Evaluating the Imperative of Auditing in Situating Good Corporate Governance in Developing Economies: The Nigerian Experience

Abstract

Auditing is one of the mechanisms adopted for effective corporate governance regime. There is often the need to have an independent body of persons who are to verify the records of stewardship prepared and recorded by those in fiduciary capacity to resource owners. Such reports which show the impact of management's decision on the worth of shareholder's wealth will lack creditability if not verified by an independent expert. This paper is aimed at evaluating the imperative of auditing in situating good governance in corporate businesses. The methodology adopted in this work is doctrinal anchored on appraisal and analysis. It was found that there is façade of corporate auditing as shareholders merely rubber stamp the financial statements presented to them sometimes assuming that the financial statements presented, having gone through internal audit controls, ought to be in order. It was further found that no matter how strict and consistent the rules of auditing are applied, it can hardly afford perfect protection against human factors such as susceptibility to errors, collusion and deceit. It is therefore recommended that the powers of corporate regulators or supervisory agencies should be strengthened and enhanced to include the power to ensure that auditors properly scrutinize the financial statement of the company since adequate accountability may not be achieved through a formalistic observance of the rules of financial reporting and auditing. This should be complemented by the activeness of the shareholders in ensuring good corporate governance. It is the place of the shareholders to consider and approve the appointment and remuneration of auditors as well as the financial statement in a general meeting so as to ensure that the board of directors observes financial discipline in the management of the company.