- THE INDEPENDENCE OF AUDITORS AND RELIABILITY OF FINANCIAL REPORTS IN THE NIGERIA BANKING SECTOR
- INDEPENDENCE OF AUDITORS AND RELIABILITY OF FINANCIAL REPORTS IN BANKING INDUSTRY
- EFFECTS OF FINANCIAL SECTOR REFORMS ON THE PERFORMANCE OF BANKING INSTITUTION IN NIGERIA
- THE IMPACT OF INTERNAL CONTROL SYSTEM ON FRAUD PREVENTION IN FINANCIAL INSTITUTION [A CASE STUDY OF ACCESS BANK PLC]
- THE IMPACT OF CORPORATE GOVERNANCE MECHANISM ON FIRM PERFORMANCE IN NIGERIA (A STUDY OF CADBURY NIGERIA PLC)
- THE EFFECT OF TRAINING AND DEVELOPMENT ON EMPLOYEES’ PERFORMANCE IN FINANCIAL INSTITUTION OF NIGERIA (A CASE STUDY OF FIRST REGISTRAR OF NIGERIA LIMITED)
- EFFECT OF CAPITALIZATION ON THE FINANCIAL INSTITUTION IN NIGERIA
- CORPORATE GOVERNANCE AND FIRM PERFORMANCE: AN EMPIRICAL EVIDENCE FROM SELECTED LISTED COMPANIES IN NIGERIA
- A COMPARATIVE ANALYSIS OF THE IMPACT OF INVENTORY VALUATION METHODS ON FINANCIAL REPORT STATEMENT IN MANUFACTURING COMPANIES
- CORPORATE GOVERNANCE AND FIRM PERFORMANCE: EMPIRICAL EVIDENCE FROM SELECTED LISTED COMPANIES IN NIGERIA
CORPORATE GOVERNANCE AND EXTERNAL AUDITORS REPORT IN NON- FINANCIAL INSTITUTION (A CASE STUDY OF FLOUR MILL PLC)
TABLE OF CONTENTS
Title Page i
Table of Contents vi
Chapter One: Introduction 1
1.1 Background to the Study 1
1.2 Statement of Problem 4
1.3 Research Questions 5
1.4 Objectives of the Study 6
1.5 Statement of Research Hypothesis 7
1.6 Significance of the Study 9
1.7 Scope of the Study 10
1.8 Limitations of the Study 11
1.9 Definition of Terms 11
Chapter Two: Review of Related Literature 14
2.1 Introduction 14
2.2 Corporate Governance and Audit 15
2.3 Auditors and Corporate Governance 16
2.4 Corporate Governance challenges in Nigeria 17
2.5 The Issues of Corporate Governance in Nigeria 18
2.6 Impact of Corporate Governance 18
2.7 Who is an External Auditor? 19
2.8 Why External Auditors? 20
2.9 Need for Auditing 20
2.10 The Rights and Responsibilities of External
Auditors under the Nigeria Company Law 20
2.11 Functions of Auditors 21
2.12 Appointment of Auditors 22
2.13 Right of Auditors 23
2.14 Duties of an Auditor 24
2.15 The Link Between Corporate Governance and
Investor’s Confidence 25
2.16 Essence of good Corporate Governance 26
2.17 The Role of Audit Committee 27
2.18 The Functions of Audit Committee 28
Chapter Three: Research Method and Design 39
3.1 Introduction 39
3.2 Research Design 39
3.3 Population of the Study 40
3.4 Sample Size 40
3.5 Sampling Techniques 41
3.6 Instrumentation 42
3.7 Method of Data Analysis 42
Chapter Four: Data Presentation, Analysis and
4.1 Introduction 44
4.2 Data Presentation 44
4.3 Data Analysis 45
4.4 Test of Hypothesis 57
Chapter Five: Summary of Findings, Conclusion
and Recommendations 67
5.1 Introduction 67
5.2 Summary of Findings 67
5.3 Conclusion 70
5.4 Recommendations 71
Appendix I 77
Appendix II 78
1.1 Background to the Study
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.
Good corporate 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 1998, 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.
Traditionally, the 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 (Corporate Governance Code of Nigeria, 2005).
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.
1.2 Statement of the Problem
Corporate governance has experience high weakness which is the most important factor blamed for the corporate failure consequences from the economic and corporate crises. Improvement of the integrity of financial reporting can be enhance through greater accountability, the restoration of resources devoted to audit function better corporate governance policies.
The question here is, has there be any relationship between what audit quality should be and how it enhance corporate governance. One may see to it that corporate governance can be better improve through good audit.
Again, one would like to know how an organization with good governance differ from organization without good governance in terms of the quality of financial reporting and auditor’s opinion. With regards to this, how then can a good corporate governance and audit operation helps organization to achieve their goals.
All these are some of the reasons management of organization strife hard to maintain a good audit operation that will not have any effect or conflict of interest between the corporate governance already existing in the organization and auditors.
1.3 Research Questions
1. Is there any relationship between auditing reporting and corporate governance?
2. Is there any difference between the organization with good corporate governance and the one without good corporate governance?
3. Does the auditor’s independence really proves the quality of financial reports?
4. Does the practice of good corporate governance enable the organization to achieve their goals?
1.4 Objectives of the Study
There is an increasing incidence of corporate frauds relating to exaggerated or overstated account. This has informed the need for proper audit practice in Nigeria and good corporate governance.
The main objectives of this work can be stated as follows:
1. To determine the role of auditors report in corporate governance.
2. To determine if there is a positive relationship between auditing and corporate governance.
3. To determine if practice of good governance enables organization to achieve their goals and objectives.
4. To ascertain if the auditors independence improve the quality of financial reports or if it affects it.
5. To ascertain the extent of utilization of the internal audit department.
6. To ascertain the strength and weakness of corporate governance policies in organization.
7. To compare and contrast the difference between the organization with good corporate governance and the one without good corporate governance.
1.5 Statement of Research 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.
The following hypotheses will be tested to ascertain their validity using the chi-square analysis.
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.
1.6 Significance of the Study
This research attempts to identify the role of auditors report in corporate governance and the significance or relationship between auditing and corporate governance.
This study is aimed at helping large and medium enterprises in Nigeria where personal supervision of employees is impossible.
The findings in this study 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 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.
The study also reflects the quality of audit report in Nigeria.
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, like Flour Mill Plc, Guinness Nigeria Plc, etc.
1.7 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 study will cover Flour Mill of Nigeria, Apapa, Lagos State. The sampling frame will be constructed from a list of companies obtainable from various sectors of the economy especially non-financial institutions.
1.8 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 organization.
5. Weaknesses occasioned by have of non responses from the respondents and the statistical tools used in the analysis of the data presented.
1.9 Operational Definition of Terms
1. Auditing Standards: This is a standard that set the minimum level of performance and quality that auditors are expected by their clients and public to achieve.
2. 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.
3. Audit Report: 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.
4. 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.
5. Integrity: This is required in order not a to mislead those who will have belief in and rely on the audited financial statement.
6. Shareholders Fund: This is the process whereby a shareholder of a company give right to participate in the share of profile.
7. Audit Committee: This is a committee that works closely with the external audit firm and generally influences the company’s control environment.