ABSTRACT

This study  discusses the concept of statutory auditors and their role in ensuring corporate governance in public corporations in Cameroon. It highlights the framework regulating statutory auditors in Cameroon and examines whether current practices align with corporate governance regulations. The main focus is on the challenges faced by statutory auditors while carrying out their duties and providing recommendations to address these challenges. Statutory auditors play a crucial role in promoting accountability, transparency, and fairness in public corporations. However, they encounter several challenges that hinder their ability to provide effective corporate governance. These challenges include a lack of independence and objectivity due to close relationships between public corporations’ management and government officials, limited resources hindering comprehensive audits, a weak regulatory framework with inadequate legal requirements, a shortage of experienced and qualified auditors, and conflicts of interest between auditors and the corporations they audit. To address these challenges, policy recommendations are proposed. Firstly, external auditors should provide recommendations on management areas where necessary, enhancing the effectiveness of corporate governance. Additionally, professional auditors must consistently adhere to fundamental ethical principles, minimizing situations of mismanagement despite the presence of external auditors. These recommendations aim to strengthen the regulatory framework, improve auditors’ independence and objectivity, and ensure public corporations’ financial statements and operations receive proper scrutiny.By addressing these challenges and implementing the recommended policies, Cameroon can enhance corporate governance practices in public corporations, safeguard investor interests, and foster public trust

CHAPTER ONE

GENERAL INTRODUCTION

Financial statements certified by the statutory auditors are information and communication tools for stakeholders (shareholders, financial markets, bankers, tax authorities, etc.). The produced financial statements are at the heart of companies’ accounting manipulation. Indeed, the United Nations report (2018) shows that misappropriation of assets, corruption, and financial statements are among the three main categories of professional fraud[1]. Among these fraud strategies, misappropriation of assets is the most common (89% of cases in the sample) and the least costly (with a median loss of US$114,000), followed by corruption, which appears in 38% of cases in the sample, with a median loss of US$250,000. Financial statement fraud is the least common (10% of cases) because it is most costly (the resulting median loss is $800,000). This situation leads to the problem of the quality of the auditor’s opinion.

Usually, the purpose of auditing is to enable the professional auditor to formulate an opinion whose objective is to verify that the financial statements have been prepared per a well-identified accounting framework or principles[2] . This opinion can take three forms, namely qualified, adverse, and disclaimer of opinion[3]. Based on these international and national standards[4] , it can be seen that the issuance of a reasoned opinion is an appropriate tool for his defense since the formulation of a qualified audit opinion relieves the auditor of his responsibility[5]. In the same line, the auditor’s responsibility in front of his client’s failure is not engaged if he has previously signaled a reserve during the certification process[6]. The audit report, therefore, aims to inform the various stakeholders about the company’s actual financial situation.

This chapter provides evolution of the concept of asylum in the background to the study, discusses the problem that necessitated the research, the methodology employed, the objectives to be achieved and the significance and justification for the study, amongst others.

• BACKGROUND TO THE STUDY

An external auditor is a professional or better still an audit professional that is mainly out to perform an independent audit in respect to stated laws or rules on financial statements of legal entities, state cooperation, government organizations, companies as well as institutions that prepare financial statements. The auditor is completely independent to these institutions that are audited. Being independent is one of most important points to consider when searching for an external auditor to audit the financial statements for its users. These users include shareholders, investors, foreign organizations, government agencies as well as the general public who have a great need for the external auditors report. The audited repot is relied on and consulted before most decisions affecting the company are taken.

Looking at the roots of an external auditor, it can be traced right back in to the1850s where in Britain external audits were required to be done by companies. The companies Act (1855-1856) introduced the independent auditor (external auditor) by removing the stockholders as auditors. This was one of the first laws to establish auditors and the rules for audit reports by external auditors. An external auditor became mandatory to all Public Limited Companies in 1900 and was followed by laid downed standards and qualification of external auditors.

For public limited company listed in the stock exchange in the USA, the Sarbones – Oxley (SOX) has imposed stringent requirement on external auditors. This SOX was as a result of the publication of acts regulating auditors. These acts came due to the collaboration between the ALCPA and the New York stock exchange with the purpose of improving auditing standards of reporting. The security Act and the security exchange were passed which required listed companies to file audited financial statements.[7]

The Supreme State Audit Office (SAIC) is in charge of state audit in Cameroon which was established by the head of state of Cameroon. The SAIC is required to perform the requisitioning of auditee department records[8]. Furthermore Cameroon as other countries seeing the need of statutory audit recognizes the Institute of Chartered Accountants of Cameroon (ONECCA) as the professional body to carry out the external audit of companies and other institution.

External auditors are independent assurance service providers to companies as a whole and public limited liability companies in particular. External auditors provide tremendous important information to stakeholders on the financial statement audited. The scope of the audit assignment externs to some vital sections in the internal system of the organization this includes the fact that the auditors via his report may make recommendations to the management on the loop holes found in the accounting system. For example not adhering to internal accounting standards (IAS), inform the directors on the general efficiency and accuracy of the accounting system put in place while recommending methods to improve the present accounting process. All these advice is provided to the company by an external auditor after conducting the audit. A list of qualities to be use when appointing an auditor is being provided. It is for the purpose of ensuring total independence of the auditor. Still on the quality of independence, an auditor cannot give an unbiased audited report or unclean report unless he or she is independent of all parties involved.[9] Auditors should be independent in fact and appearance that is relationship that can impair their objectives. This requires that the auditor when conducting an audit of the financial statements should not be related to the management, inventory organizational structure that will hinder objectiveness in the audit process and final audit report.

On the international horizon, the international standard of auditing (ISA) issued by the International Auditing and Assurance Standard Board (IAASB) is the starting point for the audit process. This processes which is expected to be carried out in accordance to the General Acceptable Accounting Standard (GAAS) and the General Acceptable Accounting Principle (GAAP) especially in the process of reporting on the findings of the financial statements.

The OHADA Uniform Act in relation to other regional organization such as the UEMOA[10] has establish an accounting system referred to as SYSCOA[11] which is under the UEMOA regulation No 4196 /CM December 1996, B.O UEMOA November 1997 which shows the need to ensure that there is full consultation and corporation on the part of auditors involved in the organization .

The main role of the auditor is to present a true and fair view on the audited company’s’ activities without encroaching in to the management of the company. While the administration and management of the public limited company is by the board of directors elected or appointed as indicated in the companies Article of association. Hence these directors are compelled under Article 702[12] under the OHADA act to appoint an external auditor, or two as specified under Article 703[13] relating to subsequent auditors. All who are to be appointed during the general meeting. The external auditor is in charge of analysing the financial statements prepared as well as participating in the adoption of the fiscal year budget.

STATEMENT OF PROBLEM

Poor corporate governance has led to financial scandals and calls for security measures to manage business operations. Investors prefer countries with clear legal systems and the right to monitor management actions. The OHADA legislators have focused on corporate governance to ensure performance and prevent business failure in the sub-region. They have implemented rules for companies to run in the interest of all stakeholders, ensuring transparency and equality between managers, shareholders, administrators, and control organs. However, corporate governance still faces issues of agency and abuse of limited liability.

Public limited companies in Buea, such as Cofinese PLC, have gone bankrupt with external auditors, and financial institutions have experienced negative cash flows and declared insolvents. Unchecked agency and limited liability can negatively impact corporate performance, damage public trust, and lead to investor apathy, potentially causing serious economic consequences. A modern corporate governance movement is needed to reduce or stop these abuses of power by large companies’ directors.

 1.3 RESEARCH QUESTIONS

The problems identified in this research have led to the following research questions;

 1.3.1 Main Research Question

The research question this study seeks to address the impact and challenges of statutory auditors in improving governance in public limited companies in Cameroon

1.3.2 Specific Research Questions

• What is the concept of statutory auditors and Corporate Governance in Cameroon?
• What are the framework regulating statutory auditors in Cameroon?
• To what extent is the current practice in corporations in Cameroon in line with corporate governance regulations?
• What policy recommendations can be made to the challenges identified?

1.4. RESEARCH OBJECTIVES

1.4.1 General Research Objective

• The main goal of this research is to examine the impact and challenges of statutory auditors in improving governance in public limited companies in Cameroon.

1.4.2 Specific Research Objectives

• To discuss the concept of statutory auditors and corporate governance in Cameroon.
• To discuss the framework regulating statutory auditors in Cameroon.
• To discuss if the current practices in corporations in Cameroon are line with corporate governance regulations.
• To make policy recommendations that would address challenges identified.