The Role Of Independent Auditors In Nigeria

Project and Seminar Material for Accountancy / Accounting

The Role Of Independent Auditors In Nigeria


Auditors have a role to play in the economic development of Nigeria, but this is not achieved because of the problems are uncompromising attitude on the part of their client’s staff, conflict during report writing, absence of accounting manuals in the organisations, the ambiguous nature of the Nigeria companies, decree and other acts.
The project investigates the causes and solutions to the problems. Form the findings, the true position is that, the problems of auditors range from the uniformed members of the public who do not know much about the profession and their right to the attitudes of company directors. The suggestions for the improvement of the conditions of services include. Removal of the power to appoint auditors from the directors and shareholders and to vest it on ministry responsible for trade.

Chapter One


1.1 Background Of The Study

In the early days of auditing the prince qualification of the position of auditor was reputation. A manufacturing known for his integrity and independence of mind would be sought for this honoured position, the matter of technical ability being entirely secondary; consequently has function, in those days, was never confused with that of accountant. However, as accountancy gradually became more complex and concerned with technicalities, auditors found themselves out of their depth and in turn, became increasingly dependent upon the expertise provided by accountants. Eventually the audit function itself became totally dominated by the accountancy profession. It is for this reason that the description “auditing profession” and “accountancy profession” are today used synonymously. Herein lies the root of many of the problems which the profession now faces. Auditing in some forum has existed for a long as men have been required to account for their transactions, but auditing, as we understand it now, has its roots some three hundred years ago, in the first division of interests between those engaged in a business undertaking (the entrepreneurs) and those who made the finance available without necessarily becoming directly involved in day-to day management.

The sixteenth and seventeenth centuries witnesses a great exploration and international trade, involving Surope in dealings with East and the Americans. The adventurers who understook these exploits rarely possessed the necessary financial means, and they consequently depended heavily on outside backing from earthy merchants, bankers and even royalty, as in the case of Christopher columbas. In England, Queen Elizabeth I . gave active assistance to a number of such foreign ventures.

The practice of auditing had its origin in the necessity for the institution of some system of check upon persons who had the responsibility to record the receipt and disbursement of money on behalf of others. The ancient states and empires applied some systems of checks to their public accounts. Evidence abounds that the ancient Egyptians, the Greeks and the Romans utilized system of check and counter check as between the various financial officials.

The person whose duty is to carry out such an examination of accounts become unknown as the auditor, the word being derived from the latin word “audire” to hear” originally the accounting parties were required to appear before the auditor who heard their statement of accounts.

The increase in the volume of commerce requiring the use of more capital than an individual trader could raise, compelled him to combine in the partnership with other traders to raise the requisite frauds, and this tendency was a powerful factor in the evolution of a more perfect system of accounts. Undoubtedly the employment of large capital in business had a material effect on the practice of audition. However, the audit of business accounts became common in the 19th century and 20th century. With the formation of limited liability companies and the divorce of management from ownership of corporate undertakings, involving the use of huge sums of capital, the advantages to be gained from utilizing the services of auditors became apparent to the commercial public generally, and this resulted in great increase in the practice of auditing. To protect the interests of the investing public audit that accounts of limited companies virtually in all economics, is statutorily compulsory.

In Nigeria, we have two major laws governing the operations of limited companies and these laws make the audit of accounts of limited companies compulsory.

These laws are:

  1. The companies act, 1968
  2. The companies and allied matters decree 1990.

However, in this case of public section organisation the constitution of the federal republic of Nigeria provides their audit.

1.2 Statement Of The Study

This study entitled “The role of independent auditors in Nigeria” which attempts to study the roles played by the auditors in the development of our Nigerian economy in the recent past.

The sub-problems are:

  1. knowing the history and development of audit
  2. The problems encountered by the auditors in the course of their work
  3. Whether their external auditors reports are taken as seriously as they should.
  4. Whether the incident of frauds and irregularities have reduced considerably in the past few years.
  5. To make recommendation on how to improve on any set back suffered by the auditors.
  6. Verification of accounts and statements prepared by a client or his staff.

1.3 Objective Of The Study

The study intends to enlighten people on the appointment, duties, rights, liabilities, remuneration and removal of auditors among other things. This will enable them to engage the services of auditors at all times. Most people do not know the difference between the functions of an auditor, which is to check and report upon the completed work of others, and those of the accountants which is to prepare accounts from a set of book that is agreeing the trial balance and there after preparing the profit and loss account and balance sheet. This project work will enable them to know that for an auditor to prepare accounts as well as perform an audit, he will charge separately for his accounting work.

1.4 Significance Of The Study

This work will enable any student who intends to study the course in feature to make use of this work both in their academic and research programmes. The recommendations in this research work will help to solve some of the problems encountered by the auditors since this work will be kept in the library for reference purposes, through there is always room for improvement on the work by other researchers. It will also be useful to research students both from this school and others.

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