Abstract
This project analyzes the relevance of audit committee functions on the quality of financial statement in Nigeria, the users’ perception. The broad objective of the study is to ascertain if audit committee reports strengthen the decision relevance of corporate report and also to find out if the information content of audit committee reports relevant to its users. The primary source of data was used where questionnaires were distributed to gather information. The simple random sampling technique was used to select a sample size of 145 and the chi-square statistical tool was used to test the stated hypotheses. The findings revealed that that audit committee reports is very imperative to the users of corporate or published financials. It was concluded that the extent to which audit committee function has been achieved and is quite encouraging. The study recommends among others that audit committee of companies should meet regularly as the situation demands, as this impact positively on the shareholders investment.
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
In public companies, it is generally the shareholders who ultimately approve the auditor’s appointment, and the auditors are primarily responsible to and overseen by those representing the shareholders’ interests with regards to financial reporting and internal controls. Typically an audit committee (or its equivalent), acting as a largely independent body, will be charged with representing the shareholders’ interests. Companies may not necessarily have an audit committee and this interchange may be dealt with less formally but in an equivalent manner. The audit committee is a sub-committee of those charged with governance, and is typically made up of a majority of non-executive directors who are the shareholders’ representatives in relation to the external audit. They are usually responsible for overseeing the audit and evaluating the independence and performance of the auditors.
An important role of the audit committee is to assess and recommend the appointment or reappointment of the audit firm. The audit committee also provides a forum for the auditors to escalate and discuss any significant concerns they may have about any aspect of the financial statements prepared by management. The chair of the audit committee has a vital role to play in assessing management’s tone from the top with respect to the company’s financial reporting. As well as their public report on the financial statements, the auditors will typically have more detailed communications with the audit committee. These communications may include a description of how the audit was carried out, the audit plan, the auditor’s views about the company’s accounting practices (including accounting policies, estimates and disclosures), how the auditors satisfied themselves on the key issues that arose, and significant difficulties, if any, encountered during the audit. The auditors may also comment to the audit committee on their insights in areas such as the strength of the organization’s internal control systems.
This was known as subsistence way of living man’s daily exploit lead to a graduation from this subsistence way of living, paving way for trade as a tool or means through which he will get the things which he desired but did not have. Consequently, there was the birth of trade and sole proprietorship. This is the base of the theory of the firm, which recognizes man (the entrepreneur) as a focal point for effective combination of other factors.
The emergence of sole proprietorship paved way for more efficient markets, there was need for an enlargement of the market, leading to increased capacity utilization. The seeming successful discovery was faced with lack of fund, this was an enormous, and an important factor militating against the average entrepreneur in the industry whose pooling of capital in the form of partnership could not adequately satisfy.
1.2 Statement of Problem
The statement of the problem gives a view, if having a chairman who is a chartered accountant makes the committee to be effective and independence or should audit committee members be separated from equity holders? The involvement of outside directors is having diverse effect on the performance and efficiency of the organization. Thus, the problem of this study is to the engagement of external directors which makes the committee less effective and independent.