The Impact Of Audit Report On Investment In Financial Institution

The Impact Of Audit Report On Investment In Financial Institution

Abstract

This study arose from a desire to comprehend the influence of an audit report on investment in a financial organization. Some financial institutions in the modern world find it difficult to expand and grow. It is because of the audit report that the company’s financial statements were evaluated by the shareholders or investors. If the financial statements show that the company is profitable, it will attract and motivate potential shareholders and investors to make an investment decision in the company. The audit report instills trust in the minds of the shareholders. The audit report is critical in making decisions. This study offers solutions to these issues that might influence any financial organization. In addition, this work contains information gathered via document and questionnaire that demonstrated the influence of the audit report on financial institutions. The data was collected on tale, and a basic percentage was used in the data analysis. The study found that audit reports can help any financial organization make a sound investment selection. It was suggested that the potential benefits of auditing be achieved by improving auditor independence.

Chapitre One

Introduction

1.1 General Description Of The Study Area

Most businesses today are managed by others appointed by the owners rather than the owners (shareholders). The term “stewardship” refers to this activity. Furthermore, the owners who designate the Directors to care after their property will be concerned about what has happened to it. As a result, the Directors must report on and account for the duties entrusted to them by the shareholders. Financial statements are used in the reporting and accounting process.

The financial statements are generated annually and take the form of a “Annual Reports and Account” that comprises a profit and loss account, a balance sheet, and other statements (such as the Director’s report and Auditor reports). The issue that has arisen over the Director Report to Shareholders indicates that can the shareholders believe the report? The report may contain errors, fraud, or incorrect information.

The remedy to the aforesaid problem that the owners may have with the Director is to select an impartial individual known as a “Auditor” to study the reports and report his findings to business members. So, at the end of the audit process, he will make a statement to the company’s members indicating his opinion on whether it reflects a true and fair picture or not. The “Audit report” is the statement represented by the Auditor.

The audit report is the final output of the audit and is highly important since it explains what the auditor did and how he feels about it. Furthermore, all accountants believe that the accountability process is incomplete without an audit, and that for an audit to be effective, the person doing it must be independent.

Based on this, shareholders must rely on the audit report when making investment decisions; they must also evaluate the financial statements of the company in which they desire to invest. And, because some of these investors lack expertise of accounting and financial statement analysis, they must rely on others to undertake these tasks for them. As a result, they will make their investment based on the auditor’s report.

1.2 The Problem’s Statement

An audit report gives credibility and confidence to a company’s financial statements. The audit’s major goal is for the auditor to claim that they do not.

Most of the time, the intended effect on the auditor’s report is not clean, and the effects it produces are unknown. Audit findings are also widely overlooked and frequently misunderstood by the general public. Aside from these issues, there are certain misconceptions concerning auditors. Some people regard auditors as toothless watchdogs and scammers, and as a result, they do not trust the reports they make.

There is also a lack of understanding about the significance of conducting an audit on financial statements that may contain inaccuracies or fail to disclose fraud. As a result of these issues, the researcher chose this research topic to emphasize the need and importance of conducting audits in order to educate and enlighten share holders and future investors.

1.3 The Study’s Objective

The primary goal of this research is to investigate the extent to which audit reports influence investors in financial institutions, with particular reference to Oceanic Bank PLC.

The study seeks to investigate, among other things, the purpose and objectives of an audit process, as well as the need and value of reviewing a certain firm’s audit reports before making an investment choice.

It is hoped that by doing so, this study will be of significant benefit to shareholders and future investors, particularly those looking to invest in Oceanic Bank Plc.

1.4 Question For Research

It is critical to identify the challenges related with this research because it is critical to comprehending the goal task itself.

Despite the existence of auditors for various financial institutions, the major goal of these auditors is to provide trust to the owners of these organizations and potential investors. However, the problems that arise are to what extent are audit reports issued to their investors and the investors’ faith in the audit report produced by the auditor. As a result, the research questions are as follows:

What are the consequences of an audit report for a financial institution?

What are the goals of a financial institution audit report?

What are the advantages of audit reports to Oceanic Bank Plc shareholders?

1.5 The Research’s Hypothesis

Hypothesis No. 1:

Hi: There is a strong link between audit reports and investment.

Ho: There is no statistically significant association between the audit report and the investment choice.

Hypothesis No. 2:

Hi: The inclusion of a standard audit report in a set of financial statements will have a substantial impact on investor behavior.

Ho: Adding a standard audit report to a set of financial statements has no substantial impact on investor behavior.

1.6 The Study’s Significance

The importance of this study is that it will be extremely beneficial to shareholders and potential investors who are making investment decisions.

In Nigeria, investment decisions frequently fail to materialize. The lack of a good audit report was one of the elements that contributed to this failure. As a result, this study will be valuable to shareholders and new investors who are interested in investing, as audit reports will be a significant instrument for their investment.

This study will also act as a guide for researchers who want to learn more about report writing. It is hoped that the study’s findings and suggestions would serve as a valuable resource for individuals, businesses, and the general public looking to invest.

1.7 The Study’s Limitations

This study endeavor, like many other projects, has constraints. One of the limitations is the company’s staff’s inability to share essential information needed for the project. There is also the issue of time constraints. This project has a specific goal in mind: to fulfill my graduation requirements. This project must be completed by the specified deadline or it will lose its effectiveness.

1.8 Study Objectives

This project is concerned with the rationale for releasing audit reports and the influence of audit reports on investment in a financial institution, specifically Oceanic Bank Nigeria Plc.

The scope of this study will include the audit report’s content, preparation, and importance to the shareholders and the institution. The study also looks at the different types of audit reports and their impact on financial organizations.

1.9 Term Definition

Audit: An audit is the independent review of an expression of opinion on a company’s financial statements by an appointed auditor in accordance with that appointment and in accordance with applicable rules and regulations.

An auditor is an impartial individual, usually a chartered or certificate accountant, who is appointed by an enterprise to carry out an audit process and provide his judgment on the enterprise’s financial statements.

Audit Report: An audit report is a statement made by the auditor to the members of an enterprise stating his opinion on the enterprise’s financial statements.

Financial statements, which typically contain the profit and loss account, balance sheet, and cash flow statements, are considered as a framework for recording and organizing financial information.

The firm or organization whose financial statements are being audited is known as the auditee.

Stewardship Accounting: This is the procedure through which the manager of a business accounts or reports to the business’s owners.

Investment Decision: This is the decision to allocate resources or finances to long-term assets that will provide benefits in the future.

Audit Evidence: The number of documents and other types of evidence required to support an auditor’s professional opinion on a set of financial statements for a business.