The Challenges External Auditors Experience During Auditing Nigerian Companies

1.0 Introduction

External auditor is an audit professional who performs an audit in accordance with specific law or rules on the financial statement of a company government entity, either legal entity or organization, and who is independent of the entity being audited.

There are problems which external auditor faces such as lack of visible evidence inn the computerized system, the use of unqualified accounting staff by the client, lack of proper keeping of books and records. The auditor also encounters problem in the areas of information supply; problem in the Nigerian business circle is fraud.

1.1 Background Of The Study

The significance of auditing in the accounting profession has been since the inception of business activities from a sole proprietorship to large public enterprises. According to experts, it is a very vital instrument of financial reporting. It forms the bed rock of placing reliance on report presented by the steward of companies on the state of affairs of the companies. The various interest groups in the business organization are to be assured that their interest are being protected. The owners of the business (shareholders) are concerned to be guaranteed that the management is performing its duties effectively.

Their ultimate aim is to receive as much returns as possible from the capital which they invested in the business. The government on their own part is interested in knowing whether the profit and loss shown in the financial statement is correctly prepared for the purpose of tax assessment.

Auditors reports are used by the company's advisers (the legal, financial analysts) to give advice to the management. The legal adviser interprets the legal implication of some information disclosed in the financial statement. The financial analyst also uses the result shown by the auditors to advice the clients on the best source of fund to embark on, where to invest and how much to invest in each alternative.

The auditors are always seen as the watchdog of the entire economy by representing the interest of all these various groups. Their peculiar position therefore calls for a conducive atmosphere, but it is unfortunate that most external auditor encounter serious problem in the performance of their duties. This research work therefore tends to investigate into the nature and causes of these problem and also proper solution to them.

1.2 Statement Of Problems

There are various problems facing external auditor in Nigeria. Auditor sometimes find it very difficult fo audit Nigerian companies as a result of expansion of business activities illiteracy, moral laxity, lack of adequate technical skill and training.

This work studies these problems, their causes, effects and remedies.

1.3 Objectives Of The Study

The objectives of embarking on this study include:

1. To ascertain the nature of the problem which the external auditors face while auditing Nigerian companies.
2. To identify the cause of the problems
3. To ascertain the effects of these problems on the work of the auditors
4. To recommend measures that could enable external auditors to overcome the problem identified
5. To recommend measures to be taken to overcome those problem.

1.4 Research Question

• Can the problem which the external auditors face while auditing Nigerian companies be checked?
• Is there any cause of the problems faced by external auditors?
• Is there any effects of these problems on the work of the auditors?
• Can there be any measures that could enable external auditors to overcome the problem identified?

1.5 Statement of Hypothesis

Ho: external auditors do not have problems in auditing Nigerian companies

Hi: external auditors have problems in auditing Nigerian companies

1.6 Significance of the Study

This study will enable the new or intending auditors to be aware of the problems they will encounter in the course of performing their duties and be able to guard against them.

It will also enable government to know how it can play its role in creating a better and conducive atmosphere for auditor who has been engaged to perform any duty in the Nigerian companies.

Again, it is expected that this study will consider contributions of directors in Nigerian companies toward a better auditing atmosphere in their various companies. Furthermore, this study will form a good reference material for any other student who may wish to embark on related topic in future.

1.7 The Scope of the Study

The study will not exceed problems encountered by external auditors in Nigerian companies. It will consider the effects of these problems on the work of the auditors and proffer possible solution to the problem.

1.8 Limitation Of The Study

There are many constraint facing the researcher during her study in this field such constraints include:

Time Factor: The time that is made available for carrying out the study is limited. Most often, it is interrupted by other academic programme and circular work.

Shortage Of Finance: There is an insufficient fund to meet up with financial demand required. As a result some research procedures, methods, techniques and process intended for this study will not be applied because of the cost involvement.

Scarcity Of Local Data: Most of the text book that deal with the problem under review are foreign texts and are no longer current.

Non Available Problem: In spite of several calls, some officers who the researcher wants to interview cannot be reached at because of their office schedule.

1.9 Definition Of Terms

Auditors: An auditor is a person who examines the book of accounts and vouchers of an organization in such a manner as to enable him express an opinion as to whether the accounts show a true and fair view of the state of affairs of the organization at a particular period.

Internal Auditor: This is a person employed in an organization whose responsibility is to review the operations and record of the business of the organization and to keep management informed of its operation on a more continuous basis.

Client: The company or business organization audited by the external auditors.

Permanent File: the permanent file contains information of permanent nature which are of continuing relevance to the auditor as regards to the operation and financial statements of the company being audited.

Current File: The current file (working file) contains documents and working papers which relate to the current years audit.System

File: A system file contains details of an organizations system of accounting and internal control i.e. the system of the organization documentation both manual and computer system.

Internal Check: Internal check is defined as the allocation of authority and duty in such a manner that afford check on the routine transactions of day to day work by means of work of one person being complementary to that of another person.

Auditors Report: This report shall state whether in the auditors opinion the annual account has been properly prepared in accordance with the companies and allied matter decree and whether the account shows a true and affair view of the company's state of affairs.