This study examines audit committee and corporate reporting in Nigeria. The broad objective of the study is to ascertain if there is any relationship between audit committee roles and the quality of financial report in Nigeria and also to examine if the quality of audit committee is associated with the quality of internal control in Nigeria business environment. The primary source of data collection was adopted in this study. The random sampling method was used to select 78 respondents which serve as the sample size of the study. The chi-square statistical tool was used to test the stated hypotheses. The findings revealed that there is a relationship between audit committee roles and the quality of financial report in Nigeria and that the audit committee members have no separate equity holding. It was concluded that audit committee plays a very pivotal role not only in assisting and coordinating audit related activities in the firm but also in ensuring high audit quality. The study recommends among others that audit committee member should be separated from equity ho1ders and that audit committee should be diligent in their duty by meeting frequently to deliberate on audit matters so as to enhance audit quality.
TABLE OF CONTENTS
Title Page i
Table of Contents vi
Chapter One: Introduction 1
1.1 Background to the Study 1
1.2 Statement of Problem 5
1.3 Research Questions 5
1.4 Objectives of the Study 6
1.5 Statement of Hypotheses 7
1.6 Significance of the Study 8
1.7 Scope of the Study 8
1.8 Limitations of the Study 9
1.9 Definition of Terms 10
Chapter Two: Review of Related Literature
2.1 Introduction 13
2.2 External Auditors 14
2.3 Audit Committee 15
2.4 Audit Committee Report 17
2.5 Corporate Financial Statements 20
2.6 Audit Committee and External Auditors 22
2.7 Corporate Reporting 24
2.8 Audit Committees Independence and Corporate
2.9 Audit Committee and Corporate Reporting 31
2.10 Factors Influencing Corporate Reporting 35
2.11 Problem associated with Audit Committee in
Corporate Reporting in Nigeria 38
Chapter Three: Research Method and Design
3.1 Introduction 40
3.2 Research design 40
3.3 Description of the Population of the Study 40
3.4 Sample Size 41
3.5 Sampling Techniques 41
3.6 Sources of Data Collection 41
3.7 Method of Data Presentation 42
3.8 Method of Data Analysis 42
Chapter Four: Data Presentation, Analysis and Interpretation
4.1 Introduction 44
4.2 Presentation of Data 44
4.3 Data Analysis 45
4.4 Hypothesis Testing 56 Chapter Five: Summary of Findings, Conclusion
5.1 Introduction 63
5.2 Findings 63
5.3 Conclusion 64
5.4 Recommendations 65
1.1 Background to the Study
Over the years, public organization has experienced monetary loss due to fraud, lack of documentation of statement of fund. This occurs as a result of lack of auditor and audit committee in corporate organization.
McVay (2013) showed that audit committee quality, characterized on having more financial accounting expertise and non-financial accounting expertise, is an important determinant of internal control weaknesses. In addition, he found out that auditor independence calculated as the ratio of audit fee to total fee, is also a determinant of internal control weaknesses.
Auditing is the examination of records and reports of a company in order to check that what is provided is relevant and accurate. That is to say, it asset and liabilities are properly recorded which lends to the preparation of the financial statements. This assessment is done through two methods. Firstly, by assessing internal control procedures by checking the consistence of the book.
Howard (2011) considered an audit as the examination of an organization financial statement by an auditor to show the evidence from which the final revenue account and financial statement of an organization have been prepared, in order to ascertain that they present a true and fair view of the summarized transactions for the period under review and of the financial statements of the organization at the end date, thus, enabling the auditor to report thereon.
Auditing has a significant effect to firms, it helps to determine whether the overall financial statement is presented fairly in accordance with the established criteria, the extent to which rules, policies, laws audit and tracing funds or assets identification and recovery, investigating the existence, nature., extent and identification of employee who misappropriate asset.
In a private organization, auditing is done by an internal and external auditors as it deem fit by the organization (owners) of the firms. Whereas in public/corporate organization, the audit committee is been set up to examine the financial transaction of the organization before it is been reported to the board of directors of the comparing at an annual meetings.
CAMA (1990) required all public/corporate organization to constitute audit committee as a means of ensuring the independence and effectiveness of external auditors, the committee is defined as a committee of directors, of a company whose reports/statement before submission to the board of directors.
According to section 359 (4) of the Company and Allied Matter Acts (1990) stated that the audit committee shall consist of an equal number of the company subjects to maximum of six (6) members. Their functions are to examine the auditors report and make recommendation from there on the annual general meeting as it may think fit.
Long term audit tenure has created some expectation gap this gap has led to failure of the auditor, to carryout is duty effectively. This is due, to the fact that the expectation of the auditors are not met because of the familiarity that exist between the auditors and their clients, this familiarity has made the auditors to fail in their area of independence, credibility and confidentiality because during long term audit tenure, auditors focus on non-audit service than audit services, and this led to many corporate scandal.
In a nutshell, the relevant of audit committee is to guide, direct and provide the company/corporate organization the trend of development of the company through corporate reporting and to direct any form of weakness in the part of company’s internal control system and accounting system.
Globalization of markets has meant that financial statements are increasingly used by foreign inventory and analysis, hence clear labeling of the particular accounting and auditing framework is essential. To the extent, audit committee is been set to monitor implementation of recommendation from external and internal audit functions. The audit committee scrutinizes the recommendation and the implementation given to the board of corporate reporting.
In the research study, on attempt is made to look at the extent to which audit of the committee have contributed to the independence of the auditors. Also to carry out an evaluation of the relevant of audit committee to corporate reporting in Nigeria
1.2 Statement of Problem
This study seeks to show light on the relevance of audit committee to corporate reporting in Nigeria using Guinness Nigeria Plc as the case study. The problem encountered by the audit committee can be summarized as; low moral and the inactive attitude of the auditors when carrying out their duties, political interference and instability, overstaffing, bribery and corruption.
1.3 Research Questions
1. To what extent is audit committee roles related to the quality of financial report in Nigeria?
2. To what extent is the quality of audit committee related to the quality of internal control in Nigeria business environment.
3. Does audit committee members have separate equity holding?
1.4 Objective of the Study
The main objective of this study is to relate the role of audit committee to corporate governance. The specific objectives are;
1. To ascertain if there is any relationship between audit committee roles and the quality of financial report in Nigeria.
2. To examine if the quality of audit committee is associated with the quality of internal control in Nigeria business environment.
3. To find out if audit committee members have separate equity holding.
1.5 Statement of Hypothesis
HO: There is no relationship between audit committee roles and the quality of financial report in Nigeria.
HI: There is a relationship between audit committee roles and the quality of financial report in Nigeria.
HO: The quality of audit committee is not associated with the quality of internal control in Nigeria business environment.
HI: The quality of audit committee is associated with the quality of internal control in Nigeria business environment
Ho: The audit committee members have a separate equity holding.
HI: The audit committee members have no separate equity holding.
1.6 Significance of the Study
The result of this research will be helpful for:
• Amplify the need for audit committee to corporate reporting in Nigeria.
• Identify problems associated with audit committee to corporate reporting in Nigeria in Nigeria society.
• Fund solution to the problems associated with audit committee to comporting in Nigeria.
• Services as a basis for further research work on evaluation of relevance of audit committee to corporate reporting in Nigeria.
1.7 Scope of the Study
This study is within the shoes of Guinness Nigeria Plc: Although the population of the sector is high enough to represent the entire Nigeria brewery beer industry, further research would need to be conducted in other sector for a more valid and efficient generalization to be established. For effective result, a sample size of 78 was used.
1.8 Limitations of the Study
The study is faced with some constraints which may likely affect the generalization of findings; the constraints include the following below:
1.9 Definition of Terms
For the purpose of this study, the following terms have been used as defined here:
1. Audit: Is the examination of all relevant records and reports of a company in order to check that what is provided is relevant and accurate
2. Auditor: This is the person(s) who examine all relevant document, reports and records of finance prepared by the company’s accountant or department to verify the reliability, adequacy and accuracy of the reports prepared by the department.
3. Scrutiny: This is the act of proper checking of all records, document and the financial statement of a company and tracing it asset and liabilities to concertinaed that it corresponds with what is written in documentation.
4. Investigation: This is the act of caring out finding to ascertain the correctness of a report or statement.
5. Reporting: Is the act of relating or interpreting the finding gathered from the investigation of a given phenomenon or statements.
6. Public Limited Company: This is company made up of at least seven members and unlimited member as shareholders. The numbers of shareholders are restricted only by the member of share available.
7. Internal Auditor: These are made up of the company employees whose area is to carry out the auditing of company’s record, assets and liabilities of the company over a given period of time.
8. External Auditor: This is an independent person employed by a company shareholder to carry out investigation over the prepared documents and statement of account, previously audited by company internal auditor to ascertain correctness and base his opinion on fairness and accuracy of the financial statement.
9. Financial Statement: They are report, which summaries the financial position and operating result of business. This report comprising of balance sheet, income statement, financial summaries, cash flow statement, notes on the account.
10. Independent: Not controlled by or depending on another. These external auditors exercise when examine financial statement and other relevant document and when forming his opinion.
11. Opinion: What the auditor think about a financial statement examine by him.