Thursday, 18 August 2016

EFFECT OF MISREPRESENTATION OF INFORMATION IN THE FINANCIAL STATEMENTS




CHAPTER ONE
INTRODUCTION
1.1       BACKGROUND OF THE STUDY
The concept of misrepresentation of information in the financial statement tends to examine those items that can alter the financial affairs of on the financial concern (or an entity), audited by an auditor based on the financial statement presented by the manager on the basis of true and fair view.
The establishment or introduction of the joint stock company increased the supply of capital for commerce and industry. It was therefore, necessary for the owners of the company obviously known as shareholders to delegate some of their numbers to act as Board of Directors (BOD) to take care of daily activities of the business concern.
The joint stock company act of 1844 in Britain was the first legislation, which requires that all incorporated companies or business should have the result of their daily activities known as the financial statement to be examined by an auditor. Later developments required that the auditor must be independent of his client, and be professionally qualified to enable him (the auditor) express a qualified opinion on the financial statement without bias.
Auditing was meant to serve for many purposes. So, there should not be any form of fraud, error, or misrepresentation in audited accounts in order not to create conflict between the interest groups. The critical examinations of its effects are the basis for this works. The auditor over the years played the role of instilling confidence in the public at large by revealing facts about companies, which would otherwise be hidden to avoid misrepresentation and false information. England in 1900 made it legally compulsory for every company or any organization to appoint an auditor through acts of parliament.
Nigeria as a matter of fact, having accessed the effects of misrepresentation of accounts gave recognition to auditing through the companies and Allied matters acts 1990 and other earlier promulgations.


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