CORPORATE GOVERNANCE AND AUDIT QUALITY IN NIGERIA QUOTED COMPANIES
This study is motivated by a desire to examine the corporate governance and audit quality in Nigeria quoted companies. In light of the empirical review and other discussions, a number of questions arose as to whether there is positive relationship between board size, ownership, board structure, audit committee, directors with financial expertise on the audit committee and audit quality. Using the Ordinary Least Square (OLS) regression technique with the aid of a computer software, the empirical findings revealed among other things that, board Size was found to be positively related and statistically significant to Audit quality. Recommendations were however made by the researcher.
TABLE OF CONTENTS
CHAPTER ONE: INTRODUCTION
Background to the Study
Statement of the Problem
Objectives of the Study
Statement of Hypotheses
Scope of the Study
Significance of the Study
CHAPTER TWO: LITERATURE REVIEW
2.2 Conceptual Framework
2.3 Corporate Governance
2.4 Multiplicity of Corporate Governance Codes in Nigeria
2.5 Audit Quality
2.6 Accountability and Transparent Reporting
2.7 Audits as a Corporate Governance Tool
2.8 The Audit Committee and Corporate Governance
2.9 Composition of the Committee
CHAPTER THREE: RESEARCH METHODOLOGY
3.2 Research Design
3.3 Population of the Study
3.4 Sample and Sampling Procedures
3.5 Sources of Data
3.6 Data Analysis Method
3.7 Model Specification
4.0 Data Analysis and Presentation
4.1 Descriptive Statistics
4.2 Correlation Matrix
4.3 Regression Results
CHAPTER FIVE: SUMMARY OF FINDINGS, RECOMMENDATION AND CONCLUSION
Summary of Findings
Discussion of Findings
Recommendation for Further Studies
BACKGROUND TO THE STUDY
There has been a considerable debate in recent times concerning the need for strong corporate governance, with countries around the world drawing up guidelines and codes of practice to strengthen governance. The rationale for this emphasis can be linked to increased concerns over the integrity of securities markets (Adeyemi and Fagbemi, 2010). According to them, good governance reduces the adverse effects of earnings management as well as the likelihood of creative financial reporting arising from fraud or errors.
Besides, good corporate governance by boards of directors of companies is recognized to influence the quality of financial reporting, which in turn has an important impact on investor confidence.
Ghasempour, Bayat, and Hemmati, (2012) opine that, financial reporting systems can play a key role in developing the authenticity of corporate governance systems. According to them, one of the key tasks of a financial reporting system is to limit the decisions made by top managers because top managers are motivated to protect either the interests of the major stockholders. They added that, one of the main goals of every corporate governance system is to make internal authorities accountable. Accepted general accounting principles require good quality accounting information to be presented in financial statements and consequently, more control over governance related responsibilities. An improvement in the quality of disclosures has a direct and positive impact on reducing a company’s financial expenditures because quality disclosures decrease the risk taken on by the party investing in a company. Consequently, a company’s firm productivity and performance is enhanced. A good corporate governance system will create a competitive advantage in the capital market by reducing financial expenditures by guilds, stockholders and creditors.
Adeyemi and Fagbemi (2010), empirically examine the effective components of corporate governance in Nigerian quoted companies and its relationship with audit quality. The study reveals that, non-executive directors’ ownership, size and leverage significantly have relationship with audit quality. However, all the other variables that were not found to have significant relationship still had correlation with audit quality.
STATEMENT OF THE PROBLEM
Between 1980 and 1997, over 130 countries comprising almost three fourth of the member countries of the International Monetary Fund (IMF) have experienced important problems with their banks. The fact that these crises occurred after implementation of far reaching return of the financial system revived long standing debates in economics and finance on the role of bank regulation. Notably absent in the debate however is the consideration of corporate governance in banks and the role it might play in the systemic problems.
Consideration of corporate governance in banks however, apparently easier said than done. While there is a general dearth of empirical research on corporate governance, very little of it, concerns the behavior of owners, managers of banks and the professional accountants perspective.
The weakness of corporate governance is perhaps 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. Concerns have also emerged about reduced audit quality.
Arising from the above, this research work tends to find solutions to the following problems.
Is there relationship between board size and audit quality?
Is there relationship between ownership and audit quality?
Is there relationship between board structure and audit quality?
Is there relationship between audit committee and audit quality?
Is there relationship between directors with financial expertise on the audit committee and audit quality?
OBJECTIVES OF THE STUDY
The motivation to research of this study is guided by the fact that, in developing countries like Nigeria face with ineffective corporate governance practices, the manager do not bring about optimum performances of the company unlike in the advance countries. Therefore, the objectives of the study are:
To examine whether there is relationship between board size and audit quality.
To examine if there is relationship between ownership and audit quality.
To determine whether there is relationship between board structure and audit quality.
STATEMENT OF HYPOTHESES
The following hypothesis would be tested empirically in the course of this research work and the result would form the basis of conclusion and recommendation.
Ho: Board size has no significant impact on audit quality in the banking sector.
H1: Board size has significant impact on audit quality in the banking sector.
Ho: Ownership has no significant impact on audit quality in the banking sector.
H1: Ownership has significant impact on audit quality in the banking sector.
Ho: Board structure has no significant impact on audit quality in the banking sector.
H1: Board structure has significant impact on audit quality in the banking sector.
SCOPE OF THE STUDY
The research study focuses on corporate governance and audit quality.
The sample size is restricted to seven (7) selected banks quoted in the Nigeria Stock Exchange.
The time frame of this study is five (5) years i.e. (2007 – 2011).
Geographically, the study will be specifically be restricted to Benin City, Edo State.
SIGNIFICANCE OF THE STUDY
This study will be important and beneficial to stakeholders of corporate firms on the important of corporate governance and audit quality.
The benefits derivable from the outcome of this research study include:
Creation of awareness to both existing and potential investors on matter concerning corporate governance and audit quality arrangement of banks.
The observers will have an insight into the importance of effective and transparent corporate governance.
It will serve as a productive addition to the existing literature on corporate governance and audit quality.
The result of the study is intended to serve as a suggestion to Nigerian companies this; they can greatly improve firm performance through a determined effort to improve their corporate governance and audit quality.
To enlighten the investors on policies, laws, and reforms that are pertinent for their protection.
It will also serve as reference point for further studies.
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