Impact Of Statutory Audit On An Entity Financial Statement (A Case Study Of Nigeria Breweries)

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Impact Of Statutory Audit On An Entity Financial Statement (A Case Study Of Nigeria Breweries)

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PROJECT TOPIC AND MATERIAL ON IMPACT OF STATUTORY AUDIT ON AN ENTITY FINANCIAL STATEMENT (A CASE STUDY OF NIGERIA BREWERIES)

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  • Name: Impact Of Statutory Audit On An Entity Financial Statement (A Case Study Of Nigeria Breweries)
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CHAPTER ONE

1.0 INTRODUCTION

1.1 BACKGROUND OF STUDY

Investor confidence is fundamental to the successful operation of the world’s financial markets. When making decisions about capital allocation, investors need to know that financial information they are given is credible and reliable. The quality of audits and audit opinions expressed on financial reports are crucial to achieving a sustained investor’s confidence. Independent auditors play a vital role in enhancing the reliability of financial information by attesting to the trustworthiness of the entity financial statements. However, the study of Ghosh & Moon (2005) noted that a number of accounting and reporting irregularities and frauds in the last one decade have led to intense scrutiny of corporate governance frameworks and drove intense debate about issues such as entity financial statement audit, audit approach and audit quality. Lemon et al. (2000) noted that large audit firms periodically reengineer their audit approaches, often introducing new tools and changing the processes, policies and procedures that their auditors are to follow in conducting a entity financial statement audit. Also, Bamber et al. (1989), Hyatt and Prawitt (2001) and Kin (2007) expressed that these reengineering efforts or changes may affect not only how the audit is carried out, but may also impact important features of the work environment by changing the level of structure in the firms’ audit processes. Both structured and unstructured audit approaches were identified. Cushing & Loebbecke (1986) and Yip-Ow and Tan (2001) identified that the degree of structure in a firm’s audit approach is determined by the degree to which the firm’s approach is characterized by a prescribed, logical sequence of procedures, decisions, and documentation steps, and by a comprehensive and integrated set of audit policies and tools. Therefore, audit approach continues to be a construct of relevance and importance because the degree of structure to employ represents a potentially important decision variable that may affect audit quality every time an auditing firm changes its audit policies and procedures or introduces a new tool. Thus, research into the effects of varying levels of audit approach continues to be of potential theoretical and practical interest. Hence, a review of the various changes that have taken place in audit cannot be overemphasized. A number of changes have taken place in the audit profession during the past twenty years that have changed the way external auditors operate and manage their activities in proving the statutory attest function on the entity financial statements (Geiger & Raghunandan, 2002). Legislation has played an important role in these changes, but other factors such as the information technology explosion and environmental awareness have also had an impact on the development of audit approach. Aside from these changes, the expectations of stakeholders have become more pronounced as well as audit’s own perception of itself (Higson, 2007). It is these changes and their influence on external audit methodology and approach that this study looks at in terms of their impact on audit quality and future of audit.

1.2 HISTORY OF NIGERIA BREWERIES PLC

Nigerian Breweries Plc, is the pioneer and largest brewing company in Nigeria. It serves the Nigerian market and exports to other parts of West Africa.

The Nigerian Breweries was incorporated in 1946. Its first bottle of beer, Star Lager, rolled off the bottling lines of its Lagos brewery in June 1949. The brewery commissioned other breweries including Aba Brewery in 1957, Kaduna Brewery in 1963, and Ibadan Brewery in 1982. In September 1993, the company acquired its fifth brewery in Enugu, and in October 2003, its sixth brewery, sited at Ameke in Enugu. Ama Brewery began brewing on the 22 March 2003 and at 3 million hectolitres is the largest brewery in Nigeria. Operations at Enugu brewery were discontinued in 2004, while the company acquired a malting Plant in Aba in 2008.

In October 2011, Nigerian Breweries acquired majority equity interests in Sona Systems Associates Business Management Limited, (Sona Systems) and Life Breweries Limited from Heineken N.V. This followed Heineken’s acquisition of controlling interests in five breweries in Nigeria from Sona Group in January 2011. Sona Systems’ two breweries in Ota and Kaduna, and Life Breweries in Onitsha have now become part of Nigerian Breweries Plc, together with the three brands: Goldberg lager, Malta Gold and Life Continental lager.

In December 31st 2014, Nigerian Breweries Plc completed the merger with Consolidated Breweries Plc which added the three breweries in Ijebu-ode, Awo-Omama and Makurdi. The brands 33 Export Lager, Williams Dark Ale, Turbo King Stout, More Lager, Breezer, Himalt and Maltex(the first Nigerian malt drink) were also added.

In November 2015, Nigerian Breweries launched the international brand Strongbow cider which makes it the first in Nigeria to produce and bottle the cider category beverage.

Nigerian Breweries Plc now has ten operational breweries from which its products are distributed to all parts of Nigeria, in addition to the malting plants in Aba and Kaduna. Nigerian Breweries also supports operations in Champion Breweries Plc, Uyo.

The Nigerian Breweries owns brands like Heineken, Star Lager. Climax Energy Drink, Gulder, Goldberg, 33 Export, Legend Extra Stout, Amstel Malta, Maltina, Malta Gold, Maltex, Hi Malt, Strongbow Apple Ciders, and Fayrouz.

1.3 STATEMENT OF THE PROBLEM

Financial reporting in recent times has been characterized by several audit approaches coupled with a lack of adequacy, reliability and timeliness (Hans et al.., 2003). Subsequently, users of financial statements often question the quality of audit work done through whatever approach might have been adopted by the auditor. Many a times, auditors were seen as subservient to the wishes of the company management. Hence, the confidence that the users have is put at risk. Therefore, this study sought to examine the audit approach used and its implications on the quality of financial statement produced after the audit. It is noted that the stability of any economy is hinged on the integrity of the market and businesses operated. Consequently, a lot of problems have been facing many corporate enterprises worldwide such as the squander, the misallocation, the embezzlement of funds and their eventual collapse. These series of problems has led to various changes in the approach to the audit of an entity’s financial statement. Among the most important changes that have been witnessed include a change from the traditional audit approach to risk assessment approach and strategic approach to mention but a few. Therefore, it becomes necessary to ascertain if there is any relationship between audit approach and the quality of audit amidst the various corporate scandals witnessed after an external auditor has given its opinion on an entity’s financial statement. However, the increasing need for improved investors’ confidence evidenced by the quality of audit have witnessed very scanty contributions from a developing country like Nigeria. It is to this regard that the researcher desire to investigate on the impact of statutory audit on entity financial statement using the Nigeria breweries Plc as the case study.

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