Auditing As An Indispensable Tool For Economic Development


This chapter deals on the various view, opinions and contribution made by some writers and authors who have previously written books and other publication on the chosen subject. The chapter acts as a scaffold for our study because if its many meaning depending on usage and knowledge of the varied perspective with which people have viewed the subject matter over time.

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The origin of auditing in primitive form can be traced to the accent time. A famous biblical example of how owners of properties appointed manager (servant) who look after their properties and expected  to know what has happened to the properties could be seen in St. Matthew’s Gospel.

Auditing in this context is regarded as one of the more recently established profession borne of out complexity of the modern business world.

However, it has it’s origin in  much remoter times the work of auditors is portrayed in ancient Egyptian wall painting of the Roman Empire. Since men have entered into contractual relationships with one another, the desire to ensure the accuracy and reliability of the resulting information  has always existed.  Originally, an independent record of  party was engaged to have the record of transactions read to him,    signed in the world “Audire” means to hear according to L.R Howard 1982

Later, trade and commerce increased and the need arose for some  more accurate method of recording business transactions and activities.

In the 15th century Lucia Pacili compiled his treatise on Double Entry Book keeping “which  served to put the preparation of records on a more scientific basis. However, as book keeping is not an exacxt science, still further action was  needed to ensure that the final records provided an accurate view of what had actually transpired between  parties.

Moreover, with expansion of business and the  separation of ownership of business from management of such business, the need for auditing arose in Nigeria. Those who managed the affair of the business were expected to show periodic accounts on financial position and the statement of affair of the under taking to the owners of the business.

In most cases, it is of paramount importance to get the accounts prepared by the managers and board of directors examined by an external person to assure the investor that their investment are safe and that the managers and the directors who handle the capital and prepare the accounts have presented a ture picure of te affairs. This gives rise to responsibilities accounting other wise refereed to as stewardship accounting. Obviously, it is impracticable and impossible for every shareholder or investor of a company to examine on an individual basis the books and records appoint independent auditors whose duties are to verify and examine on behalf of them and report on the extent to which the accounts presented by the directors show a true and fair view of the affaire and of the financial position of the undertaking.

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Formerly, such persons appointed need not to have knowledge of accounting but later and presently anyone with the intent of establishing its reliability and reporting of the results of hi examination with the expectation of increasing the usefulness of the information by the user must sit and pass professional examination for him to be legally qualified to do so.

This  involves the examination and evaluations of the authenticity and there fore  the reliability of an organization business documents and records. It also involves making inquires to ascertain that the financial statement on which the auditors is reporting on and which have been prepared from these records, display a true and fair view of the financial result for the year under review and at year end. To decide whether or not the auditor may report that the financial statement present fairly the financial position or result of operation of his clients,  he must follow generally accepted accounting principles applied on a consistent basis.

Auditing is so important an organization that without it, immediate peculiar disadvantage will be experienced by the organization. All form of fraud committed can be more  readily exposed by auditing procedures and practices instilled in the organization.

According to Akintola (1986) it is the intention of both legislative and professional pronouncement to ensure that the auditor carries out his duties  with characterized integrity and an impartial approach to professional work.

An auditor should be independent and free of commercial or financial involvement in the affairs of clients. He should work strictly on formal basis with the internal auditors of his client.

Vickery (1979) defines as auditor as a competent and impartial critic appointed to verity  the financial position of a firm and the person to be appointed as an independent auditor and who is expected to form an independent opinion and report there to possess the required qualification as specified by law. So the  history of audited is fairly long one. It has developed from oral to hand written, to post machines and now to  computers applications. Today, there are bodies that regulate the practice of auditing in Nigeria and confers titles upon those who meet the  requirement of training experience  character and  who pass a required examination. Such bodies are the institute of chartered accountant of Nigeria (ICAN) which was established under the act of 1965. This body aims at integrating all practicing accountants (Auditors) in Nigeria and liaison with other outsider profession bodies in the world. There is another body whose recognition has  also been approved and that I association of National accountants of Nigeria (ANAN)


Auditing according  to Howard (1979) is an examination by  an auditor of the evidence from which the final revenue accounts and balance sheet of an organization have been prepared in order to ascertain that they present a true and fair view of the summarized transaction for the period under review and of the financial state of the organization at the end of the date, thus enabling the auditor to report there on.

EYO (1994) puts it as an examination of information by a third party other than the prepare or user with or  other statement of account and to satisfy him self that the statement exhibit a correct view of the affairs of the business organization concerned.

Nwabueze (1993) gives a concise list of qualities desirable in an auditor and these are show below summarily.

  1. He must have passed any of the recognized professional accounting examination and hence been admitted as a members of any of this professional bodies.
  2. Institute of chartered accountants of England and Wales and Scotland (ICAEWS).
  3. Certified public accountants of united state of America (CPA)
  4. The Association of certified and corporate accountants (ACCA) London.
  5. Not to be suspicious but neither most he be credulous.
  6. Versed in the science of accounting with the ability to apply its principles to the various and dis- similar business which he is auditing,
  7. Have a through grasp of the general principles which governs the matters with which he likely to be brought into contact.
  8. Tact, caution, firmness good tempered, courage, integrity, honesty, discretion, judgement patience, clear headedness, and reliability should be uncalculated in an auditor.

According to Donald (1980) The main arms and objective of auditing flows are naturally and logically to express, after gathering acceptable evidence in support of the audit, a professional opinion as to fairness and reasonableness of the financial statement on which the auditor is reporting it should be noted that this objectives accords with to days. Minimum legal requirement under which an  auditor  must  gives an audit retrain this effect. This I what is known as attestation function of auditing. This means that an auditing  confirms that the financial statement for a particular entity agrees with the records from which it was prepared and that the record themselves contain veritable data representing the entities business transaction. By reporting in a particular organizational \financial statement the auditor assists the users. In making their evaluation of the quality of the information being communicated by reporting on the results of the under taking operation as well as on its financial position an audit serves to enhance the credibility and reliability of the financial statement prepared from the enterprise accounting records.

According to J Santocki (!979) The  discovery and minimization of errors and frauds not as it sometime claimed prevention of them can now be put in the right perspective. It is not the main objective of  auditing but secondary or supplementary to the main one. The discovery and  minimization of errors and fraud are best described  as by products of audit work conducted to achieve the main objectives    as for examples, in chemistry some processes properly conducted gives off by product that are known in advance in the same way as the discovery and minimization of errors and frauds.

The prevention of occurrence of errors and frauds may be theoretically possible but the cost of implementing it may be prohibitive. One tends to relate the cost to be benefit. And in business the intention is to spend certain amount of money only if the expected return is positive unfortunately, this is not  understood by all especially by the critics of auditing profession.


According to Okoji in his book impact of Auditing in society internal check can be described as a check on day to day transaction which continually as part f the routine system where by the work of one person is proved independently or complementary to the work of another, the objectives being the prevention or early detection of errors or fraud. A first principle is that all transaction either individually or in group should involve surveillance by at least two persons so far as possible  independent on each other. According to Okoye (*1991) internal check means segregation of duties such that the work of one person is cross checked by another to avoid fraud.

S.D Okon in his book internal control As a tool for Efficient management defined  internal control as including not only internal check and internal audit but all other controls designed by management for orderly management of company affairs safeguarding it s assets as well as securing adequately its financial and other records.

Statement on Auditing (1964) explains further the meaning of internal control by stating its essential characteristic which are described as follows

  • The plan of organization (with particular reference to the allocation of staff duties)
  • Authorization, recording and custody procedures (Including internal check).
  • Management reviews (including internal audit)

These should be present and of high standard before internal control may be considered to exist effectively within an organization.

P.D Ledum (1992) sees internal audit as a review of operations and records, sometime continuously undertaking within  business by a specially assigned staff.

A.C. Peter put it this way an element of internal control system set up by the management of an enterprise to examine, evaluate and control on the operations. It exist either because of management decision or in certain circumstance because of statutory requirement.

Okoye (1997) mentioned the functions of internal audit to include:

  1. Reviewing of accounting system and related internal control.
  2. Examining financial statement for the benefit of management and on behalf of the management.
  3. Reviewing the economic efficiency and effectiveness of operations and the functioning of non financial control.
  4. Review the implementation of corporation policies which include plan and procedures
  5. Special investigation in a situation where fraud has perpetuated.


The various legal provision governing auditing roles however cause  a clear distinction to be made or drawn  between many types and classes of auditor.

  1. Those employed in auditing department of corporations know as internal auditing.
  2. Those employe4d by government under stature are know as external auditors or statutory auditors and in some cases are called government auditors. In taking these forms or types of audits individually their various roles can be emphasized.

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