PROJECT TOPIC- Capital Structure and Corporate Performance in Nigeria

Abstract

This study examines the concepts of capital structure and corporate performance in Nigeria. The broad objective of the study is to examine the relationship between capital structure and return on capital employed and also to find out if there is a relationship between capital structure and return on equity. The random sampling technique is adopted in the study. The population consists of all quoted companies in the Nigerian capital market. Data were obtained from annual report and accounts of the sampled companies. Data collected were analyzed using the descriptive statistics while hypotheses formulated were tested using the ordinary least squares techniques. The findings indicated that there is a positive relationship between capital structure and return on asset managed and that there is a negative relationship between capital structure and return on equity. The study recommended among others that companies especially the manufacturing sector should not borrow the maximum amount they are able to and should hold a reserve of borrowing capacity.

CHAPTER ONE

INTRODUCTION

1.1   Background to the study

The majority of Nigerian banks are in ruins which may not be unconnected with the capital structure (debt-equity mix) of the bank. It is therefore imperative for financial manager of bank to determine the proportion of equity-capital and debt-capital to obtain financing mix that will give us optimal capital structure. An optimal capital structure is a critical decision for any business organization (Pandey, 2005).

The decision is important not only because of the need to maximize returns to various organizational constituencies but also because of the impact such decision has on an organization’s ability to deal with its competitive environment. Capital structure is used to represent the proportionate relationship between debt and equity. Equity includes paid- up share capital, share premium, reserves and retained earnings.

In the case of debt, short term borrowing are traditionally excluded from the list of method of financing the firm capital budgeting decision and therefore the long-term claims (such as long term loan and debentures) are said to be a part of the capital structure. The question then is; how much equity do we have? Or how much equity can be raised from all sources? And where will the equity come from? For the majority of companies these questions are relevant, since the corporation did not need to maintain separate equity for their branches.

In as much as capital investment decisions have implications for many aspects of operations and often exert a crucial impact on survival, profitability and growth. Much of the theory in the corporate sector is based on the assumption that the goal of firm should be to maximize the wealth of its current shareholders. One of the major cornerstones of determining this goal is financial ratio. Financial ratios are commonly used to measure firm performances. Generally, corporation includes them in their annual reports to stakeholders. Investment analysts provide them for investors who are considering the purchase of a firm’s securities.

Financial ratio represents an attempt to standard financial information to facilitate meaningful comparisons. It provides the basis for answering some very important questions concerning the financial wellbeing of the firm. Its objectives are to determine the firm’s financial strengths and to identify its weaknesses (Mahdi & Kumars, 2009). This study would therefore seek to establish the fact that there is a relationship between the capital structure and corporate performance.

PROJECT TOPIC- Capital Structure and Corporate Performance in Nigeria

1.2   Statement of problem

Survival and growth needs resources but financing of these resources has limitations. The analysis of the impact of capital choice on profit is as important as the overall existence of the companies’ themselves. It is especially important when one is considering the dwindling fortunes of the aftermath of the global economic recession which might not have been unconnected with inappropriate capital

1.3   Research questions

To this end, the following problem questions are relevant and will be addressed by the study.

  1. What is the relationship between capital structure and Return on Capital Employed (ROCE)?
  2. What is the relationship between capital structure and Return on Equity (ROE)?

iii.    What is the negative relationship between capital structure and Earnings per Share (EPS)?

  1. What is the negative relationship between leverage and Return on Asset Managed (ROAM)?

1.4   Objectives of the study

The study aims at fulfilling the following objectives.

  1. To ascertain if there is a relationship between capital structure and Return on Capital Employed (ROCE).
  2. To find out if there is a relationship between capital structure and Return on Equity (ROE).

iii.    To find out if there is a relationship between capital structure and Earnings per Share (EPS).

  1. To ascertain if there is a relationship between leverage and Return on Asset Managed (ROAM).

1.5   Statement of hypotheses

The testable hypotheses of this research work can be stated thus:

Hypothesis One

HO:   There is a negative relationship between capital structure and Return on Capital Employed (ROCE)

HI:    There is a positive relationship between capital structure and Return on Capital Employed (ROCE)

Hypothesis Two

HO:   There is a negative relationship between capital structure and Return on Equity (ROE).

HI:    There is a positive relationship between capital structure and Return on Equity (ROE).

Hypothesis Three

HO:   There is a negative relationship between capital structure and Earning per Share (EPS).

HI:    There is a positive relationship between capital structure and Earning per Share (EPS).

Hypothesis Four

HO:   There is a negative relationship between Leverage and Return on Asset Managed (ROAM)

HI:    There is a positive relationship between Leverage and Return on Asset Managed (ROAM)

1.6   Significance of the study

Performance measurement is the base of investing and financing decision. Debt holders evaluate performance to decide about interest rate. Investors, on the other hand are interested in evaluating the performance to have knowledge of success of management in applying their capital (Mahdi & kumars, 2009).

To this end this research would help investors to ascertain the impact of capital structure (debt and equity mix) on financial performance.

1.7   Scope of the study

The entire firms in the Nigerian Stock Exchange will constitute the population of the study. A sample of twenty (20) companies was selected to test the theoretical model. For these firms, data were collected for a five year period (2010 to 2015) to allow a thorough evaluation of the capital structure and corporate performance. Based on this, any conclusion, Referencing and recommendation arising from this study may be applicable to other industry or companies in Nigeria.

1.8   Limitations of the study

The problems encouraged in the course of this research include:

  1. Inadequate Study Materials: Research materials were of limited supply due to the practically of the study. Where they were available; the cost involved in sourcing for them was very expensive.
  2. Lack of access of current Data: Most managements and staff of the establishment would not want to disclose important or relevant information about their organization on this subject matter, except were such is permitted by law to be disclosed.

1.9   Definition of terms

  1. Return On Capital Employed (ROCE): This is the ratio that indicates the efficiency and profitability of a company’s capital investments.
  2. Return On Equity (ROE): The amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested.
  3. Return On Asset Managed (ROAM): This is a measure of profits shown as a percentage of the capital that is
    handled. Return on assets managed is calculated by taking operating profits and dividing it by assets (which could include accounts receivable and inventory). Asset turnover and operating margin are the two main drivers in returns on assets managed.
  4. Return On Asset (ROA): This is an indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings”, Calculated by dividing a company’s annual earnings by its total assets, ROA is displayed as a percentage. Sometimes this is referred to as “return on investment”. ROA tells you what earnings were generated from invested capital (assets)
  5. Earnings Before Interest and Taxes (EBIT): This is an indicator of a company’s profitability, calculated as revenue minus expenses, excluding tax and interest. EBIT is also referred to as “operating earnings”, “operating profit” and “operating income”.
  6. Return On Investment (ROI): This is a performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of taking operating profits and dividing it by assets (which could include accounts receivable and inventory). Asset turnover and operating margin are the two main drivers in returns on assets managed.
  7. Return On Asset (RCA): This is an indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings”, Calculated by dividing a company’s annual earnings by its total assets, RCA is displayed as a percentage. Sometimes this is referred to as “return on investment”. ROA tells you what earnings were generated from invested capital (assets)
  8. Earnings Before Interest and Taxes (EBIT): This is an indicator of a company’s profitability, calculated as revenue minus expenses, excluding tax and interest. EBIT is also referred to as “operating earnings”, “operating profit” and “operating income”.
    6. Return On Investment (ROT) – This is a performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments.
  9. Earnings Before Interest and Taxes and Depreciation (EBITD): This measure attempts to gauge a firm’s profitability before any legally required payments, such as taxes and interest on debt, are paid. Depreciation is removed because this is an expense the firm records, but does not necessarily have to pay in cash.
  10. Earnings Per Share (EPS): This is the portion of a company’s profit allocated to each outstanding share of common stock. Earnings per Share serve as an indicator of a company’s profitability.
  11. Equity: A stock or any other security representing an ownership interest.
  12. Dividend Per Share (DPS): This is the sum of declared dividends for every ordinary share-issued. Dividend per Share (DPS) is the total dividends paid out over an entire year (including interim dividends but not including special dividends) divided by the number of outstanding ordinary shares issued.
  13. Share Premium: This is the excess amount received by a firm over the par value of its shares. This amount forms a part of the non-distributable reserves of the firm which usually can be used only for purposes specified under corporate legislation.

15.   Retained Earnings: This is the percentage of net earnings not paid out as dividends, but retained by the company to be reinvested in its core business or to pay debt. It is recorded under shareholders’ equity on the balance sheet.

PROJECT TOPIC- Capital Structure and Corporate Performance in Nigeria

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CHALLENGES FACING AUDITOR’S INDEPENDENCE IN PRIVATE SECTOR ORGANISATIONS IN NIGERIA

PROJECT TOPIC- CHALLENGES FACING AUDITOR’S INDEPENDENCE IN PRIVATE SECTOR ORGANISATIONS IN NIGERIA

Abstract

The study is aimed at examining the challenges facing auditors’ independence in private sector organizations in Nigeria. The ultimate aim of this research work is to evaluate the impact of auditors’ independence on audited report and increase credibility on the financial statement to the user. The researcher employs primary data (questionnaire and personal interview) in its data collection. It was discovered that closeness in terms of giving management decisions can impair an auditor’s independence and that auditor’s independence has a direct impact on the audit report. Finally, it was recommended that seminars and lectures should be conducted for auditors to enable them appreciate their profession the more to maintain their personal integrity despite the advise situation in the country, knowing fully well that a good name is better that riches.

CHAPTER ONE

INTRODUCTION

  • Background to the Study

Over the past three decades, Nigeria has witnessed a huge growth in its private sector with the development of free enterprise, and influx of foreign corporations (Zhao & Murinde; 2011, Ezeoha, 2007; Ningi & Dutse, 2008). Also, the level of private sector investments increased the need for fairly stated financial statements became more important. This surge in the private sector came along with many positive and negative aspects. The economy witnessed a rapid growth in the level of corruption, and fraud perpetuated by businesses.

This pointed to the need for further governmental efforts to regulate business reporting in the country (Ayoola-Akinjobi, 2010). Auditing is not yet well developed in Nigeria. Currently, there are two accounting bodies, Institute of Chartered Accountants of Nigeria (ICAN) and Association of National Accountants of Nigeria (ANAN), recognized in the country to regulate the practice of accounting, however, ICAN is the oldest and most dominant accounting body in Nigeria.

The house and senate approved a bill to set up a third accounting body (Certified Public Accountants of Nigeria, 1998), but the bill was not signed by President Obasanjo before he left office, and his predecessors are yet to sign the bill into law. While both bodies have witnessed great improvements in their regulation of the practice of accounting in the country, they have not done much in the area of auditing.

Recent reports of questionable accounting practices employed by some companies in Nigeria have brought the issue of auditor independence to the forefront, and put the auditing profession in a serious credibility crisis (Otusanya & Lauwo, 2010). In response to this, the public has called for auditors to be independent of their clients. Audit independence refers to the ability of the external auditor to act with integrity and impartiality during his/her auditing functions.

Two types of auditor independence were developed by Mautz and Sharaf (1961) namely practitioner-independence (or independence in fact), and profession independence (or independence in appearance). Communication of accurate financial statements is vital to the operation of the economy since users of financial statements depend on this information to make financial decisions.

To increase the confidence in their financial statements, companies utilize the services of external independent auditors to audit their books. Independent auditors audit the financial statements and express an opinion on the fairness of the statements. The confidence placed on these statements depends ultimately on the perceptions held by the users of these statements regarding the independence of the external auditors. While the external auditors may in fact be independent of the management of the company being audited, if they are perceived not to be independent, then the value of their opinions to the users of the statements is diminished.

PROJECT TOPIC- CHALLENGES FACING AUDITOR’S INDEPENDENCE IN PRIVATE SECTOR ORGANISATIONS IN NIGERIA

  • Statement of Problem

The concept of independence is a cornerstone of the accounting profession. The main aim of employing the services of an auditor in an organization is to audit the financial statement in order to produce a report that will add credibility to financial report in practical terms if independence of the auditor is in place. This research is to ascertain the challenges facing auditor’s independence on management decision making process and to proffer solutions on the ways forward to enhance auditor’s independence in Nigeria.

1.3   Research Questions

Below are research questions meant to direct the study.

  1. Does the effectiveness of auditor’s independence have an impact on the report given?
  2. Does the increase in credibility on the financial statement have an impact on user?

iii.    To what extent do auditors know and appreciate relevance of independence?

  1. To what extent can one appraise the areas of weakness and strength with a view to making recommendation on possible improvements where necessary?
  2. Of what relevant is the provision by statutory bodies and standard on auditor’s independence?

1.4   Objectives of the Study

The level of reliance on the audited financial statement by the users is not that encouraging due to the ineffectiveness, of auditor’s independence. The aim of this project is to achieve the following objective;

  1. To evaluate the impact of auditors independence on audited report.
  2. To increase credibility on the financial statement to the user.

iii.    To ensure that auditors know and appreciate relevance of independence

  1. To appraise the areas of weakness and strength with a view to making recommendation on possible improvements where necessary.
  2. To assess relevant provision by statutory bodies and standard on auditor’s independence and as certain how credible it has been. If not to evaluate and give necessary suggestions that will help appraise the system.

1.5   Statement of Hypotheses

In order to achieve the objective of this study, the following hypotheses are raised.

Hypothesis One

Ho:  Auditors’ independence does not have a direct impact on the auditor’s report.

HI:    Auditors independence have a direct impact on the auditor’s report.

Hypothesis Two

Ho:  There is no significant relationship between the provision of statutory bodies and auditors independence.

Hi:   There is significant relationship between the provision of statutory bodies and auditors independence.

Hypothesis Three

Ho:  There is no significant relationship between auditors and appreciating relevance of audit independence of auditors in private sector organization in Nigeria. 

Hi:   There is a significant relationship between auditors and appreciating relevance of audit independence of auditors in private sector organization in Nigeria.

Hypothesis Four

Ho:  There is no significant relationship between weakness and strength with improvement on audit dependence to private sector organization in Nigeria.

Hi:   There is a significant relationship between weakness and strength with improvement on audit dependence to private sector organization in Nigeria.

Hypothesis Five

Ho:  There is no significant relationship between the provision of statutory bodies and auditor’s independence to private sector organization in Nigeria.

Hi:   There is a significant relationship between the provision of statutory bodies and auditor’s independence to private sector organization in Nigeria.

1.6   Significance of the Study

This study aims at evaluating the impact of auditor’s independence on audited report and gives insight into the effect to the users of such reports. It is also to assess relevant provision by statutory bodies and standard on auditor’s independence and ascertain how credible it has been.

1.7 Scope of the Study

This research focuses on the independence of auditors and its impact on audit report in accounting and its scope is centered on selected audit firms in the country using some audit firms in Benin City, Edo state as case study. The study covers the range between 2008 -2013 and the sample size of 30 is used for the population.

1.8   Limitations of the Study

The limitation of this study was the difficulty in getting relevant journals that is related to the area of study.

1.9   Definition of Terms

Audit: it is a process carried out by suitably qualified auditor where the accounts of business entities, including limited companies, charities trusts and professional firms are subjected to scrutiny in such details as will enable the auditor.

Auditing: It is defined as the process by which a competent qualified independent person accumulates and evaluates evidence about quantifiable information relating to a specific economic entity for the purpose of ascertaining the compliance with any relevant statutory obligation.

Auditor: Is an auditor as an expert accountant who makes an examination of accounting data in order to form his opinion as to the reliability of those data.
Independence: This is the independence of the auditors mind in order to form an objective opinion of the financial statement examined by him without any direct interference from his client.

True and fair view: This means accounts prepare in accordance to the generally accepted accounting principles.

Audit Report: This is the opinion of the auditor after due examination of the financial statements. Audit report is a written summary of the findings of the auditors during their audit work along with their opinion on such findings. The report may either be the domestic report also called letter of weakness addresses to owners of the organization (in case of company’s shareholders).

PROJECT TOPIC- CHALLENGES FACING AUDITOR’S INDEPENDENCE IN PRIVATE SECTOR ORGANISATIONS IN NIGERIA

THE IMPACT OF CASH-FLOW STATEMENT ON CORPORATE ORGANIZATION

 

 

Abstract

This research work critically examines the impact of cash flow statement in an organization. The broad objective of this study is to examine the relationship between operating cash flows and corporate performance and also to examine the correlation between investing cash flows and corporate performance. The primary source of data collection was used in the study and data for the study were collected through the use of questionnaire. 60 questions were administered and fifty eight (58) were returned. The responses were then analyzed using the simple percentage method and the chi-square denote by a Greek symbol (X2) to test the hypothesis. The findings showed that there is a significant relationship between cash flow statement and corporate investment and that cash-flow statement impact on organization performance. However, it was recommended that in improving their performance and cash flow, corporation should seek to improve their investment policy since increase investment lead to more cash flows for the organization

 

CHAPTER ONE

INTRODUCTION

Background to the Study

Cash flow of a company is a crucial factor that enhances its operations. According to Efobi (2008), Due to the relevance of cash flows in the company’s operations and performance, corporate organizations need to develop a suitable cash flow mix and apply it in order to maximize shareholders values. Uremadu (2004) sees cash flows of an organization as those pool of funds that the company commits to its fixed assets, inventories, account receivables and marketable securities” that lead to corporate profit. The ability of the company to effectively choose adequate source of funds to finance its operations will differentiate strong cash flow governance and poorly managed cash flows (Efobi, 2008). For the cash flows to be well structured and effectively utilized, a business firm must be able to devise various ways for selecting the best components of its cash flows which would be used in the company’s operation to raise its productivity or achieve performance. This process should be based on the criteria well drawn up by the finance manager after making a careful financial planning and control for the company (Uremadu, 2004).

Cash flow is an index of the money that is actually received by or paid out by a firm for certain time period (Albrecht, 2003). This index is not inclusive of non-cash accounting charges such as depreciation. Cash represents the firm’s vascular system, if it dwindles, the business will not survive. The fact that a firm is profitable does not mean that it is also solvent. The profit is not cash. The solvency, flexibility and the financial performance of the firm are set on the firm’s ability to generate positive cash flows from the operating, investing and financing activities (Turcas, 2011). Cash flows represent all inputs and outputs liquidities and cash equivalents. Liquidities represent cash on hand and demand deposits. Cash equivalents are short-term investments with a liquidity degree that can be easily converted into cash with an insignificant risk of value change.

According to Adelegan (2003), cash flows are more direct measure of liquidity and a contributing factor in corporate performance. Cash flow information assists its financial statement users in obtaining the relevant information concerning the use of resources of virtually the entire financial resources over a given time period (Ross, 2007). Financial statements translate the financial activity of the enterprise into a more or less objective set of numbers, which provide valuable information about the firm’s performance and about its possible problems and its potential in the future (Turcas, 2011). The importance of cash flows cannot be overemphasized mainly because the users of accounting information are particularly interested in the cash of the company that is published) in its financial statements (Narkabtee, 2000). According to Bodie (2004), internally, managers need to know the current financial position of the firm (performance and problem), continuing with problems and control functions. According to Fabozzi and Markomits (2006), suppliers are interested in the firm’s liquidity because their rights are generally on a short term and in this case the company’s ability to pay is best reflected by the liquidity indicators. According to Bragg (2002), investors in bounds, who ordinarily lend the firm on medium or long term for remuneration, are rather interested in the company’s ability to generate cash flow for medium and long-term coverage of debt service.

 

THE IMPACT OF CASH-FLOW STATEMENT ON CORPORATE ORGANIZATION

 

1.2   Statement of Problem

According to Pitman (2010), cash flow does not always coincides with cash outflows. Thus, in some periods, cash will flow in than out and at other times, cashflows out than in. if receipts and payments period could be matched perfectly and forecast with certainty than a firm need no cash balance.

Pitman (2010) went further I say that shortage of cash curtail the operations of the firm which usually manifest inability of the organization to pay bills when due and the dissipation of assets. Persistence of cash shortage can lead to financial insolvency which may subsequently lead to litigation of the organization. If there is too much cash, it is not invested, then the firm is paying directly or indirectly for money that is not using. The organization losses to earnings, interests and run the risks of keeping the liquid fund (cash). The problem that faces management is how to maintain and control optimum cash balances despite the difficulties in cashflows.

Pitman (2010) also stated that the importance of cash as an asset of a firm cannot be over emphasized with out cash, that is, where is short is supply, the normal flows of operation of the corporation flows are directly productive, it is sterile. It neither produces goods for sale or induces customers to buy as if the case of other assets, fixed assets, inventories and account receivable.

In current practice, including the ambiguity of terms such as funds, lack of comparability arising from diversity in the focus of the statement (cash, cash and short term investment, quick assets, or working capital) and resulting differences in definition of funds flows from operating activities

 

THE IMPACT OF CASH-FLOW STATEMENT ON CORPORATE ORGANIZATION

CORPORATE GOVERNANCE AND AUDITORS REFORM: AN EMPIRICAL REVIEW

PROJECT TOPIC- CORPORATE GOVERNANCE AND AUDITORS REFORM: AN EMPIRICAL REVIEW

ABSTRACT

The project examines the link between corporate governance and auditors report in Nigeria. The study main objective is for an appointed auditor to express a professional opinion on the financial position of an enterprise as contained in the financial statement prepared by the management so that any person reading or using them can have faith in them. The primary source of data collection was used in gathering data from respondents. A structured questionnaire was designed by the researcher which was used to capture the relationship between corporate governance and auditors. It concluded that management of companies need to improve their accounting practices and ensure timely and adequate disclosure of information regarding financial position and performance, as this will in turn improve the public’s understanding of such companies and in the long run attract profitable investment. Finally, it was recommended that the board of directors should be able to check the activities of the internal and external auditors in other for them not to present a fraudulent financial statement that will reduce the image of the companies.

CHAPTER ONE

INTRODUCTION

1.1   Background to the Study

The term “Corporate Government” has been identified to mean different things to different people. Magdi and Margret (2002) stress that corporate governance is about ensuring that the business is managed well and investors receive fair return. OECD (1999) provides of more encompassing definition of corporate governance. It defines corporate governance as the system by which business corporations are directed and controlled.

The corporate structure specifies the distribution of rights and responsibilities among different participants in the corporation such as, the board, manager’s shareholders and other stakeholders, and spells out the rules and procedures for making decisions on corporate affair. By doing this, it also provides the structure through which the company’s objectives and monitoring performances.

This definition is in line with that of Akinsulire (2010) financial scandals round the world and recent collapse of major corporate instructions in Nigeria recently having shaken investor’s forth in the capital market and the efficacy of existing corporate governance practices in promoting transparency and ‘accountability. This has brought to therefore once again the need for the practices of good corporate governance.

Effective corporate governance reduces “control rights” shareholders and creditors confer on managers, increasing the probability that managers invest in positive net present value projects (Shleifer & Vishny 1997; p.78). Depending on the jurisdiction, different bodies may have responsibility of corporate governance. Board of Directors, Audit committee and other supervisory committees.

International standards on Auditing (ISA) 260, requires the auditors to determine those persons charged with corporate governance. The most direct benefit of corporate governance is to shareholders. However, the ultimate benefit is the more efficient allocation of capital to its most productive uses. Where organizations are left to themselves, it can easily deteriorate as a result of individuals seeking for their own interest, therefore not for such organization to be audited.

In other worlds no governance system, no matter how well, designed will fully prevent greedy and dishonest people from putting their personal interest ahead of the interest of the company they manage. Many steps can be taken to improve corporate governance and thereby reduce opportunities for accounting fraud; this is where the role of auditing comes into play.

Auditing reports is a report by the auditors appointed to audit the accounts of companies the auditors of a limited company are required to form an opinion as to whether the annual accounts of the company give is true and fair view and of its state of affair at the end of the year or period. (Oxford Dictionary of Accounting, (2005). According to Adeniyi (2004, p.12), Audit report is the means by which the auditors express their opinion on the truth and fairness of a company’s financial statement for the benefit principally of the shareholders, but also for other users. Since the auditor provides a check on the information aspect of the governance system it is said that the auditor does not have a direct corporate governance responsibility, the roles of auditor’s in corporate governance involves reporting, decision making, accountability and monitoring.

The objective of an auditor under CAMA 1990, is for an appointed auditor to express a professional opinion on the financial position of an enterprise as contained in the financial statement prepared by the management so that any person reading or using them, can have faith in them. Other objectives are to prevent fraud and errors, to detect any forms of irregularity, to advice on financial matters for efficient decision making by the management. Adeniyi, (2004, p. 68).

One perception of corporate governance failure has been to focus on the effectiveness of internal control. Auditing involves a public responsibility that is more important than employment relationship with the client, for the auditors to meet their obligation, relevant and reliable information’s must be given to them.

PROJECT TOPIC- CORPORATE GOVERNANCE AND AUDITORS REFORM: AN EMPIRICAL REVIEW

  • Statement of Problem

The research is an attempt to examine the role of auditors’ report in corporate governance in relation to the organizations in Nigeria. The research problems can therefore be started as: knowing the factors influencing auditors’ report, to what extent does corporate governance influence auditor reports, what is the relationship between corporate governance and auditor reports? What role(s) or any of external auditors in ensuring sound corporate governance? And knowing the role of audit committee in enhancing quality audit report sound corporate governance.

From the above problems, there is the need for effective corporate system to be put in place as a strategy for efficient and effective operation which requires the need for proper audit report.

1.3   Research Questions

The following are the research questions the researcher aim to solve in other to achieve the objective of the study. 

  1. What are the factors influencing auditors report?
  2. To what extent auditors report influences corporate governance?
  3. What is the relationship between audit report and corporate governance?
  4. What are the roles of external auditors in ensuring sound corporate governance?
  5. What are the roles of audit committee in ensuring sound corporate governance?

1.4   Objectives of the Study

Any venture without a clear objective amount to inutility and irrelevant in respect of time and resources, in other to make this work as a more purposeful and relevance study emphasis should by on the following;

  1. To examine the factors influencing auditors report.
  2. To examine the extent to which auditors report influences corporate governance.
  3. To examine the relationship between audit report and corporate governance.
  4. To ascertain the roles of external auditors in ensuring sound corporate governance.
  5. To determine the role of audit committee in ensuring sound corporate governance.

1.5   Statement of Hypotheses

A hypothesis can be seen as a tentative answer to a research question. It is often stated in the form of a relationship between dependent and independent variable.

The following hypotheses will be tested to ascertain variables against the research questions. These hypotheses are;

Hypothesis One

HO:   Corporate governance does not significantly influence audit report in Nigeria

HI:    Corporate governance influence audit report in Nigeria

Hypothesis Two

HO:   There is no significant relationship between auditing and corporate governance.

HI:    There is a significant relationship between auditing and corporate governance.

Hypothesis Three

HO:   Auditing in Nigeria does not give a true and fair view of companies in Nigeria.

HI:    Auditing in Nigeria give a true and fair view of companies in Nigeria.

Hypothesis Four

HO:   Auditing and corporate governance does not serve as a tool of control used by management to ensure the achievement of organization goals.

HI:    Auditing and corporate governance serves as tools of control used by management to ensure that achievement of organization goals.     

Where      HO is Null Hypothesis 

HI is Alternative Hypothesis

1.6   Significance of the Study

The significant of the study goes a long way, to record the role of auditors report in corporate governance and the relationship between auditing and corporate governance. Taking a glance of the business organization, the management, auditors and owners of the business can be informed on factors influencing good corporate governance and the findings in this study will be relevant in taking steps to ensure adherent to corporate governance and. auditor’s provisions.

1.7   Scope of the Study

The research concern itself with the regulating framework for various aspects of corporate governance and the standard for general auditing practices put in place by organization. This work is empirical in nature and will utilize data of some financial firms listed on the Nigeria Stock Exchange (NSE) between the year 2007 and 2010 in Benin City, Edo State. The study will aim at Banks in Edo State.

1.8   Limitations of the Study

  • Data collection: The study has limitation on the primary and secondary source of data. The primary data from questionnaires and interview were scanty because of errors in opinion of the respondents on the objectives of the secondary source of data collection. There were not enough literature on the study in the schools library.
  • The secrecy of the organization was another major constrain is that the top management staff were not willing to dispose certain information that would have enable the researcher to make a proper conclusion.
  • The retrieval of the administered questionnaire pose another challenges to the end that some of the management staff were not around as at the times the researcher came to collect the answered questionnaires. This inhibits a great problem that hindered the researcher to form a proper conclusion.

1.9   Definition of Terms

Audit: Is a financial statement in an exercise whose objective is to enable auditors to express an opinion whether the financial statement give a true and fair view of an entity.  

Auditor: A person or a firm appointed to carryout an audit of an organization.

Corporate Governance: The manner in which organization particularly limited companies are managed and the nature of accountability of the manager to the owners.  

Audit Report: A report by the auditors appointed to audit the account of a company or other organizations.

Auditor Independence: An auditor independence should not only be independent in fact but  also independent in appearance, he should therefore avoid relationship that may cause the users of account to question his integrity and objectivity.

Accounting: An account maintained by a bank or building society in which a depositor’s money is kept. 

PROJECT TOPIC- CORPORATE GOVERNANCE AND AUDITORS REFORM: AN EMPIRICAL REVIEW