AUDIT REPORT AND IT’S IMPACT ON THE ACTIVITIES OF BUSINESS ORGANIZATIONS IN NIGERIA (A CASE STUDY OF FIRST BANK OF NIGERIA)
1.1 Background of the study
The word “audit” came from a latin word “audire” meaning to hear. Auditing was known to have existed from the time of ancient civilization of china, Egypt and Greece; etc. during the period, every public officer must account for everything given on trust by simply reading them out to those who have need of such information.
In those ancient times, around 1394, trading was owned and managed by individuals of small mills and cottages. Hence, there was no need for the business managers to report to owners on the management of resources. As a result, there was little use of auditing. But with tremendous expansion of business, other forms of ownership emerged like companies and corporations, there was increase government of those days. The management of these organizations was carried out by paid managers where conflicts of interest became eminent.
Owners started doubting the integrity of the paid company officials, the owners of business needed an independent third party to dissolve the conflict of interest and to give them assurance of fair presentation of the financial report. And also, those in government too wanted to be assured of the honesty of the stewards.
In the 1500, accounting work was centered on government activities and family units. In those days, it was common to observe that two scribes used to independently keep financial records of the ancients rulers. In ancient Rome Empire, the hearing of account was used, which required the stewards to tell how they kept the accounts of the empire or state. This was done to detect fraud and other irregularities by those public officials. Auditing during the ancient times was concerned about detection and prevention of frauds. The ancient auditor’s fees were paid depending on the discovery of fraud or on the auditor’s ability to prove the accuracy of the account or prove the honesty of public officers or stewards.
During the 18th century and up to the 20th century, industrial revolution brought large scale production, steam power, improved facilities and better means of communication. This resulted in the origin of joint stock form of organization. Therefore, the direction of audit work has significantly changed from fraud detection, fraud prevention and accuracy verification of financial record to “the examination if financial statement presents fairly the true and fair view of the company’s position, covering a particular period of time”. The description of the auditor’s examination as an audit of the books and account henceforth use the word “we have examined and in our opinion the books give a true and fair view of the state of affairs”.
In Nigeria auditing is regulated by certain statutory provisions such as the companies and Allied Matters Act of 1990 (CAMA 1990), bank and other financial institution Act (BOFIA) 1991 and the insurance Act 2003 of the National Insurance Commission (NAICOM).
First Bank of Nigeria Plc was incorporated as a limited liability company and was founded 31st March, 1894. It began trading under corporate name of bank for British West Africa. Which was later changed to Bank of West Africa in 1969. It was incorporated locally as the standard bank of Nigeria Limited in line with companies Decree of 1968. And in March, 1971 and 1991 to First Bank of Nigeria limited, then First Bank of Nigeria Plc.
1.2 Statement of the Problem
Business organizations are by nature established for numerous reasons (goals) to maximize the wealth of their shareholders and to also meet other social responsibilities. For the shareholders to be confident that the business is going on well, they must audit the account of the business by an independent and external auditor.
The statutory auditor will have to give a report of his own opinion on the financial statement that he audited. The report is only an opinion on whether the information presented is correct and free from material misstatement (errors).
Depending on the type of report given by an auditor on the financial statements, the performance of the business is greatly influenced.
This project will state empirically the possible relationship that exists, between the audit report and how it affects the performance of First Bank of Nigeria Plc, in terms of its share price.
1.3 Objectives of the study
The objectives of the study focus on the following:
- To determine whether there is any relationship between audit report and its impact on the activities of a business.
- To determine the extent of the relationship (if any)
- To determine whether the audit report has any effects on the performance of a business.
- To determine whether the information content of the audit report is relevant to uses, and
- To determine whether the audit report affects the share price of the bank.
1.4 Research Questions
The following questions are relevant in this study:
- Is there any relationship between audit report and its’ impact on the activities of a business.
- To what extent does the relationship exist (if any)
- What effect does audit report have on the performance of a business?
- Does the information content of the audit report have any relevance to the users?
- Does the audit report affect the share price of the banks?
1.5 Significance of the study
This research project will be beneficial to the following: shareholders of the company, tax authorities, financial institutions, customers and suppliers, regulators and employees. Also it will provide a useful guide to other researchers especially students who may be interested in further research undertaken in this regard.
1.6 Scope and Limitation of the Study
The main purpose and focus of this project is on audit report and its impact using First Bank of Nigeria Plc as the focus of the study.