THE IMPACT OF AUDIT REPORT AND INVESTMENT DECISION IN NIGERIA(A SURVEY OF SELECTED MINISTRIES IN RIVERS STATE)
1.1 BACKGROUND OF THE STUDY
Listed companies in Nigeria use financial statement such as audit report etc as one of the major medium of communication with their stakeholders.
Therefore, stock market regulators and accounting standards settlers are tying to improve the quality of financial statements in order to increase the
transparency level in financial reporting (Vishnani S., Shah B.K, 2008). Financial statement may consist differentypes of information. Which can be named as
financial information/Accounting information and Non-financial information/Non Accounting Information? Accounting Information are information which
describes in account for a utility. It processes financial transaction to provide external exporting to outside parties such as to stockholders investors, creditors
and government agencies etc. and non accounting information are information which cannot be measured in monetary terms to make
investment decision by the investors. This type of investment is called Ethical investment.
Audit export is essential in making sound investment decisions and it will undue the informational asymmetry problem between the firm’s manager and the
investors (Hossain, D.M Khan, A., Yasmins I. 2004). Though the investors use non financial information in order to make investment decision, still
conventional investors give more weight to financial information. Akintoye (2008) discovered that the quality of accounting information in terms of
accuracy adequacy, reliability and mode of disclosure is a major determinant of the level of efficiency of the capital market and other decision tasks.
Recent happenings in the Global World however and various empirical studios imposed that accounting information in published financial statement lost
their relevance over the period of time. (Ball and Brown 1968, Oyeunde D.T 2009).
The preparation of a company financial statement is regulated by the companies and Allied matter Act 1990 (CAMA 1990) as amended and the accounting
standards for example, section 331 of CAMA 1990 provide procedure which management of every registered public limited liability company should follow in
preparation of this financial statements. Sections 334 of CAMA 1990 also provide the duties of the directors in preparation of financial statement. In the same
vein, section 342 of CAMA 1990 provide reporting standard of the directors of the financial statement prepared. On the other hand, accounting standard set
the underlying standard for the preparation of financial statement. The sole aim of preparing financial statement is to report to the shareholders which are
the owners of the company on the financial performance of the company. When shareholder receives financial statement of the company they have invested
in, most of them simply look to see whether the business has made profit. They are aware of only one thing that is, that the company has made profit. They
do not know if it was a “good” profit nor do they know whether these were any dierence
from the profit in the previous years.
By human initiatives these might be the tendency of the management preparing progress statement of account to suit their own interest instead of giving
proper and correct information to the owners and investors. The management annual financial statement may contain error and may not disclose all
information required by law. In respect to this, audit of the financial statement is therefore necessary so as to show that the financial statement shows a true
and fair view.