Measuring Customer Experience and Financial Performance

182 Nigerian provisions set out the functions of the committee in details designed perhaps to solve the peculiar problems of the Nigerian corporate management.

The audit committee as already noted consists not of ‗insiders‘ only but also ‗outsiders‘ who can bring their respective ideas and independent minds to bear on the issues at hand.

However, due care and diligence must be exercised and taken in other to ensure that the committee does not become forum for confrontation in the affairs of the company especially between the directors on the one hand and shareholders on the other. Rather, their effort should be geared towards ensuring that they work harmoniously to correct errors, and implement and observe its functions duly accorded it.

183 enable the auditor form an opinion on the basis of which to make a report that the financial statements, the subject of his examination, show a true and fair view.⁵¹⁸

One of the mechanisms for providing assurance to the investors and other stakeholders is corporate auditing. The principal characteristics of ensuring effective corporate governance such as transparency, accountability and integrity are enhanced with conduct of audit into the affairs of a company. Generally, internal and external auditors may conduct audit into the operation of a company. The internal auditors are the employees of a company who are appointed by the management to carry out audit of the day-to-day affairs of the company as part of the internal control system. The external auditor on the other hand, is highly regarded in the corporate governance framework because unlike the internal auditor, he is appointed by the shareholders. The external auditor is an independent person or firm of auditors appointed according to statutory requirement to investigate the financial statements of an entity and express his opinion in form of report on the true and fair view of such financial statement.⁵¹⁹

Auditing standards ensures that the basic rules of corporate governance such as objectivity, integrity, accountability, etc which are essentially in the auditors‘ performance of his responsibilities are highly actualized. These basic rules of governance, when it is fully observed with implementation, make good corporate governance to thrive. It is, however, auditing process that can impact positively in the concerned company in achieving these goals. So a good auditing is very crucial in the rules of corporate governance.

518 O. Aguolu, Fundamentals of Auditing, 3^rd edn., (Institute for Development Studies, Nigeria, 2008) p. 560.

519 J.O. Alabede, ‘The Role, Compromise and Problems of the External Auditor in Corporate Governance’, Research Journal of Finance and Accounting, vol. 3 No 9 (2012), p.155 available at URL www.iiste.org, accessed on 21/09/ 2013).

184 Auditing can impact the risk taking incentives of management through an appropriate application of accounting policies. However, it is also important to ensure that rules (in the event of a breach of accounting policies) are correspondingly enforced. Another effect auditing has impacted positively in a company is corporate accounting scandal. Under this case, there must be a fair and true auditing, if not, corporate accounting scandal can surface and at the end leaves the company no choice than going bankrupt.

The frequency of corporate scandal in the past decades is alarming and has caused the public to question what the role and impacts that auditors have in corporate governance. The numerous cases of corporate accounting scandal have created crisis of confidence in the accountancy profession though not every case of corporate scandal and failure can be attributed to auditing failure or auditor‘s negligence. Some of the high profile cases of such corporate scandals are Enron, WorldCom, Parmalat, etc.⁵²⁰

Auditing has established an enhanced corporate accountability by working with the board of directors and management to improve control and strengthen the financial reporting practices of a company. The goal has been to promote proper conduct of the affairs of the corporation in line with generally accepted accounting, ethical and legal standards. That being the case, the achievement of these objectives provides protection for the shareholders especially their respective interest.

520 Ibid, et el, p. 119.

185 Auditing ensures checks and balances on the board of directors and management. It is very important to bear on companies the political doctrine of separation of power. That power corrupts and absolute power corrupts absolutely, is a well known adage. To saddle the chairman of a company with the additional duty of chief executive is to make him accountable to himself as he presides over both the board and management and without much power on any other person to question his action or inaction. Same thing applies to the directors that prepare the financial statement of a company.

It is however, auditing that would act as cheek on them and as well the auditors will in turn be accountable and answerable, to the members in general meeting. When this auditing process is there, the directors and the management will be moved to be diligent and careful in performing and carrying out their respective duties without any symptom of negligence on their part.

Another impact of auditing under the rules of corporate governance is publication of credible and reliable information about the subject matter concerned especially to the members. The auditor has done or contributed much in the nation. The credible and reliable information, especially financial statements published, avails the members wherever they are to reasonably determine whether the company they are investing in is worth it. This is because even the company‘s profit and loss account is also contained in the report. It then leaves the member the choice to decide whether to continue investing in such a company or to decline. The auditing process also is a cheek whether the financial information given to investors is reliable or not. Auditing process has gone very far in establishing confidence and trust on the company which in turn has reduced uncertainty and risk thereby adding value. If there is

186 confidence and trust among the members in a company it will be a motivating factor that increases their investment in the company thereby enhancing profits.

The efficacy of the accounting system in reducing agency conflicts depends, at least in part, on whether accounting principles are applied in a manner consistent with Generally Accepted Accounting Principles (GAAP), or other standards outlined in the contracting setting. The auditor has served as a central effort beyond it. That is, in order for accounting reports to be effective in reducing agency costs, contracting parties must be provided with some assurance that the financial reports have been prepared in accordance with the provisions of the contract. This gives rise to a demand for auditing, as an audit certification provides some assurance that the financial statements have been prepared in accordance with a set of recognized principles. This assurance can come from either the insurance role of the audit (i.e, the auditor can be sued if there is an error or irregularity), or from the auditors reputation. When financial accounting numbers play a more prominent role in the contract, the demand for auditing is expected to be greater.

It is widely acknowledged that the impact of auditing is very alarming. There is no doubt that auditing has brought about improvement in accountability and transparency in corporate governance thereby reducing the company‘s death or bankruptcy.