a true and fair view of the company’s financial performance.
- Compliance with Regulations: Public companies are subject to a multitude of regulations and reporting requirements set by regulatory bodies like the Securities and Exchange Commission (SEC) in the United States. Auditors assess whether the company complies with these regulations, such as the Sarbanes-Oxley Act (SOX), which mandates internal control assessments and reporting.
- Internal Control Evaluation: Auditors assess the effectiveness of the company’s internal controls over financial reporting. Internal controls are processes and procedures designed to prevent errors, fraud, and misstatements in financial statements. An auditor’s evaluation helps ensure the reliability of financial reporting.
- Shareholder Confidence: Auditors play a critical role in maintaining investor confidence. By providing an independent assessment of a company’s financial information, auditors contribute to reducing information asymmetry between management and investors, fostering trust in the financial markets.
Private Companies: Private companies are not publicly traded, and their shares are typically held by a limited number of investors or owners. The roles of auditors in private companies are similar to those in public companies but might have some differences:
- Financial Statement Audit: Private companies might undergo financial statement audits to provide assurance to investors, lenders, and other stakeholders. Audited financial statements can enhance credibility and facilitate obtaining financing or attracting potential investors.
- Risk Assessment: Auditors evaluate the financial risks faced by private companies and provide recommendations for mitigating those risks. This can help company management make more informed decisions about resource allocation and risk management strategies.
- Due Diligence: In cases of mergers, acquisitions, or other transactions, auditors can perform due diligence to assess the financial health and risks associated with the target company. This is crucial for potential buyers or investors to understand the target’s financial position.
- Tax Compliance: Auditors often provide guidance on tax compliance, helping private companies navigate complex tax regulations and minimize tax liabilities while staying within legal boundaries.
In both public and private companies, auditors are expected to maintain independence and objectivity to ensure the integrity of their assessments. Their roles are essential for promoting transparency, accountability, and confidence in a company’s financial reporting and operations.