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This paper examinesthe perception of financial statement userson the effect of the provision of non-auditing servicesby an auditor to his audit client on audit quality. A survey research design was deemed appropriate for the study. 400 respondents were sampled, however only 350 usable responses were available for the study. A five point Likert scale questionnaire was used to elicit information from the stakeholders. Descriptive statistics and the t-test statistic were employed for the analysis of the responses and testing the hypothesis for statistical significance.Descriptive statistics were used to determine the most common reasons for the responses of the financial statement users as to whether provision of non-auditing services to audit clients by auditors impair audit quality. The findings show that provision of non-auditing services to audit clients is perceived by respondents as impairing audit quality. The results also indicate the respondents’ perception of the likely non-auditing services that should not be combined by auditors when extending audit services to their clients. The results of this study have implication for regulatory action both at the Nigerian Financial Reporting Council level and at the self- regulatory level of the accounting profession in Nigeria.


Financial Statements’ auditors are important gatekeepers in any corporate governance system. They attest to the financial statements prepared by the management of a company and thus lend credibility to the statements (Adeyemi & Olowokere, 2012). Auditors are appointed by the shareholders although the Board of Directors has a say on the choice of the firm. The main objective of mandating the appointment of auditors, according to Company and Allied Matters Act (CAMA), 1990 as amended, is to enable the auditors’ report to the shareholders the position of the financial statements and activities of the firm, on whose behalf, and for whose benefit, the directors carry on the business(CAMA, 1990).Each time an auditor used the term“True and Fair view” in his report, he is saying among others that as to his examination, his independence is unquestionable; no limitation has reduced the scope of his audit below the level considered minimal, all records required by him were made available to and utilized by him, and he had exercised every professional care and skill throughout his examination of his client’s records.

Shoddy work by an auditor as a result of lack of independence can lead to audit failure. Nigeria is not spared from incidences of audit failure. Perhaps, the greatest audit failure in Nigeria in recent times is that associated with the Cadbury (Nig.) Plc. accounting scandal which came to the fore in 2006 (SEC, 2006). This scandal which has since been euphemistically dubbed Nigeria’s Enron equivalent (in terms of its magnitude) drew the ire of the Nigerian Security and Exchange Commission (SEC) on the auditors of the company. The auditors were accused, among other things, of failure to exercise due diligence and lack of professional skepticism in carrying out the audit of the company.

Audit failures are costly to investors, the auditors themselves and even the wider society as a whole. Enormous sums of money are lost every year by investors to fraud and corporate collapse. There is a raging debate as to whether provision of non-auditing services(henceforth NAS)colour the independence of the auditor and thus contribute to audit failure with its dire consequences.Audit failure occurs when management grossly misrepresents their financial statements and auditors through negligence or incompetence fail to discover and report these misrepresentations to the public (Tackett, Wolf & Claypool, 2006).

Attempts to solve the problem of audit failures have taken the front burner and cuts across jurisdictions. The genesis of current global attempts to fix audit failures, arguably, can be traced to Enron debacle in the United States of America.

Studies on the issue of corporate governance factors in audit quality in Nigeria are still evolving, and conflicts exist in findings on provision of non-auditing services (NAS) to audit clients.Adeyemi and Olowokere (2012a, 2012b,2011) found that the provision of non-auditing services significantly relates to audit quality, impairs auditor’s independence and widens the expectation gap between auditors and investors. Holland and Lane (2012) however, reject prohibition of auditors from providing non-auditing services to its audit clients. Bell, Causholli and Knechel (2012) did not find that provision of non-audit services compromises audit quality. Such studies are thus rendered inconclusive. Many of the studies also fell short on the strategic stakeholder groups targeted in the study. This study intends to bridge these perceived gaps.

Therefore, this study is set out to determine the perception of financial statement users (regulators, investors, auditors and financial statement prepares) on the effect of the provision of non-auditing services (NAS) by an auditor on audit quality.How does performance of Non-Audit services (NAS) affect audit quality? This objective is hypothesized thus:

Ho: Provision of non-audit services (NAS) by auditors to audit clients does not have a significant effect on audit quality

It is believed that this study will contribute to the debate on the effect of provision of NAS on audit quality and thus guide regulatory action in this regard.


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