research work tends to cover the relationship between corporate governance and
external auditor’s report as it is important to non-financial institution.
Improper accounting records, frauds and other internal factors are some of the
factors that lead to lack of returns on investment in an organization. Hence,
the broad objective of the study is to ascertain the relationship between
auditing reporting and corporate governance and also to find out if auditing
and corporate governance serve as a tool of control used by management to
ensure achievement of organizational goals. The primary source of data
collection was used where stratified questionnaires were distributed to
respondents. The judgmental sampling technique was used to select a sample size
of 100. The chi-square statistical tool was used to test the stated hypotheses
and the findings revealed that there is significant relationship between audit
quality and good corporate governance. The study concludes that there is a
strong unbreakable chain connection between corporate governance and auditing
regarding committing to values, ethical business conduct, transparency and
accountability. The study recommends among others that the directors and
auditors should be effective in carrying out the organization responsibilities
and enhance effective corporate governance in the organization.
TABLE OF CONTENTS
of Contents vi
One: Introduction 1
Background to the Study 1
Statement of Problem 4
Research Questions 5
Objectives of the Study 6
Statement of Hypotheses 6
Significance of the Study 8
Scope of the Study 9
Limitations of the Study 10
Definition of Terms 10
Chapter Two: Review of
Related Literature 13
on Auditing and Corporate Governance 14
Issue of Corporate Governance in Nigeria 16
Governance and Audit 17
Roles of the Board of Directors 18
CEO and Management 19
Right and Privileges 20
Role of Audit Committee 21
Functions of Audit Committee 22
and Corporate Governance 23
External Auditors 23
is an External Auditor? 24
Governance Challenges in Nigeria 24
of Corporate Governance 25
of good Corporate Governance 25
Link between Corporate Governance and Investors’ Confidence 26
2.17 The Role of those concerned with Financial
2.18 Fundamental Determinant of Equity Agency
Chapter Three: Research
Method and Design 33
Research Design 33
Description of Population of the Study 34
Sample Size 34
Sampling Techniques 35
Sources of Data Collection 35
Method of Data Presentation 36
Method of Data Analysis 36
Chapter Four: Data
Presentation, Analysis Hypotheses
Presentation of Data 38
Data Analysis 39
Hypotheses Testing 51
Chapter Five: Summary
of Findings, Conclusion and
Summary of Findings 61
Background to the Study
Auditing and corporate
governance as a good tool or form of control in organizations, are gaining more
recognition in Nigeria today, due to the fact that organizations are striving
to achieve their vision and mission.
Auditing and corporate
governance has become action of control,
that is been employed in organization and gaining more recognition due to the
fact that organization are striving to
achieve their vision and mission as well as maximizing shareholders’ funds.
This cannot however be
unconnected with the recent time concerning the need for strong corporate
governance globally with countries around the world drawing guidance and code
of practice to strengthen governance. This emphasis can be linked to increased
concerns over the integrity of securities markets oversight function of control
regulatory and guidance in the ways and manner business is been carried out
(Eugene & Michael, 2009).
governance by board of directors is recognized to influence the quality of
financial reporting which in turn has an important impact on investor’s
confidence (Levitt, 2008). It is believed and advocated that good corporate
governance reduces the adverse effects of earnings management as well as the
likelihood of creative financial reporting arising from fraud or errors and
some cases misrepresentation of accounting financial statement.
external auditor played an important role in improving the credibility of
financial information so presented and published by firms, however, in recent
times, series of well publicized cases of accounting improprieties in Nigeria
has captured the attention of investors and regulators alike. The search for
means to ensure reliable and high financial reporting has largely focused on
the structure of audit report. The auditing profession has been pro-active in attempting
to improve audit report by issuing standards focused on discovery and
independence. As a result, there has been a control effort to advanced ways of
enhancing independence of an auditor and putting in place a good corporate
governance, ethics in place (Nobel, 2009).
The profession has also
responded to several instructions on audit report, by emphasized that by its
nature, the inherent limitations of an audit assignment make it impossible to
eliminate the risk of audit and corporate governance failure. The effect on the
sound corporate governance practices on the quality of financial reporting has
recently received attention globally and this has lead to a change in the ways
of doing business as more organized becoming socially responsible to the environment
The main focus on this
study is the relationship between audit committees and fraudulent financial
reporting, with result generally supporting a negative relationship between an
active audit committee and likelihood of a company being cited fraudulent
reporting. While these results provides evidence from a strong and
sophisticated capital market environment, very little research has been conducted in countries
where capital markets are less developed and where corporate governance
mechanisms are still evolving. However, sound corporate governance practices
are equally, if not more important, in countries that are attempting to gain
credibility among global investors.
This is particularly so
in Nigeria as the country attempts to regain investor’s confidence, following
widely reported financial crises.
Statement of Problem
organization is set up, to achieve some specific objectives. To achieve such
objectives, rules and. regulations are laid down even procedures are set out
which have to be complied with. No shareholder or potential investors would
like to invest in a business that would not yield returns on investment. There
are many factors that could cause lack of returns on investment in an
organization. It can be due to improper accounting records, frauds and other
internal factors. Good corporate governance and proper audit report provides
for accountability and an input to management information system. Based on the
problems stated above, it is very necessary for effective operations and as
such the need for proper audit reporting cannot be overemphasized. This
research intends to examine the role of auditor’s report in corporate
governance in relations to non-financial institution in Nigeria and possible
The following are the research questions
of the study;
Is there any
relationship between auditing reporting and corporate governance?
To what extent
does auditing and corporate governance serve as a tool of control used by
management to ensure achievement of organizational goals?
How important is
corporate governance in building confidence in investors and encouraging stable
To what extend
does auditing in Nigeria give a true and fair view of companies in Nigeria?
Objectives of the Study
broad objective of this study is to ascertain the concept of corporate
governance and external auditors report in non financial institutions. However,
the following are the sub-objectives of the study are to:
ascertain the relationship
between auditing reporting and corporate governance.
find out if
auditing and corporate governance serve as a tool of control used by management
to ensure achievement of organizational goals.
importance of corporate governance in building confidence in investors and
encouraging stable investment?
auditing in Nigeria gives a true and fair view of companies in Nigeria.
Statement of Hypothesis
A hypothesis can be
seen as a claim made about a population subject to test, to determine it’s
validity. It is often stated inform of a relationship between a dependent
variables and independent variables.
hypotheses will be tested to ascertain their validity using the chi-square
H0: There is no significant relationship between
auditing quality and good corporate governance.
H1: There is significant relationship between
auditing quality and good corporate governance.
H0: Auditing and corporate governance does not serve as
a tool of control of management to ensure organizational goals.
H1: Auditing and corporate governance serve as a tool of
control of management to ensure organizational goals.
H0: Good corporate governance practice is not important
in building confidence in investors and encouraging stable investment.
H1: Good corporate governance practice is important in
building confidence in investors and encouraging stable investment.
H0: Audit in Nigeria does not give a true and fair view
of companies in Nigeria.
H1: Audit in Nigeria give a true and fair view of
companies in Nigeria.
Significance of the Study
This research attempts
to identify the role of auditor’s report in corporate governance and the
significance or relationship between auditing and corporate governance.
and Medium Enterprises: This study is
aimed at helping large and medium enterprises in Nigeria where personal
supervision of employees is impossible.
Managers of firms will benefit from
this study as the findings will be relevant in taking steps to ensure adherence
corporate governance and auditing provisions. The importance of auditing can be
illustrated to under the principal-agent relationship. The demand for external
auditors is directly related to the fact that it is the directors (the agents)
who prepare the financial statements, which is primarily based on cost reasons.
This study will be useful to
shareholders in the Nigeria stock exchange (NSE), as it provide evidence on the
relationship between audit report and the reform instituted by them in
formulating the code of corporate governance for listed companies in Nigeria.
Research: This study contributes
to the audit literature as it provides additional empirical evidence on the impact
of the size of audit firm on the level of audit report.
Scope of the Study
This research will
concern itself the programme and standards of the general auditing practice and
procedures and also corporate governance techniques put in place in organizations
especially non-financial institutions in Nigeria.
The sampling frame will
be constructed from a list of companies obtainable from various sectors of the
economy especially non-financial institutions. Using a time frame of 5 years
(2011 to 2015), a sample size of 100 was used for effective result.
Limitations of the Study
It is certain that no
research work will be accurately be perfect, this research work is not
exempted. Business and other social science research investigation strive to
employ scientific tools and method. The problems that limit this research
investigate are as follows:
1. Inability to obtain sufficient data.
2. Unwillingness of companies to give information and
in cases where they do such information is highly altered.
3. Inability to actually access some organization due
to undue rules and regulations.
4. Presentation of incomplete reports by the
5. Weaknesses occasioned by have of non responses from
the respondents and the statistical tools used in the analysis of the data
Definition of Terms
Auditing Standards: This is a standard that set the minimum level of
performance and quality that auditors are expected by their clients and public
Fraudulent Financial Reporting: This is when an auditor give unqualified audit
opinion of financial statements that will be obtain a loan when he know they
are materially misstated.
The only sanction of a auditor is his report. The issuance of a report is the
final stage of audit work. The form will however, depend on the nature of the
audit. The report in order to be meaningful and significant to the users must
be, it must be clear and comprehensive. Honest, objectives, informed and well
evidenced and understandable.
Financial Institution: These are these institution that are financially
oriented e.g. Bank while non financial institutions are those institutions that
are not financially oriented e.g. Flour Mill Nig. Plc, Guinness Nig. Plc, etc.
This is required in order not a to mislead those who will have belief in and
rely on the audited financial statement.
This is the process whereby a shareholder of a company give right to
participate in the share of profile.
This is a committee that works closely with the external audit firm and
generally influences the company’s control environment.