1.1 Background of the study
1.2 Statement of problem
1.3 Objective of the study
1.4 Research Hypotheses
1.5 Significance of the study
1.6 Scope and limitation of the study
1.7 Definition of terms
1.8 Organization of the study
2.0 LITERATURE REVIEW
3.0 Research methodology
3.1 sources of data collection
3.3 Population of the study
3.4 Sampling and sampling distribution
3.5 Validation of research instrument
3.6 Method of data analysis
DATA PRESENTATION AND ANALYSIS AND INTERPRETATION
4.2 Data analysis
This project analyzes the relevance of audit committee functions on the quality of financial statement in Nigeria, the users’ perception. The broad objective of the study is to ascertain if audit committee reports strengthen the decision relevance of corporate report and also to find out if the information content of audit committee reports relevant to its users. The primary source of data was used where questionnaires were distributed to gather information. The simple random sampling technique was used to select a sample size of 133 and the chi-square statistical tool was used to test the stated hypotheses. The findings revealed that that audits committee reports is very imperative to the users of corporate or published financials. It was concluded that the extent to which audit committee function has been achieved and is quite encouraging. The study recommends among others that audit committee of companies should meet regularly as the situation demands, as this impact positively on the shareholders investment
- Background of the study
In public companies, it is generally the shareholders who ultimately approve the auditor’s appointment, and the auditors are primarily responsible to and overseen by those representing the shareholders’ interests with regards to financial reporting and internal controls. Typically an audit committee (or its equivalent), acting as a largely independent body, will be charged with representing the shareholders’ interests. Companies may not necessarily have an audit committee and this interchange may be dealt with less formally but in an equivalent manner. The audit committee is a sub-committee of those charged with governance, and is typically made up of a majority of non-executive directors who are the shareholders’ representatives in relation to the external audit. They are usually responsible for overseeing the audit and evaluating the independence and performance of the auditors. An important role of the audit committee is to assess and recommend the appointment or reappointment of the audit firm. The audit committee also provides a forum for the auditors to escalate and discuss any significant concerns they may have about any aspect of the financial statements prepared by management. The chair of the audit committee has a vital role to play in assessing management’s tone from the top with respect to the company’s financial reporting. As well as their public report on the financial statements, the auditors will typically have more detailed communications with the audit committee. These communications may include a description of how the audit was carried out, the audit plan, the auditor’s views about the company’s accounting practices (including accounting policies, estimates and disclosures), how the auditors satisfied themselves on the key issues that arose, and significant difficulties, if any, encountered during the audit. The auditors may also comment to the audit committee on their insights in areas such as the strength of the organization’s internal control systems. There has always been a curious intention for men since the inception of life to exploit the necessary avenues and opportunities that would make himself reliant being. This gave birth to the hunting and gathering of goods the very days of men. As he developed more skills and tools, he discovered he could adequately provide for himself and have some left over. This was known as subsistence way of living man’s daily exploit lead to a graduation from this subsistence way of living, paving way for trade as a tool or means through which he will get the things which he desired but did not have. Consequently, there was the birth of trade and sole proprietorship. This is the base of the theory of the firm, which recognizes man (the entrepreneur) as a focal point for effective combination of other factors. The emergence of sole proprietorship paved way for more efficient markets, there was need for an enlargement of the market, leading to increased capacity utilization. The seeming successful discovery was faced with lack of fund, this was an enormous, and an important factor militating against the average entrepreneur in the industry who’s pooling of capital in the form of partnership could not adequately satisfy.
- STATEMENT OF THE PROBLEM
The statement of the problem gives a view, if having a chairman who is a chartered accountant makes the committee to be effective and independence or should audit committee members be separated from equity holders? The involvement of outside directors is having diverse effect on the performance and efficiency of the organization. Thus, the problem of this study is to the engagement of external directors which makes the committee less effective and independent.
- OBJECTIVE OF THE STUDY
The broad objective of the study is to analyze the relevance of audit committee functions on the quality of financial statement in Nigeria, the users’ perception. The following are the sub-objectives of the study;
- To ascertain if audit committee reports strengthen the decision relevance of corporate report.
- To find out if the information content of audit committee reports is relevant to its users.
iii. To determine if the users of corporate report rely on audit committee in making decisions.
1.4 STATEMENT OF HYPOTHESIS
The following are the hypotheses of the study and are presented in the null and alternative forms;
HO: Audit committee report does not strengthen the decision relevance of corporate report.
HI: Audit committee reports strengthen the decision relevance of corporate report.
HO: The scope and information content of audit committee reports is not adequate to its users.
HI: The scope and information content of audit committee reports is adequate to its users.
- SIGNIFICANCE OF THE STUDY
The significance of the study is to reveal the perception of the users of financial audit committee report, and will also:
- Enable users of financial statement report to make an evaluation on the relevance of audit committee report.
- It will expose the shortcomings of the audit committee report as it affect users of financial statements and offers suggestions on how those shortcomings can be amended.
iii. To evaluate users of corporate report to have a better understanding of the general working of the audit committee.
- To the academicians, it will increase the body of their knowledge
- SCOPE AND LIMITATION OF THE STUDY
This research work focus on the relevance of audit committee functions on the quality of financial statement in Nigeria. The study will involve assessing the effectiveness of audit committee since introduction. It will assess the relevance of audit committee report to users of financial statements. The geographical location for this study is Benin City, Edo State. Using a time frame of five (5) years, i.e. 2011 to 2015 (both years inclusive), a large sample size of 145 was used for effective survey. The researcher encounters some constrain which limited the scope of the study;
- a) AVAILABILITY OF RESEARCH MATERIAL: The research material available to the researcher is insufficient, thereby limiting the study
- b) 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.
- c) Organizational privacy: Limited Access to the selected auditing firm makes it difficult to get all the necessary and required information concerning the activities.
1.7 DEFINITION OF TERMS
- Auditing: Auditing could be defined as a service activities demanding by society (the demand having it not in some things called the agency theory) with the expressed aim of adding to the perceived credibility of the published financial statement of limited liability enterprises.
- Audit committee: This is a standing committee established to enhance the corporate accountability by working with the board and management to improve the financial reporting practices of an entity and ensure proper conduct of corporate affairs.
iii.Independence: This implies freedom from include influence. This is imperative if the auditor is to make true and unbiased comments on the financial statement.
iv.Audit Programe:- An audit programme is the list of work an auditor does on the occasion of his audit.
1.8 ORGANIZATION OF THE STUDY
This research work is organized in five chapters, for easy understanding, as follows
Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study. Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding. Chapter five gives summary, conclusion, and recommendations made of the study