Over the past decade, increased instigation as well as criticism of auditors has left little room for doubt that auditors are facing a liability and credibility crises in their profession. The reputation of accountancy profession comes under question for the reliability of their services (Adhikari, 2011). Similarly, failure of business in which deficiencies of financial reporting and corporate disclosure have figured prominently are not new phenomena however, high profile cases of recent past such as Enron, Worldcom, Global crossing, Adelphia communication and most recently, Royal Ahold and Health South together with a host of small-scale example worldwide such as Cadbury, Oceanic bank and Intercontinental Bank Plc. in Nigeria, have drawn for greater attention to this area. At the same, there has been evidence of an increased frequency of restated financial statements. All these have had a negative cumulative impact on the way informed opinions views the quality of financial reporting. This loss of credibility has been wide spread across capital market. A key factor in the scale of the problems was the unprecedented high level of share price in many markets. Maintaining these price levels was a top management objective and when it became clear that the supposed level and trend of profitability justifying the level has not existed, the fall in share prices was accentuated by a major re-rating of the shares. This impacted share in similar companies (ICAN Study Pack, 2009:252). Be that as it may, the quest over the year has been how confidence and credibility in audit and financial reporting (both in internal and external auditing) can be improved and sustained. Adequate literature review has shown that effectives of the audit process, the auditor’s personal qualities and skills as well as the discipline from the audit profession have significant relationship with the achievement of public confidence and credibility. For instance, independence is fundamental to the credibility of auditors’ reports. Those reports would not be credible, and investors and creditors would have little confidence in them. If auditors were not independent in both fact and appearance. To be credible, an audit opinion must be based on an objective and disintegrated assessment (Olagunju, 2011). It is on the basis of the issue raised above that this research work aims a presenting confidence and credibility in audit report as reliable approaches to maintaining and improving audit competence.
Meanwhile, the next literature review will include the overview of the concept of credibility and confidence in audit reports, the factors responsible for loss of credibility and confidence, the drivers and indicators of audit quality as well as suggestion to improve credibility and public confidence in audit reports.