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ABSTRACT

          This project is the impact of true and fair view in financial statements is put together to cater for some uncertainties that hamper the conformity of financial statement analysis with the primary motive of audit which is to ascertain whether the state of affairs show true and fair views. On this regard, consideration was based on disclosure, materiality, appropriateness, consistency, clarity and objectivity. The objective of the study is statutory and the statement of hypothesis is properly highlighted. The literature review is properly analyzed starting from the introduction, historical background, objective of an audit, error and defalcation, contractive advice, statutory duties of an auditor, statutory right of an auditor. The analysis of bring independent, the concept of true and fair view, The concept of materiality in financial statements is another area of focus, the qualification and reason for qualification of audit report. The internal control as a means of evaluating a system. In area of design methodology, I have research data, it was based on tables and simple presentation. Test of proportion was adopted for the answer to research question and test formulated hypothesis. Conclusion and Recommendation is based on the findings or the research project, which is highlighted at the final segment of this project.

 

TABLE OF CONTENT

          CHAPTER ONE

1.0INTRODUCTION

1.1     BACKGROUND OF THE STUDY

1.2STATEMENT OF THE PROBLEM

1.3OBJECTIVE OF THE STUDY

1.4STATEMENT OF HYPOTHESIS

1.5SIGNIFICANCE OF THE STUDY

1.6              SCOPE OF THE STUDY

 

1.7              LIMITATION OF THE STUDY

 

1.8              DEFINITION OF TERMS

 

                   REFERENCE

 

         

          CHAPTER TWO

2.0REVIEW OF RELATED LITERATURE

2.1     OBJECTIVE OF AN AUDIT

1. THE SECONDARY  OBJECTIVE OF AN AUDIT

 

1. STATUTORY DUTIES OF AN AUDITOR

 

1. STATUTORY RIGHTS OF AN AUDITOR

 

1. WHY THE AUDITORS SHOULD BE INDEPENDENT

 

1. INDEPENDENCE AND THE COMPANY’S ACTS

 

1. INDEPENDENCE AND THE PROFESSIONAL BODIES

 

1. MANAGEMENT SERVICES AND INDEPENDENCE

 

1. THE CONCEPT OF TRUE AND FAIR

 

1. THE MEANING OF TRUE AND FAIRNESS

 

1. A LEGAL CONSIDERATION OF TRUE AND FAIR

 

1. THE CONCEPT OF MATERIALITY IN FINANCIAL STATEMENT

 

1. REASON FOR QUALIFICATION

 

2.7              INTERNAL CONTROL QUESTIONNAIRES AS A MEANS OF EVALUATING A SYSTEM

                  

          CHAPTER FOUR

4.0              PRESENTATION AND ANALYSIS OF DATA

4.1     DATA ANALYSIS AND INTERPRETATION (TABLE)

1. PERSONAL RESPONDENTS ON THE SEPARATION OF DUTIES BETWEEN ACCOUNT DEPARTMENT

 

1. RATING OF THE PERFORMANCE OF THE ACCOUNTS DEPARTMENT IN RELATION TO RECORD KEEPING

 

1. PERSONAL AGREEMENT AS TO WHETHER OR NOT THE COMPANY’S BOOKS ARE IN AGREEMENT WITH THE FINANCIAL STATEMENTS

 

1. PERSONAL AGREEMENT ON THE PROVISION OF NECESSARY BOOKS OF ACCOUNT TO AUDITORS

 

1. EVALUATING THE DEGREE OF COMPLIANCE IN DETERMINING THE EXTENT OF RELIANCE

 

1. DETERMINATION OF WHETHER OR NOT THE FIRM MAINTAIN ADEQUATE RECORDS TO ENABLE AUDITORS TO FORM AN OPINION

 

1. EVALUATION OF THE INTERNAL CONTROL PROCEDURE

 

1. TESTING OF HYPOTHESIS

 

CHAPTER FIVE

1. SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATION

 

5.1    SUMMARY OF FINDINGS

 

5.2      CONCLUSIONS

 

1. RECOMMENDATIONS

 

BIBLIOGRAPHY

 

 

 

CHAPTER ONE

 

 

1. INTRODUCTION

 

1.1     BACKGROUND OF THE STUDY

 

          Accounting may be said to be a communication of fact? Through the use of common means of expression, Viz words and numbers. One of the great problems with using “words” is that not everyone will necessarily understand them to mean the same thing. Even with communication by members, there can be problems, caused to a certain extent by the very exactness of numbers, but also by the fact that communication by members meritably requires the support of words. We are concerned  with what is meant by “TRUE” and what is meant by “FAIR” in the context of accounting.

          Since accounting involves, amongst other things, a consideration of the meaning and importance of;

Disclosure

Appropriateness

Materiality

Consistency

Clarity and

Objectivity

 

          The general acceptance and significance are all based on value concepts. Therefore, they require the exercise of judgment. And since, they are all inextricable involved with the presentation of a true and fair view, the determination of what is or is not a true and fair view also necessitates judgment. But, an American author, cowan, points out that effective judgment requires a clears definition of objective. The national and international accounting scene has not yet agreed on the purpose of financial reporting. Various interpretations have been preferred to the meaning of the phrase “a true and fair view”.

          The concept of independence: This concept states that the auditors independence in reporting truly reflects the basis of the truth and fairness of the financial statement.

          The concept of materiality: the word “material” and its synonym “significant” are open to very wide interpretation. A broad definition for accounting purpose is “a matter of material if its non-disclosure, misstatement or omission would be likely to distort the view given by the accounts or other statement under consideration” (Alvin A. 1984, Auditing an integrated Approach).

          Financial statements are accounting reports prepared by the company’s accountant and audited by the external auditor (who is believed to be independent) to the following interest group for investment purposes, thus is in accordance with (Chike Nwocha); they are

• The shareholders (existing and potential shareholders)
• The creditors
• The banks and other financial institutions
• The Management and directors

The financial position and profit or loss of any organisation. This is regarded as the “corporate report”, which represents the title given to the paper published in 1975 by the International Accounting Standard Committee (IASC). On the view of the IASC there is implicit responsibilities to report on every economic entity whose size or format renders it significant. This corporate report indicates the financial position of an organisation over time. The reliability and validity of this report conforms its truth and fairness as expressed by the auditor.

Therefore, in presentation of financial statements, it is the duty of external auditor to confirm that the accounts show a true and fair view of the company’s affairs if they have observed the required rules and regulations ie. accounting concepts and conventions and the standards laid down by other regulatory bodies, ie. Such as international Accounting Standards Committee, companies and Allied matters Act, to mention but a few. The scope of this research work makes it impossible for I to carryout a detained view of all relevant parties in the presentation, interpretation and otherwise of the financial statements of companies.     

1.2                 STATEMENT OF THE PROBLEM

          Financial statements are reports prepared to the aforementioned interest groups the true position of the company’s state of affairs, which help them in different capacities. There is need therefore that this report truly and practically reflect the true financial position of the company. But this fact cannot wholly be confirmed to be true, as a result of some factors found among the reporting agencies/bodies.

          Since the interest groups are to be guided, the companies Act made compulsory that those reports to the organization. This is why the external auditor is to be appointed in the Annual General meeting of the company, by the shareholders and not even by the management of the company.

          However, the audit report of the auditor has to be free from bias, but this cannot be exactly said to be the case. The following factors contribute to an extent in some audit reports Bering subjective.

1. The auditor may be denied access at all times to the books, accounts and vouchers of the company
2. Unavailability of such information and their explanation as he considers necessary for the performance of his duties [i.e. what he (the auditor) requires not what the directors think he should have]
3. The auditor is  allowed to attend Annual General meeting and to receive all notices and communications relating to such meetings.
4. The auditor is  allowed to speak at the Annual General meetings on the part of the business that concerns him as auditor.

In general terms, the auditors’ problems includes:

• Unavailability records
• Level of co-operation of management and staff of the company in the due process of the audit work.
• The view of the staff (mis-conception of the purpose of the audit).
• 100% independence of the auditor in reporting
• The adequacy of the internal controls in the company.
  1. OBJECTIVE OF THE STUDY

The objective of the study is apparent, having clearly stated the problems that limit the preparation of the financial statements. Most individuals may think that the financial statement intend to give a true and fair view on a platen of gold, but this is not easily obtainable, otherwise the rampant bank failures wouldn’t be occurring. This is why this  study provides a basis for the ascertainment of whether or not a company is duly performing or not. Against this backdrop, one can conclude that the financial statements shows a true and fair view of the financial position of the company.

The basic objectives are statutory in nature, because the statute has the requirement, which is established to be true would confirm that the statements are correct and free from material misstatements, fraud, and negligence.

The objectives include:

(i)      That the company books have been properly kept in accordance with the Acts

(ii)     That the accounts are in agreement with the accounting records.

(iii)    That proper books of accounts have been kept by the company.

(iv)    The balance sheet shows a true and fair view of the state of the company’s affairs and the profit and loss account shows a true and fair view of the results for the period.

                   Note that the balance sheet is the summary of the whole transactions embarked upon by the company, this is why it concludes that the performance of the company is in line with the relevant requirements of the standards.

1.4              STATEMENT OF HYPOTHESIS

Ho:      The company’s books are not prepared in accordance with the Acts.

Hi:       The company’s books have been prepared in accordance with the provisions of the relevant Acts/laws.

Ho:      The finan