IMPORTANCE OF AUDIT FINANCIAL STATEMENTS
CHAPTER ONE : INTRODUCTION
    The origin of Auditing is as old as the existence of the human society which is accompanied by the development of system of accounting. Although the ancient history of auditing has sparse documentation, its existence had been traced from the records of the Mesopotamian civilization dating back to 3,500 BC. The Mesopotamian records, which were essentially financial transactions, exhibited marking. Viewed as a system of verification, provided e evidence of the existence of internal control and separation of duties (Oladipupo, 2005).    
    Going by historical approach the work Audit is a Latin word known as “he bears”. This was brought about by the practice whereby the accounts of the estate domain or manor were checked by those in authority ensuring accountability. Hence audit in recent time refers to a process whereby the accounts of business entities are subjected to scrutiny in such details as will enable the auditor (independent person) to form an opinion as to their truth and fairness (Woolf, 1994).
    An audit is the examination of the financial report of an organization as presented in the annual report by some independent of that organization. The financial report includes a balance sheet, an income statement, a statement of change in equity, a cash flow statement, and notes comprising a summary of significant accounting policies, and other explanatory notes.
    Audit has been seen overtime as a relevant tool in reducing the threat and risk faced by organization. One of the most significant threats for many businesses today despite their size and the nature of their operations is insolvency. Extant evidence shows that in the past two decades business collapse have occurred at higher rates than at any time since the early 1930s. It is also interesting to note that during the 1980s certain sectors of the Nigeria economy, such as industrial businesses and banking sector in depressed areas experienced collapse rates as high as 50% over a time-years period (Rees, 1995).
    The economic cost of corporate collapse is relatively large. Evidence shows that the market value of the distressed firms decline substantially (Wainer, 1997).
STATEMENT OF THE RESEARCH PROBLEM  
    Many companies have failed and others are at the verge of failure in Nigeria due to various factors. It is provided in SAS of CAMA (2004) that all companies must prepare financial statements and these statements are subjected to Audit by independent person called Auditor. One of the reasons for the audit function is for the audit to express an independent opinion of the financial statements prepared by the Directors, the following problems call for answers:
1. What are the factors responsible for corporate failures in Nigeria?
2. Can Audited financial statement assist organizations to predict corporate failure using the Altman Z-test model?    
 OBJECTIVE OF THE STUDY  
    The objective of audit of financial statement is to guarantee accurate and exhaustive financial reporting, resulting in improved financial management of private sector and providing a sound basis for performance auditing.
    When financial audit were first introduced, their aim was to verify whether or not the financial reports of companies give an adequate overview of their actual financial situation.
1.    To identify reasons for corporate failure in Nigeria.
2.    To examine the relevance of audited financial statement using the Altman’s Z-score model in predicting corporate failure in Nigeria.
SCOPE OF THE STUDY
    This research is restricted to collapse entity and how the use of audited financial statements helps in recovery. It covers information gotten from personal interview, relevant journals, internet and textbooks.
SIGNIFICANCE OF THE STUDY   
    Most time when organizations collapse, that is go bankrupt, lose market share, show low profits or losses for long periods, etc, one tends to assign some single, and very often an external event for example long-drawn labour strike, failure of a major product or bad investment etc. as  the root cause.
    Corporate collapse has been attributed to reasons which are both external e.g. competition, change in government regulation, scarcity of inputs, and internal e.g. management incompetence, structural rigidity, lack of leadership etc and most importantly lack of audited financial statement.   
    Therefore, this study will help examine the following:
1.    It will help to examine the causes of decline in companies and organizational life-cycles.
2.    It will help to examine why most companies tend to get trapped in their past success pattern, and lose their flexibility to change and adapt.
3.    It will help to examine the usefulness of financial statement.
LIMITATION OF THE STUDY       
    The failed companies were limited to the banking sector because their financial statements were already in the Nigerian stock exchange fact book. More failed companies were not ready to release their financial reports.