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The auditor’s independence is a corner stone of the auditing profession, a crucial element in the statutory corporate process and a key prerequisite for the adding of values to audited financial statements. Corporate performance is an important concept that relates to the way and manner in which financial resources available to an organization are judiciously used to achieve the overall corporate objective of an organization. The main objective of this study is to examine the impact of auditor’s independence and corporate performance. Also, the study determines the relationship between audit tenure and non audit services, and how corporate performance is measured.

The primary source of data which comprise of questionnaire and personal interview were used in the study and it was found that the provision of non audit service has a significant impact on auditor’s independence in Nigeria. The study concludes that auditors independence may be threatened when an auditor provide non audit services to their clients. Based on the findings, it was recommended that legislative policies should aim at disclosing valuable information such as audit and non audit services fees.




1.1     Background of the study

The auditor’ independence is a cornerstone of the auditing profession. A crucial element in the statutory corporate reporting process and a key prerequisite for the adding of value to an audited financial statement (Mautz & Sharaf, 2009). In a general sense, auditor’s independence has borne a relationship to the prevailing commercial environment in different time periods. Independence is a state of mind characterized by objectivity, and integrity in the part of the auditors. It implies the performance of auditors work without being and avoiding undue influence.

Corporate performance is the final result of all activities. In evaluating performance, the emphasis is no assessing the current behavior of the organization in respect of its efficiency and effectiveness. Corporate performance is an important concept that relates to the way and manner in which financial resources available to an organization are judiciously used to achieve the over all corporate objectives of an organization, it keep the organization in business and creates a greater prospect for future opportunities.

According to Ojo (2009), the provision of non audit services by audit firm does not necessarily influence the independence of auditors as other writers have said. However, where the fees generated from such non audit service are considerably high (in proportion to the audit fees earned by such accounting firms) and insufficient safeguards operates to protect the auditors independence, this create a situation whereby the auditors independence is likely to be compromised since the auditors may be denied incentive contracts (in the from of fees generated from NAS) where he decides to give a give a qualified opinion on the financial being audited.

There are number of performance measurement tools. Which could be clubbed into two broad groups like (a) Traditional measures (b) Nontraditional measures. Traditional measure which indicate the financial strength, weakness, opportunities and threats are Return on investment (ROI), Residual income (RI) etc but it is found that some users of financial statement are interested on non financial performance of the corporate bodies besides financial performance. In some cases some nontraditional measurement tools are to be used like Economic Value Added, Balanced Scorecard etc.

To measure over all corporate performance, goals are set for each of these perspectives and then specific measures for achieving such goals are determined, each of these perspectives is critical and must be considered simultaneously to achieve overall efficiency and effectiveness and to succeed in the long run. If any area is either overemphasized or underemphasized, performance evaluation by the auditors will become unbalanced, in this way, the aim of the concept is to establish a set of measure – both financial and non financial through which a company can control its activities and balance various measures to effectively track performance.



Traditionally, performance measurement system measures the tangible and financial assets but an organization has to measure and respond to intangible assets of value to the substantial effect on the bottom line.

The provision of CAMA (2004) which are appointment provision, disqualification provision, removal provision etc and the rules of professional either like auditors not having financial involvement in the affairs of their client, normal procedures to be followed before accepting any new audit assignment. Auditors should not put his/herself in a situation that will lead to conflict of interest etc are laid to ensure auditors independence. The familiarity developed from lengthy auditors’ tenure, personal relationships built through alumni employees have been alleged to contribute to this erosion of auditors’ independence and corporate performance (Freeka & Solomon, 2008). The consulting nature of non audit service also puts auditors in managerial roles, potentially threatening the objectivity about the transaction and account balance that they audit (Defond, Raghunandan & Subramanian, 2002). In recent time, a great deal of attention has been given to the importance of organization culture. This is because the importance of culture to any group of people. Society, country and business organization cannot be over emphasized. Organization culture comprises the attitudes. Experience, beliefs and values of an organization.

Black (2003) defined organization culture as a specific collection of values and norms that shared by people and groups in an organization and that control the way they interact with each other and with stakeholders outside the organization. Organization values are beliefs and ideas about what kind of goals members of an organization should pursue and ideas about the appropriate kind or standards of behavior organizational members should use to achieve these goals.

1.2     Statement of Problem

Auditors’ independence is one of the most important issues in accounting practice today. Independence increases the effectiveness of the audit by providing assurance that the auditor will plan and execute the audit objectively. Because of the importance of auditors’ independence to audit quality performance in an organization, the security and exchange commission (SEC) has engaged in substantial rule making in this area without a conceptual framework. In the wake of the recent corporate performance around the globe. Attention has been drawn to the issues of auditors having market based institutional incentives to act independently in protecting their reputation and independent (Watts & Zimmerman, 2003). The question of whether auditors’ independence, organizational culture and mechanism on governance have an impact on corporate performance has been the subject of much debate and research. Auditors’ independence is an essential feature of an efficient capital market. Managers have incentives to reduce agency costs in the firm by hiring independent auditors (Jenson & Meckling, 2009). Typically, the accusation made, that auditors have allowed inappropriate accounting treatment which therefore affects their independence by the non audit fees payable to them. The problems inherent in these study are those auditors who may become too close to the company they are auditing or because their objectivity may be challenged due to reliance on income from a single source



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