THE ROLE OF AUDITING IN THE BUSINESS AND ECONOMIC LIFE OF A MANUFACTURING INDUSTRY
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BACKGROUND OF STUDY
According to Company and Allied Matter Act (CAMA) 1990, as amended to date “every limited liability companies must appoint an auditor to examine and report on the accounts prepared by the directors”. A point often mis-understood is that the auditors does not act for the directors, rather he acts on behalf of the shareholders.
The relationship between the shareholders and auditors can be considered as that of principals and agent (a point made in the case of Spacemen V. Evans 1868). Hence, his principal objective is to form an opinion on the truth and fairness of the accounts prepared by the directors.
However, it must be emphasized that nowadays the directors are seen as having a much wider responsibility especially where the shares are available to be the general public on a stock exchange. It then follows that this duties to own by the auditor is relied upon to set the seal on credible financial information.
Audited accounts are required to be filed with the registrar of companies so that the financial position of the business can be disclosed to the general public. Upon enquiry the council of the stock exchange reserves the right to refuse to grant a quotation to those companies whose accounts have attracted serious negative comment from the auditors.
Also, the auditors’ recognized the need to adhere to certain standard of practice in order to demonstrate the high level of competence and regard for standard that his role demands.
To understand the role of auditors in the business and economic life of an organization there is the need to understand what auditors are their responsibilities, their qualities, their code of conduct, how they are appointed, their rights and duties in a manufacturing business and the advantage of the report to the manufacturing organization.
- STATEMENT OF PROBLEM
Admittedly, there are various guideline published both locally and internationally that are applicable and relevant to the roles of auditors in the business and economics life a manufacturing business. The guidelines are:
- Auditing Standard and Guidelines
- International Auditing Guidelines
- Statement of Accounting Standard
- Generally Accepted Auditing Standards
- Generally Accepted Accounting Principles
However, the uniqueness of this study is that it will attempt to examine how the auditors.
- Adhere to policies prescribed by government
- The extent to which internal control measures is been followed as a means of fraud prevention
- To see to what extent the books of account have been kept by the company
- To see whether the wealth of the shareholders have been adequately protected.
1.3 SIGNIFICANCE OF STUDY
It is considered necessary to study the roles of auditing in the business and economic life of a manufacturing industry in order to identify both primary and secondary aims of audit because both aims expressed their roles in an organization.
The primary aim of an audit is the production of a report by the auditor on his opinion on the truth and fairness of financial statement so that any person reading and using such report can have assurance in them. Emanating from)this main aim is the “detection and prevention of errors and fraud as well as provision of spin off affects such as writing up books, preparing final account and text returns, financial advice, management and systems advice in liquidation and investigation.
In summary, the significance of this research is to examine the role of the auditor in the economic framework of a manufacturing business as a means of enhancing the overall growth of the organization.
1.4 RESEARCH QUESTION
This research seeks to find answered to a number of pertinent questions relating to the roles of .an auditor in the business and economic life manufacturing business.
These questions include:
- What are the advantages of auditing report to the company?
- How can the responsibilities of auditors benefit the shareholders?
- Does their work give effective business protection and safeguard against fraud?
1.5 WORKING HYPOTHESIS
Hypothesis is defined as a proposed explanation for an observable phenomenon, fact or circumstance. The hypothesis is designed to test whether.
- The auditors really prevent and detect fraud errors and irregularities
- The auditors abide by the rules and regulation laid down by law in carryout their audit activities
- The auditor general responsibilities to an organization are well furnished and established
- The auditors protect the interest of shareholders and investors by their report
1.6 SCOPE AND LIMITATION OF THE STUDY
Time, financial constrain etc as well as know has been the greatest constraints of researchers in protect writing. This research is however explanatory and will pave way for further research.
The above mentioned constrains makes it difficult for us gather adequate data. Intact it would have involved extensive travels to some of the branches of UTC Nigeria Plc but time will not permit us to do so.