CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND INFORMATION
RELEVANCE OF INVESTIGATION
Every business entity, be it profitable or non profitable, have goals and objectives for which they were established example, most liability companies are established for profit optimization and charitable or non-profit organizations, example, government parastatates reestablished to subsidize costs to the governed. However, its pertinent to note here that whether upon profitable or non profitable basis, its relevant that accounting records must be maintained Accounting is broadly defined as a process of recording analyzing and interpreting at business transactions in such a systematic and concise manners as to give full and detailed explanation to related parties who are interested in the financial statement. In every business organizations, it’s the duty of the chief accountant to keep records of all business transactions of the organization. However if thus records must be kept, it must follow norms principles, conventions and standards et out by various professional accounting bodies. In Nigeria, the Nigeria accounting standard board (NASB) is in charge of this duty. Subject to the foregoing, section 357 of the company and allied matters decree,. Makes it mandatory for every limited liability company to appoint an Auditor to examine its accounts.
This now brings us to the question, who is an auditor? With reference to Walter N. Bigg, he sees an auditor as a person appointed by the directors (Shareholder authorize the directors to appoint) of a company to examine its books of account and stake whether it gives a true and fair view of the financial position of the entity and also see that there is compliance with statute and that accounting standard are strictly adhered to. In the light of the above, the auditor should be a professional and used in the accounting field, with high integrity profile and must be a member of a recognized professional body and must be licensed to practice. In Nigeria today, the institute of chartered accountants Nigeria takes care of this. If the auditor as a professional is a ware of the fact that his work is relied upon by related third parties, he owes it a duty to the reasonable care and skill in the discharge of his duty so as not to expose himself to liabilities associated with negligence out of misfeasance proceedings. In the light of the above, for the auditor to accept assurances or to give in opinion, he must certify himself beyond all reasonable doubt that the presentation made to hi gives a true and fair view of the financial position of the entity as at the date of his audit. In these regards, he has access to all the company books and has unreserved rights as to question any maladministration, and gather all such information that would assist him in his work. However, for the auditor to formally accept assurances, has basis of acceptance must be dependent on the availability of reliable source of documents and explanations produced by the entity in question.
At diverse levels of investigation Associate source documents checks and test are applied and evidences shown must be very authentic and satisfying. For example where bank balances are investigated, for the auditor to accept the stated figures, the certifying evidences should be, bank statements, check stamps, cash books, authorization vouchers, etc and all such reconciliation that would enable him accept the presented bank balances as shown on the account. It is pertinent to note that the presentation and figures without satisfactory evidence, or source document is like a student graduating without a certificate and thus bring us to one of the objectives of this text. The investigation process involves making independent confirmation, example circulation of debtors, creditors and other related third parties to the entity in question. Generally the process of audit investigation is limited by so many factors which includes: cost consideration, time factors, unavailability of data. Distance and prevailing socio-economic and political climate, in as much as thus factors are political climate, in as much as thus factors are highlighted an noted, the auditor must not fail to certify himself beyond all reasonably doubts. This should be done by disclosing all lapses and discrepancies and must not fail to give qualifications when need be. In all circumstances, he, the audit should try to avoid damages associated with negligence as number of cases related to auditors liability has been recorded some of the case includes: CAPRO industries Vickman (1989) see SCDH. Group VMC farlance (1972) see JEP Fasteners Vmarts Bloom and Co (1981) also see security pacific business credit V peat MARWICK MAL & CO (1992).