Spread the love


| Format: Ms Word | 1-5 Chapters | Table of Content|


Study Level: BTech, BSc, BEng, BA, HND, ND or NCE

Amount: ₦3,000.00

Is legislation the answer to fat cat bonuses and poor corporate governance?



This study was carried out to examine the effect of corporate governance on audit quality of public financial institutions in Nigeria. There is an expectation that the presence of corporate governance will improves audit quality of financial institutions. Cases of related frauds which occurred in Nigeria and have collapsed a lot of businesses 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 corporate governance and audit performance. 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.

                                              CHAPTER ONE


1.1 Background of the Study   

Corporate governance and audit quality are two terms that are undergoing transformations in the modern world (Soliman & Elsalam, 2012). This has led to corporate governance being considered as the most important instrument of management since it has influence in several internal control systems in firms like internal and external audit, financial performance among other financial management schemes (Micheni, 2014). 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, 2007, Corporate Governance Code of Nigeria, 2015). The rationale for this emphasis can be linked to increased concerns over the integrity of securities markets (International Federation ofAccountants-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, 2008). 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, 2016; Dechow, et al., 2016; McMullen, 2016).

Traditionally, the external auditor has also played an important role in improving the credibility of financial information (Mautz and Sharaf, 2001; Wallace, 2018).

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, 2009). 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, 2008; 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, 2016; Beasley, 2016; Beasley, et al., 2010; Abbott, et al., 2010). 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.

Importance of Corporate Governance in an Organization - Corpbiz

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, 2013). Concerns have also emerged about reduced audit report. Economist (2014) 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. Therefore, this study will empirically investigate the effect of corporate governance on audit quality of public financial institutions in Nigeria.

1.3 Objectives of the Study

The primary aim of this study is to investigate the effect of corporate governance on audit quality of public financial institutions in Nigeria. The study intends to specifically identify the following objectives:

i.       To examine if board independence affects audit report.

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


iii.    To identify the structure of the CEO/Chairmanship of financial institutions in Nigeria.

iv. 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 relationship between executive directors’ ownership and audit report?


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’s independence 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 corporate governance on 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 reports in financial institutions in Nigeria. 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 and Limitation of the Study

This study is premised on the appraisal of audit report and corporate governance in Nigeria with particular reference to Access Bank Nigeria Limited. 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. In the course of the study, the researcher encounters some constrain which limited the scope of the study. Some of these constrain are stated below:

  • Availability of research material: The research material available to the researcher is insufficient, thereby limiting the study.
  • Time: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.
  • Finance: The finance available for the research work does not allow for wider coverage as resources are very limited as the researcher has other academic bills to cover.

1.8 Research Methodology

The hypotheses formulated for this study will be carried out using primary data and secondary data. The primary data consists of self-administered questionnaires and personal interviews, while the secondary data consists of data from various journals, magazines, annual reports of banks, the internet and other literatures. Data collected will be gathered, presented and analyzed accordingly using chi-square. Data will be presented using tables and percentages. 

1.9 Definition of Terms

Corporate Governance

The methods by which suppliers of finance control managers in order to ensure that their capital cannot be expropriated and that they earn a return on their investment.


A bank is a financial institution that accepts deposits from the public and creates credit. Lending activities can be performed either directly or indirectly through capital markets.


Management (or managing) is the administration of an organization, whether it is a business, a not-for-profit organization, or government body.


The term audit usually refers to a financial statement audit. A financial audit is an objective examination and evaluation of the financial statements of an organization to make sure that the financial records are a fair and accurate representation of the transactions they claim to represent. The audit can be conducted internally by employees of the organization or externally by an outside Certified Public Accountant (CPA) firm.


An auditor is a person authorized to review and verify the accuracy of financial records and ensure that companies comply with tax laws. They protect businesses from fraud, point out discrepancies in accounting methods and, on occasion, work on a consultancy basis, helping organizations to spot ways to boost operational efficiency. Auditors work in various capacities within different industries.

AUDITING: According to the Auditing Practicing Committee (APC) an audit is define as the independent examination and expression of opinion on the financial statement of an enterprises by an appointed auditor in pursuance with any relevance statutory law and regulation.

INDEPENDENT (EXAMINATION): free from the centre or influence of management.  This is central to the definition of audit.

FINANCIAL STATEMENT: This refers to profit and loss balance sheet, value added, statement or policies of operation, trading account, the totality of these make financial statement.

AUDITING PRACTICING COMMITTEE (APC): This is an institute that sees to the uniformity of accounting principle in Nigeria.

SHAREHOLDERS: These are group of people that bring funds together to run a business in order to have profits.  Active shareholders are shareholders that participate in the business running; they hold post in the management while non-active shareholders do participate in formation of business and provision of fund without active part.

Profit aspect of an organization that is it shows excess income over expenditure.

BALANCE SHEET: This is a book that shows the financial standard in an organization.



Leave a Reply

Your email address will not be published. Required fields are marked *