The need for the auditing of account for a business venture cannot be overemphasized, Even in the early 19th century, kings insisted that their steward read their account of stewardship to them orally which the kings listened to and acknowledge as having received. This was called “stewardship account”.

With the large amount of business transaction that companies these days go into, which involves a huge chunk of their resources. There is need for the accounts of such companies to be properly audited so that monies and resources may not be fraudulently mismanaged and such mismanagement swept under the carpet. This gave rise to the need for the appointment of external persons outside the companies staffs and management to look into the final account and vouchers such companies, such person must be trained accountants called Auditors.

The functions includes

·        To carryout detached review of financial statements

·        To perform compliance test on the internal control Opinions and test accounting records

·        To compare companies financial statement with existing accounting records to see that they agree.

·        To report on the financial statements and in compliance with any relevant statutory obligation.

According to Cook and Winle (1976), the traditional audits were meticulous, and they involved defiled review of records designed to determine whether each transaction was properly recorded in the correct account and in the amount with main objective of detecting fraud and testing the trust of persons in fiduciary positions. But modern auditing pays more attention to the efficient working off the internal control system to reduce and prevent to a large extent errors and frauds rather than detailed and massive checking (vouching) of transactions and discovering of errors.

Hence the change by the English companies Act 1948 from the true and correct view” as was formerly practiced to true and fair view” in the opinion of the auditors. This makes the auditors opinion very essential for intending investors and regulatory authorities, so the procedure for the appointment and removal of the auditors by companies should be accorded a great deal of care so not to deviate from laid down laws and also respect the intensions of the shareholders who have a stake in the decisions of the company.

Hence the change by the English companies Act 1948 from the true and correct view” as was formerly practiced to true and correct view” as was formerly practiced to true and fair view” in the opinion of the auditors. This makes the auditors opinion very essential for intending investors and regulatory authorities, so the procedure for the appointment and removal of the auditors by companies should be accorded a great deal of care so not to deviate from laid down laws and also respect the intensions of the shareholders who have a stake in the decisions of the company.


After working for the family Owned chemist shop, eastern industrial chemist, for 13 years, Sir Tony Eze Nna decided to establish his own pharmaceutical company, with the leadership and managerial skills acquired on the Job.

The company, orange Drugs limited, was registered and incorporated on July 206th1988 with No Re 115913. Its first office was in Ikenegbu, Owerri, Imo state in 1989 and in order to be among the leading pharmaceutical companies in Nigeria and compete with other companies in different parts of the world, the company later moved its base to Lagos.

The first corporate office was at 4B Okupe Estate Mende Mary Land, Lagos and in 2001, the company relocated to its present head office at 66168 town planning way, Lipeju, lagos with Braches in different parts of the country.

Orange Drugs limited is a reliability company with an authorized fully paid share capital of N5million Naira involved in the marketing and distribution of well tested drugs, manufactured in Indonesia, Italy, India, company and the United States of America with the Nigerian Consumer in mind.

Subsequently, orange Drugs limited founded the beauty care industries through the importation of saps, creams and other beauty products. By 2006, the company commended the local production of different brands of their soap in Lagos and this was aimed at boosting the Nigeria manufacturing sectors and also creating jobs for the populace.

In other to meet up with the challenges in the global economy, Orange Drugs limited subsequently diversified its line of business by the establishment of Orange Kalbe Ltd and orange west Africa landed leading to the formation of orange groups


Owing to the importance of a company maintaining proper internal control systems in the administration of its affairs, the auditors has to be properly briefed on the workings of virtually every sector of its dealings and on its tangible and intangible assets based. So as to have a proper knowledge of the companies finances./ but over the years, the rate of collapse and distress of many companies has made people to ask such questions as

1.     Why do companies publish inaccurate financial records?

2.     Why should auditors and organization deceive the public through wrong information on their finances

3.     the impact of such wrong and unreliable business info ration to national economy and investment in general

The consequences of inaccurate business information to the public

These have head to widespread speculation among financial information users that auditors are part of the causes of such collapse as they are believed to have proper knowledge of the finances of companies and report credibly about then but still such companies collapse to the disbelieve or the public.

This has even caused the Nigerian shareholders solidarity association to mobilize its members and the public to take closer looks at the role of the auditors in business failure over the last couple of years and their means of appointment.


Auditing has been defined by the American committee of Basic Auditing concepts as “A systematic process of objectively obtaining and evaluating evidence regarding the assertions about economic action to ascertain the degree of correspondence between those assertions and established criteria and communicating the result to interested user”

This definition brings out the major beneficiaries of the Auditors opinion, which are the management of the company. The investing public and regulatory bodies rely on the opinion of the external auditors in basing their own assertions of the financial strengths of the company. This shows the level of importance attached to the auditor’s final report.

This study aims to critically examines the procedure adopted by public companies in the appointed and removal of their external auditor with a view to

·        Establishing, if auditors have a good knowledge of their removal before hand.

·        Determine the reasons for the removal of an external auditor.

·        Determine it laid down law governing removal and appointment of auditors are competent, and if they are followed by public companies.

·        Determine it directors have under influence over the removal and appointment of external Auditors.

·        If shareholders are given the chance to vote during public companies AGM for or against the removal of the existing company auditors.

For knowledge of these would help in ensuring that auditors of companies are credible and accepted by all shareholders in the company hence ensuring proficiency of the final report.


The objective of this research work is to examine the procedures adopted by public companies in the appointment and removal of their external auditors using orange Drugs Nigeria limited in Imo State as a case study. This prompted reasonable question to be asked from the management staff and shareholders through company secretary so that answers given could be used as a basis of judgment on the efficiency of the procedure used in appointing and terminating the appointment of auditors of public limited companies.

·        Does the company with the company and allied matters decree, 1990 in the appointment and removal of the external Auditors.

·        If shareholders are aware of their duty in the appointment and removal of the auditors.

  It company directors use their power to intimidate the external auditor

·        Do shareholders fulfill their role in the appointment and removal of all the external auditors accordingly

·        If auditors were present at the annual general meeting, that removed and appointed the respectively.

·        What role do the audit committee plays in the appointment and remuneration fixing of the new auditors as required by 5.351 a CAMA 90


Based on the objectives of these studies, the following hypothesis are stated to guide the study

H0­: An examination of the procedure does not lead to appointment and removal of external auditor in public limited liability company,

H1: An examination of the procedure lead to appointment and removal external auditor in public limited liability company.

H0: The procedure for appointment and removal of External auditors has a negative impact to public limited liability Company

H1: The procedure for appointment and removal of external auditors has a positive impact to public limited liability company.


Auditors as the nature of their job and terms of employment are supposed to be persons who exhibit due care, skill, and diligence in the performance of their final reports attracts a large generality of stakeholders and improper reports has the possibility of rocking the life boat that helps the company keep a float and stay in business.

The research into the procedure for their appointment and removal is very significant because it reduces the risk of the company collapsing due to fraudulent practices likely to be perpetuated by top management if proper auditing of the accounts of the firm is not done to ensure compliance with company rules and regulations.

Also, the research aims to help the company plan the process for the removal of auditors in accordance with laid down provisions of CAMA 90

It aims to reduce the risk of management of public companies having undue influence over the affair of the external auditors.

This study also aims to ensure that the general public is familiar with the procedure for appointment and removal of external auditors so they have knowledge on the credibility and reliability of external auditors appointed by the form and hence can accept or reject the auditor’s attestation.


The study is intended to cover all auditors’ processes of appointment and removal but due to the researchers inability to reach all possible companies and auditors a case study of orange Drugs Nigeria limited Imo State was used to form a generalization of the intended recipients of the study.


Due to the confidentiality of answer to be received from respondent i.e. top management to questions asked, the researcher was unable to gather all answer to questions asked but this ahs not served as detriment to the quality of conclusions and recommendations proposed at the end of the study.

Also, the research work was limited because of obvious reasons such as lack of financial resources to X-ray all possible areas little time required for the completion of the research and inadequate information data base as affects all other projects of its kind in our present economic situation.


A.   Audit – An audit is an independent examination of and expression of opinion on the financial statements of an enterprise by an appointed auditor in pursuance of the appointment and compliance with any relevant statutory obligation

B.   Auditor: An auditor is a person employed by a company to audit its financial statement and investigate its internal control system.

C.   Auditor Attestation:- it is a communicated statement of opinion based upon convincing evidence b an auditor concerning the degree of correspondence and efficiency of the final accounts presented to him

D.   Compliance test: – These are test carried out by auditors that seek to ensure him that all internal controls as prescribed by management are being applied.

E.    Final Accounts: – these are the accounts of companies that reflect the financial transactions carried out by the company at the end of the financial year.

F.    Trust and fair view: – this is the view expressed by the auditor in his attestation that tells if all financial transactions were carried out accurately and were state without biases.

G.   Vouching: This is the examination of transactions of the company by the auditory and also documentary evidence to ensure that they are properly entered in the accounting records

H.   Substantive test: – these are tests carried out by the auditor on mostly companies’ transactions and balances to test for their accuracy and validity.