GET THE COMPLETE PROJECT
CORPORATE GOVERNANCE & 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.
TABLE OF CONTENTS
Title Page i
Certification ii
Dedication iii
Acknowledgment iv
Abstract v
Table of Contents vi
Chapter One: Introduction 1
Background to the Study 1
Statement of Problem 1
Research Questions 5
Objectives of the Study 6
Statement of Hypotheses 6
Significance of the Study 7
Scope of the Study 9
Limitations of the Study 10
Definition of Terms 11
Chapter Two: Review of Related Literature 12
Introduction 12
Current Literature on Corporate Governance in
Nigeria 13
Framework of Corporate Governance in Nigeria 15
Corporate Governance Mechanisms 18
Impact of Corporate Governance 24
Essence of Good Corporate Governance 24
Challenges and Failure of Corporate Governance in Nigeria 25
Fundamental Determinants of Equity Agency
Problems 27
Evidence of Conflicts of Interest between Shareholders and Managers 29
Policy Recommendation for Effective Corporate Governance in Nigeria 32
Development of the Modern Audit 33
Auditors’ Independence 36
The External Auditor 39
Duties of an Auditor 41
Auditing 41
Significance of Auditing to Management 48
Corporate Governance and Auditor’s Report 50
Summary 54
Chapter Three: Research Method and Design 57
Introduction 57
Research Design 57
Description of Population of the Study 57
Sample Size 58
Sampling Technique 58
Sources of Data Collection 59
Method of Data Presentation 60
Method of Data Analysis 60
Chapter Four: Data Presentation, Analysis and Interpretation
Introduction 63
Presentation of Data 63
Data Analysis 65
Hypothesis Testing 66
Chapter Five: Summary of Findings, Conclusion and Recommendations
Introduction 77
Summary of Findings 77
Conclusion 80
Recommendations 81
References 83
Appendices 85
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.
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 questi
