THE IMPACT OF AUDITED FINANCIAL STATEMENTS ON AN ORGANIZATIONAL PERFORMANCE AND PROFITABILITY (A CASE STUDY OF NIGERIAN BOTTLING COMPANY)


Content

Abstract

The project examines the impact of audited financial statements on an organizational performance and profitability using Nigeria bottling company as a case study. The main objective of this study is to examine whether the implementation of financial statement has helped in the growth and development of the organization. The primary source of data collection was used in gathering data from respondents. A structure questionnaire was designed by the researcher and validity by two experts from the statistics department was used to obtain data Chi-Square (X2) was used to test hypotheses formulated. It was discovered that audit report is very important to the organization, especially Nigeria bottling company plc, which was the areas of the main focus, it enhance the growth of the organization and has indeed brought in positive impact. It was concluded that it is the primary duty or responsibility of management and the board of directors of the company to prepare the financial statement and it is the duty of the auditor to examine the financial statement prepared by the management. It was recommended among others that audited financial statement should be prepared in a manner that will show the responsibilities of both the auditor and management.

 

 

 


TABLE OF CONTENTS

Title Page                                                                                                       i

Certification                                                                                                  ii

Dedication                                                                                                     iii

Acknowledgements                                                                                     iv

Abstract                                                                                                         v         

Table of Contents                                                                                         vi

Chapter One: Introduction                                                                      1

1.1       Background to the Study                                                                            1

1.2       Statement of Problem                                                                                  2

1.3       Objectives of the Study                                                                               3

1.4       Research Questions                                                                                                 3

1.5       Statement of Hypothesis(es)                                                                      3

1.6       Significance of the Study                                                                            4

1.7       Scope of the Study                                                                                       5

1.8       Limitations of the Study                                                                             5

1.9       Definition of terms                                                                                      6

 

Chapter Two: Review of Related Literature                                       8

2.1     Introduction                                                                            8

2.2     Definition of Audited Financial Statement                              8

2.3     Audit Independence                                                                 9

2.4     Types of Audit Independence                                                  11

2.5     Power and Duties of an Auditor                                                       15

2.6     Purpose of Audited Financial Statement                                 16

2.7     Credibility and Problems of Audited Financial Statement                18

2.8     Concept of Financial statement                                                         21

2.9     Audited Financial Statement and Investment Decision           22

2.10   Financial Performance                                                             23

2.11   Elements of Financial Statement                                             24

2.12   Financial Ratio in Relation to Performance and Profitability  26

2.13   Applying Financial Ratios on the Financial Statement of ABJ Industries to ascertain the Profitability and Performance of the

Entity                                                                                                32

Chapter Three: Research Method and Design                                     36

3.1       Introduction                                                                                                  36

3.2       Research Design                                                                                           36

3.3       Description of Population of the Study                                                    36

3.4       Sample Size                                                                                                   37       

3.5       Sampling Techniques                                                                                  37       

3.6       Sources of Data Collection                                                                         37       

3.7       Methods of Data Presentation                                                                    38       

Chapter Four: Data Presentation, Analysis and Interpretation     

4.1       Introduction                                                                                                  39

4.2       Presentation of Data                                                                                                39

4.3       Data Analysis                                                                                               39       

4.4       Hypothesis Testing                                                                                      48

Chapter Five: Summary of Findings, Conclusion and Recommendation 

5.1       Introduction                                                                                                  54

5.2       Summary of Findings                                                                                  54

5.3       Conclusion                                                                                                    55

5.4       Recommendations                                                                                       55

            References                                                                                                    57

Appendices                                                                                                   59


CHAPTER ONE

INTRODUCTION

1.1            Background to the Study

The demand for auditing arises from the potential conflict of interest that exists between owners (stakeholders) and managers. The contractual arrangement between those parties normally requires that management issues a set of financial statements that purports to show the financial position and results of operation of the entity. In order to properly evaluate the financial statements, the parties to the contract must agree on a benchmark or criterion to measure performance without an agreed-upon criterion, it is impossible to measure the fair presentation of the financial statements.

Generally Accepted Accounting Principles (GAAP) have, over times become the primary criteria used to prepare financial statements. As the term implies, these principles are generally accepted by the diverse users of financial statements.   

Nigeria took a step to redefine the scope and maintenance of state enterprise in 1953 as a result of the controversy surrounding public sector ownership and the virtues of private cooperation in Nigeria.
Nigeria bottling company limited is one of the few multinational organizations that had it’s beginning in Nigeria from a small family owned operations at inception.

The Nigeria bottling company limited (NBC) was in cooperated in November 1951 as a subsidiary of the A.G levities group with the franchise to bottle and sell coca-cola product in Nigeria. Production began in 1953 at bottling facilities in Ebuta-Melta, Lagos.

The role played by audit in an organization performance and profitability in developing countries is progressively becoming important as it gives room to know what is owned and what is spend by the entity. It is important for the private sector organization in the country to appoint an independent auditor who will present a report stating whether the financial statement and the book of account shows a true and fair view off the financial position of the organization.

1.2            Statement of Problem

Over the years there has been a controversy over the impact which audited financial statement has on organization performance and profiability. In view of this, the research wishes to investigate what impact audited financial statement actually have in an organization performance and profitability. The study is also set out to remove the uncertainty and make clear the important of audited financial statement to an organization .

1.3            Research Questions

The following research question were raised for the study

1.       Has there been any impact of audited financial statement on organization performance?

2.       Does audited financial statement help achieve organizational goals and objectives?

3.       Does audited financial statement increase profitability of the organization?

1.4     Objectives of the Study

The aim of the study is to examine

1.       What impact audited financial statement has on an organization performance?

2.       To know if the audited financial statement has help to achieve the goal/objective of the organization.

3.       To ascertain if audited financial statement increase profitability of the organization.

1.5     Statement of Hypotheses

For the purpose of this study the researcher would be stating the hypothesis thus:

Hypothesis One

HO:    Audited financial statement has no impact on an organization performance.

HI:     Audited financial statement has impact on an organization performance.

Hypothesis Two

HO:    Audited financial statement does not help to achieve organization goal and objectives.

HI:     Audited financial statement help to achieve organization goal and objectives.

Hypothesis Three

HO:    Audited financial statement does not increase profitability of the organization.

HI:     Audited financial statement increase profitability of the organization.

1.6     Significance of the Study

Public Sector Organizations: It is expected that the finding of this research work would be useful to the public sector organizations by enabling them to know that keeping of proper accounting records will be of help to improve the growth and development of the organization. This study will also enable the private sector to know the effect of audited financial statement on organization performance and profitability.


1.7     Scope of the Study

The scope covers the private sector organization with special to Nigeria Bottling company plc. Data was gathered from the organization’s library and other document.

The studies focus on the reporting standard that governs the firm and content of audited financial statement as regard the organization within the range of five years, (2011 to 2015). The study is restricted to the account and audit department of the organization. The study focuses more on Benin City Branch and used a sample size of 40 for effective result.

1.8     Limitations of the Study

This study suffered so many hindrances which include:

1.       Lack of Proper Accounting Record: Most public sector organization does not keep proper accounting records therefore it makes it difficult for data gathering.

2.       Financial Constrain: Worth mentioning also is the financial constraint which hindered the number of visits undertaken.

3.       Time Constraint: It was usually very difficult taking out time to go to the organization to source for information.

4.       Unfriendly staff: Some of the staff of Nigeria Bottling Company, Benin City was unfriendly. Their actions and reactions to me was quite a problem, all the same, vital information was obtained.

1.9     Definitions of Terms

Auditor: This is a qualified accountant who examines books of account and financial statement and report to the users of financial statement and those who rely on it.

Qualified Accountant: This is a person who meets the statutory requirement of a state as responds education moral, integrity, character, special training and experience.

Audit Evidence: This refers to the fact or proof required by an auditor to enable him reaches a reasonable conclusion regarding the financial statement of an organization.

Opinion: It refers to belief or judgement based on experience.

Integrity: It refers to the quality of being honest and upright in character.

Errors: These are unintentional actions or mistakes which enter into the account when transactions are made.

Fraud: It is deception that is deliberating practices in order to secure unfair or unlawful gain.

Negligence: It refers to as carelessness, failure to take proper care or precaution.

Confidence: The ability to brut and to keep information secret.

Financial Statement: This consist of balance sheet, profit and loss account, cash flow statement, value added statement and five year historical, financial summary which collectively are intended to give a time and fair view of state of affair of the organization.

Accounting Information: Is the knowledge recovered from recording, summarizing and analysis the financial transaction of the organization which assists users in making decision.


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