Audit Report and Its Impact on the Activities of Business Organisation in Nigeria


For this purpose of achieving the objectives of this work, it is imperative to give an analytic review of previous works on the subject. Due to the development in common activities auditing has evolved from a listening process to a close examination evidence. 

The formation of large business organizations where providers of capital shareholders are different from the doctors, makes it necessary that financial statements should be prepared and presented to the owners to enable them appraise the use of company resources.


Taylor in his book defined auditing as an investment or investigation by an auditor into the evidence from which the final revenue accounts and balance sheet or other statement of an organization had been present a true and fair view of the summarized transaction for the period under review and of the financial statement of the organization at the end date so enabling the auditors to report there on.


The end product of all audits is a report that communicate to the reader the auditors opinion on the degree of correspondence between the assertions of the client and the agreed upon criteria.

The staged of modern audit includes:

  1. Examination and Inspection:

It involves establishment and authenticity of the figures by reference to the source documents.

  1. Confirmation:

It involves establishing the authenticity of accounting figures by requesting debtors, banks etc to confirm their balances in writing.

  1. Observation:

This involves physical observation of stock and each account to establish validity and existence.

  1. Verification:

This involves establishing the arithmetical accuracy of figures and verification of physical assets in terms of existence ownership and control.

  1. Inquiring:

It involves putting questions directly to responsible officials for the clarification of issues.


Auditors can be classified into:


As the name implies, they are auditors that perform auditing and investigation for their client.

They are never company owners or employees of the organization that employs their services.  They work to ensure that financial statements are acceptable to investors, creditors and regulatory bodies.


Aguolu (p.82) defines internal audit as “the independent appraisal of the functions and the quality of performance of the organization by a special assigned staff”.  By implication, the internal auditor is an employee of the organization.  The internal control for adequacy and to recommend amendments to the management.  He also conducts specific investigations as directed by the management or the audit committee.


The incredibility of financial statement is achieved through honest and objective examination and expression of opinion by an independent auditor.

An independent auditors auditing a company which he is also a director might be intellectually honest, but unlikely that the public would be auditing decisions of which he is a path in making.  Likewise, an auditor with s substantial financial interest in a company might be unbiased in expressing his opinion on the financial statement of the company, but the public would be reluctant to believe that he was unbiased.

In the same vein, the Company’s and Allied Matters Decree (CAMD) Section 358 (i) provides that a person as an auditor of a company unless he is a member of a body of accountants in Nigeria.

The degree disqualifies the following from holding office as auditor of a company.

  • An officer or servant of the company
  • A body corporate
  • A person who is a partner of or in the employment of an officer or servant of the company.

To ensure the independence of the auditor the audit personnel should compose of staff who do not have his responsibility in the organization and with no conflict of interest in the affairs of the organization being audited.


An audit report is a report made by auditors of a company to its members on the accounts examined by them, and on every balance sheet and profit and loss account, and on all group financial statements copies of which are to be laid before the company in a general during the auditors’ tenure of office.

The auditor’s report which shall be countersigned by a legal practitioner shall state the matters set out in Schedule 6 of this act.


The reporting state of an audit engagement begins when the independent auditors have completed their field work and their proposed.



The report should be clear, constructive and concise, careful presentation will help the recipient to understand the significance of the comments and devise corrective actions. The following factors should therefore be borne in mind.

It is important matters of concern should be discussed and recorded as they arise to ensure that the auditor has properly understood the situation. These discussions may take place with members of staff at an operating level as well as with executives concerned solely with finance and accounting. When the points in the report are drafted they should be cleared for factual accuracy with the client’s staff concerned.

When submitting his report the auditor should use his best endeavours to ensure that is contents reach those members of management who have power to act on the findings. It is usually appropriate to address the report, or that part of the report. Containing the major points, to the Board of Directions or equivalent body even if the receipt or less important points is delegated by the Board. If the auditor chooses not to sent a formal letter or report but considers it preferable to discuss any weaknesses with management , the discussion should be minute or otherwise recorded in writing. Management should be provided with a copy of this note to ensure the discussion has been fairly reflected. The written record of any such discussion should be filed with the audit working paper.

The auditor should explain in his report to management that it only includes those matters which came to his attention as a result of the audit procedure and that it should not be regarded as a comprehensive statement of all weaknesses that exist in all improvement that might be made.

The report may contain matters of varying levels of significance and the inclusion of detail may make it difficult for senior management to identify points of significance. The auditor can deal with this by giving he report a ‘tiered’ structure so that major points are dealt with by the directors minor points are considered less senior personnel adjustments have been accepted and recorded by their client.

The contents audit reports are basically governed by statutes and the auditing standard.

The CAMD requires that such reports expresses the auditors opinion as regards whether the financial statements show a true and fair view and complies with the relevant statutes. The auditing standards also requires the auditors to:

  • Identify those to whom it is addressed and the financial statement to which it relates.
  • Refer to whether the financial statements have been audited in accordance with approved auditing standards.
  • Refer expressly whether in his opinion, the financial statements give a true and fair view of the state of affairs of the organization.
  • Refer expressly to any matter prescribed by relevant legislation or other requirements.

The above requirements (CAMD) are summarized into the scope and opinion paragraphed of the auditors report. Scope paragraph is the auditors report of the character or nature of his work in the audit examination. The portion of the report is virtually important for disclosure of the quality and extent of the audit itself and the auditor must render a fair presentation of his work as well as an opinion of the fair presentation of the financial statements.

Opinion paragraph is the public manifestation of the auditors private decision making process. The objective of the opinion is the enable shareholders, creditor and other users of the financial statements to determines the extent to which financial statement report on by professional auditors may be lied upon.

The auditing standard requires that when an auditors  name is associated with financial statements the auditors should:

  • Express an opinion on the financial statement as a whole or as a secondary purpose, a report to management may also be used to provide management with either constructive advises.

The auditor might be able to suggest areas where economics could be made or where resources could be used more efficiently.

A report to management is also useful means of communicating matter that have come to the auditor’s attention during that might have an impact on future audits.

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