CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Over the years, the influence of auditors on financial reports of firms or companies all over the world has become a source of concern to users of financial information’s such as investors, shareholders, stakeholders etc. In view of the importance of quality financial reporting, the International Federation of Accountants (IFAC) and it audit arm, International Auditing and Assurance Standards Boards (IAASB) stated that audit service is an assurance service that the financial statement prepared by the managers is true and fair and free from intentional and unintentional errors and misstatement and, that it also conforms to the relevant rules and regulations guiding the preparation and presentations of accounting information’s. According to (IAASB 2013) global financial stability is supported through high quality reporting which can be achieved thought high quality auditors type.
Auditors type can be seen as an audit firm made up by a group of auditors or a single auditor with the sole responsibility ofexaming books of accounts vouchers of organization in order to detect fraud, errors, misstatement and rendering professional services. The auditors type are:
The Big4 auditors The Non Big4 auditors Joint auditors
The ability of audit firm to provide high audit quality, capable of producing high financial reporting quality is attributed to certain features of the auditor’s firm. These features are:
Auditors independence Auditors compensation Auditor’s type.
For the purpose of this study our concern will be drawn to just one of these features which is the “Auditors type”.
The auditors type is conceived as financially independent and highly experienced from any pressure from the client’s “to look the other way” in their role of discovering irregularities. Moreover, Big4 auditors have more to lose should a scandal arises in that their brand names and reputation as more valuable compared to the Non-Big4 auditors.
According to Becker, Defond, Jiambalvo and Subra manian (1998) is off the opinion that, the Big4 auditors have shown to have higher accrual quality financial report while the lowest level of quality occurs when a single auditor is responsible for the audit engagement.
Therefore, this study is motivated by critical role that the auditor’s type influences the quality of financial report of manufacturing firm in Nigeria.
1.2 STATEMENT OF THE PROBLEM
The rate of organizational failure in recent times is alarming and of great concern to all. Research has revealed that wrong preparation and presentation of financial report which is the ground on which decision is made is one of the major contributions to these failures and the auditors type that detect errors and misstatement in any manufacturing firm also influences the quality of the financial report of the firm. Therefore, in as much as accurate financial reporting is very essential to any manufacturing firm, it has much impact to create due to some inherent problem faced by the company such as:
Misappropriation of Assets and Funds Mismanagement of Fund Fraudulent Practices Operational Losses etc.
To ensure that resources used achieve beneficial objective, there is serious need for accurate and quality financial reports with the help of the right auditor type either the Big4 auditors or the Non-Big4 auditors.