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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