One gospel that is vigorously preached in today’s corporate world is the need to embrace corporate governance. Corporate governance is all about enhancing stakeholder value. There is a need to institute well-developed international standards on best practices in business management for the benefit of all stakeholders. The existence of international standards would definitely bring peace of mind to investors, creditors and regulatory agencies etc., all over the world. A very critical issue in corporate governance is the control of compliance with international financial regulations, which is the concern of auditing and investigation. That is why this week we are x-raying this text entitled “Audit and Investigation”.
It is written by Olugbemiga Olagbaiye, a 1978 graduate of Pharmacology from the University of Ibadan, Oyo State, Nigeria and a member of the Institute of Chartered Accountants of Nigeria (ICAN) and the Chartered Institute of Taxation of Nigeria (CITN). Olagbaiye, who has been involved in student training and development since 1984, has varied experience in accounting practice in the public and private sectors of the Nigerian economy. He has also been a professor at the Nigerian Army College of Finance and Administration (NASFA), Apapa, Lagos, Nigeria for approximately two decades.
Olagbaiye says that a determination to provide lasting solutions to the difficulties experienced by students at tertiary institutions in general, and those preparing for the professional examinations of the Institute of Chartered Accountants of Nigeria, in particular, motivated him to write this book. He ensures that the book will be a very useful guide for academics and practitioners alike, especially as particular attention has been paid to developments that have significantly affected the work of auditors, including the recent Accounting and Auditing Standards and Guidelines.
The text is segmented into 22 chapters. Chapter one is interrogatively christened “Why audit?” Here, Olagbaiye teaches that auditing today involves scrutinizing a company’s account with enough detail to ensure that auditors can form an opinion based on truth and fairness. He notes that the auditors’ opinion will be expressed in a written report addressed to those who commissioned the audit or to those to whom the auditors may have legal responsibility.
This author also discusses the concept of stewardship. He explains that stewardship is the name given to the practice whereby productive resources owned by one person or group are managed by another person or group of people. Olagbaiye reveals that today, most companies are operated by limited liability companies that are owned by shareholders and managed by directors appointed by them.
It also sheds light on the financial statements and the parties involved. In his words, “In general, the annual reports and accounts are prepared for the attention of the members of a company, that is, the shareholders. However, a much wider range of people are now interested in these annual reports and accounts and these are: owners or shareholders; lenders or debenture holders; employees; customers; providers; stockbrokers…”
The second chapter is based on the matter of Audit and Public Limited Companies Law. In this chapter, the author x-rays different provisions of the relevant statutes regulating the practice of auditing in Nigeria. He explains that a person will not be qualified for appointments as a company auditor unless he is a member of a body of accountants in Nigeria established by law or decree.
Chapter three focuses on audit planning. Olagbaiye says that Nigerian Standards on Auditing (NSA) 8, i.e. “Planning for a Financial Statement Audit”, is the local standard governing audit planning. He extends that the purpose of the NSA is to establish standards and provide guidance on the considerations and activities applicable to planning an audit of financial statements. This NSA falls within the context of recurring audits and the requirements of this standard are substantially compliant with ISA 300, ie “Financial Statement Planning and Auditing”, Olagbaiye educates. He adds that planning an audit involves establishing the overall audit strategy for engagement and developing an audit plan to reduce audit risk to an acceptable low level.
In chapters four through ten, Olagbaiye shines his intellectual spotlight on concepts such as audit evidence; audit time; modern audit stages; verification of assets and liabilities; audit working papers; said report; and accounting standards.
Chapter 11 examines the code of ethics in auditing. This professional accountant says that the code of ethics is essentially a set of professional ethical standards that regulate the relationship of public accountants with their clients, employers, employees, group members and the general public. According to him, in Nigeria, upholding ethical standards is a collective concern of ICAN and members of the accountancy profession.
In chapters 12 to 18, he analytically discusses the x-ray concepts of the internal control system; internal audit; auditors’ responsibility; research; fraud and error; special audits; and stock transfer audit.
Chapter 19 has a thematic focus on stock valuation. Olagbaiye teaches that assets can be real or financial. Physical assets, according to him, are called “real assets,” while securities like stocks and bonds are called “financial assets.” He says that a well-informed and well-functioning capital market is called an “efficient capital market.”
In chapters 20 to 22, Olagbaiye examines the concepts of the computer-based accounting system; public sector audit; and accounting as an indispensable profession.
If there is something that stylistically underlines the strength of this book, it is the didactic way of presenting the highly sequential concepts that are the product of in-depth research. The modality is also complemented by the mastery and simplicity of the language. The outer cover design embedded with physical auditing and research symbols visually suggests the overall theme of the text.
The layout of the text is fine. In summary, the content of this text reflects a perfect blend of Olagbaiye’s experience in academia, as well as in the public and private sectors, as it consistently radiates all three professional backgrounds.
However, some minor errors are found in the text, which should be corrected in the next edition. One is “Acknowledgment” (page viii) instead of “Acknowledgments.” Another is “…to allow auditors to train” (page 1), instead of “…to allow auditors to train.” The use of the preposition “To” is mandatory, with the verb “Enable” in the previous and following (double) forms. However, the second “To” is almost always omitted in Nigerian English, probably because it is “thought” to be redundant. The use of the second “To” is a kind of correlative like “Either or” and is a mandatory transformation in the syntax. Another error is “Third Party” (page xi) instead of “Third Party”.
Generally, this text is a treasure trove of auditing knowledge; a high-level radiation of intellectual insight. Therefore, it is recommended for students, teachers, auditors, as well as operators and regulators in the public and private sectors.