A Critical Analysis on Audit Committee and Financial Reporting In Nigeria.
ABSTRACT
Out of the worries ignited by the incessant occurrence of organizations failure and liquidation in Nigeria, even with the presence of audit committees in these organizations, this project topic was born. A topic aimed at evaluating audit committee and financial reporting Nigeria.
In carrying out this investigation, the likert-scale questionnaire was drawn to extract correct and direct data from respondents in some randomly selected firms. Data extracted were presented, analyzed and interpreted.
Hypothesis were tested using chi-square with five percent (5%) level of significance, indicating ninety five percent (95%) assurance or confidence on the accuracy reliability and validity of the data collected and information gathered therefrom.
After rigorous research and study, it was revealed that audit committees have contributed immensely to the financial reporting in Nigeria, though at some point they just exist without making any considerable impact in the financial reporting system in the firm they are established.
It was recommended that it is not enough for companies to establish audit committees because the law, CAMD 1990, says so but that the company and its board of directors must show full commitment to accountability by providing a conducive environment in which their audit committees can discharge their responsibilities effectively and efficiently
TABLE OF CONTENT
Title Page………..i
Certification……ii
Dedication………iii
Acknowledgement…….iv
Abstract……..viii
CHAPTER ONE: INTRODUCTION
1.1 Introduction………………1
1.2 Statement of Research Problem………..2
1.3 Objectives of Study………………2
1.4 Research Hypothesis……..3
1.5 Scope of study………….…4
1.6 Significance of the Study…………4
1.7 Limitations of the study…….….5
REFERENCES…………………….6
CHAPTER TWO: LITERATURE REVIEW
2.1 Historical Background………7
2.2 Functions and Practices of Audit Committees in Nigeria………………………9
2.3 Composition of Audit Committees in Nigeria and the Ambiguity in the Provision of CAMD‟90(Now CAMA 2004)…….10
2.4 Qualifications of Audit Committee Members…………….12
2.5 Quality of Audit Committees……………………14
2.6 Audit Effectiveness and its Relevance to Financial Reporting………………….15
2.7 Audit Committee Independence…………………18
2.8 Audit Committee Relationship with Management, Internal Auditor and External Auditors..21
2.9 Audit Committees and the Independence of External Auditors…………….….22
2.10 Audit Committees and Financial Reporting: Audit committee Characteristics and Financial Reporting Quality……24
2.11 Corporate Reporting…………………26
2.12 Forms and Contents of Financial Statements….26
2.13 Types of Financial Statement……..27
REFERENCES……………….28
CHAPTER THREE: RESEACRH METHODOLOGY
3.1 Introduction………………….30
3.2 Research Design…………..30
3.3 Population of Study…………30
3.4 Sample and Sampling Technique………30
3.5 Sources of Data……………..31
3.6 Instrument of Data Collection…………………32
3.7 Actual Field Work……………..32
3.8 Data collection Method……………..32
3.9 Data Analysis Method……………32
3.10 Justification for the use of Chi-Square test….33
3.11 Decision Rule…………………33
REFERENCES……………………33
CHAPTER FOUR: DATA PRESENTATION, ANALYSIS AND INTERPRETATION.
4.1 Introduction……………35
4.2 Data Presentation…………35
4.3 Data Analysis and Interpretation ….…..35
4.4 Test of Hypothesis……..48
REFERENCES……………………54
CHAPTER FIVE: FINDINGS, RECOMMENDATIONS AND CONCLUSION
5.1 Introduction……………..55
5.2 Findings………………55
5.3 Recommendation(s)……………..56
5.4 Conclusion………………57
BIBLIOGRAPHY…………59
INTRODUCTION
One mechanism that has been widely used in worldwide organizations to monitor the financial reporting process is the establishment of an audit committee comprising a majority of independent directors. The existence of an audit committee could improve the monitoring of financial reporting and internal control.
This could be done by bridging the communication gap between the auditors and management and by strengthening the role of the internal auditors.
Although audit committees have been in existence for decades, there are criticisms of the practices of audit committees and a large amount of research have been undertaken to identify an ideal audit committee that would act in the interest of shareholders (Abbott and Parker, 2000; Krishnan, 2005).
Audit committees serve as a bridge in the communication network between internal and external auditors and the board of directors, and their activities include a review of nominated auditors, the overall scope of the audit, results of the audit, internal financial controls and financial information for publication (FCCG, 1999).
Indeed, the existence of an audit committee in a company would provide critical oversight of the company‟s financial reporting and auditing processes (FCCG, 1999; Walker, 2004).
Audit committee could also enhance auditor independence. Knapp (1987) discovered that an audit committee is more likely to support the auditor rather than management in audit disputes and the level of support is consistent across members of the committee, regardless of whether the member is in a full-time or part-time position, such as managers, academicians and retired partners.
BIBLIOGRAPHY
Abbott, L. S. Parker and G. Peters (2002): “Audit Committee Characteristics and Financial Misstatement”: A Study of the Efficacy of Certain Blue Ribbon Committee Recommendations. SSRNid319125.
Abel, A. A. (2001), “The Challenge of Corporate Governance in Nigeria”: The Nigerian Accountant, Vol. 34, No. 3.
Agbonifoh B. A. and Yomere G. O. (1999): “Research Methodology in the Social Science and Education”, Centerpiece Consultants Nigeria Limited, Benin City.
Andrew F., Krishnameurthy S. and Solieri S. (2003): “Audit Committee Characteristics and the Perceived Quality of Financial reporting: Empirical Analysis”.
Beasley, M. (1996): “An Empirical Analysis of the Relation Between Board of Directors Composition and Financial Statement Fraud”. The Accounting Review 71(4): 443 – 465.
Bigg, W. W. (1974), “Spicer and Pegler‟s Practical Auditing”, (HFL Publishers Ltd, London).
Blue Ribbon Committee on Improving the Effectiveness of Audit Committees (1999), New York Stock Exchange and National Association of Securities Dealers.
Bronson, Carcello, Carl and Neal (2005): “Are Fully Independent Auditors Really necessary”.
Charter of the Audit Committee of the Board of Directors of Pharmacist, Inc.
Code of Corporate Governance, Nigeria (2009), SEC. www.proserng.com
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