AUDITORS REPORT ON CORPORATE GOVERNANCE IN NIGERIA NON-FINANCIAL INSTITUTION A case study of Guinness Nigeria Plc

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AUDITORS REPORT ON CORPORATE GOVERNANCE IN NIGERIA NON-FINANCIAL INSTITUTION A case study of Guinness Nigeria Plc

ABSTRACT

The major corporate collapses and related frauds which occurred in Nigeria and around the world have raised doubts about the credibility of the operating and financial reporting practices of companies in Nigeria. This stirred a number of professional and regulatory organizations to recommend reforms that will improve transparency in financial reporting and thereby increase audit quality and corporate governance practices. Although evidence of corporate governance practices and audit report exists from developed economies, very scanty studies have been conducted in Nigeria where corporate governance is just evolving. Therefore, this study provides evidence on corporate governance, audit report, and firm related attributes from a developing country,Nigeria. Logistic regression was used in investigating the questions that were raised in the study. Findings from the study show that ownership by non-executive director has the possibility of increasing the quality of audit report. Evidence also exist that size of the company and business leverage are important factors in audit report for companies on the Nigerian Stock Exchange. The study suggests that the composition of non-executive directors as members of the board should be sustained and improved upon in order to enhance audit quality.

TABLE OF CONTENT:

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

1.2 Statement of the Research Problem

1.3 Objectives of the Study

1.4 Significance of the Study

1.5 Research Questions

1.6 Research Hypothesis

1.7 Conceptual and Operational Definition

1.8 Assumptions

1.9 Limitations of the Study

CHAPTER TWO

LITERATURE REVIEW

2.1 Sources of Literature

2.2 The Review

2.3 Summary of Literature Review

CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Research Method

3.2 Research Design

3.3 Research Sample

3.4 Measuring Instrument

3.5 Data Collection

3.6 Data Analysis

3.7 Expected Result

CHAPTER FOUR

DATA ANALYSIS AND RESULTS

4.1 Data Analysis

4.2 Results

4.3 Discussion

CHAPTER FIVE

SUMMARY AND RECOMMENDATIONS

5.1 Summary

5.2 Recommendations for Further Study

Bibliography

CHAPTER ONE

1.1 INTRODUCTION

According to McConomy and Bujaki, 2000), there has been a considerable debate in recent times concerning the need for strong corporate governance globally (with countries around the world drawing up guidelines and codes of practice to strengthen governance (Cadbury, 1997, Corporate Governance Code of Nigeria, 2005). The rationale for this emphasis can be linked to increased concerns over the integrity of securities markets (International Federation of Accountants-IFAC, 2010; Millstein, 1999).

Good corporate governance by boards of directors is recognized to influence the quality of financial reporting, which in turn has an important impact on investor confidence (Levitt, 1998 and 2000). Studies have shown that good governance reduces the adverse effects of earnings management as well as the likelihood of creative financial reporting arising from fraud or errors (Beasley, 1996; Dechow, et al., 1996; McMullen, 1996).

Traditionally, the external auditor has also played an important role in improving the credibility of financial information (Mautz and Sharaf, 1961; Wallace, 1980).

In recent times, a series of well-publicized cases of accounting improprieties in Nigeria has captured the attention of investors and regulators alike. The search for means to ensure reliable and high financial reporting has largely focused on the structure of audit report. The auditing profession has been proactive in attempting to improve audit report by issuing standards focused on discovery and independence. As a result, there has been a concerted effort to devise ways of enhancing independence (Corporate Governance Code of Nigeria, 2005; Blue Ribbon Committee, 1999). The profession has also responded to denigrations on audit report. It emphasized that, by its nature, the inherent limitations of an audit make it impossible to eliminate the risk of audit failure (Ricchiute, 1998; IFAC, 2009). The effect of sound governance practices on the quality of financial reporting has recently received attention from researchers, particularly in the United States (McMullen, 1996; Beasley, 1996; Beasley, et al., 2000; Abbott, et al., 2000). The main focus of these studies is the relation between audit committees and fraudulent financial reporting, with results generally supporting a negative relation between an active audit committee and the likelihood of a company being cited for fraudulent reporting. While these results provide evidence from a strong and sophisticated capital market environment, very little research has been conducted in countries where capital markets are less developed and where governance mechanisms are still evolving. However, sound corporate governance practices are equally, if not more important, in countries that are attempting to gain credibility among global investors.

This is particularly so in Nigeria as the country attempts to regain investor confidence following widely reported financial crises.

1.2 STATEMENT OF THE PROBLEM

The weakness of corporate governance has proved to be the most important factor blamed for the corporate failure consequences from the economics and corporate crises. There is much that can be done to improve the integrity of financial reporting through greater accountability, the restoration of resources devoted to audit function, and better corporate governance policies (Saudagaran, 2003). Concerns have also emerged about reduced audit report. Economist (2004) noted that there are questions about the independence of the “Big 4” and suggested that concentration is lowering the quality of audits. Therefore, our study extends and contributes to the body of research using Nigerian data to investigate the likely impact of audit report and governance related attributes.

This study is motivated by the interest surrounding the appropriateness of reforms instituted by corporate governance code in Nigeria in response to the corporate failures, global best practice and their implied efficacy in the face of significant implementation and audit report. We investigate empirically the relationship of attributes in the code in improving financial reporting quality.

1.3 OBJECTIVES OF THE STUDY

This study specifically identified the following objectives:

i. To examine if board independence affects audit report.

ii. To investigate if non-executive directors’ ownership affects audit

report.

iii. To examine if executive directors’ ownership and audit report

iv. To identify the structure of the CEO/Chairmanship of companies in Nigeria; and

v. To examine the relationship between board compositions, ownership, institutional structures, CEO Chairmanship and firm characteristics on audit report.

1.4 RESEARCH QUESTIONS

The main research problem is broken down into sub-problems stated as research questions, which guided the study. Attempts were made in the course of the research to resolve the following questions which are raised:

i. Does board independence have any relationship with audit report?

ii. Does non-executive directors’ ownership affects audit report?

iii. Is there a relationshipbetween executive directors’ ownership and audit report?

1.5 RESEARCH HYPOTHESES

The null hypotheses stated below, were tested in order to provide answers to the research questions mentioned.

Hypothesis 1:

H (₀):There is no significant relationship between boards

independence and audit report.

H (₁):There is significant relationship between board’sindependence and audit report.

Hypothesis 2:

H (₀):There is no significant relationship between non-executive directors’ ownership and audit report.

H (₁):There is significant relationship between non-executive directors’ ownership and audit report.

Hypothesis 3:

H (₀):There is no significant relationship between executive directors’ ownership and audit report.

H (₁):There is significant relationship between executive directors’ ownership and audit report

1.6 SIGNIFICANCE OF THE STUDY

The importance of auditing can be illustrated under the principal-agent relationship. The demand for external audits is directly related to the fact that it is the directors (the agents) who prepare the financial statements, which is primarily based on cost reasons. Therefore, this study is expected to provide useful insight into improving audit report. This study contributes to the audit literature as it provides additional empirical evidence on the impact of the size of audit firm on the level of audit report. The study also reflects the quality of audit report in Nigeria. This study will be useful to stakeholders in the Nigerian Stock Exchange (NSE), as it provides evidence on the relationship between audit report and the reform instituted by them in formulating the Code of Corporate Governance for listed companies in Nigeria.

1.7 SCOPE OF THE STUDY

This study is premised on the appraisal of audit report and corporate governance in Nigeria. Therefore, data on corporate organisations in Nigeria were sought in providing answers to the problems and questions that have been raised in this research work. The study focuses on Guinness Nigeria plc.

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OWNERSHIP STRUCTURES, CORPORATE GOVERNANCE AND PERFORMANCE OF small MFIs in Nigeria(MSC)

YOU CAN CALL US BACK FOR THE COMPLETE THESIS. WE CAN ALSO HELP YOU WITH CORRECTIONS FROM YOUR SUPERVISOR. PLEASE CALL 08068231953, 08168759420 MSC THESIS TOPIC: OWNERSHIP STRUCTURES, CORPORATE GOVERNANCE AND PERFORMANCE OF small MFIs in Nigeria(MSC) Abstract The purpose of the study was to examine the relationship between ownership structures, corporate governance and the performance of small MFIs in Nigeria. Interest in this study was as a result of poor performance of these MFIs as indicated in the AMFIU Annual report of 2006. The study therefore sought to determine if this could be attributed to their ownership structures and therefore governance levels. A cross sectional survey design was used to undertake this study using a sample of 65 MFIs from which responses from 44 MFIs were received; giving a response rate of 67.7%. Findings of the study reveal that ownership structures and corporate governance are significant predictors of MFI performance accounting for 42.4%

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AUDITORS REPORT ON CORPORATE GOVERNANCE IN NIGERIA NON-FINANCIAL INSTITUTION A case study of Guinness Nigeria Plc

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