The Significance and Objectives of Source Documents in Audit Investigation


One cannot talk of source documents without giving identification of the auditors role and responsibility.  Several works have been carried on this field of endeavour presenting several, and sometimes diverse viewpoints about the concepts of auditing.  In this chapter we shall attempt to understand what auditing means, and the role of source document no audit investigations, we shall also look at the regulatory framework of the practice investigation procedures.

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In the eye of the Layman, Auditing is a question of just detecting for Fraud even the educated ones, who are not versed in the accounting field, do look at auditing in the same direction.  Though fraud, errors and theft may be detected in the course of an audit, this is never the primary objective of auditing.

Several definitions has been given for auditing, but for the purpose of this text, well shall look at two of such definitions and relate them to sources documents – and proceed to look at their merits and demands in the investigation process.

Finally we shall attempt an all embracing definition Walter W Big in has book a practical Auditing” defined audit as “such an examination of the looks of accounts and vouchers of a business as to enable the auditor to report whether he is satisfied that the balance sheet is properly drawn up so as to give a true and fair view of the state of affairs of the business and that the profit and loss account gives a true and fair view of the profit or loss of the financial year and are accordance with information and explanation given to him and as shown by the books and of not to what respect he is not satisfied.

Leslie R. Howard, in his book stated that an audit may be deserted as an examination by an auditor, of the evidence from which the final revenue accounts and balance sheet of an organization has been prepared, in order to ascertain that they present a true and fair vies of the summarized transactions for the period under review and of the financial state of the organization as at that date, thus enabling the auditor to report there on.

Most other definition of audit, more or less say the same thing as the two above, but however this definition has been observed to the defective in two major respects, VIZ:

A       There is a unnecessary emphasis on the profit and loss account and the balance sheet which appears to suggest that an audit cannot be carried out.  Where these does not audit cannot be carried out where these does not exist.  Exist some non profit organization prepare income and expenditure  account and government account lacks balance sheet in the proper sense of it. Such organizations, prepare statement of accounts which are subject to audits

  1. The emphasis on examination of vouchers and records may be misleading, this does not recognize  the fact that physical verification assets and discussion with the client staff are also part of the audit investigation.

Conclusively, it is pertinent to note here that the relationship between auditing and sources document is a complementary one. For it is noted here that fore auditing to be effectively carried out, there must be reliable and convincing audience which comes in form of source documents.

Most other definitions of auditing revolve round the above mentioned ones.  But in view of the shortcomings of the above definitions, JUT OKOLO, in his book “The concept and practice of Auditing put forward what appears like a more embracing definition of auditing as a conscientious and objective examination of and enquiry into any statement of account relating to money, or money’s worth, the underlying documents and physical assets where possible as will enable the auditor to form an opinion as to whether or not the statement of account present a true and fair view of what is supposed to be presented and reported accounting.



In the early days, there existed only the sole proprietorship, with the owner being directly involved in the day  to day running of the business.  In those days, there was no need for an audit.  However, with the advent of the limited liability company, in which the company is regarded as a corporate entity distinct from its supers, the owners of the organization usually appoint a management to oversee the day today running of the organization.  These owners of the company (shareholders) will from time to time need to know what the performances of the company and its state of affairs look like.  Not only the shareholders are interested in what goes on in the company, also prospective investors, government and even leaders are equally interested in knowing the company’s performance and its financial position.

In view of the importance of the auditors report to various interest groups in the society certain legislation have been put in place overtime to regulate their work and to ensure a high standard of practice.  The legislation covering all aspects of the auditors role is the companies and Allied matters Decree 1990-.  The relevant sections of the decree are section to 368. Section 357 deals with the appointment of the auditor.  This section makes it mandatory for every limited liability company to appoint an auditor to examine its books.  The shareholders in their general meeting (GM) would authorize their directors to appoint an auditor.  Section 358:  This section deals with the qualification of the Auditor – see introductory chapter of this text.

Section 360: This section clearly sets out the duties and responsibilities of the auditor in a company and gives the auditor all such authority as to unreserved access to all the company’s books of account.

Section 361:  This section takes care of the liabilities of auditors to related third parties, whom he owes a duty of care, the court may award damages of the auditor appears to be negligent under this section.

Apart from the requirements of the (AML) (1990) the product with prices and incomes Board Act.  (No 30) 1977 requires the auditor to report in the financial statements whether or not the company has compiled with all the relevant guidelines issued under the act.

In this context, the auditor will review guidelines relating to

  1. Wages and other forms of income
  2. Prices
  3. Charges or other sums payable under transaction of any description
  4. Charges in respect of any form of property or right
  5. Return on capital invested in any form of property including dividend



In view of he statutory requirements on the part of the auditor, various accounting and auditing institutes have formulated guidelines designed to assist the auditor the accounting standards set by the various accounting institutes to which  the financial statements must comply.  In Nigeria the governing body is the institute of chartered Accountants of Nigeria (ICAN)  to complement the statutory provisions, the institute of chartered accountants of Nigeria in November, 1978, issued a code of conduct which provides the following:


A member should act with integrity, honesty and probating and maintain a professional attitude in the performance of his duty.


A member should exercise this progression with independence and objectivity.  He must be in position to give honest and unbiased judgement and not associate himself with any financial statement that could be misleading.

In this regards, he must not possess direct, or indirect beneficial interest in any company for which he is acting as an auditor.

Accept fees, the amount which is based on the turnover of the company.  Accept fees which is based on the success of this assignment except where unavoidable Act for any two opposing parties in respect of negotiation.  Unless appointed as an arbitrator.  Work for he client in an executive capacity.

In view of the legal and regulatory requirements relating to the functions of the auditor, it has become necessary that the auditor has to exercise utmost care in the performance of his duties, more so when several parties, like bankers, investors, government, tic are interested in the audited financial statement.

An auditor can insure liabilities as a result of any misinformation arising from his work..  This again underlines the need for him to exercise due professional care in the execution of his duty as an auditor.  To affect this, the auditor must adopt a well articulated approach in carrying out his functions.  The next section looks at the approach that the auditor ha to adopt in the performance of his duties as an auditor.

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