Effects of Audit Standards on Auditors Performance
Research Aim and Objectives
The aim of the research is to understand the role that audit standards play in assessing the financial performance of an organisation ensuring proper planning and authenticity of the audit process.
The main objective that this is study will be endeavouring to fulfil in this is research are
- To evaluate the impact of audit standard on the financial performance of Nigerian companies
- To assess the role of audit standards in improving financial performance of Nigerian
- To evaluate the impact of key audit matters on the financial performance of Nigerian company
Literature review is the potential part of a research that identifies additional requirements with proper justification of a research and establishes familiarity and ensures professional standard by avoiding duplication in investigation topics (Maggio, Sewell and Artino, 2016). In this dissertation the literature review chapter is going to discuss an overview of the audit standard on financial performance including improvement, disadvantages and advantages. This chapter is going to ensure the impact of audit standards in measurement of financial performance in Nigeria through formulating practice and exercises of audit standards. Conceptual framework and literature gap also interpreted in this chapter after developing theoretical alignment to provide overview of existing findings.
Overview of the audit standards on financial performances
According to Gao and Zhang (2019), audit standards are used as a factor for mitigating possible misalignments of financial interest of auditors along with investors that restrict business exercise with professional judgement in terms of leading compliance mentality. Auditing standard contributes to the strategic purpose for preventing auditors and uncovering misstatements from financial accountability and statements that avoid consequences of professional failure to achieve goals. In the report of Knechel (2013), the audit process effectively mitigates information advantages that courses through auditors as a professional audit expert for motivating firm growth. However, audit standards are usually applicable for every auditing form that performs review of financial information and audits including assurance and service engagement. In addition, Standards on Auditing (SAs) refers to the objective of an independent auditor to perform audits with standard, audit engagement and in accordance with quality control of financial statements (Breger, Edmonds and Ortegren, 2019). Furthermore, auditing standards include documenting the auditor’s responsibility to identify any fraud in financial statements through consideration of regulations and laws in an audit government and management regarding material planning performance evaluation on specific independent reports.
Analyze the role of audit standard for improving financial performances
Audit standards provide duration and establish requirements for applying auditors’ engagement in conduction of Management assessment of audit to examine the effectiveness of internal control over financial statements (PCAOB, 2007). As a result of accurate internal control through auditing standards over financial statements usually contribute reasonable assurance about reliability and accuracy of financial reporting. In case of material weakness such as lack of control on financial reporting companies may fail to obtain engagement performance to auditors that impact on operations activities such as economic condition, financial reporting practice regulations and loss with capital structure changes.
Exploratory research design was framed to interpret the collected secondary qualitative data and also flourished new knowledge about the chosen topic. The exploratory research design is evolving and plays a vital role at the time of developing a significant inquiry. Most of the previous journals generate valuable information regarding the impact of audit standards in the financial sectors. With the help of this design all the information was analysed and evaluated properly to develop better outcomes of the research work. Exploratory research design helped to unravel the consequential findings of the previous information that were collected through different authentic organizational sites and government sites of Nigeria. On the basis of exploratory design all the collected data was analysed and concluded with a significant narrative approach. This design develops an inter- subjectivity overview of the collected information and maintains transparency of the data with correct justification. Therefore, it can be stated that the use of exploration was very much justified in this study.
Data analysis technique
In this research study, the data analysis has been done in respect of different business sizes both large and small companies in order to determine the financial performance across a large data set. Furthermore, the analysis is conducted to understand the role of audit standards in influencing financial performance. Also, this analysis is based on the Annually released financial reports and quarterly reports of Nigerian stock markets that have been analysed critically over a time period. Also the use of content analysis will be applied. The content analysis gave the opportunity to analyse the existing context with an open mind in terms of gathering meaningful information related to the subject areas (Erlingsson and Brysiewicz, 2017). In order to analyse data, all the relevant journals were selected to understand the context related to the research questions. After that all the units and selected areas were defined to meet the research aims and objectives. Furthermore, develop a specific set of rules to design the text coding and then all the text was coded as per the rules. Lastly, all the coded text has been analysed to interpret findings of the research study and draw a conclusion in order to understand the data analysis.
FINDINGS AND ANALYSIS
In this chapter of findings and analysis the discussion is based on the found information and data which are collected through the secondary qualitative data collection method. The findings are discussed using the thematic analysis process which helped to understand the aspects of the objectives properly. In the thematic analysis the data are based on the different information which are collected through the secondary data collection system. This study will critically analyse financial statement of Listed companies across different sectors in the Nigerian Stock Market to evaluate how the application of Audit standards and Key Audit Matters (KAM) has an impact on auditors performance in Companies in Nigeria. Three companies were selected from the sample size for extensive analysis because these three companies represent the industry leaders in the most significant industries in Nigeria from the sample set.
CONCLUSION AND RECOMMENDATION
Based on the above discussion it has been concluded that audit standards play a significant role in impacting the financial performance of a firm, given the fact that there is transparency and the statements are accurately provided. This is one of the reasons why the auditors have standards which basically provides the guidelines that are required to be followed in order to ensure that there is authenticity in the reports of the auditors and the companies are sharing their financial statements with utmost accuracy. It can be stated that the Institute of Chartered Accountants in Nigeria are responsible for comprehending the financial performances, they work as the regulators which ensures the transparency and reliability of the audits done by the auditors including independent one. The Nigeria Standards of Auditing (NSA), contains all the regulations which the auditors are supposed to adhere to in order to carry out the auditing process in an effective manner. On the basis of the study, it can be concluded that in Nigeria the NSA helps in maintaining the stronghold on the auditing process which ensures that there is no mistake in the auditing process that has a negative impact on the businesses. In fact, it is the mistake of the auditors which is one of the most recurrent causes that lead to the failure of businesses. It is the report submitted by the auditors that decides the return on asset and the return on equity of an organisation which is necessary to determine the overall performance of the business. Apart from that the auditing process and the efficiency with which the auditors submit the reports also helps in the growth of the auditors which further improves their reputation in the banking industry. The more an auditor is able to provide an accurate financial report which helps an organisation and the evaluation of their performance it enhances the success of the auditing firm or independent auditors as well. The fact that proper evaluation of the financial report is emphasised on in Nigeria because considering the poor condition of the economy, growth of businesses play a significant role in that and financial report helps in understanding the performance of the companies. Based on this it can be stated that the two research questions have been answered by this study.
Taking into consideration that the study has been conducted on the audit standards in Nigeria, this study has gathered secondary qualitative data in the form of thematic analysis, which was the most suitable option for a cross sectional study trying to gather a large amount of data for providing an in-depth analysis of the study. However, it can be suggested that if there was more time in hand adding a primary quantitative data could have also helped in bringing a lot of information which would have allowed the study to understand the real time scenario and situation prevailing in the auditing industry of Nigeria. The reason that this has been suggested is that collecting data in the form of a survey which had involved several business owners of Nigeria, could have provided more of their subjective auditing experiences and the issues they have faced in providing financial statements to the auditing bodies. This would have helped in providing an insight on the issues that has been encountered on most ends to provide a more in-depth analysis of the data. On the other hand, the survey since the survey would have allowed the study to gather more data in numerical forms it would have been easier to understand the prevalent understanding of the majority regarding their auditing standards. Apart from that it is also recommended that had there not been any time constraint, the study could have also provided a comparative study with one of the G7 countries which had helped in identifying the differences, and the effectiveness of the audit standards that are followed by Nigeria. This would also help in understanding the various ways where Nigeria has more enhanced policies and the deficiency in their standards as well. The inclusion of the comparative study would have helped this study to analyse the problems that the Nigerian Auditory bodies are facing and the strategies that can be implemented by them in order to combat those issues. As it has been seen that they have faced challenges like shortage of employees, lack of facilities and others. This is due to the fact that mitigating these issues would enable the nation to have more effective auditory standards that will help in better financial performance analysis. These are some of the recommendations which could have been integrated in this study if there were no time constraints.
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