The purpose of this study
is to examine whether efficient corporate governance regime dependent on the
level of competitiveness of the market for audit services. A further objective is
to provide an insight into how weak corporate governance practice leads to
corporate failure. The researcher used primary source of data towards obtaining
authentic information on the topic. However, the issues now bother on whether
independence of auditors contributes to the growth of effective and efficient
corporate governance and f efficient and effective corporate governance
contribute the economic growth of the nation in general. In testing the
hypothesis chi-square was used. The summary of findings includes the efficient
cooperation governance regime which dependent on the level of competitiveness
of the market for audit services and conclusion was made, that for quantitative
governance, it is imperative for an organization to seek for reliable audit
services. Recommendation was made on the fact that there is need for a
regulatory framework for auditors in Nigeria, for this we improve their
performance and positively affect the growth of Nigerian economy.
TABLE OF CONTENTS
Title Page i
Table of Contents vi
Chapter One: Introduction 1
to the Study 1
of Problem 4
of the Study 6
of Hypothesis (es) 6
of the Study 7
1.7 Scope of
the Study 8
of the Study 9
of Terms 9
Chapter Two: Literature Review 11
Governance and Demand of Audit Services 16
and Directors Independences 17
Roles of External Auditors 18
for Effective Audit Function 19
2.7 The Code
of Best Practices on Corporate Governance in Nigeria 21
Governance Legislation in Nigeria Disclosure and Transparency Issues 22
of Auditor Responsibilities in Nigeria 23
and Debt Financing 25
Governance Code and Guidelines 27
Governance Mechanism and control 28
Corporate Governance Control 28
Corporate Governance Control 30
of Corporate Governance in Nigeria 30
Chapter Three: Research Method and Design 32
3.1 Introduction 32
of Population of the Study 33
of Data Collection 34
of Data Presentation 34
of Data Analysis 34
Chapter Four: Data Presentation, Analysis and
Chapter Five: Summary of Findings, Conclusion and
5.1 Introduction 48
of Findings 48
Appendix I 53
Appendix II 54
Background to the Study
governance is all about running an organization in a way that guarantees that
its owners are stakeholders receiving a fair return on their investment.
Corporate governance has been part of research since Berle and Mean’s (1932)
publication on “Separation of Corporate Ownership from Control”. The important of
separation of ownership from management is vital feature of modern firm.
Corporate governance is concerned with the way in which all parties interested
in the well.-being of the firm attempt to ensure that managers and other
members take measure or adopt mechanism that safeguard the interest of the
and Deck (1997) define corporate governance as the process of a virtuous circle
that links the shareholders to the board, to the management, to the staff, to
the customer and to the community at large. A typical firm is characterized by numerous
owners having no management function and managers with no equity interest in
the firm. Shareholders or owners of equity are large in numbers and an average shareholder.
Control a minute proportion of the shares of the firm. This gives rise to
shareholders to take no interest in monitoring of managers, who are left to
themselves and maybe pursuing interest different from those of the owners of equity.
Corporate governance has found a way to address this problem which arises and a
number of significant researches have been conducted towards resolving it.
and Nedareh (2002) emphasize the need for auditor’ s to act in the interest of
the stakeholders particularly minority shareholders or investors by ensuring
that only action that facilitate delivery of optimum returns and other
favourable outcome are taken at all times. One of the stated policies on corporate
governance is to protect the outside shareholders claim of the firm assets.
There is no one simple factor that contributes to institutional problems than
the lack of effective governance. The governance of a county for example refers
to the power and action of the legislature. The narrow view perceives corporate
governance in terms of issue relating to shareholder protection, management
control and the popular principal agency problems of economic theory. No
company can achieve the principle of good corporate governance without a
reliable audit services.
(1998) define audit as a conscientious and objective examination and inquiry
into any statement of account relating to money or money worth, the underlying
document and the physical assets were possible as will enable the auditor to
form an opinion as to whether or not the financial statement present a true and
fair view of whatever it purposes to represent and to report accordingly. Audit
is an independent examination of an expression of an opinion on the financial
statement of an enterprise. The auditor dictates the successful and
unsuccessful project. A research was carried out in US audit market, indicating
the serve to monitor management, contribution to companies over all corporate
governance thereby protecting shareholders interests. Although in some
countries like Germany, the demand for auditing as a monitoring mechanism may
be limited since the companies there relied more on debt than on equity
capital. The demand for auditing as a monitoring mechanism in Germany is
limited since private debt holders, as the major capital providers have more
direct oversight of management relative to dispersed minority shareholders.
German law also limits audit firm liabilities, suggesting the auditing does not
play an insurgence role in Germany as it does in other countries like United
Statement of Problem
governance practice is still growing in Nigeria and has not reached a mature
stage. As a result, financial reporting suffered some set back which weaken
investors’ confidence on publishing financial statements.
to Sarbanes-Oxley Act (2002), corporate governance has been identified as a
tool for sound financial system. Poor corporate governance has recently caused
corporate failures all over the world thereby causing inefficient financial
system. The market for audit services is highly competitive, for this reason
the audit market that is supposed to give a helping hand has also failed in many
countries like Nigeria. Auditors are supposed to give reliable and competent
financial information to protect the shareholders wealth in the favour of
management for them to be re-appointed in the next Annual General Meeting.
the course of this study the following research questions where formulated.
What is the influence of composition
of auditors on firm performances?
What is the relationship between board
size and firm financial performance?
What is the relationship between
separation of the posts of CEO and board chair have to do with firm
What is the extent of shareholding
related to firm financial performance?
Objective of the Study
essence of this study is to find out if efficient
corporate governance regime dependent on the level of competitiveness of the
market for audit services. The following are also the reason for this study to;
Know the influence of composition of
auditors on firm performances.
Determine the relationship between
board size and firm financial performance.
Determine the relationship between
separation of the posts of CEO and board chair have to do with firm
Ascertain the extent of shareholding
related to firm financial performance.
1.5 Statement of Hypotheses
assumption made to direct the trust of this study is:
governance regime does not dependent on the level of competitiveness of the
market for audit services.
governance regime dependent on the level of competitiveness of the market for
HO: There is no significance relationship
between board size and firm financial performance.
HI: There is significance relationship between
board size and firm financial.
Significance of the Study
study will be significance in the following ways;
is our design that this study will provide additional insights into the
relationship between corporate governance mechanism and market for audit
Stock Exchange: It is hope that the evidence would
serve as important quantitative information into the cauldron of policy in the
developing Stock Exchange Market in Nigeria.
iii. The Nation: The need for the study of this kind
is even more important in an environment like Nigeria which is characterized by
growing calls for effective corporate governance especially in the quoted
is also going to be useful for the ongoing privatization programme that
government of Nigeria is doing. Corporate governance encourages market for
Audit Services to improve the growth of the Nation.
Scope of the Study
The study involves
essentially corporate governance application and demand for audit service in
corporate outfits in Nigeria. It is designed to cover the various issues in
corporate governance and market for audit services in Nigeria. However, it
should be noted that corporate governance is applicable to countries, state
owned enterprises, private limited companies and pubic limited companies. There
will be a general study of corporate governance and market for audit services
from 2010 – 2014, that is four years. With special reference to Benin City, Edo
state using a sample size of 50 for effective survey.
Limitations of the Study
study is impeded by a number
of limitations such as reliability of financial report of firms or companies
used for the study as some of the companies may not be sincere enough to report
their activities the way they are. The time stipulated for the completion of
the research work also serves as limitation of the study.
smallness of the sample size, reluctance of respondents to filling the questionnaires
and the difficulty in determining who actually filled the questionnaires in
situations where it was not filled immediately were also issues encountered. Lastly,
statistical tools which include correlation and regression analyses have their
own limitations also.
Definition of Terms
i. Audit Committee: A committee of board of
director’s with responsibilities, for a range of audit related issues and in
particular the conduct of the external and the company’s relationship with its
ii. Efficient Market Hypothesis: In
finance, the efficient market hypothesis (EMH) asset that financial market are
iii. External Auditors: It
refers to that audit professional who perform independent annual audits of organization
iv. Financial Statement: A
statement containing financial information, the main financial statement of a
company is the balance sheet and profit and loss account in the annual report
v. Internal Auditors: They
are employee of an enterprise who is specifically assigned by the management to
conduct a review of the accounting and internal control system.
vi. Independence: Free
from the influence of another individual.
vii. Principle for Corporate Governance: This
can be defined as the relationship among the company’s participant which depend
on certain principle and standard.
viii. Strong Corporate Governance: This
means firm with the independent board of directors and independent audit.