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Saturday, 23 September 2017


MSC Project Topics in Accounting and Finance
Efficient financial management in the corporate world has become topical in the last two decades as a result of series of financial scandals that happened both at national and international levels. This has raised a lot of questions on the capacity of auditing firms globally and raised concern on the role of an external auditor in providing security against financial fraud and deliberate misrepresentation of financial reports. However one of the major issues that are of concern in the public domain has been the incessant problems that have bedeviled the public companies in Nigeria in spite of the annual independent audit exercises. This study examined the impact of audit attributes on the financial reporting quality of quoted food and beverages firms in Nigeria. Secondary data from annual reports and accounts was employed. The correlational research design was used in a sample of fifteen (15) firms for a period of six years (2008-2013). Random Effect (GLS) regression technique for data analysis was used. The study found a significant positive relationship between audit attributes and financial reporting quality during the period under review. Specifically, the study found that auditor size, audit delay and auditor remuneration have a significant positive impact on the quality of financial report of the sample firms. The study on the other hand found that auditor rotation has no significant impact on the financial reporting quality of the sample firms. The study recommends that the regulators (SEC) of the listed companies in Nigeria should emphasize and encourage the use of audit quality attributes; especially the auditor size, audit delay and auditor remunerations. The study also recommends that managers of the food and beverages firms in Nigeria should improve compliance with the acceptable ethical standards in discharging their duties and responsibilities, so as to enhance the credibility of their financial reports and safeguard their entities from going-concern threats.

1.1 Background to the Study
Financial statements audit is a monitoring mechanism that helps reduce information asymmetry and protect the interests of the principals, especially, stockholders and potential investors, by providing reasonable assurance that financial statements prepared by managements are free from material misstatements and intentional errors (Watts and Zimmerman, 1986). This monitoring function of external auditors is critical to the quality of financial reports and the level of confidence by the users of accounting information. In this context, Wright and Wright (1997) posit that audited financial statements are the joint product of the auditor-client negotiation process. Therefore, audit quality is at the heart of the integrity of the audit process. That is, maintaining the integrity of the independent audit functions about financial reporting is mandatory for auditors and required by the laws and regulations of the accounting profession. However, recent accounting and audit scandals at companies such as Adelphia, Tyco International, Enron, Cadbury, and WorldCom have eroded public confidence in the independence of the accounting profession and the quality of audit services.
Audit quality describes how well an audit detects and reports material misstatements (including intentional and unintentional errors) of financial statements, reduces information asymmetry between management and stockholders and helps protect the interests of stockholders (Chen, Elder, & Liu, 2005). High audit quality is therefore associated with high information quality of financial statements because financial statements audited by high quality auditors should be less likely to contain material misstatements and unethical accounting practices. In response to the global accounting and audit scandals by accounting regulatory bodies around the world headed by the International Federation of Accountants (IFAC), stringent regulations are established and enforced, and the existing ones are reviewed. These include International Auditing and Assurance Standards Board (IAASB),International Standards on Auditing (ISA), International Ethics Standards Board for Accountants (IESBA), International Standards on Assurance Engagements (ISAE), International Standards on Review Engagements (ISRE), International Standards on Related Services (ISRS), International Standards on Quality Control (ISQC), International Auditing Practice Notes (IAPN), and Consultation Papers (IAASB, 2013).
According to IFAC (2013), through its auditing operational arm (IAASB), global financial stability is supported through high quality reporting, which could be achieve through high quality audits that can help foster trust in the quality of reporting. It also highlights the importance of audit quality and its relevance to all stakeholders in the financial reporting supply chain. With this in mind, the IAASB developed the Framework for Audit Qualitythat describes in a holistic manner, the different elements that create the environment for audit quality at the engagement, firm, and national levels, as well as relevant interactions and contextual factors.
It is worth noting that the mission of IFAC and its organs is to serve the public interest by: contributing to the development of high-quality standards and guidance; facilitating the adoption and implementation of high-quality standards and guidance; contributing to the development of strong professional accountancy organizations and accounting firms, and to high quality practices by professional accountants, and promoting the value of professional accountants worldwide; and speaking out on public interest issues.Similarly, in efforts to restore public confidence in accounting and audit services, individual countries particularly United State of America (US) and European Union (EU) has also respondents significantly. For instance, in US Sarbanes-Oxley (SOX) act of 2002 was enacted to address the issues of audit quality by increasing the independence of outside auditors who review the accuracy of corporate financial standard. Moreover, SOX created a new agency, the Public Company Accounting Oversight Board (PCAOB), charged with overseeing, regulating, inspecting and disciplining accounting firms in their roles as auditors of public companies (SOX, 2002).
The general focus of IFAC and SOX is basically on the quality of auditing in order safeguard the integrity of financial reporting and the accounting profession as a whole. The major audit attributes covered in SOX and IAASB‟s framework of audit quality include the audit independence (through audit and non-audit fees), audit rotation, audit competence and experience, and timely audit process. It is therefore concluded by the regulators that high quality audits provide a number of benefits to institutions, financial systems and existing and potential investors. Similarly, external audits performed in accordance with the best world practices and ethical standards are critical to the appropriate implementation of investment, credit and similar decisions.
However, not only accounting regulators and professional bodies responded to the gross loss of confidence in accounting and auditing profession associated with poor quality audit, researchers also joined the struggle to investigate the factors associated with audit that distort the financial reporting quality. For instance,DeAngelo (1981) and Shockley (1981) proposed that audit firm size is positively associated with audit quality, and that, larger audit firms are viewed as more independent than smaller firms. That is, larger audit firms are perceived to be more likely to resolve audit conflicts in favor of the audit firm‟s position and thus high quality financial reporting.In essence, larger audit firms are more likely to resist client management pressures than smaller audit firms in auditor-client negotiation over financial reporting issues (Chen et al., 2005). As such audit quality studies indicate that, when accounting firm size is used as the indicator of audit quality, higher audit quality is associated with less information asymmetry and higher information quality. On the other hand, a large body of research has studied the issue of auditor rotation, primarily by testing whether proxies for earnings quality (financial reporting quality) or audit quality improve or deteriorate with long-term auditor-client relationships. In view of this, the opponents of audit rotation suggest that the loss of experience with the audit client due to rotation reduces audit quality (Myers, Myers, & Omer, 2003). Similarly, Dopuch, King, and Schwartz (2001) reported that rotation discourages auditors from intentionally biasing their audit opinions in favor of management, despite incentives to compromise their independence, which affects financial reporting quality negatively. On the other hand, the long association between a client and the auditor may lead to closer identification of the auditor with the interests of the client and could lead to impaired auditor independence. Thus, mandatory auditor rotation could enhance auditor independence. Moreover, the economic view of audit quality, suggests that auditor independence and audit quality could be impaired in the early years of auditor tenure because auditors could be more accommodating to the client to extract future quasi-rents to recover losses incurred due to low-balling. Thus, restricting auditor tenure could exacerbate auditor independence rather than enhancing it.
Moreover, prior research on financial reporting quality has linked audit delays and quality of financial reporting, because audit delays can cause delay in annual accounting disclosures. Delayed earnings announcements generally cause less market reaction than early announcements due to lack of timeliness or even negative reactions as they are likely to contain bad news (Alkhatib&Marji, 2012). According to Abdulla (1996), the shorter the time between the end of the accounting year and the publication date of the year‟s financial statements, the greater the benefits that can be derived therefrom.

Another factor affecting the quality of audit is audit remuneration (audit and non audit fees) in relation to auditor independence. It is argued that audit remuneration can strengthen the auditor‟s economic bond with the client, their by increasing the auditor‟s incentives to acquiesce to client pressure, including pressure to allow earnings management which reduces the quality of financial reporting (Simunic 1984, and Beck et al,1988a). On the other hand, audit remuneration can also increase the auditor‟s investment in reputational capital which the auditor is not likely to jeopardize or satisfy the demand of any one client, and thus increase the quality of audit and financial reporting as well (Arrunda, 1999). Some of the major motivating factors for this research effort are the brazen concern associated with the rot in the financial reporting quality in Nigeria, and the recent adoption of International Financial Reporting Standard (IFRS). This made Nigeria to be a member of IFAC, where all the international accounting and auditing regulations are applicable to the Nigerian accountants and auditors. Recently, emphases have been on the effect of the type of audit firm that review and approve organizations financial reports, audit firm rotation, audit fees and audit delay on financial reporting quality in Nigeria.

MSC Project Topics in Accounting and Finance


Department: Accounting and Finance (M.Sc)
Format: MS Word
Chapters: 1 - 5, Preliminary Pages, Abstract, References, Appendix.
Delivery: Email
No. of Pages: 100

NB: The Complete Thesis is well written and ready to use. 

Price: 10,000 NGN
In Stock

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