Statutory Audit Research Articles

Federal Tax Revenue and Government Expenditure on Roads and Power in Nigeria

Government spending on infrastructural development is a key driver for the growth and development of any economy. Evidence from literature has shown that Nigeria was lagging behind on spending for infrastructural development as every sector of the Nigerian economy is challenged with huge infrastructure deficit and decay. The extent of government spending on roads and power in Nigeria, funded from federal tax revenue had remain uncertain. Studies have shown that while many developed and developing countries have fully diversified to income from taxes to fund infrastructure for development, Nigeria was yet to fully integrate income from taxes into its development programmes. Therefore, this study examined the effect of federal tax revenue (companies income tax, petroleum profit tax, customs and excise duties, value added tax and tertiary education tax) on government expenditure on roads and power in Nigeria. The study adopted an expo facto research design. The study evaluated the effect of federal tax revenue on government expenditure on roads and power in Nigeria from 1994-2021. A purposive sampling technique was adopted. Data were extracted from the Central Bank of Nigeria Statistics Bulleting, Office of Budget and Fiscal Policy, Nigerian Exchange Group and the Federal Inland Revenue Services. The validity and reliability of data were premised on the statutory audit of the financial statements of the government agencies by the office of the Auditor General of the Federation. Descriptive and inferential (multiple regression) statistics were used to analyze the data at 0.05 level of significance. The study revealed that government expenditure on roads (Adj.R2 = 0.806, F (5, 21) = 25.097, p < 0.000) and government expenditure on power (Adj.R2 = 0.742; F (5, 21) = 17.63; p <0.05) were significantly affected by federal tax revenue. The study concluded that federal tax revenue influenced government expenditure on roads and power in Nigeria. Hence, the study recommended that as a priority, the Federal Inland Revenue Service and other relevant tax authorities should device and implement strategies that will ensure effective collection of tax revenue from taxpayers. The federal government should strengthen tax administration in the country through capacity development programmes for staff of the Federal

FORENSIC ACCOUNTING AND AUDIT TO STRENGTHEN CORPORATE GOVERNANCE

Forensic accounting is a distinct specialized field of accounting. It is described as a dynamic and all-encompassing instrument for investigating financial fraud that includes a thorough review of records to support financial fraud and serves as supporting documentation in legal proceedings. It involves applying scientific knowledge to legal proceedings and tries to use accounting reports for legal reasons to survive legal scrutiny for criminal prosecution. It has been determined that internal and statutory audit systems are insufficient to prevent frauds, and it is urgently necessary to redefine the function of auditors. As a result, forensic audit is expected to grow dramatically. This paper is descriptive and qualitative in nature and is based on secondary sources of data. It clarifies the idea and application of forensic accounting and recognises its significance in corporate governance. The Forensic Audit Investigation Methodology has been discussed and the regulatory stance on Forensic Audit in India has been elaborated. It also identifies the difficulties in implementing Forensic Accounting in India. The use of forensic auditing as a preventative measure has given management and regulators access to intricate financial concealment. Since stakeholders have grown to comprehend the significance of forensic audit and recognise its relevance, a regular procedure is now employed to preserve an entity's operational accuracy and managerial effectiveness. The forensic audit should be made mandatory in order to stop scams before they start and increase security awareness to fight fraud. India's financial sector reforms are intended to increase its versatility, efficiency, and competitiveness.

Corporate governance disclosure: Empirical evidence in the Portuguese capital market

The corporate governance theme has been a subject of great debate due to the financial scandals of recent years. However, it is currently seen as a key factor for the success of organizations. This is because of the strong evolution that it has undergone over the years and the increase in financial market demands. Corporate governance is also seen as a crucial component in strengthening investor confidence. According to the literature, good corporate governance allows for the achievement of a degree of trust necessary for the proper functioning of a market. Currently, good corporate governance practices contribute to attracting investors, increasing stakeholder confidence, raising a company's reputation, and increasing business transparency among other benefits. The present study aims to analyse corporate governance disclosure in companies listed on Euronext Lisbon in 2020. To achieve this aim, we perform a content analysis of the corporate governance and annual reports as well as the consolidated annual accounts of a sample comprising 32 companies listed on Euronext Lisbon as at 31st December 2020. To analyse the extent of disclosure, a disclosure index is created based on the recommendations of the Portuguese Securities Market Commission; this makes it possible to measure the degree of compliance with recommended disclosures. Only disclosures related to the board of directors, the audit committee, the external auditor, and the statutory auditor are considered. The average value of the disclosure index is 0.977, with the most disclosed information related to the statutory auditor and the least disclosed related to the audit committee. This study contributes to a good understanding of corporate governance in the Portuguese context.

Non-Financial Reporting and Assurance: A New Opportunity for Auditors? Evidence from Portugal

Research on auditing professionals’ perceptions of non-financial reporting and its assurance is relatively scarce, and the majority of the existing studies pay little attention to the assurance aspect. Our study contributes to strengthening this type of research by investigating Portuguese audit professionals’ perceptions of non-financial reporting and its assurance. The purpose of the current paper is to identify the perceptions of Portuguese audit professionals about non-financial reporting, particularly the responsibility for its preparation, its mandatory or voluntary natures, and how to improve non-financial reporting and its assurance. We also analyze whether these perceptions are associated with sex and work experience. The perceptions of statutory auditors were surveyed by using a questionnaire. Results allow us to conclude that Portuguese statutory auditors agree that non-financial reporting assurance is an important practice, and that company management should be responsible for the preparation and publication of non-financial reports. They consider that assurance of these reports should be conducted by a statutory auditor and think that the Institute of Portuguese Statutory Auditors should have a more active role in this matter. Notwithstanding, very few of the respondents have experience with this type of assurance, which may explain their acknowledgment of the importance of additional training. Work experience and sex do not influence the perceptions of the auditors. Findings suggest the existence of a positive attitude towards non-financial reporting and its assurance associated with the acknowledgement of its underdevelopment in Portugal. As far as we are aware, our study is the first to focus exclusively on Portuguese auditing professionals’ perceptions concerning non-financial reporting and assurance.

Information Sharing between Tax and Statutory Auditors: Implications for Tax Audit Efficiency

ABSTRACT We examine whether tax audits become more efficient if tax auditors have access to information about statutory audit adjustments. To this end, we extend the standard tax compliance game by including a statutory auditor and analyze the strategic interactions among a firm issuing financial and tax reports, a statutory auditor, and a tax auditor. We show that granting the tax auditor access to information on statutory audit adjustments can, in some cases, increase tax revenues while simultaneously decreasing tax audit frequency. Thus, more information sharing between statutory and tax auditors could be a policy instrument to combat tax evasion and increase tax audit efficiency. However, the tax audit efficiency enhancing effect comes at the cost of a reduction in financial statement quality as the probability of overstated financial assets increases. Moreover, depending on the importance of firms' financial statement valuation, the additional information may also reduce tax revenues. The regulator must, therefore, carefully weigh the potential efficiency gains from information sharing on statutory audit adjustments that are derived in this study against the potential efficiency losses.

Marketing of Accountancy Services in Nigeria: The Institutional Constraints

This paper examined the institutional constraints in the marketing accountancy services in Nigeria. It was established that accountancy services are many, and they include services provided by accountants other than statutory audit. In view of the fact that providers of these services are professionally qualified accountants, there must be some competition among them, leading to intense marketing activities. However, this paper found that professional bodies, in particular, Institute of Chartered Accountants of Nigeria (ICAN) have developed stringent guidelines, rules, and professional ethical standards that seriously curtail marketing activities of product (service) development, and service distribution, pricing, and promotional activities among accountants in Nigeria.

The Effectiveness of Strategies Used to Combat Earnings Management in Commercial Banks in Tanzania

This study investigated earnings management in the Tanzanian context. The study specifically focused on the effectiveness of earnings management strategies in Commercial Banks in Tanzania. The research aimed to answer a key research question: How effective are the strategies used by commercial banks in Tanzania to combat earning management. Many studies on earnings management focus on listed and/or large firms, which leave out the Commercial Banks, especially in developing countries like Tanzania. The conceptual framework with two variables (organizational strategies and stakeholders' strategies) was developed from the literature review. The qualitative approach was considered the most appropriate for the study. Being informed by participants' position in the preparation and analysis of financial statements, fourteen participants, including two (2) Chief financial officers, two (2) Financial controllers, two (2) Performance managers, two (2) External auditors, and two (2) Internal auditors, two (2) Audit committee members and two (2) stakeholders were purposively selected to from the study sample. McIntosh and Morse (2015) suggested that open-ended semi-structured interviews were used for data collection. The findings of the study were analyzed using a thematic research approach. Following inductive thematic analysis, five effective strategies in combating earning management in commercial banks in Tanzania emerged. The findings of this study indicate that internal control, governance system, competence of the bank personnel, statutory audit, and Central Bank oversight are the effective strategies used to deal with earnings management. Participants disclosed that adopting these strategies could reduce the incidence of commercial banks' earnings management problems. In many respects, the present study adds knowledge to the existing body of knowledge. Based on the literature reviewed, this study stands as the first and only research to analyze the strategies used in an emerging market by commercial banks to deal with earnings management in Tanzania. This research relates to restricted earnings research performed in developed countries. The study results could be used, in particular, by commercial banks, organizations, and other stakeholders involved in ensuring the reliability of the financial statements issued. The reliability of the released financial statement would be strengthened by focusing on the strategies to deal with earnings management in commercial banks.

The development of audit activities: challenges, opportunities, prospects in the context of the digitalisation of the economy

Subject. Audit services as an effective tool for identifying challenges of financial and business operations of economic entities in the modern digital economy. Purpose. An original study of the practical significance of audit automation tools and the identification of the features of the software to be used during audits. Methodology. To achieve the goals, the scientific methods of analysis, synthesis, analogy, classification, and logical approach were used. Results. Key features of software products that allow reducing energy consumption during audits and ensure compliance with all statutory audit rules and standards were identified. The importance of using information technologies in order to improve the quality of provided audit services was proved. Conclusions. The conclusion was made that it is advisable to automate processes during all stages of audits by reviewing and critically assessing the essential characteristics of the most common software tools which can serve as a basis for information for audit organisations facing the choice of implementing information technologies in their core activities.

COVID-19 government grants, liquidity indicators and going concern uncertainty

The purpose of this study is to enhance our understanding of the effect of the liquidity position on going concern reporting during the COVID-19 liquidity crisis. The first possible effects of COVID-19 as they occur in 2020 are enclosed in the financial statements of 2019 as an event after the balance sheet date. By studying a sample of 579 financial statements of private (non-listed) companies that are subject to a statutory audit in the Netherlands, we find that both liquidity indicators and government grant applications result in a higher propensity to issue a mandatory going concern paragraph in the financial statements. Additionally, we find no evidence that liquidity levels prior to the COVID-19 pandemic crisis affect an application for a government grant.

Continuous Fraud Assessment within the External Auditing

Abstract This paper is dealing with the first pioneering steps to introduce continuous fraud risk assessment tools and techniques in the medium size audit clients in Montenegro. Based on the available experience and audit evidence data gathered in the period 2019 to 2021 statutory audits of medium size enterprise the clients were open and perceptive to adopt simple techniques of the continuous fraud assessment by applying the MS Excel templates. The beforementioned approach is improving the quality of internal control, lowering the levels of asset’s misappropriation, improving the quality of financial and non-financial reporting, regulatory compliance and significantly preventing illegal acts within the enterprise.

Financial Inclusion and Stakeholders Value: Employees and Management Staff, Customers, Creditors and Depositors in Deposit Money Banks in Nigeria

Stakeholders’ value maximization involves taking into consideration the needs, interests and value of stakeholders in any organization with utmost and high priority at all times. Value maximization objective of stakeholders is a major concern of deposit money banks (DMB) because failure to actualize it can threaten their going concern. Deposit money banks have adopted financial inclusion in recent time to maximize the value of its stakeholders but many of these stakeholders are yet to obtain full value for their investment. This study investigated the effect of financial inclusion on stakeholders’ value in deposit money banks in Nigeria. Ex-post facto research design was employed in the study. The population of the study consisted of 16 Deposit money banks quoted in Nigerian Stock Exchange (NSE) as at December 2020. Judgmental and purposive sampling technique was used in selecting a sample of 10 banks. The validity and reliability were premised on the statutory audit of the financial statements of the banks. Descriptive and Inferential (Multiple regression) statistics were also employed in analyzing the data. The study found that financial inclusion had significant effect on employees and management staff value in deposit money banks = 0.58, F (5, 94) = 37.55, p< 0.05).Also financial inclusion exerted significant effect on customers, creditors and depositors value in deposit money banks in Nigeria (Adj.R 2 = 0.7315, F (5, 94) = 54.95, p< 0.05).The study concluded that financial inclusion affect stakeholders’ value in deposit money banks in Nigeria. The study recommended that deposit money banks management should improve on their employees’ remunerations and training; they should intensify effort in giving loan and advances to customers and also ensure their customers are using digital banking to transact businesses.

Performance Management and Market Capitalisation of Listed Oil and Gas Companies in Nigeria

Market capitalization has become a universally accepted indicator of business valuation. The capitalization of a company is the product of the price of a share for the number of shares issued and listed. The global market crash of 2008 led to the Nigerian stock market losing nearly N9 trillion causing many shareholders to lose interest in the capital market. The inconsistency of reduced dividend payments, dwindling retained earnings and re-investment of profits by the management of these companies are creating worries and concerns for financial analysts and shareholders at large which have adversely affected market capitalization. Therefore, the study examined the effect of performance management on the market capitalization of listed oil and gas companies in Nigeria. The study adopted an ex-post facto research design and the population consisted of 11 listed oil and gas companies. The sampling techniques were purposive and convenient. Data used were secondary data from financial statements of the 6 selected listed oil and gas companies. The validity and reliability were premised on a statutory audit of the financial statements. Data were analyzed using descriptive and inferential statistics and Performance Management (PM) measure significantly affects with Market Capitalization of oil and gas companies listed in Nigeria F-Stat/Wald Stat (Prob) = F (5, 114) = 123.11 (0.0000) , AdjR 2 = 0.8369, P< 0.05). The study recommends that managers should not be interested in estimating previous costs behaviour patterns only in projects appraisal, they should be investigating cost dependence and their behaviour on different factors to reduce their overhead cost. Knowledge of cost behaviour and dependence may lead to lower overheads (production and administrative) that ultimately result in a better valuation of market capitalization.

Performance Management and Dividend Yield of Listed Oil and Gas Companies in Nigeria

Increasing shareholder value has become a strategically important part of the decision-making process. Recently, many companies have started to implement shareholder value principles from strategy development to performance measurement and these principles are implemented into all business units of the company. A dividend is the part of the earnings the company pays to its investors, and the dividend yield is how much the company pays out relative to its share price. Investors have different preferences concerning dividends. The failure of business leaders to prioritize dividend yields of shareholders has resulted in poverty, weak infrastructure, insecurity, poor governance, weak public sector, and corruption, which allows tax evasion, corporate exploitation, abuse of employment rights, environmental degradation and other corporate externalities. The study, therefore, examined the effect of enterprise performance management on the dividend yield of listed oil and gas companies in Nigeria. The study adopted an ex-post facto research design and the population consisted of 11 listed oil and gas companies. The sampling techniques were purposive and convenient. Data used were secondary data from financial statements of the 6 selected listed oil and gas companies. The validity and reliability were premised on a statutory audit of the financial statements. Data were analyzed using descriptive and inferential statistics. The findings revealed that the Performance Management (PM) measure significantly affected the dividend yield of oil and gas companies listed in Nigeria ( F-Stat/Wald Stat (Prob) = F (5, 114) = 3.72 (0.0037) , Adj. R 2 = 0.1037, P< 0.05) . The study concluded that Performance management significantly affects the dividend yield of selected listed oil and gas companies in Nigeria. The study, therefore, recommends that the management of listed oil and gas companies in Nigeria should know the fundamental characteristics of performance management in each area of responsibility/business function/processes to improve the dividends yield of stakeholders.

IMPACT OF CREATIVE ACCOUNTING PRACTICES ON FINANCIAL STATEMENTS: A CASE STUDY OF PALESTINIAN AUDITORS AND ACADEMICS

This paper presents an initial study considering the impact of creative accounting on financial statements in Palestine to determine the involvement of Palestinian companies in creative accounting and to illustrate how creative accounting affects the financial performance of these companies. This study adopted a descriptive design of the ex-post facto type, with a sample of 100 auditors’ and academics’ perspectives. Questionnaires were sent to a random sample of accounting instructors and auditors in Palestine. The result showed that accountants and academics evaluated the impact of advanced accounting approaches on the reliability of financial reporting to improve its credibility. Both positive and negative consequences may result from using cutting-edge accounting methods. The adverse effects of new accounting systems on financial reporting were researched in this study. The research shows that statutory auditors may play a key role in minimizing the detrimental impact of new accounting systems on the reliability of financial reporting.

Key audit risks and audit procedures during the initial year of the COVID-19 pandemic: an analysis of audit reports 2019-2020

PurposeThe purpose of this study is to explore audit procedure disclosures related to key audit risks, during the prior year and the initial year of the COVID-19 outbreak, by reporting on matters published in over 3,000 Australian statutory audit reports during 2019 and 2020.Design/methodology/approachThis study partially uses latent semantic analysis methods to apply textual and readability analyses to external audit reports in Australia. The authors measure the tone of the audit reports using the Loughran and McDonald (2011) approach.FindingsThe authors find that 3% of audit procedures undertaken during 2020 were designed to address audit risks associated with the COVID-19 pandemic. As a percentage of total audit procedures undertaken during 2020, the authors find that smaller practitioners reported much less audit procedures related to COVID-19 audit risks than most larger audit firms. Finally, the textual analysis further found differences in the sentiment or tone of words used by different auditors in 2020, but differences in sentiment or tone were not found when 2020 was compared to the prior year 2019.Originality/valueThis study provides early evidence on whether auditors designed audit procedures to deal specifically with audit risks that arose due to the COVID-19 pandemic and on the extent and nature of those audit procedures. The study will help policymakers to better understand whether Key Audit Matters provided informational value to investors during a time of global crisis.

Study on the Importance of the Statutory Auditor

The global economy is constantly changing and innovating, new situations are emerging and adaptability to these conditions is essential. Thus, the importance of the statutory auditor has become more and more accentuated, the value offered by him through the mission he carries out as well as through the opinion he issues is much more substantial than it is seen at first sight. This article aims to highlight the importance of the statutory auditor in the global economy. The image of the entities is transposed in an audit report and through a positive opinion it brings credibility, respect, prosperity and trust both economically and socially. The auditor offers perspectives and open doors to creditors, investors and collaborators and internally contributes to staff accountability, business transparency and devotion from stakeholders. In order to give credibility to the audit report, we need to know who prepares it, what are the skills and competencies required and what kind of training and professional experience is required to practice this profession. Through a research on the conditions imposed by the legislation as well as on the path that an auditor must follow in order to acquire this quality, I will demonstrate the professionalism of the auditor as well as the value that he brings to the audited entity.

Enterprise Risk Management in the Nigerian Insurance Industry

The study looked at how Nigerian-listed insurance companies performed in terms of enterprise risk management (ERM). An ex post facto research design was used in the study. According to Nigeria Stock Exchange (NSE) data, as of December 30, 2021, there were 23 insurance businesses listed on the Exchange (NSE). Ten Nigerian insurance firms made up the sample size. In choosing the selected firms, we used the convenience sampling approach. The sample firms’ financial statements and annual reports were used to collect data for the study. The statutory audit of the financial accounts served as the foundation for validity and reliability. Inferential (multiple regressions) and descriptive statistics were used to analyze the data. According to the findings, ERM has no significant impact on the earnings per share, return on assets, or return on equity of Nigerian-listed insurance companies. According to the study’s findings, ERM has little or no financial impact on Nigeria’s listed insurance businesses. The research proposed that risk committee meetings be held regularly in order to improve performance and that members of the committee should be proficient in managing risk-related issues. It also suggested that the committee be allowed to operate independently.

Statutory Auditors’ Independence in Protecting Stakeholders’ Interest: An Empirical Study

The central theme of the book is statutory auditors’ independence in protecting stakeholders’ interest which has created a lot of buzz over the last couple of years. Quite a few books have been published in this field, among which the works of Jones (2011, John Wiley & Sons), Saha (2015, Lap Lambert, Germany), Adelopo (2012, Routledge) and Saha & Roy (2017, Emerald) are notable. The book adds to the existing pool of knowledge by making a cross-country analysis of regulatory and ethical framework governing statutory auditors’ independence in select countries; comparing the statutory auditors’ independence in select cases of corporate accounting scandals; and empirically analyzing the opinion of select classes of respondents on three inter-linked themes that represent the title of the book. Corporate failures and accounting scandals had shaken the investor confidence in the accountability of big corporate houses. There had also been public disquiet about the role of professional auditors associated with these corporate scandals. Every time a scandal got exposed, question on auditors’ independence was raised. In some cases, big audit firms were observed to have a nexus with the management to falsify financial reports and in other; their unintentional negligence resulted in disastrous consequences. Stakeholders were betrayed and ethical responsibility of the auditors was questioned. Hence, statutory audit failure in the backdrop of recent corporate accounting scandals and their irreparable impact on stakeholders’ interest of the business is the main theme of the book.

Compliance with the provisions of the Corporate Governance Code by companies listed on the Romanian capital market with respect to the formation and functioning of audit committees

Abstract The corporate governance pillars have been intensively discussed in the literature and the formation and functioning of the audit committees have a special place in this world. Considering the existing conclusions retained by the literature on the influence of the audit committees on the performance of the companies, we intend to analyse the current status quo of the level of compliance for the listed Romanian companies in this field. Corroborating the recommendations of the corporate governance code provided by the Bucharest Stock Exchange along with the provisions of the norms that regulate statutory audit in Romania, we find a positive evolution of the level of compliance for the Romanian companies with respect to the formation and functioning of the audit committees.

Artjewel: No Treasure for Posh Ventures

The case aims to serve as a basis for discussing private equity investment strategies in emerging markets such as India, covering the due diligence process, private equity (PE) exit routes, and associated risks. It also focuses on the conflict-of-interest issues when statutory auditors also assume advisory roles.