Get the complete project »
- The Complete Research Material is averagely 69 pages long and it is in Ms Word Format, it has 1-5 Chapters.
- Major Attributes are Abstract, All Chapters, Figures, Appendix, References.
- Study Level: BTech, BSc, BEng, BA, HND, ND or NCE.
- Full Access Fee: ₦4,000
1.1 BACKGROUND OF STUDY
The non-financial sector in Nigeria has improved significantly with improved audit rotation in Nigeria. Audit involves performing procedures to obtain evidence about amounts and disclosures in the financial statements so as to evaluate the appropriateness of accounting estimates made by management (KPMG, 2008). The Audit quality therefore, is a basic ingredient in enhancing the credibility of financial statements to users of accounting information. Audit quality is a product of auditor’s independence and independence is relevant to auditor familiarity with client. When auditor becomes too familiar with a client, it may affect his/her independence. When auditor independence is impaired, the quality of audit suffers. Therefore, auditor rotation is a means of maintaining auditor’s independence.
Audit firm rotation is defined in the Sarbanes - Oxley (SOX) Act section 207 as the imposition of a limit on the period of years during which an accounting firm may be the auditor of record. Audit firm rotation is often discussed as a potential way to improve audit quality typically gaining attention when public confidence in the audit function has been eroded by events such as corporate scandals or audit failures (McLaren 1958; Seidman 1967; Corporate Accountability Research Group 1976; Hoyle 1978; Imholff 2003). De Angelo (1981) defined audit quality as the probability that an auditor will both discover and truthfully report material errors, misrepresentation and omissions detected in a client’s accounting system. This probability depends upon the broad concept of an auditor’s professional conduct, which includes factors as objectivity, due professionalism and conflict of interest. The concern about Auditor rotation arises because if a company and an auditing firm have been in close association for a long period of time, this may lead to auditors identifying with their clients management consequent detrimental effect on independence (Gray and Manson, 2008). This has actually led to suggestions that auditor should be rotated with the added benefit that this would: (i) result in automatic checks of the work of the previous auditor; (ii) encourage audit innovation; and (iii) discourage complacency (Gray and Manson 2008).
The idea of auditor rotation is not new. Professionals and regulatory bodies have discussed this subject since Senator Metcalf in 1976 suggested auditor rotation as a safeguard to prevent auditors to become too familiar with its clients. audit firm rotation is an extension of audit partner rotation, while audit firm is being replaced after a fixed number of years. The replaced audit firm is then not allowed to take on the old clients until a fixed period of years has elapsed. Some countries had tried audit firm rotation through the last two decades but they have later abandoned the idea (Porter, Simon and Hatherly, 2001). Consequently, studies (Arrunada and Paz-Ares, 1997; Healey and Kim, 2003; Brody and Moscove, 1998) have attempted to identify possible control variables for the state of audit quality. In the light of these studies, auditor tenure has become the focus of much debate.
The resulting dilemma is that the firm is faced with the decision of whether to replace its auditors after a period of time or to build and maintain a long-term relationship with the audit firm. The outcome is at polarity with conflicting findings. While some researchers have identified the need and have provided justification for auditor rotation (Healy and Kim, 2003; Ebimobowei and Oyadonghan 2011; Geiger and Raghunandan 2002) others argue on positive effects of tenure on audit quality (Ghosh & Moon, 2005; Adeyemi & Okpala 2011; Defond & Francis, 2005). Several studies (Arrunada and Paz-Ares, 1997; Healey and Kim, 2003; Brody and Moscove, 1998; Dopuch, King and Schwartiz, 2001; Myers et al 2003) have attempted to evaluate possible explanatory variables for the state of audit quality. In the light of these studies, auditor rotation has become the focus of much debate. Should a firm replace its auditors on a regular basis, or should the auditor be allowed to build a long-term relationship with the client? Studies on the impact of auditor rotation on audit quality are at polarity. A considerable number of these studies (Healy and Kim, 2003; AICPA, 1992; Carcello and Nagy, 2004) consider rotation of audit firms as a way of improving audit quality. This is because familiarity with the client has the effect of reducing the fresh point of view auditors have in the early years of engagement. The Sarbanes-Oxley Act of 2002 consolidates this view as it requires rotation of the lead audit partner every five years so that the engagement can be viewed “with fresh and skeptical eyes.”
1.2 STATEMENT OF PROBLEM
Audit firm rotation policy is very important for the increase in the performance in the non-financial sector. However the frequency of rotation may have effect the audit quality of the non-financial firm because auditors were not given much time to adjust. Conversely, other studies (Ghosh and Moon,2005; Defond and Francis,2005; Jenkins and Velury,2008) also argue that longer auditor rotation improves audit quality as auditors may need time to gain expertise in the business they audit and acquire client-specific knowledge over time. In the Nigerian audit setting, the challenge of auditor rotation and client relationship though still budding has not attracted much analytical attention and empirical studies beyond mere anecdotal opinions. Consequently, there has been a dearth of research in this area and inadequate empirical evidence from Nigeria. Thus, the study will provide empirical evidence from Nigeria on the existence or otherwise of a relationship between rotation of auditor and audit quality. The study in this regard desires to examine the determinant of audit firm rotation in Nigeria with focus on the non-financial sector in Nigeria.
1.3 AIM AND OBJECTIVES OF STUDY
The main aim of the research work is to examine the determinant of audit firm rotation in the non-financial sector in Nigeria. Other specific objectives of the study are:
1. to determine the relationship between audit firm rotation and the performance of the non-financial sector in Nigeria
2. to determine the effect of audit firm rotation on audit quality in non-financial sector in Nigeria
3. to examine whether audit firm rotation have significant effect on firm rotation in Nigeria
4. to determine the relationship between big 4-audit firm and audit rotation in the non-financial sector in Nigeria
1.4 RESEARCH QUESTIONS
The study came up with research questions so as to ascertain the above stated objectives of the study. The research questions for the study are:
1. What is the relationship between audit firm rotation and the performance of the non-financial sector in Nigeria?
2. What is the effect of audit firm rotation on audit quality in non-financial sector in Nigeria?
3. Does audit firm rotation have significant effect on firm rotation in Nigeria?
4. What is the relationship between big 4-audit firm and audit rotation in the non-financial sector in Nigeria?
1.5 STATEMENT OF RESEARCH HYPOTHESIS
H0: the determinant of audit firm rotation has no significant effect on the level of audit quality in the non-financial sector in Nigeria
H1: the determinant of audit firm rotation has no significant effect on the level of audit quality in the non-financial sector in Nigeria
H0: there is no correlation between audit firm rotation and the leverage rate of the non-financial sector in Nigeria
H1: there is correlation between audit firm rotation and the leverage rate of the non-financial sector in Nigeria
1.6 SIGNIFICANCE OF STUDY
The study on the determinant of audit firm rotation will be if immense benefit to the non-financial sector in Nigeria by looking into the non-financial sector in Nigeria; considering the problems faced by the non-financial sector in Nigeria. The study will examine the concept of audit, and audit firm rotation and also establish audit firm rotation and the non-financial sector nexus in Nigeria. The study will serve as a repository of information to other researchers that desire to carry out similar research on the above topic. Finally the study will contribute to the body of existing literature and knowledge in this field of study and provide a basis for further research
1.7 SCOPE OF STUDY
The study will cover on the determinant of audit firm rotation in the non-financial sector in Nigeria from 2000-2017
1.8 LIMITATION OF STUDY
Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet).
Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work
1.9 DEFINITION OF TERMS
Auditor independence: Auditor independence refers to the independence of the internal auditor or of the external auditor from parties that may have a financial interest in the business being audited.
Audit firm rotation: is a limit on the period during which an accounting firm may be the auditor of record
You either get what you want or your money back. T&C Apply
You can find more project topics easily, just search
SIMILAR ACCOUNTING FINAL YEAR PROJECT RESEARCH TOPICS
» CHAPTER ONEINTRODUCTION1.1 BACKGROUND OF THE STUDYThe system of tax collection and administration in Akwa Ibom State has been carryout towards the soc...Continue Reading »
» CHAPTER ONE INTRODUCTION 1.1 BACKGROUND TO THE STUDY Accounting is the art of recording, classifying and summarizing in a significant manner and in te...Continue Reading »
» ABSTRACT This project is aimed at identifying the problem of partnership business in Nigerian and how to solve some of the problem. This is an attempt...Continue Reading »
» ABSTRACTorganizational objectivesThis research work is conducted as part of the requirement for the award of a Higher National Diploma (HND) in financ...Continue Reading »
5. THE APPLICATION OF INFORMATION SYSTEMS IN THE PREVENTION OF POLLUTION IN THE MARITIME INDUSTRY (A CASE STUDY OF RIVERS PORT)» CHAPTER ONE INTRODUCTION 1.1 Background of the Study Countries with small populations and higher levels of development may cope with globalization bet...Continue Reading »
» TABLE OF CONTENTS CONTENT PAGE Title page i Declaration ii Approval Page iii Dedication iv Acknowledgement v Table of Content vi Abstract viii CHAPTER...Continue Reading »
» ABSTRACTFinancial performance requires appropriate internal audit practices to enhance efficiency. For the purpose of this study the researcher sought...Continue Reading »
» ABSTRACT The objective of this study was to evaluate the internal control system in operation at power holding company of Nigeria Plc in Enugu State w...Continue Reading »
9. THE ROLE OF ACCOUNTING IN THE CONTROL OF PUBLIC EXPENDITURE (A CASE STUDY OF ISOKO NORTH LOCAL GOVERNMENT COUNCIL)» CHAPTER ONE INTRODUCTION 1.1 Background Of The Study For some years ago, public expenditure remains an area of study relatively unexplored. Despite th...Continue Reading »
» CHAPTER ONE INTRODUCTION 1.1 Background of to study As a result of petroleum products being the major exporting product among others, of our country. ...Continue Reading »