DEVELOPMENT AND OBJECTIVES OF AUDIT
- Auditing
Auditing is broadly defined as a systematic process of objectively obtaining
and evaluating evidence in respect of certain assertions about economic actions
and events, to ascertain the degree of correspondence between those assertions
and established criteria and reporting the results to interested parties.
Auditing usually covers a particular period of time. Auditing may be narrowly
defined as a written report on the examination of financial statements for a
particular period of time.
- Independent auditing
The International Federation of Accountants (IFAC), recognising the
responsibilities of the accountancy profession and considering its own role to
be that of providing guidance, encouraging continuity of efforts and promoting
harmonisation, has deemed it necessary to establish an international “Code of
Ethics for Professional Accountants” to be the basis on which the ethical
requirements (code of ethics, detailed rules, guidelines, standards of conduct,
etc.) for professional accountants in each country should be based.
In Nigeria, the auditor is expected to comply with the ‘Rules of Professional
Conduct for Members,’ issued by The Institute of Chartered Accountants of
Nigeria.
The Auditors’ Code 011 titled ‘Fundamental Principles of Independent Auditing’
published by the Auditing Practices Board (APB) in the United Kingdom sets
out the fundamental principles expected to guide the conduct of auditors in
rendering services to their varied clients. The Code when taken with the ethical
standards issued by the professional bodies to which the auditor belongs (for
example, the Code of Conduct issued by The Institute of Chartered Accountants
of Nigeria) and if regularly followed, ensure that the professional accountant
maintains the highest quality of performance and public confidence.
The Auditors’ Code describes ‘independent audit’ as providing reasonable
assurance that published audited financial reports are free from material misstatement
and are in accordance with legislation and relevant accounting
standards.
The Nigerian Accounting Standards Board (NASB) is charged with the
responsibility of developing and publishing accounting standards to be
observed in the preparation of financial statements in Nigeria. The Companies
and Allied Matters Act makes it mandatory for auditors to ensure that the
financial statements prepared in Nigeria comply with the accounting standards
issued by the NASB. The Nigerian Accounting Standards Board Act, 2003 further
seeks to promote and enforce compliance with the accounting standards to be
observed in the preparation of financial statements.
It is noteworthy to mention that users have much confidence in the audited
financial reports, bearing the seal of a Chartered Accountant. Auditors add to
the reliability and quality of financial reporting. The reports of the auditors
add credibility to the financial information prepared and published by the
directors or officers of an entity.
The auditor also prepares a management report which contains matters which
have come to his attention in the course of the assignment, together with
recommendations for improvement in the internal control and business of the
company. The management report, also called domestic report, is normally
addressed to the directors of the company.
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