Thursday, 9 June 2016

The Role Of Auditing In The Business And Economic Life Of Manufacturing Industry

According to Company and Allied Matter Act (CAMA) 1990, as amended to date “every limited liability companies must appoint an auditor to examine and report on the accounts prepared by the directors”. A point often mis-understood is that the auditors does not act for the directors, rather he acts on behalf of the shareholders.

TITLE PAGE                                                                            
TABLE OF CONTENT                                                           

1.1    Background of the study                                             
1.2    Statement of problems                                                
1.3    Significance of the Study                                             
1.4    Research question                                                      
1.5    Working hypothesis                                                    
1.6    Scope and limitation of the study Reference              
1.7    Definition of Terms                                                   
1.8    Research Methodology                                            
1.9    Plan of the Study                                                     
1.10  Objective of the Study                                             
2.1    Auditors Reports                                                                   
2.1.1 An Abstract of Auditors Reports in a
Limited Liability Company                                           
2.2    Effect of Auditors Report                                             
2.3    Roles of Auditors                                                             
2.4    Relevance of Auditing Information to
Users of a Accounting  Information                            
2.5    The users of Accounting Information                          
2.6    Prevention of Fraud, errors and Irregularities
by an Auditor                                                               

3.1       Introduction                                                                 
3.2       Research Design                                                           
3.3       Sample and Sampling Method                                        
3.4       Data Collection Instrument                                             
3.5       Research Statistic                                                         
3.6       Restatement of the research hypothesis                     
3.7       Characteristics of the study population                     
3.8       Administration of data collection instrument             
3.9       Procedure for analyzing collection data                      
3.10    Limitation of the methodology                                     

4.1       Introduction                                                                 
4.2       Data analysis                                                                
4.3       Interpretation of Result                                                

5.1    Summary of Findings                                                   
5.2    Conclusion                                                                             
5.3    Recommendation                                                         
5.4    Suggestion for the Further Research                          



According to Company and Allied Matter Act (CAMA) 1990, as amended to date “every limited liability companies must appoint an auditor to examine and report on the accounts prepared by the directors”. A point often mis-understood is that the auditors does not act for the directors, rather he acts on behalf of the shareholders.

The relationship between the shareholders and auditors can be considered as that of principals and agent (a point made in the case of Spacemen V. Evans 1868). Hence, his principal objective is to form an opinion on the truth and fairness of the accounts prepared by the directors.

However, it must be emphasized that nowadays the directors are seen as having a much wider responsibility especially where the shares are available to be the general public on a stock exchange. It then follows that this duties to own by the auditor is relied upon to set the seal on credible financial information.

Audited accounts are required to be filed with the registrar of companies so that the financial position of the business can be disclosed to the general public. Upon enquiry the council of the stock exchange reserves the right to refuse to grant a quotation to those companies whose accounts have attracted serious negative comment from the auditors. Also, the auditors’ recognized the need to adhere to certain standard of practice in order to demonstrate the high level of competence and regard for standard that his role demands.

To understand the role of auditors in the business and economic life of an organization there is the need to understand what auditors are their responsibilities, their qualities, their code of conduct, how they are appointed, their rights and duties in a manufacturing business and the advantage of the report to the manufacturing organization.


Admittedly, there are various guideline published both locally and internationally that are applicable and relevant to the roles of auditors in the business and economics life a manufacturing business. The guidelines are:
• Auditing Standard and Guidelines
• International Auditing Guidelines
• Statement of Accounting Standard
• Generally Accepted Auditing Standards
• Generally Accepted Accounting Principles

However, the uniqueness of this study is that it will attempt to examine how the auditors.
• Adhere to policies prescribed by government
• The extent to which internal control measures is been followed as a means of fraud prevention
• To see to what extent the books of account have been kept by the company
• To see whether the wealth of the shareholders have been adequately protected.


It is considered necessary to study the roles of auditing in the business and economic life of a manufacturing industry in order to identify both primary and secondary aims of audit because both aims expressed their roles in an organization.

The primary aim of an audit is the production of a report by the auditor on his opinion on the truth and fairness of financial statement so that any person reading and using such report can have assurance in them. Emanating from)this main aim is the “detection and prevention of errors and fraud as well as provision of spin off affects such as writing up books, preparing final account and text returns, financial advice, management and systems advice in liquidation and investigation.

In summary, the significance of this research is to examine the role of the auditor in the economic framework of  a manufacturing business as a means of enhancing the overall growth of the organization.


This research seeks to find answered to a number of pertinent questions relating to the roles of .an auditor in the business and economic life manufacturing business.
These questions include:
•  What are the advantages of auditing report to the company?
•  How can the responsibilities of auditors benefit the shareholders?
•  Does their work give effective business protection and safeguard against fraud?


Hypothesis is defined as a proposed explanation for an observable phenomenon, fact or circumstance. The hypothesis is designed to test whether.
• The auditors really prevent and detect fraud errors and irregularities
• The auditors abide by the rules and regulation laid down by law in carryout their audit activities
• The auditor general responsibilities to an organization are well furnished and established
• The auditors protect the interest of shareholders and investors by their report


Time, financial constrain etc as well as know has been the greatest constraints of researchers in protect writing. This research is however explanatory and will pave way for further research.

The above mentioned constrains makes it difficult for us gather adequate data. Intact it would have involved extensive travels to some of the branches of UTC Nigeria Plc but time will not permit us to do so.

AUDIT is a process (carried out by qualified auditors) whereby the accounts of business enterprises including limited compares, charities, trustee and professional firms are subjects to scrutiny in such details as will enable the auditors to form an opinion as to their truth and fairness.

INDEPENDENCE AUDITOR: In this research work independent auditor means external auditor

AUDITING:- it involves a detailed examination embracing review of the system of book keeping accounts and internal control and making such test and inquiries as he deems fit to enable him form an opinion of the reliability of the records as a basis for the preparation of the accounts to compare the profit and loss account and balance sheet with the underlying records in order to determine whether they agree therewith, to make a critical review of the profit and loss account and balance sheet in order that a report be made to the member or shareholders stating whether in the opinion of the auditor the accounts are prepared as the items are described in such a way that should not only reflects a true and fair view but also are prepared in accordance with the statutory provisions.

AUDITOR: Oxford Advance learner Dictionary defined an auditor as a person who officially examines the accounts of a company. An auditor visualizes whose system and report on the account prepared by the directors.


Selecting a method of investigation into a problem is a key consideration for the research for this reason.  This project is based on exploratory research and descriptive research.  In carryout this research work information was gather from primary and secondary data.  All the fact contained this project were draw from text book, personal interview, class lectures, information supplied by the respondent belief as a scholar in accountancy.

The research used both primary and secondary source of data. T he instrument used for the collection of the primary data are questionnaire and personal interview. The aim of this is to get certain information from the employees or workers of UTC Nigeria PLC.

The research used both primary and secondary source of data. The instrument used for the collection of the primary data are questionnaire and personal interview. The aim of this is to get certain information from the employees or worker of UTC Nigeria Plc.


This research work contains five chapters.  Chapter one deals with the introduction, and it entails the definition of the study that is starting from theoretical background of the study.

Chapter two on the other hand deals with the literature review where all known literature that has relevance to the problem being study is review.

Chapter three is based on research methodology which is the procedure through which data are converted and analysed in order to test the hypothesis methodology.

Chapter four deals with presentation and analysis of the data collection.

Chapter five based on summary of findings, conclusion arrived at after the research work and recommendations for the reader and other researchers that may be interested in this topic of research.


The main objective of the study is that an audit under CAMA 1990 is for an appointed auditor to express a professional opinion of the financial position of an enterprise as contained in the statement prepared by the management so that any people reading and using them can have faith in them.

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