1.1              Background of the study                                                       
1.2              Statement of problem                                                
1.3              Objective of the study                                                           
1.4              Significance of the study                                           
1.5              Definition of the terms                                              
1.6              Scope and limitations of the study                
2.9 The auditing and fraud                            
3.1 Summary of findings                                                                   
3.2 Conclusion                                                                       
3.3 Recommendation                                                             
3.4 Bibliography                                                        
3.5 Appendix                                                                                     
Complexity and the continuous growth in business organization call for more employees and also the separation of the business from its owners. Because of this increase in size of the business, it is not possible for the owner to run all the departments, effectively. He now requires more hands, making way for managers to be employed to run the various departments.
            It is important therefore at this to say that as the business continues to show a constant growth rate, the sole trader will gradually give way to partnership, perhaps for better management and also due to the need for bigger capital.          
As the partnership becomes bigger, it ushers in the limited liability company which came in with share holding concept a situation a very large sum of money is required for a business venture by the public each contributing a singly unit o share.
            Shareholders, as owners of the business appoint directors to run the day-to-day affairs of the company. The directors, on the other hand appoint managers who serve as stewards of the company.
            The managers fulfill their accountability to the shareholders and other interested parties by preparing financial statements. The financial statement may take the form of balance sheets, profit and loss account, source and application or fund statement (VAS) an historical financial summary.
            The statement are presented in annual reports conform with accounting goals and standards, which now serve as instruments for activating profit in a business organization.
            In some cases, when managers report to shareholders, some problems arise, such as can the shareholder believe this report, most of the following are the reasons shareholders doubt the report of managers.
1      Most of these contain errors, e.g. error in principle, error of omission and commission, to mention but a few.
2            Such reports can be misleading.
3            Such report may not disclose relevant information.
To solve the above-mentioned problems, the company has to appoint an independent expert called “AUDITOR” to investigate the reports and make his own opinion and report on h is findings.
However, the auditor is seen as a watchdog on the records of the organization so as to ensure that the financial statements are a reflection of the affairs of the organization as prepared in these records. Since these records are a summary of the transactions for a specified period, the auditor also goes behind these records to the source documents in order to confirm the accuracy, completeness and validity of the records.
            According to Pugh Michael (1992) p. 12 it is the responsibility of the auditor to ascertain that all financial statements of the business are followed, because the accounting profession requires of its members integrity, transparency, honesty, independence and objectivity of performance as well as strict adherence to accepted professional standards.
            Also looking at the works of A.W. Holiness (1959) p. 12, he stated that there is a provision that all registered limited liability companies must have their financial records audited annually by a firm or auditors so appointed. He further stated that the law concept compels the auditor to express his opinion to the directors and at the same time, the auditor must be seen as independent.
            In summary, the auditor, shareholder and director have a tripartite relationship in the company. The shareholder are owners of the company, directors are employed by the shareholder to oversee the business, inform the shareholders appoint the auditor to act as check and balance for the purpose of fitting them a true and fair view of the company’s account at any point in time.
            Many people see the auditor in different ways. Some take them to be a body that checks the fraudulent art in some bodies business. While others see him as somebody who approaches his work with suspicion or with a conclusion that something is wrong.
In the case of DE-KI NGTON MILL COMPANY (1896), it was held that the auditor is not bound to approach his work with suspicion or with a foregone conclusion that there is something wrong.
             Business organizations today are filled with stories of 419ers, Ducks and Drakes of public funds, etc. fraudulent acts is now the order of the day, that most times, one wonders if there is no means of eliminating the act.
It has been stated that managers of a business are also the custodians of its assets and are therefore hold liable in the occurrence of a loss.
            However, the accountant who prepares the books of account is directly under the managers and thus it is possible for the managers to alter the records, the books, covers fraudulent acts, deliberately, given an unfair view in their statement of accounts.
            Therefore in the interest of the shareholders and investors, and to ensure that there is no room for mismanagement of funds, the auditor is appointed to act as watchdog on the companies’ accounts. Also, the auditor as an accounting expert should be independent of the company’s management, and his duty theme is to give credibility to the financial statement of books or the company in question. He also guarantees that the companies, books of account present a true and fair view of the company.
            Looking into the books of Augusta, it states that the duty of the auditor is limited to expressing an opinion as to whether or not the company’s financial statement is to the best of his knowledge represent a true and fair view of the company. According to her, he is not responsible for not detecting and uncovering fraud as such duties belongs to the management and one only a subsiding duty to him.
This brings us to say that, if the auditor is not responsible for uncovering frauds, how does he give the assurance, that the company’s financial statement represent a true and fair view of the company. Thus, if the auditor is not relevant in uncovering fraud, he is therefore not relevant to the company. It is believed that the auditor should and must uncover fraud.
            It is believed that internal control is a tool at managements, disposal to curb fraud. Despite the internal control in today’s companies, management has not been able to effectively curb fraud as we can see from media reports filled with news of financial fraud.
            We therefore need to know why this system has failed tremendously. Also, since the report of fraud has grown to almost an uncontrollable rate. It has become proper to think of a more economical, effective and efficient way of curbing it. This nay of course read the hands of internal exports, the auditor. In which case, the primary aim of an audit has to include detecting and prevention of fraud.
The objective of this study therefore is: VIZ
I To examine the statutory principles of audit in relation to fraud.
Ii To examines the need for auditors as well as managers to be responsible for detecting and curbing fraud.
Iii To evaluates the system of external controls as a measure of controlling fraud.
            The primary goal of an audit as required by (CAMA) company and Allied matters act of 1990 is that the auditor must satisfy himself that:
a)      That the accounts have been prepared in accordance with the decree.
b)      The accounts are in agreements with records.
c)      Proper accounting records have been kept.
d)     The balance sheet shows a true and fair view.
e)      He has obtained all the information and explanation necessary for the purpose of audit and that adequate returns have been received from branches not visited by him.
The secondary goal of an audit as stated by CAMA is:
a)      The prevention of irregularities, errors and fraud.
b)      The provision of assistance to management by way of drawing management’s attention to weakness in the system discovered in the course of the audit exercise.
This study would go a long way to show that the secondary goals of auditing are indeed the goals that make the auditor relevant in a profitable business organization. The study will try and fashion out a way by which auditing will not be restricted to inspection of books as shown in the primary goals, rather it involves a well organized system of preventing fraud.
      The study also looked into the current mode of relationship and suggests ways of improvement so that they can work together for the comm0on good of the organization.
      Lastly, this write up would be of very good help to all business organizations. The shareholder stands to benefit in the sense tht the information gotten will enhance his opinion of who an auditor is and his relevance to the profitability of his business organization. Directors will benefit from this study because they already know that they are not the only people handling the records of the organization.
Students, who may need further research, will find the research work of great benefit and finally it would be of great benefit to the general public.
i. MATERIALITY: A matter is material if its omission would influence the decision of a user of the financial statement. The auditing practice board defines this.
ii. STAFF COLLUSION: It is a comprehensive relaxation of inter-related checks by staffs that operate complementary roles for their mutual benefits.


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