The “Effectiveness of Audit Report on Improvement of Financial Management in Nigeria Federal Parastatals with emphasis on the educational system in Nigeria. The study aims at determining or examining the effectiveness of audit report in improvement of financial management in the Federal Parastatals particularly the Educational System in Nigeria. It is thus set out to achieve objectives among which are; (i) to identify the major challenges confronting auditors from giving effective audit reports (ii) to examine the extent to which auditors independence is infringed upon by the hospitality or public relation practices of some Parastatal of Federal Ministry of Education. It also set out to answer research questions including (i) what are the major challenges confronting auditor from giving effective reports to the Federal Parastatals in Education Sector in Nigeria (ii) what is the extent to which auditors independence is infringed upon by the hospitality or public relation. To properly guide the work, four research hypotheses were formulated: (i) wrong choice of audit firm, audit fees, lack of independence and registering of audit firms under different names constitute the major challenges confronting auditors in effective audit reports, (ii) non disclosures of classified information available to the auditors of Federal Parastatals in Education Sectors in Nigeria in their audit report significantly affects the effectiveness of this report among others. The survey research design was adopted in this study. The primary source of data was employed and the instrument of data collection was the questionnaire. The population of the study is made up accounting officers, internal audit staff and other staff of the studied parastatals. The Taro Yamane’s formula was used in selecting the sample size 476.