This project work titled “the impact of conflicts of interest on the auditor’s independence” using a price water house coopers as a case study, examines specifically the concepts of independence and conflicts that may arise when it is lacking. Independence are identified and discussed on how to manage threats. The primary and secondary sources of data were used in gathering information for the success of the project work. It was discovered that auditor’s conflict of interest greatly influence the auditor’s independence. It was concluded that the conflicts of interest exists from the auditor to the structures that govern the industry, the institutions and legislation. Finally, it was recommended that auditors should be chosen not by management of the company, but by the committee which should comprise of the Board of Directors (BODs).



1.1   Background to the Study

Conflict of interest and auditor’s independence are two concepts that must be considered properly in this project work. If there is any way auditors’ conflict of interest affects his independence. To start with auditor’s conflict of interest according to Andrew (2004) is a setting where an auditor trade off the influence and been biased of his report. There are two types of conflicts of interest in this regard.

They are conflict where auditor earns reward from a third party between form and clients interest and conflict between the interests of two or more client e.g. where an auditor or audit team has a long term relationship. While auditor’s independence refers to as the independence of the auditor from parties that have an interest in the financial statement of an entity. This usually safeguard the auditor’s integrity and also an objective approach to the audit process.

It is obvious that there is auditor’s conflict of interest i.e. either of the two types of conflict of interest, there is usually auditor trade of the influence and been based that could make auditor not given accurate report, and then affect auditor independence. The definition of auditor and auditor’s independence over the decades, have evolved along with accounting profession itself the concept independence was considered of great importance, and the focus was am elimination of conflict of interest that arose from financial relationships between auditors and their clients.

The twin sides of a coin are the concept of audit and the concept of independence. The auditor who has lost his independence has lost his reason, he has become a dependent auditor and will be in conflict of interest with his clients. Independence remains as crucial an issue as it was in the nineteenth century, and is still required to be demonstrated.


1.2   Statement of Problem

Financial reports are meant to be a formal record of business activities and these reports are meant to provide an overview of the financial position and profitability in both short and long term of companies to the users of these financial statements such as shareholders, managers, employees, tax analyst, banks, etc. But in recent times, the financial manipulations, weak internal control systems, ignorance on the part of the board of directors and audit committee, manipulation on the part of the reporting auditor and other fraudulent activities that occur within companies, creating a negative goodwill to the general public.

A typical example of a financial statement malfunction is the popular case of Enron. Enron was one of the largest energy companies in the US. By fraud and bribery, Enron executives avoided income taxes, and this lead to the downfall of this multi-billion dollar firm. Importantly, this wasn’t the first, a similar case appeared in 1973, when equity funding an insurance firm located in Los Angeles went bankrupt (Don, 2006).

In fact every year, a new business fraud is unraveled, often with similar components, corporate instability, uniformed accountants, high-level connections, and broke investors (Knapp, 2005). Enron started in July 1985 when Omaha-based inter-north merged with Houston natural gas. Kenneth Lay, who had originally held positions in academic and the government, became chief executive and chairman.

By 2001, Enron had grown to one of the of the largest energy companies in the world. However, the company sudden by unraveled and collapsed. Some other examples of corporate failure on the local scene are Lever Plc now Unilever in (1998) and African Petroleum (2000). From the above discussions, there is need to ensure credibility of financial statement of companies in order to increase users confidence and thereby affecting investors behaviour. This study seeks to investigate why corporate organizations fail and how it is occasioned by the independence of auditors.

1.3   Statement of Hypothesis

A research hypothesis is an assumption of statement, which may not be true concerning one or more population.

There are two types of hypothesis, the null hypothesis (Ho) and the alternative hypothesis (Hi). The null hypothesis is a negative type of proposition of the research hypothesis. The alternative hypothesis is accepted once the wall hypothesis is rejected. Below is the formulated hypothesis.

Hypothesis One

HO:   Conflicts of interest does not influence the auditors independence

HI:    Conflict of interest influences the auditors independence.

Hypothesis Two

HO:   Conflicts of interest does not cause bias judgment and decisions by an auditor

HI:    Conflict of interest can cause bias judgment and decisions by an auditor.

1.4   Objectives of the Study

The main objective of this research is to examine specifically the impact of conflict of interest on auditors’ independence.

The specific research objectives are:

  1. to assess the impact of interest influences on the auditors’ independence.
  2. to evaluate whether the conflict of interest can cause bias judgment and decisions by an auditor.

1.5   Scope of Study

The scope of this research was limited to price Water House Coopers, which is one of the largest professional service providers globally.

1.6   Significance of the Study

This study will help reveal the conflicts of interest of auditors, its impact on auditors’ independence and its findings and recommendations will be of benefit to:

  1. Auditors: The auditors will benefit from this study in the sense that it reveals the conflicts of interest which will be an advantage to them in carrying out their audit work.
  2. Individuals who may wish to be auditors in future. This study will serve as guidelines for them in the course of carrying out their audit exercise.
  3. Organizations that hire auditors high-lightening them on the rules governing the independence of auditors.

1.7   Limitations of the Study

So many limitations were met during the process of this research work. The first among others was getting information relevant to the research combining and relating the research work. Another limitation are:

Finance: There was also the challenge of inadequate finance faced by the researcher to carry on adequate research in respect of the aforementioned topic.

Time: There was often time consuming in sourcing for research materials and other relevant information. This, in addition to the above mentioned was a great challenge to the researcher.

1.8   Definition of Terms

Accountability: It is the obligation stewards or agents to provide relevant and reliable information relating to resources over which they have control and which have effects on others.

Accounting Principles: These are principles according to which the amounts of all items in a company’s account are to be determined.

Audit Opinion: This is an opinion expressed by an auditor upon financial statements,

Statement of Financial Position: This shows the assets, liabilities and capital of an organization at a particular data.

Statement of Comprehensive Income: This is a financial statement of an enterprises or income and expenditure.

Auditors Attitude: It is a combination of education, experience and judgement which provides a frame of mind, a point of view toward his work, that enables and auditor to appraise his problems accurately.

Audit Services: Fee based services provided by the qualities to provide reasonable assurance that the company’s financial statements are fairly presented.
Auditor: The external professional charged with the task of attesting to the fair presentation of company financial statements.

Auditor Independence: The expected relationship between the auditor and client in order to receive reasonable assurance that the judgement made by the auditor are free age any influence by the client or other parties.

Conflict of Interest: The perceived or actual state of an individual where the judgements and opinions are developed to promote the interests of the individual rather than the other interested stakeholders.

Non-Audit Services: Free based services performed by the auditing firm which are not related to the audit engagement.

Auditors Report: A report made by an auditor upon financial statements.

Financial Statements: The statement of financial position, statement of comprehensive income, statement of cash flows or total recognized gains and losses, notes and other statements and explanatory material all of which are identified in the auditors reports as being part of the financial statement.

Fraud: The use of deception to obtain an unjust illegal financial advantage or intentional misinterpretation by one or more individuals among management, employees, auditors or other parties.  

True and Fair View: The accounting standards obtained a legal opinion that stated true
and fair view which is to be adhered to by auditors.

Low-Balling: The reduction in audit fees by an auditor, so as to protect or establish the relationship between the auditor and clients and to build the relationship that could become profitable later.

Objectives Assessment: An opinion or a judgement about the financial statements of a company, that is made by an auditor, and is free from influence of personal feelings, from clients and other parties.

Audit Evidence: The information obtained in arriving on the condition on which he bases his opinion about the financial statements of a company.

Audit Fees: The combined and total fees generated by the auditor for providing service to the client.

Institution Provisions: This include auditing standard and auditing guidelines, the statements issued by profession accounting bodies setting up basic principles, procedures and ethics to be adopted by members in the conduct of audit and how they should be applied.


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The creditability of corporate financial reporting and audit challenges in the economy is relevant if there is no bias in the preparation to favour a segment in the public. This study looks into issues affecting corporate financial reporting in Nigeria economy. Using the questionnaires I administered questions like relationship among internal control system, board size, audit committee, auditor’s independence and corporate financial reporting were asked. Empirical and theoretical review were re-viewed. In analyzing the hypothesis, z-test method was employed in testing the hypotheses which shows that board size and internal control system have a positive and significant relationship with corporate financial reporting. It was thus concluded that for corporate financial reporting should be more relevant, reliable and auditors should be granted more independent along with the audit committee in order to be more effective and efficient.



  • Background to the Study

In any business entity, whether profit or non-profit, it has set of objective. It mobilizes resources from various sources to achieve set goal at the end of the period. This is necessary to determine how well these resources have been utilized. Where there is separation of ownership from management, the owners will want to know how judiciously these resources have been used. This is the stewardship function of accounting.

The function is discharged by the presentation of a report of the activities to owners by management; such report are usually conveyed by means of financial statement (Schipper and Vincent, 2003). The following objective of financial reporting information concerning economic entities, primary financial report is useful for economic decision making (FACB, 1999, IAEE, 2008).

Providing high financial reporting information is important because it will positively influence capital provider and other stakeholders in making investment credit and similar resources. Allocation decision enhancing overall market efficiency (IASB, 2006; IASB, 2008). Although both FASB and IASB stress the importance of corporate financial reporting, it is how over affected by the quality of auditing. This is due to its context specifically, empirical assessment of financial reporting inevitably including preference among myriad of constituent (Dechow and Dishes, 2002).

Statement of accounting Standard (information to be disclosed in financial statement) and section 334(2) of Companies and Allied Matters Act (CAMA), provides that financial obstacle shall include; the mission of statement comprehensive income policies, statement of financial income, note to the account, auditor’s report, directors report, value added statement of five years financial summary.

The financial statement must accurately represent the underlying economic activities of the organization. It is possible to have a discontinuity between induce doubt and the organization. When this occurs, the creditability such statement induces doubt and uncertainty in the mind of the various users of the financial statement. These, therefore means there is lack of uniformity between information available to the management and information available to the investing public (Bostosan, 2004).

There are two sources of information as regard financial statement, in the book keeping (financial report) these process include:

  1. Management understanding of underlying activities may not be accurately represented in financial statement and
  2. Investing public understanding or perception of information represented in financial statement may be different from that which has been documented.

Corporate financial reporting is aided by auditing stem from the fact that a lot of person’s requires corporate financial reports for different legitimacy and enhance companies images lack of proper audit or carelessness on the part of the auditors in auditing financial statement of companies, have led to investors making wrong decision, as well as closure of companies, who otherwise were thought to be doing well such as Enron in the United State as well as some companies and banks in Nigeria.

Corporate financial reporting is a communication of relevant qualitative and quantitative information for decision making. Management is entrusted with the legal responsibility of preparing and communicating such relevant information to the users. However, the management does not independently carry this task, but it is the joint effort by account researchers, management auditors and the government.

Financial statements make a case for reporting entity in their guest for indivisible funds. Where a reporting unit creates uncertainty in the minds of investors, it is perceived as risky. The effect is that investors demand a compensation for a perceived level of risk. This result to an increase in cost of capital of such economic unit. This is known as “capitals need hypothesis” (Choi, 1973) suggested that a prime mature for disclosure as to raise capital at the lowest cost (Cooke, 1991) posit that “a number of explanations can be advanced for the hypothesis”. In order to raise capital from the financial institutions, he says that the companies must increase their compliance with disclosure.

Disclosure in financial statement determine the level of transparency of such entities. Hitherto poor response of international investors has been adduced to lack of transparency not only of government but also of private economic sectors. Regulatory agencies such as Central Bank of Nigeria (CBN) and Securities and Exchange Commission (SEC), has been perceived as ineffective.

This perception has been accentuated especially in situations where such banks have been given a clean bill of health by auditors. What this translates to be an economic environment characterized by lack of trust. In the last decade, studies have shown that the auditing profession has had to deal with a lot of challenges than it has done in its lengthy history which spans over one hundred years (Smith, Machosh et al, 2010). 


1.2   Statement of Problems

Principally, management activates are conveyed by means of financial statements. Where these financial statements introduced elements of doubts in the minds with the effect that the continued survival of the firm is threatened as it is starved by needed funds.

1.3   Research Questions

  1. What is the relationship between internal control system and corporate financial reporting?
  2. What is the relationship between board size and corporate financial reporting?
  3. What is the relationship between audit committee and corporate financial reporting?
  4. What if there is relationship between auditor’s independence and corporate financial reporting?


1.4   Objectives of the Study

Any organization that seeks to be successful must take pains to present a financial report devoid of fraudulent practices, as this improves the credibility of the company.

Any effort aimed at improving corporate reporting activities with has effect of enhance investors’ confidence as well as increase economic resources.

The key object of this study is to evaluate corporate financial reporting, how it has been affected by auditing as well as challenges of auditing practices over the years. Other objective includes:

  1. To ascertain if there is a relationship between internal control system and corporate financial reporting.
  2. To ascertain if there is a significant impact of board size on corporate financial reporting.
  3. To enquire out if there is a significant relationship between audit committee and corporate financial reporting.
  4. To examine the relationship between auditor’s independence and corporate financial reporting.

1.5   Statement of Hypotheses

        Hypothesis One

Ho:  There is no significant relationship between external control system and corporate financial reporting.

Hi:   There is a significant relationship between external control system and corporate financial reporting.

Hypothesis Two

Ho:  There is no positive relationship between board size and corporate financial reporting.

Hi:   There is a positive relationship between board size and corporate financial reporting.

Hypothesis Three

Ho:  There is no significant impact of audit committee on corporate financial reporting.

Hi:   There is a significant impact of audit committee on corporate financial reporting.

Hypothesis Four

Ho:  There is no significant relationship between auditor’s independence and corporate financial reporting.

Hi:   There is a significant relationship between auditor’s independence and corporate financial reporting.

1.6   Significance of the Study

The trust worthiness “of the research depend in what the counts as knowledge” (Lincoln and Guba, 1985). This research work on its conclusion together with solution of finding may arise. This will prove useful to some particular group of persons of otherwise for various needs some of the beneficiaries are shareholders. The shareholders are interested in affairs of the company. They want to know what the affair of the organization owns which are called asset, what the organization owes is called liabilities. They are which guarantees the dividend at the end of the financial year.

Public: The public have interest, particularly those resident in the immediate business environment they use accounting information to known the rate of profit, the organization is making by exploiting information to negotiate with the company to provide welfare facilities like school, hospital, scholarship and employment to their youth.

Potential Investors: Some business men have millions of naira to invest. Such investors in accounting information are to determine the most profitable organization. Where they will invest their money and get good returns.

It would also be useful for auditors in the sense that it would expose some of the issues that have to divided the auditing profession over time, and to provide answer to some pertinent question as regards auditing practice in Nigeria.

1.7   Scope of the Study

The scope of this study focuses on corporate reports on manufacturing companies and other financial institution in Nigeria. The subject matter of the study is corporate financial reporting and challenges of auditing practice; corporate of interest in the will of those item in sections 334(2) of CAMA 2004.

The time period for this study is between the period of pre-consolidation and post consolidation. Geographically, this study will be limited to Benin metropolis in Edo State capital.

1.8   Limitations of the Study

A subject of the nature entails a lot of work, however, the researcher’s limitation were low respondent, found it difficult to spare the researcher their time was also the problem of interest material as most of its required to be downloaded. The website were requesting for membership code as they were only available to existing members of their book. This proves to be a major constraint to the study.






1.1   Background to the Study

Corporate governance has been defined as the way and manner in which the affairs of companies are conducted by those charged with the responsibility. It is a system that ensures optimal utilization of resources for the benefits of shareholders while meeting societal expectations. Given the high correlation between corporate governance and investor decisions, the government of Nigerian is keen to position the country to take advantage of the opportunities in the global market by adhering to principle of good governance, thus, Securities and Exchange Commission (SEC) and the Corporate Affairs Commission (CAC) came out with seventeen (17) member committee and drafted the code of best practices for corporate governance in Nigeria.

Depending of the jurisdiction, different bodies may have responsibility of corporate governance, board of Directors, Audit Committee and other supervision committees. International Standards on Auditing (ISA) 260, requires the auditor to determine those persons charged with corporate governance. The most direct of corporate governance is to shareholders. However, the ultimate benefit is the more efficient allocation of capital to its most productive uses.

In the real sense, no governance system, no matter how well designed, will fully prevent greedy and dishonest people from putting their personal interests ahead of the interests of the companies 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 (through proper audit reports) comes into play.

The auditor does not have a direct corporate governance responsibility, but rather provides a check on the information aspects of the governance system. The role of auditors in corporate governance involves reporting, decision making, accountability and monitoring. Decision requires relevant and reliable information, accountability involves measuring, reporting and transparency, and monitoring includes system and feedback.

Auditor’s primary role is to check whether the financial information given to investors is reliable, i.e. if its expressed the true and image of the organization. The objective of an audit is to express an expert opinion on the fairness with which the financial statement are prepared and presented, in all material aspects a company’s financial position, results of operations, and cash flow in conformity with GAAP to be able to express such an opinion. This must be done using sound auditing techniques.

People rely on financial statements to make economic decision, especially the shareholders, that is, an enterprise outside the organization. With the help of audit work by the external auditor, risk and uncertainty are reduced. Error and fraud can cause irregularity in the case of financial report or statement of any organization. It is the responsibility of the auditor to verify the cause of any irregularity of the auditor to verify the cause of any irregularities in the financial statement.

One perception to corporate failures has been to focus on public companies internal controls. Sarbanes-Oxley Act (2002) (SOX) requires a separate report on the effectiveness of internal controls. Recent changes to ISAs place a much higher focus on the auditors understanding internal controls as a part of the audit. Corporate governance is nothing more than how a corporation is administered or controlled.

Corporate governance takes into consideration company stakeholders as governmental participants, the principle participating being shareholders, company management, and the board of directors. Adjunct participant may include employees and suppliers, partners, customers, governmental and professional organization regulators and the community in which the corporation has a presence.

There are so many interested parties, its inefficient to allow them to control the company directly. Instead, the corporation operates under a system of regulations that allow stakeholders to have a voice in the corporation commensurate with their stake, yet allow the corporation to continue operating in an efficient manner. Corporate governance also takes into account audit procedures, in order to monitor outcomes and how closely they adhere to goals, and to motivate the organization as a whole to work toward corporate goals, by using corporate governance procedures widely and sharing results, a corporate can motivate all stakeholders to work toward the corporation goals by demonstrating the benefits to stakeholders of the corporation success.

According to Alfaki (2005), corporate governance are the rules and practices that govern the relationship between managers and shareholders contributes not only to the growth and financial stability of corporate enterprise but also promotes financial intensity and economic efficiencies.


1.2   Statement of Problem

In Nigeria like most countries, the failure of companies can be due to internal or external factors or in rare cases, the combination of both which basically has to do with poor corporate governance. The researcher intends to focus on reforms as aspect of corporate governance and indicators of business failure as well as the linkage between the two concepts. The study also intends to raise the consciousness and institutionalize good corporate governance and business sustainability. For effective corporate governance reduces “control rights” shareholders and creditors confer on managers, increasing the probability that managers invest in positive net present value projects

1.3   Research Questions

In the study the following research questions are asked in order to achieve the objectives of the studies

  1. Does corporate governance affects vital issue of firm’s performance?
  2. Is corporate governance essential in achieving public confidence in corporate entities?

iii.    Is company failure a result of non existence of corporate governance?


1.4   Objectives of the Study

The primary objectives of this study are:

  1. To find out if corporate governance affects vital issue of firm’s performance.
  2. To ascertain if corporate governance is essential in achieving public confidence in corporate entities.

iii.    To determine if company failure is as a result of non existence of corporate governance.

1.5   Research Hypotheses

Hypothesis One

HO:   Corporate governance affects vital issue of firm’s performance

HI:    There is no significant relationship between corporate governance and firm performance.

Hypothesis Two

Ho:  The effect of corporate governance is not essential in achieving public confidence in corporate entities

HI:    The effect of corporate governance is essential in achieving public confidence in corporate entities.

1.6   Significance of the Study

In regards to the relevance of the study it covers areas which are useful to the board of directors as regard to their mission, vision, objectives and strategy of a company. It is relevance to shareholders by booming their confidence to invest in a particular business which involves protecting their rights.

Companies will benefit as it ensures, the financial availability business. It also indicates that the way in which companies are directed and controlled through governance principles of disclosure and accountability of a company. It is also relevant to the public sector. Public sector will benefit as it will ultimately improve economic growth and functional position of the country on a global level. It is also used as a determinant in developing policy, social economic analysis and poverty resolute issue.

1.7   Scope of the Study

This study examines corporate governance and firm’s performance using Guinness Nigeria Plc as a case study. This research essentially focuses on the process and structure in which firm performance and corporate governance are directed, manage and controlled. A time frame of 5 years was used which range from 2010 to 2015. For effective correlation, a sample size of 100 was used.

1.8   Limitations of the Study

The study certainly suffers from a number of limitations prominent among them includes:

  1. Primary data collected by previous researcher could have been manipulated hence, altering good conclusion in that could have been drawn from them.
  2. Sizeable quality of information obtained from papers were in pigmentation and sometimes complex.
  3. Reduction of the respondent to full the Questionnaire
  4. Limited literature in this area of study
  5. Sizeable quantity of information obtained from papers were in fragmentations and sometimes complex.
  6. Reluctant of the respondent to fill the questionnaires.

1.9   Definition of Terms

Management: Is a distinct process consisting of planning, organization, starring, directing, coordinating, reporting and budgeting, performed to determine and accomplished stated objectives with the effective use or human being and other resources.

Cooperation: Cooperation is a big company or group of companies acting together as a single organization for a particular purpose with a legal entity distinct from its owners.

Strategic Planning: Strategic planning is a process of determining the major objective of an organization and the policies and strategies that will govern the acquisition, use disposition of reassures to achieve set objectives.

Planning: Planning is the establishing of objectives and the formulation, evaluation and selection of policies strategies, faction and actions required to achieve set objective.

Efficiency: A level of performance that describe a process that uses the lowest amount of inputs to create the greater amount of outputs.

Business: An economic system in which goods and services are exchanged for one another or money, on the basis of their perceived worth.


















This study on “Impact of the Nigerian Capital market in Financing Small and Medium Scale Enterprises (SMEs) in Nigeria” is intended to identify and consequently analyze the financial incentives available to SMEs in the Nigerian capital market. It provides solution to the financial gap existing between large enterprises and small and medium scale enterprises in terms of availability of financial resources referred to as the missing middle. The methodology adopted in conducting the research was a survey design. The independent variable of the study was the Nigerian capital market while the dependent variable was small and medium scale enterprises. A disproportionate stratified random sampling technique was adopted to select a representative sample SMEs. Questionnaire was used as instrument for data collection. The questionnaire was developed on a four-likert scale ranging from one to four (i.e. from strongly disagree to strongly agree) while, the hypothesis developed was tested using Chi-square (X2). Tables and percentage was adopted to analyze the hypotheses of the study. Base on the findings, it was concluded that SMEs always see the Nigerian Capital Market as a good source of capital for them since equity financing is always cheaper for long-term financing. Yet, many SMEs still entertain some fears in approaching the Nigeria capital market such as: the fear of losing their total control over their companies, and the fear of sharing their profit with other investors as well as hostile takeover of their companies by other investors. The study recommended that the cost of borrowing should be reviewed in order to encourage more enterprises to come into the market so as to expand and deepen the market. The Nigerian stock market needed to be built up with mass participation of SMEs to attain a meaningful sustainable growth and development. There are also needs to formulate investment friendly regulations; keep low inflationary rate; provide favorable government policies and provide stable macroeconomic framework for the sustainability of informal and SMEs sector in the developing countries.





1.1     Background to the Study


Production of goods and services in the most efficient manner has continued to be the only viable and reliable option for growth, development, and survival of world economies. Despite the importance of production, it is impossible for a sustained high productive level to be attained without a well-developed industrial sector. Industries normally operate either on a large or small scale both in the public and private sector. In Nigeria, the private sector enterprises cover a wide range of different types of industries as distinguished by various criteria such as size, sector, ownership structure, employment and technology.

The small-scale industries cover the entire range of economic activity sectors and are very heterogeneous groups (Hallberg, 2011) They include a wide variety of firms – village handicraft, restaurants, bakeries, poultry farming, hair dressing, barbers shops just to mention a few. The Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), (2011) classify industries into small and medium scale enterprises (SMEs).

The significance of small and medium scale enterprises to growth, productivity and competitiveness of the economies of developing countries is universally recognized. Small and medium scale enterprises are generally acknowledged in (Kasekende& Opondo, 2003) as the bedrock of the industrial development of world economies. They are more innovative than larger firms are. Small and medium scale enterprises usually provide training grounds for entrepreneurs even as they generally rely more on the use of local materials. SMEs development can play a key role in entrepreneurs’ development through their contributions to economic advancement and social empowerment.

In Oteh (2011), the Global Entrepreneurship Monitor 2009, a research program aimed at assessing the national level of entrepreneurial activity in selected countries, conducted an entrepreneurship and economic growth study on 37 countries. According to the study, the economic growth of a country is directly correlated with its level of entrepreneurial activity. The study reveals that, there is a high correlation between economic growth and entrepreneurial activity in industrialized countries, hence to achieve Nigeria Vision 20:20 then greater attentions should be paid on very vibrant and robust enterprises. Entrepreneurs create new enterprises, new commercial activities and new sectors, which have a positive multiplier effect on the economy. Entrepreneurial activities are very crucial to fostering economic and social progress in the country. The development of SMEs in Nigeria is therefore an essential element in the growth strategy. Notwithstanding the widely acknowledged role of SMEs in fostering economic growth and development, SMEs have continued to face a variety of constraints (Adelaja, 2004) and majorly that of finance.

This is quite common in many African countries, including Nigeria, where access to finance was the second most important constraint to doing business after inadequate supply of infrastructure. This is because; the conditions for financing SMEs are more restrictive to those of large enterprises. This has also confirmed the fact that, inadequate finance is a serious challenge that must be tackled before there could be any meaningful progress in the SMEs sub-sector.

Small and medium scale enterprises in Nigeria suffer from lack of access to appropriate (term and cost) funds from both the money and capital markets. This is due in part to the perception of higher risk resulting in high mortality rate of the business, information asymmetry, poorly prepared project proposals, inadequate collateral, absence of, or unverified history of past credit(s) obtained and lack of adequate accounting records of the company’s transaction. In some cases, there are virtual absence of capital market facilities and instruments that SMEs can access. (Bates, 2010) The capital market in Nigeria is still evolving while other conventional sources have no confidence in the credit worthiness of SMEs. Non-bank financial intermediaries such as micro credit institutions could play a greater role in lending to SMEs. Nevertheless, some of these institutions may not consider SMEs credit worthy. .

Small and medium scale enterprises therefore rely on their retained earnings, informal savings and loan associations, which are unpredictable and insecure with little scope for risk sharing as their major source of capital. Many African countries have to deal with this chasm between the role of micro credit institutions and that of larger financial institutions. This is the space where SMEs operate and is referred to in the African Commission’s Report as the missing middle. (Oteh, 2011). Yet, the panacea for solving problems of economic growth in Nigeria often resides in adequate financing of small-scale industries. The missing middle or financial gap is a serious challenge in a fast-changing knowledge based economy because of the speed of innovation. Innovative SMEs with high growth potential, many in high- technology sectors, have played a pivotal role in raising productivity and maintaining competitiveness in recent years. Nonetheless, innovative product and services need investment to flourish, however great their potential might be. SMEs depend on capital accumulation, and capital accumulation requires investment and an equivalent amount of saving to match it. Two of the most important issues in developing countries, are how to stimulate investment, and how to bring about an increase in the level of saving to fund increased investment.

Most importantly, well functioning financial systems are heavily based on trust. An investor who deposits money in the bank or contacts his/her broker to buy stocks place his/her money and trust in the hands of the financial institution that provides her with advice and transaction services (Madura, 1996).

No wonder, Kneown (1996) stressed that, one reason why underdeveloped countries are underdeveloped is because, they lack a financial system that has the confidence of those who must use it. Particularly, the stock market crash of 2008 affected the Nigeria financial sector adversely. It generated a pessimistic outlook on the economy that led to a decline in the demand for loans and higher percentage of loan defaults, causing a consequent decline in the stock prices. Despite all these illicit practices in the financial sector, the Nigerian capital market is potentially the most viable source of capital for industries in Nigeria.

The primary focus of this research work emanates from the fact that, there exist a wide financial gap between the capacity of micro financial institutions and that of larger financial institutions. While large loans are available to a certain degree for large-scale industries, there is an evident lack of access to medium and small-scale finance for SMEs. In trying to bring a solution to this problem, the Central Bank stipulated that 20% of banks’ credit should be granted as loan to Small Scale Enterprises. This was not adhered to because, most loans granted to small scale holders were not repaid and so the banks did not consider them as creditworthy. In the light of these, the research has explored the financial incentives available to small-scale enterprises especially in the Nigerian capital market in order to provide the financial information needed by entrepreneurs.




1.2     Statement of Problem

In Nigeria, most small and medium enterprise ownership is indigenous. In major countries small and medium enterprises contribute close to half of the net output of the private sector and a significant proportion of the Gross Domestic product (GDP). In Nigeria however, it is being postulated that there are no adequate records to show for such growth by the small and medium enterprises. Considering the socio-economic importance and advantages to the nation, which include provision of employment, consumer and producer goods, promotion of indigenous technology, raw materials utilization, entrepreneurial Spirit, rural and industrial development.

Unfortunately, small and medium scale enterprises have relatively limited access to loan capital. They depend highly on financial resources of their owners and sometimes from friends and relatives, and retained earnings from the business as it expands. Most times all these proved grossly inadequate for finance needed projects as small scale enterprises grows further, market funds become imperative. The statements of problem that shall be addressed by this work are essentially:

  • What is the impact of the Capital Market in financing small and medium enterprises (SMEs)
  • How well small and medium enterprises benefited from the activities of the capital market in Nigeria
  • What is the relationship between capital market and other sources of finance for small and medium enterprise

Has the performance of small and medium enterprises impacted in the increase of Gross Domestic Product



The Impact of Audited Financial Statements on an Organizational Performance 



The project examines the impact of audited financial statements on an organizational performance 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




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

The Impact of Audited Financial Statements on an Organizational Performance 


Statement of Problem

Over the years there has been a controversy over the impact which audited financial statement has on organization performance. In view of this, the research wishes to investigate wheat impact audited financial statement actually have in an organization performance.

As a result of this uncertainty of the auditing financial statement has also been under-rate. The study is also set out to remove the uncertainty and make clear the important of auditing financial statement in an organization performance.

The Impact of Audited Financial Statements on an Organizational Performance