INTRODUCTION
Auditing, both in the public and corporate
Sector is an independent examination of, and an expression of an opinion on the
financial statements of governments by a duly appointed person(s) in accordance
with all relevant statutory obligation. In other words, auditing does not
concentrate on fraud detection alone, but rather, to look at the financial and
non-financial activities of an organization in terms of management, procedure, systems
and statutory requirements to test the compliance level in term of operation
with the overall aim of preventing fraudulent activities of public officers.
Individual firms of accountants have refined
their approach to auditing from time to time and the professional accountancy
bodies in various countries have published guidelines to their members on
auditing procedures. Auditing is as essential in the public sector as it is in
the private sector. Section 85 of the 1999 Constitution states that there shall
be an Auditor-General for the Federation.
An audit is an independent examination of the
financial statements of an organization with a view to forming an opinion as to
the truth and fairness of the statements. Audits everywhere are undertaken to lend
credibility to financial statements for use of people other than those who
prepared them.
CHARACTERISTICS OF MODERN AUDITING
1. Execute a
wide range of audits and reviews in a diverse and highly computerised
organisation;
2. Provide an
independent, objective assurance and consulting service to management, with the
principal aims of evaluating and improving the effectiveness of risk
management, control and governance processes;
3. Make
recommendations on increasing operational efficiency, having regard to value
for money auditing;
4. Agree the
annual audit plan with the Chairman prior to approval by the Audit Committee;
5. Report
quarterly and as requested to the Audit Committee and to the Chairman or any
person with equal position;
6. On a day to
day functional basis, the Internal Auditor reports to the Chairman or any
person with equal position;
7. Any other
appropriate duties as may be defined from time to time by the Chairman.
FACTORS AFFECTING MODERN
AUDITING IMPERATIVE FOR CORPORATE AND PUBLIC ACCOUNTABILITY
The
following are factors affecting modern auditing for corporate and public
accountability:
·
Economic
Forces
An auditor must evaluate how current
economic conditions affect a company. For example, a company's growth may be
down, but if the economy is in a recession, this dip in growth may be
acceptable. Conversely, in a robust economy, a company that is not experiencing
growth may be in worse trouble than if the lack of growth were in a flat
economy. The auditor may wish to look into the balance sheet and financial
supporting documents to see if the company report has taken this external
factor into account.
·
Social
and Cultural Forces
The culture a company operates in can
affect it. If the auditor finds that a shift in public tastes is affecting the
market share of the company, this must be taken into account when evaluating
the company's sales projections. For example, the tobacco industry has
experienced a shift in attitudes toward smoking over several decades. An
auditor should check to see if the company has factored in social changes in
its estimates.
·
Political,
Governmental and Legal Forces
When government begins to crack down on
industry practices, the auditor can take this change into account. The auditor
may find that one of the biggest sources of income for the company may come
from an area that is coming under greater legal restrictions. This could
negatively affect that company's revenues in the future. On the other hand, a
company that is in an industry that is being deregulated may be positioned for
a strong growth period. The auditor's position should be that the company must
make realistic projections based on the legal environment.
·
Technological
Forces
Many a company got caught in the switch
from analog to digital products. Film companies stopped making film and moved
into digital imaging. An auditor can take into account changes in technology
when evaluating a company. Sales and revenue projections may rely on an
existing technology that is changing or being phased out. The auditor would
know that the company's outlook and expenditures must consider this changing
technology.
·
Demographic
Forces
Changing demographics can positively or
negatively affect a company. For example, if aging baby boomers are seeking
luxuries, the auditor can evaluate a luxury products company in that light. If
young people no longer like talking on the phone, a phone company auditor can
question the company outlook in light of the changing tastes among certain
demographic groups.
·
Fraudulent financial
reporting and audit failures
Various corporate collapses occurred in the
late 1990s and early 2000s many of which were the result of fraudulent
financial reporting, and these resulted in significant losses for creditors and
serious hardship for shareholders. Many of these business failures were also
seen as audit failures, and the auditing profession stood accused of not
performing its ‘watchdog function' effectively and with objectivity.
·
New
legislation, regulations and standards
The response by governments and regulators
to the corporate collapses and perceived audit failures gave rise to various
new statutory requirements, regulations and standards that were aimed at
strengthening the auditors' independence and improving the quality of their
work.
CHALLENGES FACING THE
MODERN AUDITING IMPERATIVE FOR CORPORATE AND PUBLIC ACCOUNTABILITY
Factors
such as the volume of transactions, information technology, globalization and
the constant increase in the complexity and number of laws, regulations and
standards governing entities and their auditors have all impacted drastically
on the evolving role of the registered auditing profession. The corporate
collapses, business failures and fraudulent financial reporting scandals of the
late 1990s and early 2000s led to a very turbulent time and resulted in a
credibility crisis for the auditing profession. One of the consequences of this
was the demise of Arthur Andersen and the resultant decrease in the number of
big audit firms from five to four.
A
further consequence was the drastic interventions by governments, regulators
and the auditing profession itself, which have given rise to various and
onerous new laws, regulations and standards that govern financial reporting and
the auditing thereof. This is described as follows by Knechel, et al.
(2007:xiii):
The period 2000 through 2006 has been a very
turbulent time for the auditing profession, a period that witnessed numerous
scandals and their aftermath (Enron, WorldCom, Parmalat), strident calls for
changes in the way that auditors practise their profession, and regulatory
initiatives that significantly change the way the profession is governed.
Long-held attitudes and customary practices have been challenged and found to
be deficient by the media, the investing public, and those charged with
regulating financial reporting and auditing. Issues of auditor independence,
the role of corporate governance, the responsibilities of management, the
appropriateness of consulting services, and the overall professional
obligations of auditors have all been discussed and debated by a broad array of
interested groups and individuals. As a result, this period has probably
resulted in more substantive changes to the auditing profession than any other
period in modern day business history.
The
above developments also gave rise to the risk of a Big Four auditing firm
domination of the audit market, and the possible effect that a collapse of one
of these remaining firms poses to the effective functioning of the audit
market.
REFERENCES
Ahmed,
M., 2011. PPP for Infrastrutural Development- The Nigerian
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ICRC.
Anyanwu,
F.N., 2001. Audit Profile: Office of the Auditor General for
the Federation of
Nigeria. International Journal of Government Auditing, 28(2), pp.13-14.
Auditor
General, N., 2006. Achieving Public Sector Outcomes with
Private sector Partners. Accounting,
Auditing & Accountability Journal, 24, pp.824-847.
Maimako,
S.S., 2005. The Role of Financial Contrl Institutions in
Promoting Financial
Accountability in the Public Sector. Nigeria: University of Jos
Salawu,
R.O. & Agbeja, O., 2007. Auditing and Accountability
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