ABSTRACT
The
project examines the link between corporate governance and auditors report in
Nigeria. The study main objective is for an appointed
auditor to express a professional opinion on the financial position of an
enterprise as contained in the financial statement prepared by the management
so that any person reading or using them can have faith in them. The
primary source of data collection was used in gathering data from respondents.
A structured questionnaire was designed by the researcher which was used to
capture the relationship between corporate governance and auditors. It
concluded that management of companies need to improve
their accounting practices and ensure timely and adequate disclosure of
information regarding financial position and performance, as this will in turn
improve the public’s understanding of such companies and in the long run
attract profitable investment. Finally, it was recommended that the board of
directors should be able to check the activities of the internal and external
auditors in other for them not to present a fraudulent financial statement that
will reduce the image of the companies.
TABLE OF CONTENTS
Title Page i
Certification ii
Dedication iii
Acknowledgment iv
Abstract v
Table of Contents vi
Chapter One: Introduction 1
1.1
Background to the Study 1
1.2
Statement of Problem 1
1.3
Research Questions 5
1.4
Objectives of the Study 6
1.5
Statement of Hypotheses 6
1.6
Significance of the Study 7
1.7
Scope of the Study 9
1.8
Limitations of the Study 10
1.9
Definition of Terms 11
Chapter
Two: Review of Related Literature 12
2.1
Introduction 12
2.2
Current Literature on Corporate Governance
in
Nigeria
13
2.3
Framework of Corporate Governance in
Nigeria 15
2.4
Corporate Governance Mechanisms 18
2.5
Impact of Corporate Governance 24
2.6
Essence of Good Corporate Governance 24
2.7
Challenges and Failure of Corporate
Governance in Nigeria 25
2.8
Fundamental Determinants of Equity
Agency
Problems
27
2.9
Evidence of Conflicts of Interest
between Shareholders and Managers 29
2.10 Policy
Recommendation for Effective Corporate Governance in Nigeria 32
2.11 Development
of the Modern Audit 33
2.12 Auditors’
Independence 36
2.13 The
External Auditor 39
2.14 Duties
of an Auditor 41
2.15 Auditing
41
2.16 Significance
of Auditing to Management 48
2.17 Corporate
Governance and Auditor’s Report 50
2.18 Summary
54
Chapter
Three: Research Method and Design 57
3.1
Introduction 57
3.2
Research Design 57
3.3
Description of Population of the Study 57
3.4
Sample Size 58
3.5
Sampling Technique 58
3.6
Sources of Data Collection 59
3.7
Method of Data Presentation 60
3.8
Method of Data Analysis 60
Chapter Four: Data Presentation,
Analysis and Interpretation
4.1
Introduction 63
4.2
Presentation of Data 63
4.3
Data Analysis 65
4.4
Hypothesis Testing 66
Chapter Five: Summary
of Findings, Conclusion and Recommendations
5.1
Introduction 77
5.2
Summary of Findings 77
5.3
Conclusion 80
5.4
Recommendations 81
References 83
Appendices
85
CHAPTER ONE
INTRODUCTION
1.1 Background
to the Study
The
term “Corporate Government” has been identified to mean different things to
different people. Magdi and Margret (2002) stress that corporate governance is
about ensuring that the business is managed well and investors receive fair
return. OECD (1999) provides of more encompassing definition of corporate
governance. It defines corporate governance as the system by which business
corporations are directed and controlled. The corporate structure specifies the
distribution of rights and responsibilities among different participants in the
corporation such as, the board, manager’s shareholders and other stakeholders,
and spells out the rules and procedures for making decisions on corporate
affair. By doing this, it also provides the structure through which the
company’s objectives and monitoring performances. This definition is in line
with that of Akinsulire (2010) financial scandals round the world and recent
collapse of major corporate instructions in Nigeria recently having shaken
investor’s forth in the capital market and the efficacy of existing corporate
governance practices in promoting transparency and ‘accountability. This has
brought to therefore once again the need for the practices of good corporate
governance.
Effective
corporate governance reduces “control rights” shareholders and creditors confer
on managers, increasing the probability that managers invest in positive net
present value projects (Shleifer & Vishny 1997; p.78). Depending on the
jurisdiction, different bodies may have responsibility of corporate governance.
Board of Directors, Audit committee and other supervisory committees. International
standards on Auditing (ISA) 260, requires the auditors to determine those
persons charged with corporate governance. The most direct benefit of corporate governance is to
shareholders. However, the ultimate benefit is the more efficient allocation of
capital to its most productive uses.
Where
organizations are left to themselves, it can easily deteriorate as a result of
individuals seeking for their own interest, therefore not for such organization
to be audited. In other worlds no governance system, no matter how well,
designed will fully prevent greedy and dishonest people from putting their
personal interest ahead of the interest of the company they manage. Many steps
can be taken to improve corporate governance and thereby reduce opportunities
for accounting fraud; this is where the role of auditing comes into play.
Auditing
reports is a report by the auditors appointed to audit the accounts of
companies the auditors of a limited company are required to form an opinion as
to whether the annual accounts of the company give is true and fair view and of
its state of affair at the end of the year or period. (Oxford Dictionary of Accounting, (2005).
According
to Adeniyi (2004, p.12), Audit report is the means by which the auditors
express their opinion on the truth and fairness of a company’s financial
statement for the benefit principally of the shareholders, but also for other
users. Since the auditor provides a check on the information aspect of the
governance system it is said that the auditor does not have a direct corporate
governance responsibility, the roles of auditor’s in corporate governance
involves reporting, decision making, accountability and monitoring.
The
objective of an auditor under CAMA 1990, is for an appointed auditor to express
a professional opinion on the financial position of an enterprise as contained
in the financial statement prepared by the management so that any person
reading or using them, can have faith in them. Other objectives are to prevent
fraud and errors, to detect any forms of irregularity, to advice on financial
matters for efficient decision making by the management. Adeniyi, (2004, p.
68).
One
perception of corporate governance failure has been to focus on the
effectiveness of internal control. Auditing involves a public responsibility
that is more important than employment relationship with the client, for the
auditors to meet their obligation, relevant and reliable information’s must be
given to them.
1.2 Statement of Problem
The
research is an attempt to examine the role of auditors’ report in corporate
governance in relation to the organizations in Nigeria. The research problems can
therefore be started as: knowing the factors influencing auditors’ report, to
what extent does corporate governance influence auditor reports, what is the
relationship between corporate governance and auditor reports? What role(s) or
any of external auditors in ensuring sound corporate governance? And knowing
the role of audit committee in enhancing quality audit report sound corporate
governance.
From
the above problems, there is the need for effective corporate system to be put
in place as a strategy for efficient and effective operation which requires the
need for proper audit report.
1.3 Research
Questions
The
following are the research questions the researcher aim to solve in other to
achieve the objective of the study.
1. What are the factors influencing auditors
report?
2. To what extent auditors report influences
corporate governance?
3. What is the relationship between audit
report and corporate governance?
4. What are the roles of external auditors in
ensuring sound corporate governance?
5. What are the roles of audit committee in
ensuring sound corporate governance?
1.4 Objectives
of the Study
Any
venture without a clear objective amount to inutility and irrelevant in respect
of time and resources, in other to make this work as a more purposeful and
relevance study emphasis should by on the following;
1. To examine the factors influencing auditors
report.
2. To examine the extent to which auditors
report influences corporate governance.
3. To examine the relationship between audit
report and corporate governance.
4. To ascertain the roles of external auditors
in ensuring sound corporate governance.
5. To determine the role of audit committee in
ensuring sound corporate governance.
1.5 Statement
of Hypotheses
A
hypothesis can be seen as a tentative answer to a research question. It is
often stated in the form of a relationship between dependent and independent
variable.
The
following hypotheses will be tested to ascertain variables against the research
questions. These hypotheses are;
Hypothesis
One
HO:
Corporate governance does not
significantly influence audit report in Nigeria
HI:
Corporate governance influence audit
report in Nigeria
Hypothesis
Two
HO:
There is no significant relationship
between auditing and corporate governance.
HI:
There is a significant relationship
between auditing and corporate governance.
Hypothesis
Three
HO:
Auditing in Nigeria does not give a true
and fair view of companies in Nigeria.
HI: Auditing in Nigeria
give a true and fair view of companies in Nigeria.
Hypothesis
Four
HO: Auditing and corporate
governance does not serve as a tool of control used by management to ensure the
achievement of organization goals.
HI: Auditing and corporate
governance serves as tools of control used by management to ensure that
achievement of organization goals.
Where
HO is Null Hypothesis
HI
is Alternative Hypothesis
1.6 Significance
of the Study
The
significant of the study goes a long way, to record the role of auditors report
in corporate governance and the relationship between auditing and corporate
governance. Taking a glance of the business organization, the management,
auditors and owners of the business can be informed on factors influencing good
corporate governance and the findings in this study will be relevant in taking
steps to ensure adherent to corporate governance and. auditor’s provisions.
1.7 Scope
of the Study
The
research concern itself with the regulating framework for various aspects of
corporate governance and the standard for general auditing practices put in place
by organization. This work is empirical in nature and will utilize data of some
financial firms listed on the Nigeria Stock Exchange (NSE) between the year
2007 and 2010 in Benin City, Edo State.
The study will aim at Banks in Edo State.
1.8 Limitations
of the Study
§ Data
collection: The study has limitation on the primary and secondary source of
data. The primary data from questionnaires and interview were scanty because of
errors in opinion of the respondents on the objectives of the secondary source
of data collection. There were not enough literature on the study in the
schools library.
§ The
secrecy of the organization was another major constrain is that the top
management staff were not willing to dispose certain information that would
have enable the researcher to make a proper conclusion.
§ The
retrieval of the administered questionnaire pose another challenges to the end
that some of the management staff were not around as at the times the
researcher came to collect the answered questionnaires. This inhibits a great
problem that hindered the researcher to form a proper conclusion.
1.9 Definition
of Terms
Audit:
Is
a financial statement in an exercise whose objective is to enable auditors to
express an opinion whether the financial statement give a true and fair view of
an entity.
Auditor:
A
person or a firm appointed to carryout an audit of an organization.
Corporate
Governance: The manner in which organization
particularly limited companies are managed and the nature of accountability of
the manager to the owners.
Audit
Report: A report by the auditors appointed to audit the
account of a company or other organizations.
Auditor
Independence: An auditor independence should not only
be independent in fact but also
independent in appearance, he should therefore avoid relationship that may
cause the users of account to question his integrity and objectivity.
Accounting:
An account maintained by a bank or building society in which a depositor’s
money is kept.
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