Abstract
This research examines firm characteristics, corporate governance and audit delay in Nigeria. The main objective is to examine the relationship between firm age and audit delay and also determine the relationship between number of committees on corporate governance and audit delay. The secondary source i.e. audited annual reports and accounts of the sampled companies listed on the Nigeria Stock Exchange was used for data collection while the findings were analyzed using OLS statistical technique. The study discovered that firm age has a positive significant relationship with audit delay and that board size has a positive significant relationship with audit delay. The study concludes that audit fee has positive relationship with delay audit, implies that the larger the audit charged by audit firm the wider the audit delay. The study however recommends amongst others that companies should be mandated to shift their balance sheet date to July to avoid December rush and that regulatory bodies should come up with a specified model that will reveal the amount to be charged by audit firms for audit services.
TABLE OF CONTENTS
Title Page i
Certification ii
Dedication iii
Acknowledgements iv
Abstract v
Table of Contents vi
Chapter One: Introduction
1.1 Background to the Study 1
1.2 Statement of Problem 2
1.3 Research Questions 3
1.4 Objective of the Study 4
1.5 Statement of Hypothesis(es) 5
1.6 Significance of the Study 6
1.7 Scope of the Study 7
1.8 Limitations of the Study 7
1.9 Definition of Terms 8
Chapter Two: Review of Related Literature
2.1 Introduction 10
2.2 Definition of Corporate Governance 12
2.3 Theoretical Issues Relating to Corporate Governance 30
2.4 Corporate Governance Measures in Nigeria 34
2.5 The Roles of the Board of Directors 35
2.6 Shareholders Rights and Privileges 37
Chapter Three: Research Method and Design
3.1 Introduction 41
3.2 Research Design 41
3.3 Description of Population of the Study 42
3.4 Sample Size 42
3.5 Sampling Techniques 43
3.6 Sources of Data Collection 43
3.7 Method of Data Presentation 43
3.8 Method of Data Analysis 44
Chapter Four: Data Presentation, Analysis and Interpretation
4.1 Introduction 46
4.2 Data Presentation 46
4.3 Data Analysis 47
Chapter Five: Summary of Findings, Conclusion and Recommendations
5.1 Introduction 54
5.2 Summary of Findings 54
5.3 Conclusion 55
5.4 Recommendations 56
References 57
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
Long audit report lag or inordinate delay jeopardizes the quality of financial reporting by not providing timely information to investors. Delay disclosure of auditor’s opinion on the true and fair view of financial information prepared by management exacerbates the information asymmetry and increases the uncertainty in investment decisions. Consequently, this may adversely affect investors’ confidence in the capital market. Corporate financial reporting practice which entails the compilation, auditing, publication and presentation of audited annual reports and account are tools through which corporate entitles communication financial information about their audited report, is of no use if it fails to meet with trend of entities, it must be timeliness in order to enhance prompt decision by users of the same.
The requirement that annual financial statement be subjected to external audit can conflict with the requirement of timely reporting. To the extent that auditing is a time consuming activity, release of the earnings announcement and the financial statement is delayed. While this conflict is perhaps most easily seen in the case of qualified audit opinions usually event involving auditor client disagreement are not the only reason for variable audit lengths.
The motivation of the study is to ascertain the relation of some uncommon corporate governance variables. The researcher employed the variables in the Nigeria environment.
1.2 Statement of Problem
Many studies (Dyer & McHugh, 2005; Davis & Whittred, 1980, Chambers & Penman, 1984; Zeghai, 1984; Kros & Schoeder, 1984; Richardson, 1989, Woody & Penman, 1984 & Owusu-Ansah, 2000) examined the determinants of audit delay. These studies have two local points. The first set of studies aims to tackle the issue of relationship between the timing of annual earnings announcement and some firms characteristics and its effect on firm value. These studies focused on audit delay analyzing the characteristics of audit, the audit and audit process and their effects on the timing of the audit report date (Chambers & Penman, 1984; Zeghai 1984, Kros & Schoeder, 1984, Richardson, 1989, Daging, Woody & Penman 1984).
However, to the best of any knowledge some crucial firm characteristics like share capital and profit after tax before appropriation have not be used in our local environment.
1.3 Research Questions
The following research questions have been identified and will form the direction for the study.
i. Does firm age have any significant relationship with audit delay?
ii. Does number of committees on corporate governance have any significant relationship with audit delay?
iii. Does board size have any significant relationship with audit delay?
iv. Does share capital have any significant relationship with audit delay?
v. Does profit after tax before appropriation have any
significant relationship with audit delay?
1.4 Objective of the Study
The may purpose of this study was to examine the nature and relationship between firm characteristics, corporate governance and audit delay in the manufacturing companies in Nigeria. The specific objectives of the study were to:
i. Examine the relationship between firm age and audit delay.
ii. Determine the relationship between number of committees on corporate governance and audit
delay.
iii. Ascertain the relationship between board size and audit delay.
iv. Examine the relationship between share capital and audit delay.
v. Investigate the relationship between profit after tax before appropriation and audit delay.
1.5 Statement of Hypotheses
In this study, the following hypotheses were tested:
Hypothesis One
HO: There is no significant relationship between firm age and audit delay.
HI: There is significant relationship between firm age and audit delay.
Hypothesis Two
HO: There is no significant relationship between number of committees on corporate governance and audit delay.
HI: There is significant relationship between number of committees on corporate governance and audit delay.
Hypothesis Three
HO: There is no significant relationship between board size and audit delay.
HI: There is significant relationship between board size and audit delay.
Hypothesis Four
HO: There is no significant relationship between share capital and audit delay.
HI: There is significant relationship between share capital and audit delay.
Hypothesis Five
HO: There is no significant relationship between profit after tax before appropriation and audit delay.
HI: There is significant relationship between profit after tax before appropriation and audit delay.
1.6 Significance of the Study
The following parties will find this study relevant;
Companies: Companies will benefit as it ensures the financial viability of business. It also indicates the way in which companies are directed and controlled through basic governance principles of disclosure and accountability of a company.
Public Sector: Public sector will benefit as it will ultimately improve economic growth and functional position of the country on a global level.
Government: It will also serve as a determinant in developing policy, social economic analysis and poverty resolute issue.
1.7 Scope of the Study
This study examined the relationship between firm characteristics, corporate governance and audit delay over the same period of 2004 to 2013. The period of ten (10) years is chosen in line with Schome (2006), which states that the minimum period for a secondary data should be ten years while the minimum year for primary data is five years. The scope consist all manufacturing companies quoted on the floor of the Nigerian Stock Exchange.
1.8 Limitations of the Study
This study is face with the following limitations:
i. Smallness of the sample size
ii. Inappropriate measurement of the variables.
iii. The study is restricted to only manufacturing companies, the result if generated may not be correct since trading and financial services company have their peculiarity.
1.9 Definition of Terms
Corporate Governance: This refers to framework of rules and practices by which a board of directors ensures accountability, fairness and transparency in a company’s relationship with its all stakeholders (financiers, customers, management, employees, government and the community).
Audit: This is an examination and verification of a company’s financial and accounting records and supporting documents by a professional such as certified public accountants.
Accounting Practice: This is a system of procedures and controls that an accounting department uses to create and record business transactions.
Internal Control: This is a systematic measure such as review, checks and balances methods and procedures instituted by an organization to conduct its business in an orderly and efficient manner.
Shareholders: These are referring to as the owners of one or more share of a company.
Procedures: A fixed, step by step sequence of activities or course of action (with definite start and points) that must be followed in the same order to currently perform a task.
Management: The organization and coordination of the activities of a business in order to achieve defined objectives.
Profitability: This is the ability of a business to earn a profit.
Public Corporation: This refers to a company whose share a publicly traded and are usually held by a large number (hundreds or thousands) or shareholder.
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