An Appraisal Of Auditing And Application Of International Auditing Standard In Public Sector (Local Government) In Nigeria

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ABTSTRACT

The auditors in the Local Governments are a watchdog of Public officers in terms of financial activities. They critically examine the financial activities of governments to ensure minimum financial and auditing standards are not compromised, and to ensure stewardship in the utilization of public funds by ultimately adhering to all relevant statutory provisions. This raised the concern of researcher as to whether the financial statements of the local councils and audit reports on the statements comply with relevant standards. 

The main objective of this study is the appraisal of auditing and the application of International Auditing Standards (IAS) in Kwara State Local Governments of Nigeria. While the specific objectives includes: (i) to examine whether the financial statement prepared and presented by the councils complies with professional guidelines laid down by international public sector accounting standards (IPSAS); (ii) to examine the auditors compliance with the provision of International Auditing Standards (IAS); and (iii) to examine the effectiveness and efficiency of the internal control system in Kwara State Local Governments. 

The descriptive design was adopted for the study with a sample size of 120. The simple random sampling technique was used. The structured questionnaire was the main instrument used for data collection and the z-test statistical tool was used to test the stated hypotheses.

The results indicate the conformity with the IPSAS and IAS by the councils and auditors respectively, the result also show the existence of internal control system in Kwara state local councils. Based on the findings, some recommendations made are: (i) all activities of the councils should be monitored and effectively controlled by the internal control system; (ii) to ensure all time compliance, the councils should keep preparing and presenting their financial statement in line with the provision of IPSAS; and (iii) the local councils should, make sure at all time, report all revenue accruing to it, both internally generated and the allocation, and report the use of it.

Based on the findings of this study, it was therefore concluded that despite the numerous benefits identified, there are also militating factors, if these factors are taken care of, the level of quality audit report, that will be produce by auditors, on the financial statements of local governments in Nigerian will increase drastically and this will also help to achieve the objectives of the relevant standards.

TABLE OF CONTENT

Title page

Approval page

Dedication

Acknowledgement

Abstract

Table of content

CHAPTER ONE: INTRODUCTION

1.1 Background to the study

1.2 Statement of the problem

1.3 Research questions

1.4 Objectives of the study

1.5 Justification for the study

1.6 Hypotheses of the study

1.7 Scope of the study

1.8 Plan of the study

1.9 Definition of terms

CHAPTER TWO: REVIEW OF RELATED LITERATURE

2.1 Introduction

2.2 Conceptual Framework

2.2.1 Appraisal of Auditing

2.2.2 Concept of Local Governments

2.2.3 Management Control in Local Governments

2.2.4 International Auditing Standards

2.2.5 Application of International Auditing Standards in Kwara State LGs

2.2.6 Duties and Responsibilities of Auditor Generals

2.3 Theoretical Framework

2.4 Empirical Framework

2.4.1 Research Gap

CHAPTER THREE: RESEARCH DESIGN AND METHODOLOGY

3.0 Introduction

3.1 Research design

3.2 Sources of data

3.3 Population for the study

3.3.1 Sample technique/sample size

3.4 Method of Data Collection

3.5 Method of Data Analysis

CHAPTER FOUR: DATA ANAYSIS AND PRESENTATION

4.0 Introduction

4:1 Data Analysis/Presentation

4.2 Analysis Section A Question

4.3 Analysis of Section B Questions

4.4 Test of hypotheses

4.5 Discussion of Result

CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS

5.1 Introduction

5.2 Summary of the findings

5.3 Conclusion

5.4 Recommendations

5.6 Suggested Area for Further Research

REFERENCES

APPENDIX / QUESTIONNAIRE

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND TO THE STUDY

Auditing in the public Sector is an independent examination of, and an expression of an opinion on the financial statements of governments by a duly appointed person(s) in accordance with all relevant statutory obligations.

Auditing is as essential in the public sector as it is in the private sector. Section 85 of the 1999 Constitution states that there shall be an Auditor-General for the Federation. The role of the Auditor-General is to ensure that there is accountability by the Executive arm of the Government to the Legislative arm, for the proper administration of the activities, functions, operations and programmes of the government and its various agencies.

In other words, the auditor in the Local Governments is a watchdog of Public officers in term of financial activities. He critically examines the financial activities of governments to ensure minimum financial and auditing standards are not compromised, and to ensure stewardship in the utilization of public funds by ultimately adhering to all relevant statutory provisions.

Nigeria runs a convoluted federal system of government. Obviously, one of the impediments of this current convoluted governance structure is the over concentration of powers, enormous responsibilities and resources of the state at the centre. The sharing formula for revenues accruing to the nation bears eloquent testimony to this by allocating 56% to centre, 24% for states and 20% to Local Councils. For a long while, this lopsided arrangement has given impetus to the demand for devolution of powers. The ongoing National Conference came at the right time to objectively tackle the issue and remedy the situation.

However, to the consternation of all, the Political Restructuring Committee of the conference penultimate week veered off the track by inconceivably suggesting the de-listing of Local Government Administration entirely from the constitution of Nigeria. Ultimately the suggestion if implemented will annihilate the only reason why Nigerians thought government exists in the rural areas in the first place. This wrongly mooted ideal should not be allowed to find its way into the recommendations of the National Conference, pronto!

Surely, the impact of Local Government administration has not been felt in majority of the states in Nigeria since 2003 when the aberration called joint state and local government account was created. This contraption gave state governments the unfettered, undeserved leverage to blatantly divert allocations meant for local government councils to other non-appropriated interests.

Over the years, states and local government councils have become paupers or mere appendages of the almighty federal government only to fail woefully in meeting the aspirations of their people. In the same vein, states have wittingly reduced the local government administration to a mere government house department which can only function at the whims of the executive governor. In some states, local government elections are yet to be held in more than seven years. Governors now determine which project to execute or not in local governments they neither know well nor even visit in their four-year tenure, (The Nation Newspaper, 2014).

Apart from the provisions of the 1999 Constitution, the Audit Act, 1958 also provides that the Accountant-General of the Federation should furnish the Auditor-General for the Federation with the country’s financial statements within seven months after the close of each financial year.

In the early history of public accounting, when accounting associations started to emerge during the 1880s in the United Kingdom (UK), the quality of audit examination often varied widely, depending on the skill understanding and judgment of the particular auditor involved.

Even at that early stage in its development, the profession quickly recognized that standards as such were clearly needed. For instance, the American Institute of Certified Public Accountants (AICPA) formed a committee on auditing procedures in the 1950s. That committee was interest in setting the audit standards for use by auditors. The AICPA Committee published its report in 1954 (AICPA, 1954). This report was the basis of registering auditing companies in the United States (US) for much of the 50s into 70s.

To this end, the American profession began drawing up a number of authoritative standards that have now undergone several decades of refinement and interpretation. A set of Generally Accepted Auditing Standards (GAAS), to use their official designation, was issued. It is essential that every auditor have a thorough understanding of these standards. These standards are the model that should be used to judge an auditor’s performance level.

Auditing standards are important to the user of accounting reports and data such as banks, host community, shareholders, government, creditors etc. The standards explain the responsibility and independence of the auditor from the point of view of management and shareholders.

International standards have been formulated to harmonize auditing practices between different nations and are to be applied where there are no local standards. In Nigeria, the International Standards on Auditing (ISA) are mandatory for both private and public organizations. But due to the peculiarity of the Nigerian environment on July, 2006 nine (9) Nigerian Standards on Auditing (NSA) were issued. These claimed priority over the ISAs in the Nigeria context.

The objective of the audit of financial statements is to enable the auditor to express an opinion on whether the financial statements were prepared, in all material respects, in accordance with an identified financial reporting framework. The auditor’s opinion is intended to enhance the credibility of the financial statements. To achieve these objectives there are requirements that should be satisfied according to the ISAs and NSAs.

It has been asserted that many Nigerian auditors are not complying with the general auditing standards, field work standards and reporting standards and that there is a need for guidelines for applying the broad concept of these requirements to Nigerian circumstances. Against this backdrop, the paper is therefore to examine auditing standards as they influence auditor’s performance.

1.2 STATEMENT OF THE PROBLEM

The problems inherent in this research study as will be investigated by the researcher are;

1. Non compliance with professional guidelines laid down by International Public Sector Accounting Standards (IPSAS) in preparing and presenting Kwara State Local Governments financial statement.
2. Non compliance with the provision of International Auditing Standards (IAS) by auditor in carrying out their audit assignment on Kwara State Local Governments financial statement.

iii. No effective and efficient internal control system in many Kwara State Local Governments.

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