CHAPTER ONE

INTRODUCTION

Background to the Study

Auditing and corporate governance as a good tool or form of control in organizations, are gaining more recognition in Nigeria today, due to the fact that organizations are striving to achieve their vision and mission. Auditing and corporate governance has  become action of control, that is been employed in organization and gaining more recognition due to the fact  that organization are striving to achieve their vision and mission as well as maximizing shareholders’ funds. This cannot however be unconnected with the recent time concerning the need for strong corporate governance globally with countries around the world drawing guidance and code of practice to strengthen governance. This emphasis can be linked to increased concerns over the integrity of securities markets oversight function of control regulatory and guidance in the ways and manner business is been carried out (Eugene & Michael, 2009). Good corporate governance by board of directors is recognized to influence the quality of financial reporting which in turn has an important impact on investor’s confidence (Levitt, 2008). It is believed and advocated that good corporate governance reduces the adverse effects of earnings management as well as the likelihood of creative financial reporting arising from fraud or errors and some cases misrepresentation of accounting financial statement. Traditionally, the external auditor played an important role in improving the credibility of financial information so presented and published by firms, however, in recent times, series of well publicized cases of accounting improprieties in Nigeria has captured the attention of investors and regulators alike. The search for means to ensure reliable and high financial reporting has largely focused on the structure of audit report. The auditing profession has been pro-active in attempting to improve audit report by issuing standards focused on discovery and independence. As a result, there has been a control effort to advanced ways of enhancing independence of an auditor and putting in place a good corporate governance, ethics in place (Nobel, 2009). The profession has also responded to several instructions on audit report, by emphasized that by its nature, the inherent limitations of an audit assignment make it impossible to eliminate the risk of audit and corporate governance failure. The effect on the sound corporate governance practices on the quality of financial reporting has recently received attention globally and this has lead to a change in the ways of doing business as more organized becoming socially responsible to the environment (Coarse, 2013). The main focus on this study is the relationship between audit committees and fraudulent financial reporting, with result generally supporting a negative relationship between an active audit committee and likelihood of a company being cited fraudulent reporting. While these results provides evidence from a strong and sophisticated capital market environment, very little  research has been conducted in countries where capital markets are less developed and where corporate governance mechanisms are still evolving. However, sound corporate governance practices are equally, if not more important, in countries that are attempting to gain credibility among global investors. This is particularly so in Nigeria as the country attempts to regain investor’s confidence, following widely reported financial crises.

Statement of Problem

Every business organization is set up, to achieve some specific objectives. To achieve such objectives, rules and. regulations are laid down even procedures are set out which have to be complied with. No shareholder or potential investors would like to invest in a business that would not yield returns on investment. There are many factors that could cause lack of returns on investment in an organization. It can be due to improper accounting records, frauds and other internal factors. Good corporate governance and proper audit report provides for accountability and an input to management information system. Based on the problems stated above, it is very necessary for effective operations and as such the need for proper audit reporting cannot be overemphasized. This research intends to examine the role of auditor’s report in corporate governance in relations to non-financial institution in Nigeria and possible way forward.

Research Questions

The following are the research questions of the study;

Is there any relationship between auditing reporting and corporate governance? To what extent does auditing and corporate governance serve as a tool of control used by management to ensure achievement of organizational goals? How important is corporate governance in building confidence in investors and encouraging stable investment? To what extend does auditing in Nigeria give a true and fair view of companies in Nigeria?

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