Home » Accounting » AN EVALUATION OF THE FACTORS INFLUENCING AUDIT QUALITY OF BUSINESS ORGANIZATIONS...

AN EVALUATION OF THE FACTORS INFLUENCING AUDIT QUALITY OF BUSINESS ORGANIZATIONS IN CAMEROON (A CASE STUDY OF ECOBANK, CAMEROON)

Sold By: | Item Type: Project Material | Report this?  |  Attributes: 54 pages | 1-5 chapters | Amount: ₦5,000 | Marked useful: 1,315 times

Delivery: Within 24 hours

AN EVALUATION OF THE FACTORS INFLUENCING AUDIT QUALITY OF BUSINESS ORGANIZATIONS IN CAMEROON (A CASE STUDY OF ECOBANK, CAMEROON)

CHAPTER ONE

INTRODUCTION

1.1 Background of the study

The current evolution of the company landscape has demonstrated a growing demand for the implementation of an audit procedure. The ownership of a corporate entity, which includes shares and investments, can be held by multiple parties (Jeli, 2021). Regulations mandate that financial reports, which are created and presented by corporate management to shareholders, undergo scrutiny to ensure their truth and impartiality, thereby maintaining the separation between shareholders and company managers.

A Statement of Basic Auditing Concepts (ASOBAC) provides a definition of auditing as a methodical procedure carried out to impartially gather and assess evidence concerning the assertion of different economic acts or events, with the purpose of determining the degree of compliance between these assertions (Jeli, 2021). Audit operations are performed by external entities or independent parties, which is crucial for a company to do (Probohudono et al., 2019). The audit report will serve as a baseline for assessing the quality of the audit process. Independent party audit reports serve as a resource for three distinct interest groups: the managers of the audited company, the company's shareholders, and external parties including potential investors, creditors, and suppliers. An audit is a rigorous examination conducted by an impartial entity to minimise the likelihood of discrepancies between the information presented by the manager and the financial accounts held by stakeholders (Godwin, 2021). Financial statement users, particularly shareholders, rely on an audit report from an independent party to assess the accuracy and impartiality of a company's financial statements before making decisions. This elucidates the crucial function played by the independent party in validating a company's financial accounts.

The public accounting profession is a vocation that is based on the confidence and reliance of the general public. Public accounting is a profession that carries the weight of public trust, as public accountants bear significant responsibility in accurately evaluating and presenting a company's financial accounts. Public accountants play a crucial role in providing trustworthy information that serves as a foundation for making informed decisions (Arisinta, 2019). The primary responsibility of the public accounting profession is to enhance the dependability of a company's financial statements. This ensures that the public, particularly shareholders, may access trustworthy financial information to make informed decisions. Public accountants bear a significant duty in ensuring the quality of audits they conduct, since it directly impacts the trust placed by users of audited financial reports and other services. Benson et al. (2018) assert that a high level of audit quality enhances the dependability of financial statement information, hence aiding shareholders (investors) in more accurately assessing the estimated worth of the organisation.

External auditors are required to have work experience and professionalism according to auditing standards. This is to enhance the quality of audits and to ensure that auditors are capable of understanding and adjusting to changes in the audit scope. According to Carey (2021), sufficient job experience can enhance an individual's task completion performance. Greater job experience of an external auditor directly correlates with higher audit quality. Professionalism has a direct impact on the quality of audits and the competence of auditors, which in turn affects their performance as employees (Wardayati et al., 2019).

In addition to the expertise and professionalism of the external auditors, the performance of the external auditors is also affected by time constraints and the length of their employment in conducting audits. The research indicates that Swedish auditors' performance in audits is negatively affected by time constraints, resulting in a decrease in the quality of their work (Broberg et al., 2017). Moroney et al. (2019) asserted that the impairment of auditor independence resulting from personal ties with clients can impact their cognitive dispositions and viewpoints. In their study, Davis et al. (2022) found a negative correlation between the duration of the audit engagement (tenure) and the quality of the audit report on the financial statements. Several abnormalities or violations related to audit quality can be observed in different situations, such as the case of Enron Corporation in late 2001, where the Public Accounting Firm Arthur Andersen served as its public accountant. The bankruptcy of Enron was attributed to inadequate audit quality. Public Accountant Arthur Andersen was convicted for his complicity in colluding with business executives to manipulate Enron Corporation's financial information. The rationale behind this occurrence stemmed from a lack of independence inside the Arthur Andersen Public Accounting Firm. This was exacerbated by the fact that they had been engaged in auditing services for their customer, Enron Corporation, for a period of 20 years (Ntia et al., 2021).

According to WE Online (2017), there were two auditors from the Public Accounting Firm Klynveld-Peat-Marwick-Goerdeler (KPMG) and PricewaterhouseCoopers (PWC) who were fined millions of pounds for their failure in conducting audits, leading to low audit quality. KPMG was found to have failed an audit conducted by the Securities and Exchange Commission (SEC) regarding energy company Miller Energy Resources. It was determined that KPMG had provided an unqualified opinion on the financial statements, which revealed that the company had manipulated the increase in the carrying value of its assets, inflating it to 100 times its actual worth in the 2011 financial statements. Subsequently, PwC incurred a financial penalty and faced censure from the Financial Reporting Council due to PwC's acknowledgement of a mistake in its examination of RSM Tenon Group during the 2011 fiscal period (Ntia et al., 2021). 

A study conducted by Mulyadi (2017) found that auditor experience has a substantial and beneficial impact on the quality of audits. The findings of Slamet (2019), Nirmala et al. (2018), and Wulandari et al. (2019) regarding the experience of auditors align with Mulyadi's (2020) research, which asserts that auditor experience has a substantial and favourable impact on audit quality. The findings of Futri and Juliarsa's (2018) research diverge from past studies as they indicate that auditor experience does not have any impact on audit quality, hence contradicting prior research. The study conducted by Mulyadi (2017) found that auditor professionalism has a substantial and favourable impact on the quality of audits. However, the study conducted by Futri and Juliarsa (2014) found that there is no correlation between auditor professionalism and audit quality. The study conducted by Ningsih and Yaniartha (2017) on time budget constraint reveals that it has a notable adverse impact on the quality of audits. The research conducted by Nirmala et al. (2013) further corroborates the findings of other studies, indicating that time budget pressure has a notable adverse impact on the quality of audits. Contrary to prior research findings that suggest time budget pressure has no substantial positive impact on audit quality, a study conducted by Zam and Rahayu (2020) opposes this claim. Additionally, Arisinta (2019) asserts that time budget pressure does indeed influence audit quality.

Kurniasih and Rohman (2017) conducted research on audit tenure and found that it had a notable detrimental impact on audit quality. This study is additionally corroborated by Panjaitan and Chariri (2018), but the research conducted by Wulandari et al. (2018) contradicts prior findings that suggest audit tenure does not have a noteworthy and favourable impact on audit quality. Hilman et al. (2020) did research on mistake detection expertise and found that it has a significant impact on the quality of audits. 

In Cameroon, where the business climate is characterised by economic instability and regulatory complications, it is crucial to prioritise audit quality in order to ensure the stability and growth of corporate organisations. Ecobank is a prominent financial company in Cameroon, offering a diverse array of banking services to individuals, corporations, and governments. Ecobank Cameroon, a subsidiary of Ecobank Transnational Incorporated (ETI), operates in more than 30 African nations and holds a prominent position in Cameroon's banking industry. The bank's dedication to rigorous financial reporting and governance sets it apart as an exemplary subject for assessing the elements that impact audit quality. This study intends to comprehensively analyse the factors that impact audit quality at Ecobank. Its objective is to provide a thorough understanding of the main determinants of audit quality and propose practical solutions for enhancing it. Ensuring the audits are of superior quality is crucial for cultivating stakeholder trust, improving corporate governance, and advocating for sustainable business practices in Cameroon.

1.2 Statement of the problem

Audit quality is an essential determinant in guaranteeing the precision, dependability, and openness of financial accounts in corporate entities. The success of audits in Cameroon is crucial due to the country's economic instability and intricate regulatory framework. Although the significance of high-quality audits is well recognised, numerous corporate organisations in Cameroon, including Ecobank, encounter obstacles that can undermine the quality of audits.

Dysfunctional behaviour is believed to have a moderating effect on audit quality. Kelley (2022) asserts that dysfunctional behaviour directly affects the quality of audits. This is because dysfunctional behaviour diverges from auditing standards. This behaviour demonstrates a propensity for irresponsibility in completing tasks. Examine dysfunctional audit practices, such as suddenly ending audit procedures, altering audit stages, and decreasing processing time. The dysfunctional behaviour exhibited by auditors can be attributed to attribution theory. Dysfunctional behaviour may arise when an auditor succumbs to external pressures beyond their control, leading them to engage in dysfunctional conduct throughout their assignment. Yuen et al. (2019) state that any threat to the quality of an audit will inevitably affect its independence. Disregarding independence as an auditor poses a danger of failing to report irregularities in the financial accounts, which reduces the quality of the audit. In such cases, the auditor may be compelled to engage in dysfunctional behaviour to fulfil their duties.

In addition, Arnold et al. (2019) state that a limited amount of time allocated for an audit assignment has the potential to decrease the proficiency of auditors. Auditors typically conduct analyses within a restricted scope, depend on less dependable evidence, and exclude some audit techniques. If the auditor minimises dysfunctional behaviour, the reliability of audit quality will increase, even when facing significant time budget pressure. This statement aligns with the findings of Margheim et al. (2017), which revealed that auditors experiencing significant time budget pressure are more prone to exhibiting dysfunctional behaviour, and vice versa.  According to Wu (2019), an auditor who possesses a high degree of Machiavellian traits has the capacity to be ineffective when doing their tasks. Winanda and Wirasedana (2018) suggest that auditors with a strong Machiavellian inclination are likely to engage in dysfunctional behaviour by deliberately breaking limits in order to benefit themselves. Undoubtedly, this conduct will inevitably affect the calibre of the audits conducted by an auditor throughout the execution of audit tasks.

Various factors impact the quality of audits, including auditor-related characteristics like competence and independence, as well as client-related factors such as the complexity of operations and the efficacy of internal controls. Furthermore, external variables such as the legal framework and economic circumstances have a substantial impact on determining the quality of audits. Given Ecobank Cameroon's substantial presence in the financial industry and extensive operations, these concerns are particularly relevant. Audit methods that are not efficient can result in undiscovered financial discrepancies, heightened operational risks, and failure to comply with regulatory obligations. Ultimately, this can have a negative influence on the bank's financial well-being and the faith of its stakeholders. The objective of this study is to identify and assess the characteristics that impact the quality of audits in commercial organisations in Cameroon, with a particular emphasis on Ecobank. The study seeks to examine these elements in order to gain a deeper understanding of the current status of audit procedures. It attempts to identify areas that may be improved and provide solutions to enhance the quality of audits within the corporate environment of Cameroon.

Objectives of the study

The primary objective of this study is to critically evaluate the factors influencing audit quality of business organizations in Cameroon (a case study of Ecobank, Cameroon). Specific objectives of this study are to:

To investigate the factors that impact audit quality at Ecobank, Cameroon.

To evaluate the Role of Auditor Expertise on the quality of audits at Ecobank.

identify the Role of Auditor Independence on the quality of audits at Ecobank, Cameroon

to Identify the main challenges faced by auditors at Ecobank in achieving high audit quality

1.4 Research Questions

The following research questions which are in line with the objectives of this study will be answered in this study:

What are the factors that impact audit quality at Ecobank, Cameroon?

What is the Role of Auditor Expertise on the quality of audits at Ecobank, Cameroon?

What is the Role of Auditor Independence on the quality of audits at Ecobank, Cameroon?

What are the main challenges faced by auditors at Ecobank in achieving high audit quality?

1.5 Research Hypothesis

To determine the effectiveness of this study, the following research null hypotheses will be formulated to guide the study and it will be tested at 0.05% levels of significance.:

Ho: There are no significant factors that impact audit quality at Ecobank, Cameroon

Ha: There are significant factors that impact audit quality at Ecobank, Cameroon.

1.6 Significance of the study

The importance of this study resides in its capacity to enhance financial performance by improving the efficiency of auditing, reinforcing internal controls, fostering transparency, guiding strategic decision-making, informing policy and best practices, supporting organisational growth, and offering practical insights for the manufacturing sector. It plays a role in both academic research and the practical improvement of auditing and financial management procedures.

The study aims to uncover the elements that impact audit quality in order to offer valuable insights on how auditing methods may be enhanced at Ecobank and other comparable organisations. Consequently, this results in enhanced precision and dependability in financial reporting. Gaining insight into the variables that influence the quality of audits aids in pinpointing specific areas where auditors may improve their expertise and approaches, resulting in superior audit results.

Moreover, conducting high-quality audits enhances the precision and dependability of financial accounts. The study's results can aid in guaranteeing the accuracy and authenticity of financial reports, accurately representing the organization's actual financial status. High-quality audits and dependable financial reporting enhance stakeholders' confidence in the organization's financial well-being and governance. This includes investors, regulators, and customers.

Moreover, the analysis assists in identifying vulnerabilities in audit procedures and elements that could impede the quality of audits at Ecobank. This allows the organisation to tackle these difficulties and enhance its financial management and controls. Ecobank can enhance the efficiency and effectiveness of its audit procedures and outcomes by comprehending the elements that impact audit quality and allocating resources accordingly.

Moreover, the study might provide policymakers and regulatory agencies with valuable insights about the efficacy of existing auditing standards and processes in Cameroon. This has the potential to result in enhancements in regulatory frameworks and standards. Gaining a comprehensive understanding of the elements that influence the quality of audits is crucial to guarantee that auditing methods are in line with both national and international legislation. This, in turn, promotes improved compliance and governance.

In conclusion, this study offers empirical evidence to the academic literature on audit quality, serving as a basis for future research on themes such as the influence of audit quality on financial results and corporate governance. The findings provide a foundation for further investigations into the quality of audits and the factors that influence it. This might potentially result in more targeted studies on specific elements that impact audit processes in various organisational settings.

1.7 Scope of the study

Broadly, this study focus is to critically evaluate the factors influencing audit quality of business organizations in Cameroon. Specifically, this study seeks to assess the Current Audit Quality in Business organizations in Cameroon, investigate the factors that impact audit quality in Business organizations in Cameroon and evaluate the Role of Auditor Expertise on the quality of audits in Business organizations in Cameroon. 

Further, this study will focus on identifying the Role of Auditor Independence on the quality of audits in Business organizations in Cameroon and it also seeks to Identify the main challenges faced by auditors in achieving high audit quality in Business organizations in Cameroon.

 The study is carried out in Cameroon. 

1.8 Limitations of the study

As with any human endeavour, the researchers experienced many minor constraints during the investigation. The main limitation was the lack of extensive literature on the subject, due to the limited availability of data about the assessment of factors that impact the quality of audits in Cameroonian corporate organisations, specifically focussing on Ecobank, Cameroon. Hence, a significant allocation of time and exertion was necessary to ascertain the appropriate materials, books, or information and amass data. 

Furthermore, this study is constrained by its small sample size and narrow geographical scope, focusing solely on Cameroon. Therefore, the conclusions of this study cannot be extended to other situations, thus requiring further investigation. 

Moreover, the researcher's restrictions were primarily due to financial constraints, as they are a student without any source of income to sustain themselves. The exorbitant transportation costs at the research location posed a challenge in terms of affording transportation fees.

Furthermore, the researcher faced a time constraint due to the need to conduct this study while still fulfilling the obligations of attending lectures and participating in other educational activities.

1.9 Definition of terms

Audit: Audit is the examination or inspection of various books of accounts by an auditor followed by physical checking of inventory to make sure that all departments are following documented system of recording transactions. It is done to ascertain the accuracy of financial statements provided by the organization.

Corporate governance: Corporate governance is the structure of rules, practices, and processes used to direct and manage a company. A company's board of directors is the primary force influencing corporate governance.

Accountability: Accountability is the practice of being held to a certain standard of excellence. It is the idea that an individual is responsible for their actions and, if that individual chooses unfavorable actions, they will face consequences.


This material content is developed to serve as a GUIDE for students to conduct academic research



Delivery: Within 24 hours

  • Reference(s):

    Yes available

  • Methodology: Yes available


Advertise Here

For advertisement, call 08168958821

Not what you were looking for? Perform a search

What's your project topic?


Comment on Facebook: