AUDIT INDEPENDENCE

AUDIT INDEPENDENCE

Chapter 1.

1.0 Introduction

1.1 Background of the research

The topic of openness and accountability in today’s corporate entities has managed to attract publicity like never before. It has become a topic of controversy and academic study, both in advanced economies around the world, mainly because of the latest financial problems and corporate crises. Greater openness and accountability are claimed to boost the performance of corporate entities by a better source of information management, improved productivity, and increased growth opportunities.

1.2 Statement of the research problem

Openness and accountability are progressively relevant, widely applicable, but often more under-researched in enterprises. Despite the current company policy, which includes the regulatory structure and regulations regulating corporate operations, the absence or lack of openness and accountability contained in sound governance procedures has partially contributed to organizational weaknesses.

1.3 Study objectives

They are classified into two, which is general and specific purposes. The general objectives is enhancing openness and accountability in organizations.

Specific objectives include:

1. To get if the audit committee ensures transparency and also responsibility in the organizations.
2. To find out if the board independence ensures there is transparency and even accountability in the Organization
3. To highlight if the ownership provides, there are accountability and transparency in the organizations.

1.4 Scope of the Study

This research emphasizes on increasing openness and accountability in corporate organizations. The research also explores the factors that improve openness and accountability in the banking sector. The mentioned financial institutions whose activities are centered in the metropolis of Benin are investigated utilizing a formal questionnaire with a purpose of concluding.

1.5 Research Questions

• Does the audit committee improve openness and accountability in commercial entities?
• Will the Board’s autonomy enhance the openness and accountability of corporate entities?
• How would control of ownership enhance openness and accountability in commercial entities?

1.6 Significance of the research

The subject of this is essential in light of the ongoing financial crisis impacting companies in advanced countries and developing nations. The findings of this research would be of concern to monetary authorities like the state government and the central bank (Nandy, 2019). It is because legislation intended to make companies or corporate organizations more open and responsible will help regular shareholders who depend on organizational management and financial transparency and will contribute to better growth of the economy.

1.7 Limitations of the research

The problem in extracting fair, accurate, and credible information from participants – Study participants prefer to give information that they believe the analyst would have been delighted to obtain, which might not be the correct information.

Financial barrier – lack of funds continues to limit the investigator’s productivity in the acquisition of related content, literature, or data and the information collection method (questionnaire and panel discussion).

Time Limit – The analyst must deal with other scholarly works in this analysis at the same time. As a result, this would reduce the time allocated to study work.

1.8 Definition

Audit: It’s an official inspection of the company and financial records to see if they are reasonable and valid.

Independence: The right to manage a company and to make choices.

2.0 Chapter 2.

2.1 Literature review

2.1.1 Agency theory

The concept of the Organization is a constructive economic philosophy of transparency, which explains the nature and value of auditing. An entity is a network of transactions, identified by a nexus of agreements used as a way of associating the varied interests of the participants to a shared objective of maximizing the benefit of the entity. The Agency Theory marks to the unique nature of the relationship among owners of assets within the entity who are the guiding principles and those recruited to maintain these funds for reward, who are the representatives. The concept of the Agency refers to a dispute that results from a lack of trust between both the Principal and the Agent; this is the product of asymmetric information and disparities in motivation between both the two parties. The essence of the relationship established the creation as well as the reason for the value and intent of the audit.

Agency theory has not yet been commonly applicable to audit research; nevertheless, it is a valuable framework for recognizing a need for and the differing complexity of internal audit roles. The internal audit role of the company is intended to minimize the expenses of the Organization and hence the Organization. Theory keeps as a basis for describing the character and nature of the audit activities. This idea is, indeed, opposite to the results, the research of which developed that the presence of an internal audit component is not linked to the variables of the Agency. Instead, they viewed the oversight position of internal audits as replacing instead of complimenting external audits. However, it should be noted that the research was focused on the establishment of a small family company, and this can be a significant factor as the findings cannot be replicated across major public sector organizations in the light of variations in the nature of the research.

2.1.2 Theory of stimulated confidence

The theory of influenced trust, also resorted to as the philosophy of reasonable boundaries, has been created. This maintains the need for audit is motivated by the participation of external shareholders in the firm’s relations. Shareholders who allocate assets to the life and sustainability of the Organization need transparency from those responsible for managing the day-to-day activities of the company. There is an element of risk that, due to possible competing interests amongst managers and shareholders, data on the affairs of the company used by managers cannot accurately represent the situation; This information will, therefore, be subject to any objective review (Meuwissen, 2019). From such an independent investigation, the investigator will use all the tools at his or her disposition to confirm that the standards of the stakeholders are met through the provision of the required standard of assurance. The theory of trust-inspiring describes the belief that the community has a positive impact on the performance of leadership information on the inspector’s capacity, thereby promoting quality transparency. Limberg explains the auditor’s responsibilities as follows: “The insurance adjustor-confidential agent derives his duties.

• Conceptual framework

It was built from a thorough review of prior audit and legal and regulatory studies. Previous research has shown that the existence of a residence audit feature in an enterprise has a positive impact on results. This definition encourages the present study and thus theorizes that the autonomy of the internal audit feature is strongly related to increased openness and accountability. The connection between both the independent factor autonomy of the audit feature and the dependent factor openness and accountability.

Independent variable                                                Dependent variable

• The independent variable
  • Independence

Independence as an audit system quality factor will be assessed by the opinions of internal audit professionals on a range of issues related to the accounting framework of the audit system, the selection of the Chief Audit Manager, and the quality assessment of the audit system.

The table below gives a summary of the independent variables

Table 1. Measures of the independent variable

The independent factor will be evaluated using a 5-point Likert-type graded test, varying from “Firmly agree” to “Completely disagree” or “Still” to “None” based on the existence of the elements of each aspect. Audit professionals (both senior audit officer and audit staff) will be asked to present their views on the integrity characteristics of independent audits in their local governments.

• The measure of the effectiveness of internal audit in ensuring there are transparency and accountability

Internal audit efficiency in improving openness and responsibility for the purposes of this analysis would be evaluated via a 5-point Likert-type leadership interpretation questionnaire on particular issues relevant to the position of internal auditors in their specific local governments. The inquiry would also determine the degree to which guidelines for internal audits are enforced by leadership (Castillo-Merino, 2019). Literature refers to the challenges in assessing the success in internal audits in sustaining management systems and the lack of a widely accepted method for evaluation. Though, as it is pointed out, the use of the executive management guidelines by leadership as an impact indicator and the extent of execution of audit guidelines can be seen as some of the objective metrics for the efficacy of internal audits. The use and degree of implementation of the audit report demonstrate management approval for the internal audit feature. The audit research highlights the criticality of managerial help in assessing the efficacy of audit roles. Company expectations of the part of the auditor in openness and accountability will be pursued in respect of statistical risk perception and managerial action on audit suggestions.

References

Castillo-Merino, D., Garcia-Blandon, J., & Martinez-Blasco, M. (2019). Auditor Independence, Current and Future NAS Fees and Audit Quality: Were European Regulators Right?. European Accounting Review, 1-30.

Meuwissen, R., & Quick, R. (2019). The effects of non-audit services on auditor independence: An experimental investigation of supervisory board members’ perceptions. Journal of International Accounting, Auditing and Taxation, 36, 100264.

Nandy, M., Lodh, S., & Jarvis, R. (2019). Mandatory audit form rotation in the UK.