Research Journal of Finance and Accounting www.iiste.org ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) Vol.4, No.13, 2013 92 Impact of Audit Evidence on Auditor’S Report Augustine, O. Enofe, Chijioke Mgbame, Lucky, G. Odeyile & Kinglsey Kuegbe Department of Accounting, University of Benin, Benin City. Abstract This study seeks to emphasize the importance of audit evidences, their quality characteristics and the professional judgment used to measure and to evaluate them in order to express their final audit opinion. There is no mathematical formula, neither a specific model in order to evaluate the quality of audit evidences. Their quality depends upon the professional judgment concerning the audit technical standards, the accounting references and nevertheless upon the auditor’s ethics. This is one of the reasons for which the financial audit is one of the edges of economical research, highlighting the credibility of financial statements. This study employ primary and secondary source of data. Questionnaires were administered to obtain information about audit evidence and auditor report was obtained through the secondary source. The empirical findings from the binary logistic regression result revealed that sufficiency of audit evidence had a negative but insignificant and reliability of audit evidence had a positive coefficient sign but insignificant. The low value of the Mcfadden R- squared indicated that the null hypotheses were rejected and acceptance of the alternative hypotheses. The study suggested that further empirical work should be conducted in this area. Keywords: Auditor report, Audit evidence, Audit opinion and Auditing standard. 1.1 INTRODUCTION Auditing is a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between those assertions and established criteria and communicating the results to interested users (American Accounting Association, 1972). In order to give an assurance about the financial statements of an entity, the auditor receives assertions from the management about these reports. These assertions cannot be trusted and the auditor needs to collect evidence that confirms that the information produced by the management is accurate. Audit evidence includes written and electronic information that permits the auditor to reach conclusions through reasoning. In this respect, audit evidence help auditors to establish a starting point from which an auditor expresses audit opinion on the accounts and financial operations of the company being audited. Such evidence is obtained from tests that determine how well accounting controls work and from tests of accounting details (such as completeness and disclosure of information). Auditors, by doing audits in accordance with the generally accepted auditing standards (GAAS), will attest to the fairness of corporate financial reports by detecting and reporting material deviations from the generally accepted accounting standards to various stakeholders (lin, Liu, & Wang, 2009). Hence, independent audit can decrease the asymmetry information and agency problem. Audit opinion about accounting information by the decrease of agency problem can provide the usefulness of accounting information to the capital market participants. The usefulness of accounting information can effect on the decision making of users. So, in order to increase the usefulness of accounting information, auditors add the assurance of financial information which it can results to increase the value relevance. Hence, when audit report has value relevance, it can improve decisions of users about rational investment, credit, and etc. Thus, it expected that audit report (i.e. unqualified audit report or other audit report) can effect on positively the value relevance and a positive signal send to capital market. 1.2 PROBLEM STATEMENT Recent financial statement manipulations such as by Enron, Worldcom, or Parmalat revealed that information provided by financial statements does not always correspond with reality. At least in the most recent case of Parmalat, as well as in the cases of Comroad and FlowTex in Germany, management counterfeited documents and receipts for non-existent assets or transactions. These scandals illustrated clearly that it is not sufficient to rely on documents, receipts, or management representations to be what they seem at first glance. Rather, the auditor must go beyond the façade and question the truth of any information received. Responding to these developments, standard setters have tightened professional auditing standards. Their reaction was to strengthen the requirement of professional skepticism, of a critical evaluation of audit evidence, and of explicitly considering the possibility of fraud (AU 316, 2005). Independent of possible manipulations, auditors are required to judge whether financial statements provide a true and fair view of the audited entity’s financial position, results of operations, and cash flows (ISA 200.2 & 14, 2005). Independent audits enhance the credibility of corporate financial reports and assist investors to make rational decisions in the capital market. The users are perceived to gain benefits from the increased credibility. These benefits are typically considered to be that the quality of investment decisions are improved when they are