In recent times there is an existence auditor expectation gap which has triggered attentions on knowing the actual role cum functions of an auditor. This quest leads to this research which is aimed at ascertaining the impact of legal audit requirements on the auditors performance in Nigeria using Guinness Nigeria PLC. The research formulated the following three specific objectives; determine the impact of audit requirements on the performance of Auditors in Nigeria. Ascertain the influence of unqualified audit report by internal control mechanisms of Firms in Nigeria and ascertain the effect of legal audit requirements on the auditor’s performance. Thus, research questions and research hypotheses were structured in accordance with the specific objectives. In a bid to achieve a meaningful research study work, this research will review related literatures on the impact legal audit requirement on the performance of auditors. Which were sub-divided into three subheadings such conceptual framework, theoretical framework and empirical review. However, in the quest to perfect this research; survey research design was adopted were data was sourced primarily through questionnaire instrument. The questionnaire instrument was used to 92 staff of Guinness NigeriaPLC, Aba, Abia branch of which 65 were completely filled and returned. Thus, the data gathered were analyzed using simple regression. The analysis however made the following findings; That there is a significant relationship between audit requirement and auditor performance in Nigeria, that there is an affirmative effect of unqualified audit report on auditor’s performance in Nigeria and that legal audit requirements has a momentous influence on auditor’s performance in Nigeria. Sequel to the findings and conclusion, the research made the following recommendations that the State legislative arm should ensure that the independence of the internal auditor is guaranteed by a statute, such that he will discharge his duties without fear of any form of molestation or duress, that the present fight ageist corruption in Nigerian should include an assessment of the performance of internal auditors and that This study also points to the fact that auditors are financial performance role models and their inability to satisfy this role expectation will lead to role incompatibility and goal incongruence in a role set.

CHAPTER ONE

INTRODUCTION

1. Background to the Study

Most businesses are established by the shareholders for profit making and they would want to know if they are making profit or loss. Since human beings are prone to errors that could adversely affect the profit. Therefore, there is need to find a way of checking these errors in the financial statements of organizations this calls for auditing. Audit plays an important role in developing and enhancing the global economy and business firms. Auditors express an opinion on the fairness of financial statements. This is important for the users of financial statements to gain assurance that the data are being reported, properly measured, and fairly presented. Auditors must raise their skills in order to increase the probability to rely more on the auditor’s report and audited financial statements which are more relevant, unbiased and accurate for the decision makers.

Auditing is the independent examination of an expression of opinion on the financial statements of an enterprise by an appointed auditor in pursuance of that appointment and in compliance with any relevant statutory obligation. Auditing is usually carried out by qualified personnel known as auditors who may be external or internal. These Auditors are the informants that attest to the effective use of financial resources of companies. Consequently, the auditor’s opinion directly influences users of financial statement. This may include internal users e.g. shareholders, but also external users e.g. banks, suppliers, consumers etc.

According to Emile Wolf (1997), Business without auditing stifles confidence and auditing without law is force. Therefore, it is the legal prescriptions and their consequences on auditing that will form the framework of this research. The legal Framework presently used in auditing in Nigeria is known as CAMA 1990, which will be applied and used judiciously. All the regulatory codes of the auditing profession in Nigeria will be consulted to elucidate the findings of this work. Therefore, this research implores ways of using audit laws to investigate the legal unbars and it’s implication on auditing of businesses and finally suggest ways of improving the practice of auditing in the federal republic of Nigeria.

Auditing is a safeguard measure since ancient times Loeb and Shamoo (1989) Audits provide third party assurance to various stakeholders that the subject matter is free from material misstatement. As a result of an audit, stakeholders may evaluate and improve the effectiveness of risk management and control etc.

Legal audit is an appraisal of an organization’s operations to determine its compliance with the laws and regulations that apply to it. Audit guides the evaluation process by checking the company’s performance against legal standards and identifying areas where adherence needs to be stricter. The legal framework represents all enabling laws (Acts of parliaments and Judicial Pronouncements) which guide and have an impact on the audit, the auditor and the audit engagement. The contravention of these laws is actionable in the court of law. Thus, examples of these laws among others include:Companies and Allied Matters Act (CAMA) CAPC20LFN2004, Institute of Chartered Accountants of Nigeria Act, 1965, Securities and Exchange regulations, Insurance Act, Independent Corrupt Practices Commission (ICPC) Act, Economic and Financial Crimes Commission (EFCC) Act, Financial Regulations (as amended), Civil Service reform Act (as amended) and Audit Act (as amended)

There is no superiority in the provisions of these laws; the CAMA being the principal legal document is the focus of this chapter. It is the law that regulates the incorporation of companies in Nigeria. These laws and regulations have an effect on financial statements which varies considerably. These laws and regulations to which an entity is subject to constitute the legal and regulatory framework. The provisions of some laws or regulations have a direct effect on the financial statements in that they determine the reported amounts and disclosures in an entity’s financial statements. Other laws or regulations are to be complied with by management or set the provisions under which these entity is allowed to conduct its business but do not have a direct effect on an entity’s financial statements. It is responsibility of management, with the oversight of those charged with governance, to ensure that the entity’s operations are conducted in accordance with the provisions of the laws and regulations including compliance with the provisions of laws and regulations that determine the reported amount and disclosures in an entity’s financial statements.

Generally, organizations and the businesses they carry on are governed by law. Failure to comply with the specific laws of governing a particular organization can attract penalties or legal liabilities in the form of litigation.

However, the nature of law is such that it might be difficult for an in-house counsel to identify all the existing loopholes in the entire departments of an organization. Moreover, the major function of an in-house counsel is to proffer solution to legal liabilities incurred by the organization.

The function of the in-house counsel more often does not cover the following; the examination or analysis of the intricacies of the law: the interpretation of complicated sections of the law with hidden legal implications, the continuous development of the law in dynamic sectors; the systematic compliance with provisions of the law and the numerous legal restrictions of the law which can be used as a tool to hold an organization legally responsible for an action or omission. Such risks cannot be easily prevented by equipping an organization with the best in-house counsel or by conducting a financial audit on an organization. Legal audit on the other hand is quite different from financial audit but encompasses financial audit by ensuring that financial audits have been conducted in addition to ensuring that a company has observed the laws and policies which are applicable to that company.

Therefore, the above analysis boils down to this question: Is legal audit necessary for organizations carrying out businesses In Nigeria? This research work examines the concept of legal audit by tracing the history of audit, it thereafter examines the meaning of legal audit and how it applies to organizations carrying on business in Nigeria.

It also analyses the benefits attached to conducting a legal audit as well as provides a description of the various types of legal audit.

It concludes by suggesting legal audit as a means of putting an end to endless court cases, financial liabilities and available legal liabilities in organizations.

1.2 Statement to the Problem

In this system, we shall examine the situation which exists in the Nigeria Auditing Scene as the basis for the problem which has been chosen for investigation. A good number of studies have been carried out on the impact of legal audit requirement on auditor’s performance in Nigeria. For instance Obiaks (2018), conducted a study on the impact of legal audit requirement on the performance of auditors in Nigeria. The need to evaluate the impact of legal audit requirement on auditors performance in Nigeria had long be recognized in view of the enormous resources of money and materials utilized by various sectors of the economy. Specifically, the National Root Crops Research Institute, Umudike. These resources when judiciously used with respect to the economy, efficiency, and effectiveness in executing project and services, their audited financial statements will be reliable. A large number of business failures in the past were attributed to the inability of financial managers to properly plan and control its materials and resources which really hindered the performance of auditors in Nigeria coupled with the increasing cost of running and carrying an audit exercise. Furthermore, the recent global financial crisis today has created some loopholes in the application of financial reporting standard. This is so because a lot of audited reports today do not reflect the true and fair view of their principal. Audited firms (Auditors) are appointed today based on personal relationship rather than merit and it is this, that this study seeks to bridge the gap in the literature review.

1.3 Objectives to the Study

The main objective of this study is aimed at assessing the influence of audit requirements on the auditor’s performance in Nigeria.

Specifically, the research intend to:

Determine the impact of audit requirements on the performance of Auditors in Nigeria.
Ascertain the influence of unqualified audit report by internal control mechanisms of Firms in Nigeria.
Ascertain theeffect of legal audit requirements on the auditor’s performance.