creditability of corporate financial reporting and audit challenges in the
economy is relevant if there is no bias in the preparation to favour a segment
in the public. This study looks into issues affecting corporate financial
reporting in Nigeria economy. Using the questionnaires I administered questions
like relationship among internal control system, board size, audit committee,
auditor’s independence and corporate financial reporting were asked. Empirical
and theoretical review were re-viewed. In analyzing the hypothesis, z-test
method was employed in testing the hypotheses which shows that board size and
internal control system have a positive and significant relationship with
corporate financial reporting. It was thus concluded that for corporate
financial reporting should be more relevant, reliable and auditors should be
granted more independent along with the audit committee in order to be more
effective and efficient.
TABLE OF CONTENT
Table of Contents vi
Background to the Study 1
1.2 Statement of Problem 6
Research Questions 6
1.4 Objectives of the Study 7
1.5 Statement of Hypotheses 8
Significance of the Study 9
1.7 Scope of Study 10
1.8 Limitation of the Study 11
TWO: REVIEW OF RELATED LITERATURE
Corporate Financial Reporting 13
2.3 Objective of Corporate Financial Reporting 16
2.4 Capital Market and Non-Financial Influence on
Financial Reporting 18
2.5 Quantitative Financial Statement 20
2.6 Independence Nature of the Auditor 22
2.7 Qualitative Characteristics of Information in
2.8 Types of Financial Statement 29
2.9 International Financial Reporting Standards
2.10 The Role of Management in Corporate Financial
2.11 Proactive Financial Reporting 38
2.12 Auditing 40
2.13 Importance of Audit Quality 42
2.14 Audit Challenges 44
2.15 How does Audit Challenges affects Corporate
Report in Nigeria 45
2.16 Why Audit Quality Matters 47
THREE: RESEARCH METHOD AND DESIGN
3.2 Research Design 50
Description of Population of the Study 51
Sample Size 51
3.5 Sampling Techniques 51
3.6 Sources of Data Collection 51
3.7 Method of Data Presentation 52
Method of Data Analysis 53
FOUR: DATA PRESENTATION AND ANALYSIS
4.2 Data Presentation and Analysis 54
Hypothesis Testing 71
FIVE: SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
5.2 Summary of Findings 80
Appendix I 85
to the Study
any business entity, whether profit or non-profit, it has set of objective. It
mobilizes resources from various sources to achieve set goal at the end of the
period. This is necessary to determine how well these resources have been
there is separation of ownership from management, the owners will want to know
how judiciously these resources have been used. This is the stewardship
function of accounting.
function is discharged by the presentation of a report of the activities to
owners by management; such report are usually conveyed by means of financial
statement (Schipper and Vincent, 2003).
following objective of financial reporting information concerning economic
entities, primary financial report is useful for economic decision making
(FACB, 1999, IAEE, 2008).
high financial reporting information is important because it will positively
influence capital provider and other stakeholders in making investment credit
and similar resources. Allocation decision enhancing overall market efficiency
(IASB, 2006; IASB, 2008).
both FASB and IASB stress the importance of corporate financial reporting, it
is how over affected by the quality of auditing. This is due to its context
specifically, empirical assessment of financial reporting inevitably including
preference among myriad of constituent (Dechow and Dishes, 2002).
of accounting Standard (information to be disclosed in financial statement) and
section 334(2) of Companies and Allied Matters Act (CAMA), provides that
financial obstacle shall include; the mission of statement comprehensive income
policies, statement of financial income, note to the account, auditor’s report,
directors report, value added statement of five years financial summary.
financial statement must accurately represent the underlying economic activities
of the organization. It is possible to have a discontinuity between induce
doubt and the organization. When this occurs, the creditability such statement
induces doubt and uncertainty in the mind of the various users of the financial
statement. These, therefore means there is lack of uniformity between
information available to the management and information available to the
investing public (Bostosan, 2004).
are two sources of information as regard financial statement, in the book
keeping (financial report) these process include:
Management understanding of underlying
activities may not be accurately represented in financial statement and
Investing public understanding or
perception of information represented in financial statement may be different
from that which has been documented.
financial reporting is aided by auditing stem from the fact that a lot of
person’s requires corporate financial reports for different legitimacy and
enhance companies images lack of proper audit or carelessness on the part of
the auditors in auditing financial statement of companies, have led to
investors making wrong decision, as well as closure of companies, who otherwise
were thought to be doing well such as Enron in the United State as well as some
companies and banks in Nigeria.
financial reporting is a communication of relevant qualitative and quantitative
information for decision making. Management is entrusted with the legal
responsibility of preparing and communicating such relevant information to the
users. However, the management does not independently carry this task, but it
is the joint effort by account researchers, management auditors and the
statements make a case for reporting entity in their guest for indivisible
a reporting unit creates uncertainty in the minds of investors, it is perceived
effect is that investors demand a compensation for a perceived level of risk.
This result to an increase in cost of capital of such economic unit. This is
known as “capitals need hypothesis” (Choi, 1973) suggested that a prime mature
for disclosure as to raise capital at the lowest cost (Cooke, 1991) posit that
“a number of explanations can be advanced for the hypothesis”. In order to raise
capital from the financial institutions, he says that the companies must
increase their compliance with disclosure.
in financial statement determine the level of transparency of such entities.
Hitherto poor response of international investors has been adduced to lack of
transparency not only of government but also of private economic sectors.
agencies such as Central Bank of Nigeria (CBN) and Securities and Exchange
Commission (SEC), has been perceived as ineffective.
perception has been accentuated especially in situations where such banks have
been given a clean bill of health by auditors. What this translates to be an
economic environment characterized by lack of trust.
the last decade, studies have shown that the auditing profession has had to
deal with a lot of challenges than it has done in its lengthy history which
spans over one hundred years (Smith, Machosh et al, 2010).
Statement of Problems
management activates are conveyed by means of financial statements. Where these
financial statements introduced elements of doubts in the minds with the effect
that the continued survival of the firm is threatened as it is starved by
1.3 Research Questions
a. What is the relationship between internal
control system and corporate financial reporting?
b. What is the relationship between board size
and corporate financial reporting?
c. What is the relationship between audit
committee and corporate financial reporting?
d. What if there is relationship between
auditor’s independence and corporate financial reporting?
Objectives of the Study
Any organization that seeks to be successful must
take pains to present a financial report devoid of fraudulent practices, as
this improves the credibility of the company.
Any effort aimed at improving corporate reporting
activities with has effect of enhance investors’ confidence as well as increase
The key object of this study is to evaluate
corporate financial reporting, how it has been affected by auditing as well as
challenges of auditing practices over the years. Other objective includes:
if there is a relationship between internal control system and corporate
if there is a significant impact of board size on corporate financial
To enquire out
if there is a significant relationship between audit committee and corporate
To examine the
relationship between auditor’s independence and corporate financial reporting.
Statement of Hypotheses
Ho: There is no significant relationship between external control system and
corporate financial reporting.
Hi: There is a significant relationship between external control system and
corporate financial reporting.
Ho: There is no positive relationship between board size and corporate
Hi: There is a positive relationship between board size and corporate
Ho: There is no significant impact of audit committee on corporate financial
Hi: There is a significant impact of audit committee on corporate financial
Ho: There is no significant relationship between auditor’s independence and
corporate financial reporting.
Hi: There is a significant relationship between auditor’s independence and
corporate financial reporting.
1.6 Significance of the Study
The trust worthiness “of the research depend in what
the counts as knowledge” (Lincoln and Guba, 1985). This research work on its
conclusion together with solution of finding may arise. This will prove useful
to some particular group of persons of otherwise for various needs some of the
beneficiaries are shareholders. The shareholders are interested in affairs of
the company. They want to know what the affair of the organization owns which
are called asset, what the organization owes is called liabilities. They are
which guarantees the dividend at the end of the financial year.
The public have interest, particularly those
resident in the immediate business environment they use accounting information
to known the rate of profit, the organization is making by exploiting
information to negotiate with the company to provide welfare facilities like
school, hospital, scholarship and employment to their youth.
Investors: Some business men have
millions of naira to invest. Such investors in accounting information are to
determine the most profitable organization. Where they will invest their money
and get good returns.
It would also be useful for auditors in the sense
that it would expose some of the issues that have to divided the auditing
profession over time, and to provide answer to some pertinent question as
regards auditing practice in Nigeria.
Scope of the Study
The scope of this study focuses on corporate reports
on manufacturing companies and other financial institution in Nigeria. The
subject matter of the study is corporate financial reporting and challenges of
auditing practice; corporate of interest in the will of those item in sections
334(2) of CAMA 2004.
The time period for this study is between the period
of pre-consolidation and post consolidation. Geographically, this study will be
limited to Benin metropolis in Edo State capital.
Limitations of the Study
A subject of the nature entails a lot of work,
however, the researcher’s limitation were low respondent, found it difficult to
spare the researcher their time was also the problem of interest material as
most of its required to be downloaded. The website were requesting for
membership code as they were only available to existing members of their book.
This proves to be a major constraint to the study.
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