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EFFECT OF CORPORATE GOVERNANCE ON THE PERFORMANCE OF COMMERCIAL BANKS IN TERMS OF PROFITABILITY
INTRODUCTION
1.1 Background to the Study
From time immemorial, there wasn’t any need for corporate governance due to the fact that business institutions were owned and managed by their sole owners. In recent times, the owners have employed professionals to manage and direct the affairs of their institutions in anticipation of giving account of their stewardship. The issue of corporate governance has recently been given a great deal of attention in the global financial sector ensuring credibility, fairness and transparency in financial statement and protecting the interest of the owners. Corporate governance is one of the most critical issues in the financial industry across the globe. Failure of the industry in the past have made it important to promote good corporate. Corporate governance refers to the processes and structures by which the business and affairs of an institution are directed and managed in order to improve long–term shareholder value by enhancing corporate performance and accountability while taking into account the interest of the shareholders.
The recent collapse of the stock market and uncovering of flagrant abuse of loans and perquisites in the banking sector and the Nigerian economy generally are enough to pose the question indeed of not corporate governance but actually its absence in this country. The massive fraud and cooking of the books in companies, a notable example of which is Cadbury, not to mention insider dealings and compromised boards in many companies as well as spineless shareholders’ associations, audit committees and rubber stamp Annual General Meetings suggest the collapse of corporate governance in Nigeria (Oyebode,2009).
The main reason for better practices in corporate governance can be traced to the UK when in the 1980s and 1990s, a number of companies unexpectedly collapsed (Bank of Credit, Commerce and Industry, the Mirror Group, Polly Peck Int’l and Barings Bank). In each case there appeared to be serious accounting and financial reporting irregularities and inadequate internal controls and risk management.
In Nigeria, the mechanism of corporate governance are the Companies and Allied Matters Act 2004, Investment & Securities Act 2007, Securities and Exchange Commission 2011, Corporate Governance codes and various industry specific governance codes. (Osajie, 2014).
From a banking industry perspective, good corporate governance demands that banks will operate in a safe and sound manner, and will comply with applicable laws and regulations and will protect the interests of depositors. Interestingly, not many Nigerian banks are noted for their strict observance of corporate governance, best practices and high ethical standards in their operations. (Wilson, 2006).
Given the various activities that have affected the efforts of banks to comply with various consolidation policies and the antecedents of some operators in the system, there are concerns on the need to strengthen corporate governance in banks. This will boost public confidence and ensure efficient and effective functioning of the banking system (Soludo, 2004). In line with these changes, the fact remains unchanged that there is need for countries to have sound resilient banking systems with good corporate governance (Uwuigbe, 2011).
In developing economies, the banking sector and other sectors have also witnessed several cases of collapses, some of which include the Alpha Merchant Bank Ltd, Savannah Bank, Societe Generale Bank Ltd (all in Nigeria), The Continental Bank of Kenya Ltd, Capital Finance Ltd, Consolidated Bank of Kenya Ltd and Trust Bank of Kenya among others (Akpan, 2007).
Poor corporate governance was identified as one of the major factors in virtually all known instances of financial distress in Nigeria. It was because of this that 13-point agenda was introduced during the banking sector consolidation in 2004 thereby enforcing a new code of corporate governance for banks.
The emergence of mega banks in the post consolidation era task the skills and competencies of boards and management in improving shareholder values against other stakeholder interests in a competitive environment.
The aim of this study is to critically examine what corporate governance is, its mechanisms, measures of corporate performance in banks as well as the relationship between corporate performance and corporate governance.
1.2 Statement of the Problem
The global events concerning the high profile corporate failures have necessitated a policy agenda and intensified debate on the efficiency of corporate governance mechanisms as a means of enhancing firm’s financial performance. The incidence of corporate collapses regarding financial scandals and related frauds, which have dominated scholarly debates around the world, have raised doubts about financial reporting credibility (Adeyemi,and Fagbemi, 2012).
In Nigeria, before the consolidation exercise, the banking industry had about 89 active players whose overall performance led to loss of customers’ confidence. There was lingering distress in the industry, the supervisory structures were inadequate and there were cases of official recklessness amongst the managers and directors, while the industry was notorious for ethical abuses (Akpan, 2007).
Poor corporate governance was identified as one of the major factors in virtually all known instances of bank distress in the country. Weak corporate governance was seen manifesting in form of weak internal control systems, excessive risk taking, override of internal control measures, absence of or non-adherence to limits of authority, disregard for cannons of prudent lending, absence of risk management processes, insider abuses and fraudulent practices remain a worrisome feature of the banking system (Soludo, 2004).
1.3 Research Questions
In this study, the following research questions are asked with the hope of providing answers to them;
i. What is the impact of ethical practices on performance of commercial banks?
ii. What is the impact of corporate governance on the performance of commercial banks?
1.4 Objectives of the Study
The main objective of this study is to examine the effect of corporate governance on the performance of commercial banks in terms of profitability. The specific objectives of this study are to;
i. Examine the impact of ethical practices on performance of commercial banks; and
ii. determine the impact of corporate governance mechanisms on the performance of commercial banks.
1.5 Justification of the Study
This study aims at contributing to the existing literature on the topic. Generally, banks play important role in the economy of a country such that its performance affects the country positively or negatively. This study will assist the management on issues dealing with the fundamentals of accountability, transparency, probity, financial and other control structures. Poor corporate governance contributes to bank failures which will lead to loss of confidence by investors and little or no deposit by the customers. Good corporate governance ensures transparency, protection of interest of stakeholders. Hence, the study of corporate governance is intended to increase transparency and accountability of corporate firms to avoid massive disasters before they occur. The result of this study is expected to benefit shareholders and stake holders and promote shareholders trust and provide further insight to both academicians and practitioners concerning the need for corporate governance and the inadequacies that exist therein.
1.6 Hypothesis of the Study
For the purpose of this study, the following hypotheses stated in null form are tested;
H01: There is no relationship between ethical practices and performance of commercial banks.
H02: Corporate governance mechanisms do not have effect on commercial banks performance.
1.7 Scope of the Study
This study focused on the effects of corporate governance on performance of some selected commercial banks in Nigeria. The selected commercial banks’ financial statement for the years 2000 to 2014 covering the pre-consolidation and the post-consolidation periods of the Nigerian banking system was studied.
1.8 Plan of the Study
This study is organized into five chapters. Chapter one is the Introduction to the study. Chapter two is the review of relevant literature that are related to the study. Chapter three is the research methodology. Chapter four contained the presentation of data, analysis and discussion of results. Lastly, chapter five is the summary, the findings, conclusions and recommendations.
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THE ADOPTION LEVEL OF MODERN MANAGEMENT ACCOUNTING TECHNIQUES BY SMALL AND MEDIUM SCALE ENTERPRISES (SMES) IN KWARA STATE
CHAPTER ONE
INTRODUCTION
1.1 Background to the study
The small and medium scale enterprises sector has been recognized worldwide for its role in economic advancement through various ways like; wealth generation, employment creation, and poverty reduction. Small and medium scale enterprises are a fundamental part of the economic fabric in most developing countries, and they play a very important role in furthering growth, innovation and prosperity. Small and medium scale enterprises are defined as non- subsidiary, independent firms which employ less than a given number of employees, this number varies across national systems, other parameters other than the number of employees are used in categorizing businesses as small and medium scale enterprises. Small and Medium Scale Enterprises are mostly found in the service sector of various economies which in most countries account for two-thirds of employment levels.
The primary objective of management accounting is to help managers in carrying out the tasks of: planning, organizing, directing, controlling, and decision making. Also, the major goal of every organization is to achieve satisfactory financial result and for a firm to be financially buoyant the management of that organization must be efficient and effective and this will depend on the management accounting techniques being used. According to Rehman, (2011) efficiency means maintaining a satisfactory relationship between a firms resource inputs and its outputs (the number of labor hours required to produce a product); effectiveness on the other hand refers to how well a firm attains its
goal (for example, actual sale value against planned sale value).Nurturing of the small to medium size enterprises (SMEs) is being hailed for their pivotal role in promoting grassroots economic growth and equitable sustainable development, this nurturing has resulted in increased entrepreneur activities in the small and medium scale enterprises sector in developing countries. Small and medium scale enterprises play a key role in transition and developing countries. These firms, constitute a major source of employment and generate significant domestic and export earnings, thus small and medium scale enterprises development emerges as a key instrument in poverty reduction efforts and their advancement is key to sustained economic growth, for they are an integral part of a country’s economic fabric and their success affects the well being of the society as engines of job creation, economic growth and innovation.
In Kwara state, the small and medium scale enterprises play an important role in employment and wealth creation, income distribution, accumulation of technological capabilities and spreading the available resources among a large number of efficient and dynamic small and medium size enterprises.
The small and medium scale enterprises sector acts as the incubating center for emerging entrepreneurial pursuits and thus complementing the process of adjustment in large enterprises by bringing backward and forward linkages for products as well as services previously not available in the market. If well utilized, the modern management accounting techniques can provide the firm’s management with the aid to be more efficient in its operations as well as being more effective in its end results.
Small and medium scale enterprises (SMEs) are the life wire of every developing economy. Their role in the economy cannot be over looked as they contribute immensely to the growth of the nation’s economy and equally generates employment opportunities. The need for the adoption of modern management accounting techniques in these forms of enterprises therefore becomes paramount as this will enable them embrace and appreciate the benefits of management accounting and conduct their businesses to meet internationally accepted accounting standard. As today‟s business environment becomes increasingly competitive, business organisations are becoming more aggressive and dynamic in identifying competitive strategies that will ensure profitable existence. Competition may be attributed to business innovations, advancement in technology and the changing demand of customers. Competition amongst business organisations may compel the management to develop business techniques and strategies that would guide an organisation towards the maximisation of profits. This may be achieved through increased sales and reduced cost of production. The optimisation of profits and minimisation of costs may enable an organisation to create a competitive advantage in its industry. Certain management accounting practices provide strategies that can influence a large number of customers to have a lasting preference for a company’s products. Thompson, Strickland and Gamble (2009) are of the view that the adoption of management accounting techniques may provide an organisation with a sustainable competitive advantage over its rivals. Management accounting practices have moved from reporting historical information, especially on variance analysis, to taking part in the strategic planning process of an organisation (Kiesler and Sproull, 1982:548). These authors contend that management accounting skills are actively applied in the business environment where both market intelligence is sought and evaluated, and strategic decisions are made and competitive strategies put in place. These are factors which Ittner and Larcker (1997:243) argue that they enable an organisation to gain an advantage in the ever demanding competitive business environment where innovative management accounting practices need to be employed.
1.2 Statement of the problem
Traditionally, management accounting has been dominated by quantity financial information. Modern management accounting techniques such as Activity based costing, Target costing, and Lifecycle costing are mainly developed as a reaction to changes in information needs driven by a growing competitive environment. Activity based costing systems measure more accurately the cost of activities, products, services and customers. Target costing is a method of strategic management of cost and profit. It involves setting a target or objective for the maximum cost of a product or service and then working out how to achieve this target. Life cycle costing is a technique that attempts to identify the total cost associated with the ownership of an asset so that decisions can be made about asset acquisition.
Subject to changes in the economic system around the globe, there is an indication that management accounting may have lost some relevance to management of other information. Lack of managerial accounting skills and techniques for decision making are obstacles to SMEs obtaining credit.
Adoption of modern management accounting techniques such as Activity based costing, Target costing, and Life cycle costing would bring about the following benefits: Accurate measurement of cost of activities, Strategic management of cost and profit, and improved evaluation of options.
1.3 Objectives of the study
The main objective of this study assessed the adoption level of modern management accounting techniques by small and medium scale enterprises (SMEs) in Kwara state, Nigeria.
This was pursued through other specific objectives that:
1. assessed the awareness levels of Activity Based Costing technique among small and medium scale enterprises in Kwara state
2. determined the impact of Target Costing technique on the performance of small and medium scale enterprises
3. determined the benefit of adopting life cycle costing technique by small and medium scale enterprises
1.4 Research Questions
The following questions were asked with a view to providing answers to the questions asked during this research work:
1. What is the awareness level of Activity Based Costing technique by small and medium scale enterprises?
2. What is the impact of Target costing technique on the performance of small and medium scale enterprises?
3. How does the adoption of life cycle costing technique benefit small and medium scale enterprises?
1.5 Research Hypothesis
The following hypotheses in the null form were formulated to substantiate the study:
HO1: There is no significant level of awareness of Activity Based costing technique by small and medium scale enterprises.
HO2: Adoption of Target Costing technique by small and medium scale enterprises do not have an impact on their performance.
HO3: Adoption of life cycle costing technique by small and medium scale enterprises do not have an impact on their performance.
1.6 Justification for the study
Overtime, it has been seen that the level of adoption of modern management accounting techniques by small and medium scale enterprises is low and this has caused some problems for the growth and survival of small and medium scale enterprises.
Fowzia, (2011) wrote that since mid-1980’s there has been criticisms about the current state of management accounting techniques which were widely publicized in professional and academic literature. In the words of Kadel and Luther, (2006) traditional management accounting is ‘well and alive’ but there are indications of likely increased use of: information concerning the cost of quality; non-financial measures relating to employees and analyses of competitors’ strengths and weaknesses. There are evidence of a gap between current textbooks and actual practices and there are indications that management accounting techniques may have lost its relevance, hence there is a need to adopt management accounting techniques in small and medium scale enterprises in Kwara state. Furthermore, the study will try to breach the gap if any, which may exist between management accounting in theory and practice and also how government can help improve management accounting practice in Nigeria.
Adoption of modern management accounting techniques by small and medium scale enterprises is a fundamental issue that needs to be addressed in order to ensure small and medium scale enterprises long term success. This study will be of immense benefit to students, business owners and other stakeholders who are interested in the success of various small and medium scale enterprises. This study will analyze and shed more light on modern management accounting techniques, how it can be adopted and benefits derived from the adoption.
1.7 Scope of the study
This study was conducted by sampling the opinion of respondents from some selected small and medium scale enterprises in Ilorin, Kwara state. The small and medium scale enterprises selected was based on random sampling. The period covered was from October 2014 to December 2014. For the purpose of this study, the modern accounting techniques that were examined are: Activity based costing, Target costing, and Life cycle costing.
1.8 Plan of the study
The report of this study was organized into five (5) different chapters. Chapter one dealt with the introduction of the study; Chapter two discussed the Review of relevant literature to the study; Chapter three focused on the research methodology to be adopted; Chapter four of the study is dedicated to the Presentation and analysis of data; and finally, Chapter five presents the summary, conclusion, and recommendations.
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THE IMPORTANCE OF FINANCIAL ACCOUNTING LITERACY ON THE GROWTH, DEVELOPMENT, SURVIVAL, PRODUCTIVITY AND PERFORMANCE OF SMES IN KWARA STATE
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
Financial literacy remains an interesting issue in both developed and developing economies, and has elicited much interest in the recent past with the rapid change in the finance landscape. Atkinson and Messy (2005) defined financial literacy as the combination of consumers’/investors’ understanding of financial products and concepts and their ability and confidence to appreciate financial risks and opportunities, to make informed choices, to know where to go for help, and to take other effective actions to improve their financial well-being.
Financial literacy helps in empowering and educating investors so that they are knowledgeable about finance in a way that is relevant to their business and enables them to use this knowledge to evaluate products and make informed decisions. It is widely expected that greater financial knowledge would help overcome recent difficulties in advanced credit markets. Financial literacy prepares investors for tough financial times, through strategies that mitigate risk such as accumulating savings, diversifying assets, and purchasing insurance.
Financial literacy facilitates the decision making processes such as payment of bills on time, proper debt management which improves the credit worthiness of potential borrowers to support livelihoods, economic growth, sound financial systems, and poverty reduction. It also provides greater control of one’s financial future, more effective use of financial products and services, and reduced vulnerability to overzealous retailers or fraudulent schemes. Facing an educated lot, financial regulators are forced to improve the efficiency and quality of financial services. This is because financially literate investors create competitive pressures on financial institutions to offer more appropriately priced and transparent services, by comparing options, asking the right questions, and negotiating more effectively. Investors on their part are able to evaluate and compare financial products, such as bank accounts, saving products, credit and loan options, payment instruments, investments and insurance coverage, so as to make optimal decisions (Miller, Godfrey, Levesque and Stark, 2009).
Lack of business and management skills can magnify financial barriers for SMEs. Low levels of financial literacy can prevent SMEs from adequately assessing and understanding different financing options, and from navigating complex loan application procedures. Similarly, the fact that SMEs’ accounting and financial statements are often not transparent makes them risky borrowers and thus less attractive to lenders. Capacity building of SMEs in terms of preparing financial statements and business plans, as well as improving their financial literacy and management training, is shown to have positive impact on SME development. Furthermore, strengthening the horizontal linkages with other SMEs and vertical linkages with larger firms would improve SMEs’ market access. (Hogarth and Hilgert, 2002).
1.2 Statement of the Problem
Quite a number of studies have been conducted in developed countries and have shown significant relationship between financial accounting literacy and the growth and survival of small and medium scale enterprise. However, there are a lot of diverse perceptions about financial accounting literacy and these are caused by several factors. A major concern is the ignorance of owners of SMEs on the importance of book keeping and the proper understanding of the entity concept, thereby causing their business to suffer, due to lack of information (financial in nature) to aid in forecast against future eventuality and expansion. This has necessitated this study to find out the impact of financial accounting literacy on the growth and survival of small and medium scale enterprise in Kwara state, Nigeria. This study will help small and medium scale owners and folks interested in going into similar venture to understand the impact of financial accounting literacy on the growth and survival of SMEs.
1.3 Research Questions
The following research questions will be pursued in the course of this work:
i. What is the impact of financial accounting literacy on the growth of small and medium scale enterprises?
ii. What is the impact of financial accounting literacy on the survival of small and medium scale enterprises?
1.4 Justification of the Study
Lusardi and Mitchell (2006) found that financial illiteracy is widespread and is particularly acute among specific groups of the population, such as women, the elderly, and those with low education. Agarwal, Driscoll, Gabaix and Laibson (2007) further show that financial mistakes are prevalent among the young and the elderly, who display the lowest level of financial knowledge and cognitive ability. Again a study by the OECD (2005) and the work by Lusardi and Mitchell (2007) which review the evidence on financial literacy across countries show that financial illiteracy is a common feature in European countries, Australia, and Japan. These findings were confirmed in the work of Christelis, Jappelli and Padula (2006), which used micro data from European countries to find that most respondents in Europe scored low on financial numeracy and literacy scales
This study will be very useful in that the previous studies carried out on financial literacy used Europe and other developed countries of the world as its case study, but this study will focus on Nigeria and most especially Kwara state to be specific as it will serve as a guide for SME owners in this part of the world to know the impact of financial accounting literacy on the growth and survival of their enterprise. This study will be very useful in that a lot of businesses in Kwara state today hit the rocks due to illiteracy on financial management matters.
1.5 Objectives of the Study
The main objective of this study will be to determine the importance of financial accounting literacy on the growth, development, survival, productivity and performance of SMEs in Kwara state.
The specific objectives are to:
i. determine the impact of financial accounting literacy on the growth of small and medium scale enterprises.
ii. determine the impact of financial accounting literacy on the survival of small and medium scale enterprises.
1.6 Hypotheses of the Study
The hypotheses to be tested in this study are;
H01: There is no significant relationship between financial accounting literacy and the growth of SMEs in Kwara state.
H02: There is no significant relationship between financial accounting literacy and the survival of SMEs in Kwara state.
1.7 Scope of the Study
This study will focus on all SMEs in Kwara state. However, only three local government areas (Ilorin South, Ilorin North and Ilorin East local government areas) will be selected for this study using simple random sampling technique.
1.8 Plan of the Study
This study will contain five CHAPTERs. CHAPTER one will serve as the introduction which will include background to the study, the statement of the problem, objectives of the study and research questions. CHAPTER two will deal with the literature review which will contain the conceptual framework, theoretical background and empirical evidence. The third CHAPTER will focus on the report of research methodology, research design, method of data analysis, method of data collection, sampling technique and population of the study. Presentation, analysis and interpretation of data will be covered in CHAPTER four, while CHAPTER five which will be the last CHAPTER will contain summary, conclusion and recommendation.
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CAUTION/WARNING
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That you ordered this material shows you have agreed not to copy word-to-word.
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08068231953 or 08168759420
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Tags: DEVELOPMENT, PRODUCTIVITY AND PERFORMANCE OF SMES IN KWARA STATE, SURVIVAL, THE IMPORTANCE OF FINANCIAL ACCOUNTING LITERACY ON THE GROWTH
ATTENTION:
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INFORMATION:
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PROBLEMS AND PROSPECTS OF DESIGNING INTERNAL CONTROL SYSTEMS FOR SMALLER ENTITIES IN KWARA STATE
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
Internal controls are designed to provide reasonable assurance regarding the achievement of an organization’s objectives in terms of effectiveness and efficiency of operations, reliability of financial reporting, and compliance with applicable laws and regulations. It is generally believed that small and medium scale enterprises are the pillars on which the economy of a country rests, especially a developing economy like Nigeria. The impact of small and medium scale enterprises (SMEs) cannot be over emphasized as their contribution to gross domestic product (GDP) is significant. (Matlay and Westhead, 2005).
Where internal control systems come to play, every company must create a unique system because some of these controls may be either cumbersome or inefficient (committee of sponsoring organisations of the treadway commission, 2000). However there are some general factors that affect internal control design systems in SMEs. The stumbling blocks in designing effective internal control systems should therefore be brought to limelight. The possibilities of developing an internally designed control system also should be explored. Internal control means different things to different people. It is pertinent that an effective and efficient system of internal control is consciously designed to mitigate risks in firms. Internal control means that enterprises, in order to improve their self-quality of business information, promote operation efficiency, fully obtaining and using the each kind of resources, under the related laws and regulations, so as to reach the fixed management goal, take the various kinds of restrictions and regulative organization, planning, methods and procedure in the enterprise (CCSE, 2008). SMEs form a major part of the economy and internal control serves as a major tool to prevent such firms from falling apart, hence the need for it. In order to carry out internal control effectively, there has to be conscious effort put in place to ensure that there is a gearing towards the achievement of corporate objectives in all the separate but inter-twined and overlapping parts of the firm (Committee of sponsoring organizations of the tread way commission, 2013). The Sarbanes-Oxley Act of 2002 increased the amount of internal control systems that a company needs to use. This is because internal control helps in relieving ethical dilemmas, increasing accountability, deterring fraud and improving the quality of financial information used by creditors and investors: however, an internal control system is only as good as its design. This study is therefore geared towards proper identification of the problems and prospects of internal control systems design for small businesses in Kwara state.
1.2 Statement of the problem
SMEs in Kwara state have not performed creditably well and hence have not played the expected vital and vibrant role in the economic growth and development in Kwara State (Onugu, 2005). Considering any ideal model, SMEs should have little or no barriers in designing an effective and efficient internal control system alongside very high prospects and much ease in instituting internal control systems for the smooth running of the business. This is not always so in reality due to some (avoidable and unavoidable) reasons, some of which are: suitability of objectives.
Disciplined management and staff of SMEs is the cornerstone the success of SMEs. Where a good internal control system design exists, they themselves stand up to their roles and responsibilities and advocate for others to abide by already established controls. They themselves therefore serve as social controls, adding up to the administrative controls already existing. However, in reality there are indiscipline members of SMEs hence, the reverse is the case. As a result of lack of controls bringing up a new internal control system or trying to resurrect already established ones meet with so much difficulty. Therefore, the study seeks to investigate whether there is strong internal control systems design for small businesses in Kwara State.
1.3 Research Questions
This study is directed towards answering the following questions:
i. What is the effect of efficient information and communication system on the profitability of small entities?
ii. What are the effects of internal control systems on risk management in Small entities?
iii. What are the problems encountered in designing internal control systems for small entities?
1.4 Justification for the Study
The question of the role played by a good internal control design System in SMEs cannot be overemphasized, hence, the need for this research. Many researchers such as Abdulraheem, Yahaya, Oyebola & Abogun (2012) have written on accounting principles of small enterprises. (COSO 2013) also developed a final integrated framework on internal control systems design. Klynveld Peat Marwick Goerdeler (KPMG) also developed a practical guide to internal control (2012). However it is the researcher’s opinion that Problems and Prospects of internal control in Kwara state has been under researched therefore, this study intends to fill this gap.
1.5 Objectives of the Study
The general objective of the study shall be to identify and analyze the problems and prospects of designing internal control systems for smaller entities in Kwara State. More specifically, this study will help:
i. Identify the effect of efficient information and communication system on the profitability of small entities.
ii. Identify the effect of efficient internal control systems in risk management in small entities.
iii. Identify the problems encountered in designing internal control systems for small entities.
1.6 Hypothesis of the study
Ho1: there is no relationship between efficient information and communication system
Ho2: there is no relationship between efficient internal control systems and risk management in small entities.
Ho3:there are no problems encountered in designing internal control systems for small entities.
1.7 Significance of the Study
The ultimate goal of every organization is to prevent fraud, embezzlement of money and increase accountability in any organization and this is achieve through internal control system in Selected businesses in Ilorin, Kwara State. This study is necessary because it would enable the owners and employee of Small and Medium Scale Enterprises in Ilorin is to improve the ethical behaviours in the business firms. Also, it would be of immense benefit to other companies who used internal control system in their organization and to enhance more profits of the selected businesses. It will also serve as a reference source to other researchers who might want to further studies in the similar topic.
1.8 Scope and limitations of the study
1.8.1 Scope of the study
This study shall be limited to SMEs duly registered in Kwara state. The focus of this research work will be on SMEs in Ilorin Metropolis of Kwara State which has been selected by the researcher for convenience sake. The researcher has already established from the Kwara State Agency for SMEs that there are three hundred and six registered SMEs in Kwara State. (See appendix I).
1.8.2 Limitations of the study
Some of the expected limitations in this study are:
i. The limitation of this study was inability of management to divulge certain information which the considered sensitive and fear of publication which might be detrimental to their operation.
ii. Economic and geographic difference between research study and literature review. Mass literature on SMEs in scattered forms abound, but it might be easier for the researcher to access data relating to other countries and even states than those pertaining to SMEs in Nigeria, Kwara State to be precise.
iii. Shortage of information, time and funds. This might limit the intensity of the spread or area of coverage of the study.
iv. Unavailability of sufficient primary data.
v. The researcher also observed the non-cooperative attitude of some workers of the company to make information available.
1.9 Definition of Terms
For this research, the following definitions have been adopted:
1. INTERNAL CONTROL: Internal control is a process, effected by an entity’s board of directors, management, and other personal, designed to provide reasonable assurance regarding the achievement of objectives relating to operations, reporting and compliance. (COSO 2013).
It is the whole system of controls, financial or otherwise, established by the management in order to carry on the business of the enterprise, in an orderly and efficient manner, ensure adherence to management policies, safeguard the assets and secure as far as possible the completeness and accuracy of records. (ICAN, 2009).
2. INTERNAL CONTROLS: Internal controls are policies procedures, practices and organizational structures implemented to provide reasonable assurance that an organization’s business objectives will be achieved and undesired risk events will be prevented or detected and connected based on wither compliance or management initiated concerns (Awe, 2005).
3. SMALL AND MEDIUM SCALE ENTERPRISES (SMEs): In accordance with the provision of the “200 billion naira SMEs Credit Guarantee Scheme” Central Bank of Nigeria Guidelines, An SME is an enterprise that has an asset base (excluding land) of between N5 million – N500 million and a labor force of between 11 and 300.
The National Council of Industries also defined SMEs as business enterprises whose total costs excluding land do not exceed more than two hundred million naira. (N200, 000,000)
4. PROBLEMS: A question raised for inquiry, consideration, or solution i.e. an intricate unsettled question which is a source of perplexity, distress, or vexation. (Webster, 2014). It can also be defined as “Any question or matter involving doubt, uncertainty or difficulty, proposed for solution or discussion” (Prospect Dictionary, 2014).
5. PROSPECTS: The probability or likelihood of some future event occurring i.e. a mental picture of a future or anticipated event and/or chances or opportunities for success (Concise Oxford English Dictionary, 2013). An apparent probability of advancement, success, profit, outlook for the future, a mental view of survey as of a mental description (Prospect Dictionary, 2014).
6. SYSTEM: System can be an organized set of ideas or theories or particular way of doing something or a group of things, pieces of equipment that are connected or work together (Horngren, Harrison and Bamber, 1999).
7. EFFICIENCY: This is very important to the achievement of competitive advantage and the maximization of profitability (Roth, 1997).
8. BUSINESS: Is an organization or economic system where goods and services are exchanged for one another.
9. ORGANIZATION: A social unit of people, systematically structured and managed to meet a need or pursue collective goals on a continuing basis. All organizations have a management structure that determines relationship between functions and positions, and subdivides and delegates roles, responsibilities, and authority to carryout defined tasks (Simmon, 1997).
10. Abbreviations, terms and notations which shall be used in this study include but are not limited to the following:
i. SMEs: Small and Medium Enterprises are those firms which satisfy the definitions given above.
ii. SMEDAN: Small and Medium Enterprises Development Agency.
iii. COSO: Committee of Sponsoring Organizations of the Treadway Commission.
iv. NASME: Nigerian Association of Small and Medium Enterprises, which is an umbrella association of all SMEs
v. MAN: Manufacturers Association of Nigeria is the official association of manufacturing companies in Nigeria
vi. NACCIMA: Nigerian Association of chambers of commerce, industry, Mines, and Agriculture is an association of various chambers of Commerce in Nigeria.
vii. CBN: Central Bank of Nigeria, the apex bank in Nigeria, which supervises other banks
viii. DFIs: Development Finance Institutions are companies involved in project and development finance such as the Bank of Industry (BOI).
ix. ICS: Internal Control System.
x. CCSE: Canadian Centre for Science and Education.
xi. CAQ: Centre for Audit Quality.
xii. KWACCIMMA: Kwara State Chamber of Commerce, Industry, Mines and Agriculture.
1.9 Plan of the study
The rest of this research project is divided into four sections. Chapter two, which is on literature review, includes the introduction, conceptual framework, theoretical background, empirical evidence and summary. Chapter three, which is on methodology, includes the introduction, research design, population for the study and sampling techniques. Chapter four contains the analysis of data while Chapter five gives the research findings, conclusion and other useful recommendations.
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Tags: PROBLEMS AND PROSPECTS OF DESIGNING INTERNAL CONTROL SYSTEMS FOR SMALLER ENTITIES IN KWARA STATE
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THE IMPACT OF IFRS ON THE SERVICES DELIVERED BY PRICE WATERHOUSE COOPERS (PWC) LAGOS, NIGERIA
CHAPTER ONE
INTRODUCTION
1.1. Background to the Study
Financial statements, apart from stating the financial position of an organization, provides other information such as value added, changes in equity, if any, and cash flows of the enterprise within a defined period time to which it relates (Iyoha and Faboyede, 2011). This information is useful to a wide range of users making informed economic decisions. The quality of financial reporting is indispensable to the need of users who require them for investment and other decision making purposes.
Financial reports can only be regarded as useful if it represents the “economic substance” of an organization in terms of relevance, reliability, comparability and aids interpretation simplicity (Okpala, 2012); to prepare and audit financial statements, some accounting conventions and principles known as standards have been put in place by appropriate bodies set up for the purpose of encouraging uniformity and reliability. The implementation and adoption of IFRS would therefore reduce information irregularity and strengthens the communication link between all stakeholders. It also reduces the cost of preparing different version of financial statements where an organization is a multi-national (Healy and Palepum, 2001).
Globalization of business requires a unified global accounting, reporting and disclosure set of standards. As a result of increasing volume of cross border capital flows and the growing number of foreign direct investments via mergers and acquisitions in the globalization era, the need for the harmonization of different practices in accounting and the acceptance of worldwide standards has arisen (Akindele, 2012). This worldwide standard is called International Financial Reporting Standards (IFRS).
Before IFRS adoption era, most countries had their own standards with local bodies responsible for developing and issuance. The Nigerian Accounting Standards Board (NASB) was responsible for developing and issuing standards known as Statements of Accounting Standards (SAS) and in the new dispensation, the body was renamed Financial Reporting Council (FRC) of Nigeria as the regulatory body overseeing the adoption and implementation of IFRS. The International Accounting Standards Board (IASB) adopted the IFRS framework on 1st April, 2001; the standards were adopted by over 90 countries around the world. IFRS was established and approved by the IASB.
Accounting Framework has been shaped by International Financial Reporting Standards (IFRS) to provide for recognition, measurement, presentation and disclosure requirements relating to transactions and events that are reflected in the financial statements. IFRS was developed in the year 2001 by the International Accounting Standard Board (IASB) in the public interest to provide a single set of high quality, understandable and uniform accounting standards. Users of financial statement worldwide require sound understanding of financial statement but this can only be made possible based on Generally Accepted Accounting Practice (GAAP). With globalization of finance gaining ground, convergence with IFRS will enable the world to exchange financial information in a meaningful and trustworthy manner (Ikpefan and Akande, 2012).
Realization of the anticipated benefits to be derived as a result of the change from national Generally Accepted Accounting Principles (GAAP) to IFRS in terms of improved quality of financial reporting is the core motive of the proponents of general adoption of IFRS. Supporters of IFRS adoption argue that benefits will flow from expanded financial statement disclosures, differences in company reporting arising when a variety of national GAAP is used (Schipper,2005; Whittington, 2005).
As a result of the global acceptance of IFRS, some developing nations who considered the global impact would have on their economies either through foreign aids, Foreign Direct Investments (FDI) or the development of the capital market in terms of capital inflow decided to go for IFRS (Irvine and Lucas, 2006).
1.2. Statement of the Problem
IFRS is a new and emerging issue globally, with the objective of formulating and publishing accounting standards to be observed in the presentation of financial statements and equally as a benchmark for countries which are developing their own national regulation and by companies listed on the world Stock Exchange. The adoption of IFRS can bring significant additional short-term costs to businesses such as fees to train staffs and pay specialist external accountants. Equally, there are no enough experts in the country who are specialized in IFRS field. Adjustments to comply with IFRS can make performance comparisons difficult for investment analysis and also, it will reduce the level of confidence the shareholder have in the company.
Indeed, Nigeria had in 2010 signaled its willingness to adopt the IFRS in 2012. This dateline is anchored on the understanding of a progression along the milestones and timeliness enunciated in the country roadmap. However, as the Financial Reporting Council (FRC), formerly Nigeria Accounting Standards Board (NASB), duly acknowledged, the transition framework for effective and meaningful adoption may be derailed if any of the milestones and timeliness is ignored (NASB, 2010).
The adoption of IFRS reflects a fundamental shift in national accounting systems and profession. Critical constituents of a national system for a successful transition to IFRS include the tertiary educational system and the accounting profession. On this premise, the joining of anecdotal evidence with the paucity of published research about the dimensions of IFRS adoption in Nigeria tends to suggest that not much is known about this new financial language in the Nigerian academic environment and even globally (Doyle, 2010).
1.3. Research Questions
Based on the objectives of the study, the following research questions were carefully raised:
(i) What is the extent of IFRS familiarity by auditors, accountants and other experts in auditing firms in Nigeria?
(ii) Do accountants, auditors and other experts in auditing firms have different perspectives about IFRS readiness?
(iii) Do accountants, auditors and other experts have different perception regarding the enhancement of financial reporting quality through the adoption of IFRS?
1.4. Justification for the Study
Various researchers have asserted that the introduction of the IFRS has given room for uniformity in global financial reporting, although much emphasis is laid on the impact of IFRS on the economy generally and non-financial institutions among others.
Okoye and Ezejiofor (2014) worked on the impact of IFRS adoption on stock market movement in Nigerian corporate organization. The research assessed the extent at which the impact of IFRS on stock market movement can improve the position of corporate organization in Nigerian capital market. Ezeani and Rotimi (2012) worked on the adoption of IFRS to enhance financial reporting in Nigerian universities. They examined the extent to which adoption of IFRS can enhance financial reporting system in Nigerian universities.
Evans and Enahoro (2014) worked on the comparative study of the IFRS implementation in Ghana and Nigeria. The research was conducted to compare the IFRS adoption and implementation of Ghana and Nigeria. Markku V. and Hannu S. (2012) examined the impact of IFRS transition on audit and non-audit fees. The study focused on fees paid to auditors during a major accounting change associated with extra audit risk and work. They analyzed how a major accounting change from local GAAP and IFRS affects the audit and non-audit fees paid to auditors.
Nicholas A. and Ateboh B. (2014) examined the impact of IFRS adoption by Nigerian listed firms on key financial ratios used by investors. G. Demaki (2013) worked on the prospects and challenges of IFRS to economic development in Nigeria. Okafor and Ogiedu (2011) investigated the potential effects of the adoption and implementation of IFRS in Nigeria from the perspective of stakeholders. KPMG (2010) examined the impact of IFRS on the upstream oil and gas industry. Firoz and Aziz (2010) worked on environmental accounting and IFRS. They made a critical appraisal of the contemporary environmental accounting literature and examined the applicable and relevant paragraphs of the global IFRS.
There has been very little or no emphasis laid on the impact of IFRS on the services delivered by the auditing firms in Nigeria. Hence, this research will go a long way in bridging this identified gap, and to determine the impact of IFRS on the services delivered or by auditing firms in Nigeria.
1.5. Objectives of the Study
The main objective of the study was to investigate the impact of ifrs on the services delivered by price Waterhouse coopers (Pwc) Lagos, Nigeria. Other specific objectives were to:
(i) Examine the extent of IFRS familiarity by accountants, auditors and other experts in auditing firms.
(ii) Investigate whether accountants, auditors and other experts have different perspectives about IFRS readiness.
(iii) Assess whether auditors, accountants and other experts have different perception regarding enhancement of financial reporting quality through the adoption of IFRS.
1.6. Hypotheses of the Study
Based on the research questions, the following research hypotheses were tested:
HO1: There is no difference in the extent of IFRS familiarity by the accountants, auditors and other experts in auditing firms.
HO2: Accountants, auditors and other experts in auditing firms do not have significant differences in their perspectives about IFRS readiness.
HO3: Accountants, auditors and other experts in auditing firms do not have different perception regarding the enhancement of financial reporting quality through the adoption of IFRS.
1.7. Scope of the Study
This intellectual exercise focused on the impact of the IFRS on the services delivered by Price Waterhouse Coopers, Lagos Nigeria by focusing the work on accountants, auditors and other experts.
1.8. Plan of the Study
This research comprises five chapters. Chapter one focuses on the introductory part of this study, with overall insights on the background of the study, the statement of the problem, objectives of the study, hypotheses of the study, justification of the study and scope of the study. Literature review being the second chapter elucidates the various concepts underlying the study as well as the theoretical background and empirical framework or findings. Research methodology following the literature review, is the third chapter which comprehensively deals with the sampling techniques and selection, population of the study, and other methodology of data collection and analysis. Chapter four of this study being the data presentation, analysis of data and its interpretation of results, explicitly discloses both in tabular and theoretical form, the results obtained from respondents involved data collection. Chapter five focuses on the summary, conclusion and recommendation as regards the study including the limitation of the study as well as suggested areas for further research.
Definition of Terms
IFRS:International Financial Reporting Standards are standards and rules for reporting financial information. IFRS was established and approved by the International Accounting Standards Board (IASB).
Accountant:A person who is well vast and saddled with the monetary affairs of a company or an organization.
Policy:This is an initiative enforced by the government of the day in a country or by the hierarchy of an organization on its citizens/ employees, for the betterment of the country or company.
Capital market:This is a section of the financial market where bond, shares and stocks are traded.
Accounting standards:This is a statement issued by appropriate standard setting body locally or internationally on a specific area, or topic of financial accounting. The acceptance or application of which is mandatory.
Financial reporting:This is the process of conveying information contained in the financial statement to the various users of financial statement in other to meet their various needs.
Implementation:This is the process of putting into effective use, new standards, rules or regulations.
Reporting Standards:These are set of rules, regulations and principles guiding the preparation and presentation of financial reports to the stakeholders.
Employees:Employees are interested in earning higher wages and salaries. If a company is making more profit, employees would like to have a fair share of the cake. Therefore, employees make use of accounting information when negotiating for remuneration. Job security can be measured on the basis of performance.
Financial institutions:Financial institutions use accounting information in order to evaluate the credit worthiness of a company when a loan is to be advanced.
Suppliers:Businesses usually buy goods and merchandise on credit. Suppliers use accounting information in order to establish the maximum value of goods to be sold on credit including the solvency level of the entity.
Potential investors:Investors make use of accounting information when deciding whether or not to invest in a company.
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Tags: NIGERIA), THE IMPACT OF IFRS ON THE SERVICES DELIVERED BY PRICE WATERHOUSE COOPERS (PWC) LAGOS
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STRATEGIC MANAGEMENT AND PROFESSIONAL USE OF ACCOUNTING DATA FOR COMPANIES BENEFIT
CHAPTER ONE
1.0 Introduction
Strategy management can simply be defined as the effective control of available resources in an organization and the professional uses of accounting information for companies benefit in under to determine the managerial performance of industries professional use of accounting data provide information that can be expressed in financial term i.e Naira and kobo. Accounting data in an organization are usually flexible dependable and hence, it will assist the management of the organization in decision making. Furthermore, the introduction of this topic is to take a deep look into the accounting data and the records collated to access the future of the business positively as a result of strategic management and professional use of accounting data.
Due to the fact that sole trader has limited resources, strategic management and professional use of accounting information is needed as one-man business is a business organization owned run and managed by a person if he intends to use a trade name different from his surname of fore-name he/she must register the trade name under the registration of business under dubious character setting up a business under dubious name and defrauding the public. It also ensure that two or more person setting up in separate business does not use the same name in way as to confuse the public. Through strategic management sole trader reaps the profits of the business for himself and also all the possess are borne by him as the case may be.
Strategic management and use of accounting data need for effective management control system in a large scale industry as regard profits and loss ration the law regulating partnership Act 1890 which is applicable to the whole of the federation except the western and mid-western states where the partnership law 1859 applies in relation to an organization that directly with the public like the Nigeria bottling company strategic management and professional use of accounting data information is needed for companies benefit to determine the areas with immediate demand of a product also to determine the managerial performance of the company at the end of the accounting year.
It is very important to know in each and every organization that if you fail to plan, you plan to fail. This implies that it is very important to adopt strategic management and professional use of accounting data for managerial purpose and future references in an organization. Strategic management and professional use of accounting in administration may be defined as a proves of maintaining an organization and at directing if for the purpose of achieving predetermined goals.
Accounting data is an organization that are usually flexible dependable and hence, it will assist the management of organization in decision making.
Furthermore, the introduction of this topic is to take a deep look into the accounting data and the records collected to assess the future of the business positively as a result of strategic management and professional use of accounting data.
1.1 Background of Study
In the 1980s management accounting was criticised for becoming too internally focused on operational issues and was providing little help to managers making strategic decisions. The term strategic management accounting (SMA) was introduced by Simmonds (1981, p.26) and defined by him as ‘the provision and analysis of management accounting data about a business and its competitors, for use in developing and monitoring business strategy’.
Since then several attempts have been made to refine this definition and identify a set of techniques that can be classified under the banner of SMA. However there has been little agreement within the academic and professional literature on the definition of SMA and the associated techniques, nor is the term widely used by practising accountants (Langfield-Smith, 2008; Jorgensen and Messner; 2010; Nixon et al., 2011).
When management accounting was introduced as an advanced version of cost accounting after second world war its early advocates had claimed that it would make accounting more useful in assisting managers in their decision making function. As the discipline has failed to live up to the promise now strategic management accounting has been presented as a messiah for the discipline of accounting. New promises have been made that while the traditional management accounting failed to make use of strategic thinking and other qualitative aspects of management the new discipline is likely to make accounting more relevant and important for managers. The empirical evidence on successful diffusion of strategic management accounting is still not overwhelming. It is therefore yet to be seen if strategic management accounting can live up to its promise in future or not.
Most textbooks of management accounting define the discipline in terms of its decision making role. It is generally stated that since managerial functions involve using information for better planning and control, therefore, management accounting is very important for effective and successful management at all levels. In this paper, we review the role of management accounting and after identifying its limitations we examine the claim that strategic management accounting is the future of this discipline. The analytical paper looks at the development of strategic management accounting as a new discipline which promises to be the flagship of the accounting profession. It makes a contribution to the general management literature by clarifying the role of management accounting in decision making and signifying the need for more empirical evidence on usefulness of strategic management accounting for general management.
Strategic management involves the formulation and implementation of the major goals and initiatives taken by a company’s top management on behalf of owners, based on consideration of resources and an assessment of the internal and external environments in which the organization competes.[Nag, R.; Hambrick, D. C.; Chen, M.-J (2007)]
Strategic management provides overall direction to the enterprise and involves specifying the organization’s objectives, developing policies and plans designed to achieve these objectives, and then allocating resources to implement the plans. Academics and practicing managers have developed numerous models and frameworks to assist in strategic decision making in the context of complex environments and competitive dynamics.[Gareth R. Jones, 202]. Strategic management is not static in nature; the models often include a feedback loop to monitor execution and inform the next round of planning.[ Hill, Charles W.L., Gareth R. Jones, 2012]
Michael Porter identifies three principles underlying strategy: creating a “unique and valuable [market] position”, making trade-offs by choosing “what not to do”, and creating “fit” by aligning company activities with one another to support the chosen strategy. Dr. Vladimir Kvint defines strategy as “a system of finding, formulating, and developing a doctrine that will ensure long-term success if followed faithfully.”[ Kvint, Vladimir, 2009]
Corporate strategy involves answering a key question from a portfolio perspective: “What business should we be in?” Business strategy involves answering the question: “How shall we compete in this business?”[Chaffee, E., 2005] In management theory and practice, a further distinction is often made between strategic management and operational management. Operational management is concerned primarily with improving efficiency and controlling costs within the boundaries set by the organization’s strategy.
The strategic management discipline originated in the 1950s and 1960s. Among the numerous early contributors, the most influential were Peter Drucker, Philip Selznick, Alfred Chandler, Igor Ansoff, and Bruce Henderson.[ Ghemawat, Pankaj, 2002] The discipline draws from earlier thinking and texts on ‘strategy’ dating back thousands of years. Prior to 1960, the term “strategy” was primarily used regarding war and politics, not business.[Kiechel, Walter, 2010] Many companies built strategic planning functions to develop and execute the formulation and implementation processes during the 1960s.[Henry Mintberg, 2004]
Peter Drucker was a prolific management theorist and author of dozens of management books, with a career spanning five decades. He addressed fundamental strategic questions in a 1954 book The Practice of Management writing: “…the first responsibility of top management is to ask the question ‘what is our business?’ and to make sure it is carefully studied and correctly answered.” He wrote that the answer was determined by the customer. He recommended eight areas where objectives should be set, such as market standing, innovation, productivity, physical and financial resources, worker performance and attitude, profitability, manager performance and development, and public responsibility. Drucker, Peter (2004).
Porter wrote in 1980 that companies have to make choices about their scope and the type of competitive advantage they seek to achieve, whether lower cost or differentiation. The idea of strategy targeting particular industries and customers (i.e., competitive positions) with a differentiated offering was a departure from the experience-curve influenced strategy paradigm, which was focused on larger scale and lower cost. Porter, Michael E. (2002) Porter revised the strategy paradigm again in 1985, writing that superior performance of the processes and activities performed by organizations as part of their value chain is the foundation of competitive advantage, thereby outlining a process view of strategy. Porter, Michael E. (2005)
1.2 Statement of Problem
There are numerous problems hindering the effective and the efficient use of accounting data the purpose of this project work, we shall be looking at three major problems obstructing the proper use of accounting data in the management of an organization.
(i) Lack of reliable data
(ii) Behavior attitude of management
(iii) Physiological impact of the staff.
1.3 Objectives of the Study
The project work aims at determining and highlighting the need for adequate accounting data, in an organization.
The study will also provide exploration and reason for accounting data and will offer adequate solution that can reduce factors hindering the effective use of accounting data in an organization.
The objectives are stated as follows:
1. The study will help to measure the performance of the organization from the accounting data gathered.
2. The study also is used to highlight the areas of the organization where controls are needed.
3. The study helps to gather all data relating to the activities of the enterprises for the period concerned.
4. Also, the study is used as a basis for inter-firm comparison
5. Also to assist in forecasting which would likely occur in the future and consequently.
6. To serve as a guideline for the amount of revenue to be generated to the government purse.
1.4 Research Question
The research work is guided with same research question, which will be administered and distributed among the researchers area of study which are the respondents to this research work and these comprise management and staff of Nigerian bottling company within the area study. Sample research question are:
1. What is strategic management and how can accounting data be used professionally?
2. Who can you use with the help of accounting data to measure the performance of the organization?
3. What are the areas you think the company needs controls and strategic management?
4. How can the Nigeria bottling company achieve its set out objective with in a specific time in order to improve its performance both industrial and commercial wise in global corporate open market.
5. What are the activities the activities of the enterprises within the period of last six months?
6. Do you consider the inclusion of accounting data in the factors chosen?
7. What sort of accounting data do you find most useful in reaching certain decisions that you make?
1.5 Statement of Hypothesis
The researcher formed some of the hypothesis which will be tested to support this study. The hypothesis will be tested at 0.05 level of significance using the t-test method and correlation analysis.
The research hypothesis are as follows.
1. H1: Enhanced role of accounting analysis can be used to further the innovation, planning, management and professional drive in both industrial and commercial sector.
H0: Enhanced role of accounting analysis can be used to further the innovation, planning, management and professional drive in both industrial and commercial sector.
2. H1: The Company is largely dependent on the accounting data in relation to the company
H0: The Company is not dependent on the accounting data in relation to the company
3. H1: The use of accounting data is an effective tool for economic benefit.
4. H0: The use of accounting data is not an effective tool for company benefit.
1.6 Signification of the Study
This research work will present in a precise manner, the importance and use of Strategic Management over others management. It is believed that the findings of this research work should provide detailed information on the use of accounting data for companies benefit through Strategic Management with the help of professionals. It is also expected that the study will benefit the management, staffs of the company, researchers and the society in general.
The findings of the study should be useful to CEO and Directors. It is expected that the findings will expose the Company management to the importance of Strategic Management and professional use of accounting data. By this exposure the management could acknowledge the advantage Strategic Management over the conventional management method in use previously. It is possible that by this outcome the management would realistically adjust to the application of Strategic Management in achieving greater goals and benefits within the company. In turn, the staffs would have real focus for better performance and achievements in their work.
Accuracy in pin pointing the plans for strategic management and professional use of accounting data are essential in the industrial and commercial sector in that; it may invariably lead a firm to the management of compatible units that are crucial to fulfilling its objective and also for re-enforcing its objectives. However, due consideration has to be given in thus approach through due regard for opportunity cost of founding a new business towards the purpose.
The research will also be beneficial to the researcher. This is because the study will expose the researcher to so many related areas in the course of carrying out his research. This will enhance the researcher’s experience, knowledge and understanding on Strategic Management and professional use of accounting data for companies’ beneficial goals.
1.7 Justification of the Study
I want to justify this research work based on the objectives and the significance of this research work, what is within its coverage, this research work is with no doubt necessary to be carried out. Because if done will greatly highlight the importance and advantage of using Strategic Management and professional use of the accounting data for beneficial interest to any company.
1.8 Scope of the Study
The scope of this research work been narrowed down to the Nigerian bottling company. It is limited to Accounting data in the strategic management and professional use to companies benefit evaluation in Nigeria bottling company Lagos Nigeria.
1.9 Definition of Terms
Some of the term that will be used frequently would be defined in order to have a broad and clear understanding of the topic. There terms includes the following:
Management: Refers to proper and purposeful use of material skill e.tc so as to achieve an aim
Accounting: Can be seen as information in accounting from gathered and collapsed together showing past results that can help in future.
Book keeping: means the act of keeping records for future reference such that any error relation to it at any point may be quickly ascertained.
Management Accounting: Means the application of professional knowledge and accounting information in such a way as to assist and control of the operations undertaking.
Information: can be define as processed or analyzed data capable of solving problems.
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Tags: STRATEGIC MANAGEMENT AND PROFESSIONAL USE OF ACCOUNTING DATA FOR COMPANIES BENEFIT
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THE EFFECT OF FINANCIAL MANAGEMENT PRACTICES ON THE PROFITABILITY OF SMALL AND MEDIUM SCALE ENTERPRISES (SMES) IN KWARA STATE, NIGERIA
CHAPTER ONE
INTRODUCTION
1.1 Background to the study
Small and medium enterprise (SMEs) are considered backbone of economic growth in all countries (Rajesh, Surash and Deshmukh, 2008). Small and medium enterprises play an important role in Nigeria’s economic growth, as they constitute 97.2% of the companies in Nigeria (Ministry of Trade and Investment, 2011). It is unfortunate that SMEs performances have fallen short of expectations in Nigeria (Osotimehin, 2012). The country is still characterised with alarming unemployment rate of 19.7% in 2010 (CIA, 2010), as well as, high level of poverty for more than half of the population still live below the poverty line (Abu and Abdullah, 2010). This shows that Small and Medium- Scale Enterprises are not very effective in this part of the world. Most SMEs die shortly after their establishment and few that survive die following the ageing or physical incapacitation or death of their owners. The failure rate of small business stands around 50 percent in Africa (Adelakun, 2008; Ebiringa, 2011). Huyghebaert and Gucht (2004) have noted that 50% of new entrepreneurial ventures disappear within the first five years after their establishment in USA and probably that of Nigeria is higher. It should be noted that most business failures result in heavy personal loss for the entrepreneur (Bannock, 1980; Watson, 2003). The country also count losses; the loss in taxation and the business contribution to gross domestic product (GDP) as well as employment, add up to very huge losses for the country as a whole. is limited especially by market constraints. In addition to the SMEs internal limitations such as limited capital, old and poorly maintained equipment, outdated technology, lack of management skills, lack of financing resources and inexperience in the utilization of financial management practices are currently the most serious issues. Financial management plays an important role and has a large area in every activity of SMEs. Obviously, a reasonable and logical financial management practice will assist SMEs increase profitability and therefore will aid them to pass the obstacles. Financial management often led business enterprises to serious problems. According to Kwame (2010), careless financial management practices are the main cause of failure for business enterprises in Nigeria. Regardless of whether an owner manager or hired manager, if the financial decisions are wrong, profitability of the company will be adversely affected. Consequently, a business organization’s profitability could be damaged because of inefficient financial management practices. Business Enterprises’ have often failed due to the lack of knowledge of efficient financial management practices. Moreover, the uncertainty of the business environment causes business Enterprises to rely excessively on equity and maintain high liquidity and these financial characteristics affect profitability. Financial management in SMEs is noticed by many researchers. However, in many previous studies about financial management still have some limitations and more so little or no research work has been carried on financial management practices of SMEs especially in a developing country like Nigeria. It is said that, profitability is one of the most concerned goal of enterprise owners, therefore studying about relations between financial management and profitability in SMEs will have more belief in the effectiveness of financial management and to be more helpful in understanding the financial management of SMEs
1.2 Statement of the problem
Most previous researchers have concentrated on examining, investigating and describing the behavior of business enterprises in practicing financial management. Their findings are mainly related to exploring and describing the behavior of business Enterprises’ towards financial management practices. Also previous research studies came from the developed economic such as the United States of America. There seems to be a lack of evidence from less developed countries like Nigeria. Second, most previous researchers focus on investigating and describing financial management practices. There has been little research examining the effect of financial management practices on profitability (McMahon, et al, 1993).
This lack of empirical evidence from less developed economies like Nigeria and the lack of examination of the effect of financial management practices on profitability are major gaps that needs to be examined. Based on previous research findings and recognition of these gaps, a study of the effect of financial management practice on profitability should be developed and tested by using empirical data from less developed economies (Kieu, 2004). The case of Nigeria is very serious. Most Business Enterprises have not appointed financial managers to be in charge of financial management of the company. Usually, the owners or general managers with the assistance of the accountant control financial matters of the company. On the other hand, most owners or managers have no formal training in management skills, especially financial management Hence, the effect of financial management practices on the profitability of SMEs is still one of the major challenges
1.3 Objectives of the study
The main objective of this study is to determine the effect of financial management practices on the profitability of small and medium scale enterprises (SMEs) in Kwara state, Nigeria. Other specific objectives include:
i. To determine the effect of financial reporting and analysis on the profitability of small and medium scale enterprises.
ii. To determine the impact of working capital management on the profitability of small and medium scale enterprises
iii. To determine the effect of accounting information system on the profitability of small and medium scale enterprises.
1.4 Research questions
i. What is the effect of financial reporting and analysis on profitability of small and medium scale enterprises?
ii. What is the impact of working capital management on profitability of small and medium scale enterprises?
iii. What is the effect of accounting information system on the profitability of small and medium scale enterprises?
1.5 Hypotheses of the study
The following hypothesis stated in null form would be tested in this research work:
H01: financial reporting and analysis do not have effect on profitability of SMEs
H02: working capital management do not have impact on profitability of SMEs
H03: Accounting information system do not have effect on profitability of SMEs
1.6 Justification of the study
In terms of financial management practices, most previous researchers have focused on examining, investigating and describing the behaviour of SMEs in practising financial management. The specific areas of financial management practices including financial reporting and analysis, working capital management, fixed asset management and capital structure management have long attracted the attention of researchers (McMahon, et al. 1993).
Their findings are mainly related to exploring and describing the behaviour of SMEs towards financial management practices. Although they provided such descriptive statistical data and empirical evidence on SME financial management practices, it appears that there still are some gaps in the literature, which need to be addressed.
Firstly, most empirical evidence comes from the developed economies such as the United States of America (USA), the United Kingdom (UK), Canada and Australia (McMahon et al. 1993). There seems to be a lack of evidence from emerging economies, especially from transiting economies such as Nigeria
Secondly, most previous researchers focus on investigating and describing financial management practices whereas there has been little research examining the impact of financial management practices on the profitability of Smes (McMahon et al. 1993).
These are major gaps and it is difficult to convince business financial management practitioners of the need for changes in practices until evidence of the effects of financial management practices on the profitability of SME is provided and the relationship between the two variables are discovered. Based on previous research findings and recognition of these gaps, a study of the impact of financial management on SME profitability is justified and a model of the impacts of financial management practices and its effect on profitability should be developed and tested by using the empirical data from emerging economies However, such studies in Nigeria are scanty and more over, literature available in developed nations see (MacMahon, 1998, Nguyen, 2001, Peel et al., 1996) looked at individual constructs of financial management majorly like working capital management. Moreover, the present study looks at a multiplicative effect of various constructs of financial management on business performance of SMEs such as financial report and analysis and accounting information system. Therefore, this study is important not because it fills the gap, but also it sets out to address this gap knowledge.
1.7 Scope of the study
This study will be conducted by sampling the opinion of respondents from some selected small and medium scale enterprises in Ilorin, Kwara state. The small and medium scale enterprises selected will be based on random sampling. The period covered would be from July 2014 to December 2014. For the purpose of this study, the financial management practices that would be examined are: financial reporting and analysis, accounting information system and working capital management.
1.8 Plan of the study
The report of this study will be organized into five (5) different chapters. Chapter one will deal with the introduction of the study; Chapter two will discuss the Review of relevant literature to the study; Chapter three will focus on the research methodology to be adopted; Chapter four of the study will be dedicated to the Presentation and analysis of data; and finally, Chapter five presenting the summary, conclusion, and recommendations.
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BANK ACCOUNTS
Account Name: AMUTAH DANIEL CHUKWUDI
Account Number: 0046579864
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OR
Account Name: AMUTAH DANIEL CHUKWUDI
Account Number: 2023350498
Bank: UBA.
HOW TO IDENTIFY SCAM/FRAUD
As a result of fraud in Nigeria, people don’t believe there are good online businesses in Nigeria.
But on this site, we have provided “table of content and chapter one” of all our project topics and materials in order to convince you that we have the complete materials.
Secondly, we have provided our Bank Account on this site. Our Bank Account contains all information about the owner of this website. For your own security, all payment should be made in the bank.
No Fraudulent company uses Bank Account as a means of payment, because Bank Account contains the overall information of the owner
CAUTION/WARNING
Please, DO NOT COPY any of our materials on this website WORD-TO-WORD. These materials are to assist, direct you during your project. Study the materials carefully and use the information in them to develop your own new copy. Copying these materials word-to-word is CHEATING/ ILLEGAL because it affects Educational standard, and we will not be held responsible for it. If you must copy word-to-word please do not order/buy.
That you ordered this material shows you have agreed not to copy word-to-word.
FOR MORE INFORMATION, CALL:
08068231953 or 08168759420
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Tags: NIGERIA), THE EFFECT OF FINANCIAL MANAGEMENT PRACTICES ON THE PROFITABILITY OF SMALL AND MEDIUM SCALE ENTERPRISES (SMES) IN KWARA STATE
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THE IMPACT OF IFRS ON THE SERVICES DELIVERED BY PRICE WATERHOUSE COOPERS (PWC) LAGOS, NIGERIA
CHAPTER ONE
INTRODUCTION
1.1. Background to the Study
Financial statements, apart from stating the financial position of an organization, provides other information such as value added, changes in equity, if any, and cash flows of the enterprise within a defined period time to which it relates (Iyoha and Faboyede, 2011). This information is useful to a wide range of users making informed economic decisions. The quality of financial reporting is indispensable to the need of users who require them for investment and other decision making purposes.
Financial reports can only be regarded as useful if it represents the “economic substance” of an organization in terms of relevance, reliability, comparability and aids interpretation simplicity (Okpala, 2012); to prepare and audit financial statements, some accounting conventions and principles known as standards have been put in place by appropriate bodies set up for the purpose of encouraging uniformity and reliability. The implementation and adoption of IFRS would therefore reduce information irregularity and strengthens the communication link between all stakeholders. It also reduces the cost of preparing different version of financial statements where an organization is a multi-national (Healy and Palepum, 2001).
Globalization of business requires a unified global accounting, reporting and disclosure set of standards. As a result of increasing volume of cross border capital flows and the growing number of foreign direct investments via mergers and acquisitions in the globalization era, the need for the harmonization of different practices in accounting and the acceptance of worldwide standards has arisen (Akindele, 2012). This worldwide standard is called International Financial Reporting Standards (IFRS).
Before IFRS adoption era, most countries had their own standards with local bodies responsible for developing and issuance. The Nigerian Accounting Standards Board (NASB) was responsible for developing and issuing standards known as Statements of Accounting Standards (SAS) and in the new dispensation, the body was renamed Financial Reporting Council (FRC) of Nigeria as the regulatory body overseeing the adoption and implementation of IFRS. The International Accounting Standards Board (IASB) adopted the IFRS framework on 1st April, 2001; the standards were adopted by over 90 countries around the world. IFRS was established and approved by the IASB.
Accounting Framework has been shaped by International Financial Reporting Standards (IFRS) to provide for recognition, measurement, presentation and disclosure requirements relating to transactions and events that are reflected in the financial statements. IFRS was developed in the year 2001 by the International Accounting Standard Board (IASB) in the public interest to provide a single set of high quality, understandable and uniform accounting standards. Users of financial statement worldwide require sound understanding of financial statement but this can only be made possible based on Generally Accepted Accounting Practice (GAAP). With globalization of finance gaining ground, convergence with IFRS will enable the world to exchange financial information in a meaningful and trustworthy manner (Ikpefan and Akande, 2012).
Realization of the anticipated benefits to be derived as a result of the change from national Generally Accepted Accounting Principles (GAAP) to IFRS in terms of improved quality of financial reporting is the core motive of the proponents of general adoption of IFRS. Supporters of IFRS adoption argue that benefits will flow from expanded financial statement disclosures, differences in company reporting arising when a variety of national GAAP is used (Schipper,2005; Whittington, 2005).
As a result of the global acceptance of IFRS, some developing nations who considered the global impact would have on their economies either through foreign aids, Foreign Direct Investments (FDI) or the development of the capital market in terms of capital inflow decided to go for IFRS (Irvine and Lucas, 2006).
1.2. Statement of the Problem
IFRS is a new and emerging issue globally, with the objective of formulating and publishing accounting standards to be observed in the presentation of financial statements and equally as a benchmark for countries which are developing their own national regulation and by companies listed on the world Stock Exchange. The adoption of IFRS can bring significant additional short-term costs to businesses such as fees to train staffs and pay specialist external accountants. Equally, there are no enough experts in the country who are specialized in IFRS field. Adjustments to comply with IFRS can make performance comparisons difficult for investment analysis and also, it will reduce the level of confidence the shareholder have in the company.
Indeed, Nigeria had in 2010 signaled its willingness to adopt the IFRS in 2012. This dateline is anchored on the understanding of a progression along the milestones and timeliness enunciated in the country roadmap. However, as the Financial Reporting Council (FRC), formerly Nigeria Accounting Standards Board (NASB), duly acknowledged, the transition framework for effective and meaningful adoption may be derailed if any of the milestones and timeliness is ignored (NASB, 2010).
The adoption of IFRS reflects a fundamental shift in national accounting systems and profession. Critical constituents of a national system for a successful transition to IFRS include the tertiary educational system and the accounting profession. On this premise, the joining of anecdotal evidence with the paucity of published research about the dimensions of IFRS adoption in Nigeria tends to suggest that not much is known about this new financial language in the Nigerian academic environment and even globally (Doyle, 2010).
1.3. Research Questions
Based on the objectives of the study, the following research questions were carefully raised:
(i) What is the extent of IFRS familiarity by auditors, accountants and other experts in auditing firms in Nigeria?
(ii) Do accountants, auditors and other experts in auditing firms have different perspectives about IFRS readiness?
(iii) Do accountants, auditors and other experts have different perception regarding the enhancement of financial reporting quality through the adoption of IFRS?
1.4. Justification for the Study
Various researchers have asserted that the introduction of the IFRS has given room for uniformity in global financial reporting, although much emphasis is laid on the impact of IFRS on the economy generally and non-financial institutions among others.
Okoye and Ezejiofor (2014) worked on the impact of IFRS adoption on stock market movement in Nigerian corporate organization. The research assessed the extent at which the impact of IFRS on stock market movement can improve the position of corporate organization in Nigerian capital market. Ezeani and Rotimi (2012) worked on the adoption of IFRS to enhance financial reporting in Nigerian universities. They examined the extent to which adoption of IFRS can enhance financial reporting system in Nigerian universities.
Evans and Enahoro (2014) worked on the comparative study of the IFRS implementation in Ghana and Nigeria. The research was conducted to compare the IFRS adoption and implementation of Ghana and Nigeria. Markku V. and Hannu S. (2012) examined the impact of IFRS transition on audit and non-audit fees. The study focused on fees paid to auditors during a major accounting change associated with extra audit risk and work. They analyzed how a major accounting change from local GAAP and IFRS affects the audit and non-audit fees paid to auditors.
Nicholas A. and Ateboh B. (2014) examined the impact of IFRS adoption by Nigerian listed firms on key financial ratios used by investors. G. Demaki (2013) worked on the prospects and challenges of IFRS to economic development in Nigeria. Okafor and Ogiedu (2011) investigated the potential effects of the adoption and implementation of IFRS in Nigeria from the perspective of stakeholders. KPMG (2010) examined the impact of IFRS on the upstream oil and gas industry. Firoz and Aziz (2010) worked on environmental accounting and IFRS. They made a critical appraisal of the contemporary environmental accounting literature and examined the applicable and relevant paragraphs of the global IFRS.
There has been very little or no emphasis laid on the impact of IFRS on the services delivered by the auditing firms in Nigeria. Hence, this research will go a long way in bridging this identified gap, and to determine the impact of IFRS on the services delivered or by auditing firms in Nigeria.
1.5. Objectives of the Study
The main objective of the study was to investigate the impact of ifrs on the services delivered by price Waterhouse coopers (Pwc) Lagos, Nigeria. Other specific objectives were to:
(i) Examine the extent of IFRS familiarity by accountants, auditors and other experts in auditing firms.
(ii) Investigate whether accountants, auditors and other experts have different perspectives about IFRS readiness.
(iii) Assess whether auditors, accountants and other experts have different perception regarding enhancement of financial reporting quality through the adoption of IFRS.
1.6. Hypotheses of the Study
Based on the research questions, the following research hypotheses were tested:
HO1: There is no difference in the extent of IFRS familiarity by the accountants, auditors and other experts in auditing firms.
HO2: Accountants, auditors and other experts in auditing firms do not have significant differences in their perspectives about IFRS readiness.
HO3: Accountants, auditors and other experts in auditing firms do not have different perception regarding the enhancement of financial reporting quality through the adoption of IFRS.
1.7. Scope of the Study
This intellectual exercise focused on the impact of the IFRS on the services delivered by Price Waterhouse Coopers, Lagos Nigeria by focusing the work on accountants, auditors and other experts.
1.8. Plan of the Study
This research comprises five chapters. Chapter one focuses on the introductory part of this study, with overall insights on the background of the study, the statement of the problem, objectives of the study, hypotheses of the study, justification of the study and scope of the study. Literature review being the second chapter elucidates the various concepts underlying the study as well as the theoretical background and empirical framework or findings. Research methodology following the literature review, is the third chapter which comprehensively deals with the sampling techniques and selection, population of the study, and other methodology of data collection and analysis. Chapter four of this study being the data presentation, analysis of data and its interpretation of results, explicitly discloses both in tabular and theoretical form, the results obtained from respondents involved data collection. Chapter five focuses on the summary, conclusion and recommendation as regards the study including the limitation of the study as well as suggested areas for further research.
Definition of Terms
IFRS:International Financial Reporting Standards are standards and rules for reporting financial information. IFRS was established and approved by the International Accounting Standards Board (IASB).
Accountant:A person who is well vast and saddled with the monetary affairs of a company or an organization.
Policy:This is an initiative enforced by the government of the day in a country or by the hierarchy of an organization on its citizens/ employees, for the betterment of the country or company.
Capital market:This is a section of the financial market where bond, shares and stocks are traded.
Accounting standards:This is a statement issued by appropriate standard setting body locally or internationally on a specific area, or topic of financial accounting. The acceptance or application of which is mandatory.
Financial reporting:This is the process of conveying information contained in the financial statement to the various users of financial statement in other to meet their various needs.
Implementation:This is the process of putting into effective use, new standards, rules or regulations.
Reporting Standards:These are set of rules, regulations and principles guiding the preparation and presentation of financial reports to the stakeholders.
Employees:Employees are interested in earning higher wages and salaries. If a company is making more profit, employees would like to have a fair share of the cake. Therefore, employees make use of accounting information when negotiating for remuneration. Job security can be measured on the basis of performance.
Financial institutions:Financial institutions use accounting information in order to evaluate the credit worthiness of a company when a loan is to be advanced.
Suppliers:Businesses usually buy goods and merchandise on credit. Suppliers use accounting information in order to establish the maximum value of goods to be sold on credit including the solvency level of the entity.
Potential investors:Investors make use of accounting information when deciding whether or not to invest in a company.
HOW TO GET THE FULL PROJECT WORK
PLEASE, print the following instructions and information if you will like to order/buy our complete written material(s).
HOW TO RECEIVE PROJECT MATERIAL(S)
After paying the appropriate amount (#5000) into our bank Account below, send the following information to
08068231953 or 08168759420
(1) Your project topics
(2) Email Address
(3) Payment Name
(4) Teller Number
We will send your material(s) immediately we receive bank alert
BANK ACCOUNTS
Account Name: AMUTAH DANIEL CHUKWUDI
Account Number: 0046579864
Bank: GTBank.
OR
Account Name: AMUTAH DANIEL CHUKWUDI
Account Number: 2023350498
Bank: UBA.
HOW TO IDENTIFY SCAM/FRAUD
As a result of fraud in Nigeria, people don’t believe there are good online businesses in Nigeria.
But on this site, we have provided “table of content and chapter one” of all our project topics and materials in order to convince you that we have the complete materials.
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CAUTION/WARNING
Please, DO NOT COPY any of our materials on this website WORD-TO-WORD. These materials are to assist, direct you during your project. Study the materials carefully and use the information in them to develop your own new copy. Copying these materials word-to-word is CHEATING/ ILLEGAL because it affects Educational standard, and we will not be held responsible for it. If you must copy word-to-word please do not order/buy.
That you ordered this material shows you have agreed not to copy word-to-word.
FOR MORE INFORMATION, CALL:
08068231953 or 08168759420
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Tags: NIGERIA), THE IMPACT OF IFRS ON THE SERVICES DELIVERED BY PRICE WATERHOUSE COOPERS (PWC) LAGOS
ATTENTION:
BEFORE YOU READ THE CHAPTER ONE OF THE PROJECT TOPIC BELOW, PLEASE READ THE INFORMATION BELOW.THANK YOU!
INFORMATION:
YOU CAN GET THE COMPLETE PROJECT OF THE TOPIC BELOW. THE FULL PROJECT COSTS N5000 ONLY. THE FULL INFORMATION ON HOW TO PAY AND GET THE COMPLETE PROJECT IS AT THE BOTTOM OF THIS PAGE. OR YOU CAN CALL: 08068231953, 08168759420
OIL AND GAS ACCOUNTING: PRACTICE, CHALLENGES AND SOLUTIONS IN NIGERIA (A CASE STUDY OF SHELL NIGERIA PLC)
1.0 INTRODUCTION
Accounting regulatory bodies usually formulate industry specific standards when an industry has peculiar characteristic of accounting for banks and non-bank financial institutions. The oil and gas industry is one of such industries that have specific accounting standards. This can be attributed to its peculiarity in terms of high capital requirement, earning volatility, regulation, type of business ownership, taxation, non-correlation between the amount of investment made and returns obtained (Wright and Hallun et al, 2008) and high sensitive to risk price risk and foreign exchange risk.
Up and 2012 when the International Financial Reporting Standard (IFRS) was adopted by exploration companies in Nigeria, Nigerian companies in the upstream sector prepared their financial statement in line with the statement accounting standard 14 (accounting in the petroleum industry; upstream activities and SAS 17 (accounting in the petroleum industry) formulated by the Nigerian Accounting Standard Board.
By its adoption of IFRS, Nigeria joined over 100 countries who either use or have adopted t he accounting guidelines as stipulated by the International Accounting Standard Board (IASB). This will ensure harmony and easy comparison of financial statements. This is particularly useful in the oil and gas industry considering that it is one of the most global industries. The adoption of a common accounting framework also widens access to investment opportunities.
IFRS 6 applies to expenditure incurred by an entity in connection with the search for mineral resources. The standard divides upstream activities into two groups namely: exploration and evaluation activities and development activities. The standard under paragraph 9 discusses exploration and evaluation activities. Examples of expenditure that can be categorized as exploration and evaluation according to paragraph 9 are acquisition of right to explore, topographical, geological, geochemical and geophysical studies, exploratory drilling, trenching, sampling cost, costs incurred in trying to evaluate the technical feasibility and commercial violability of extracting resources. These cost are capitalized and classified as tangible or intangible (IFRS 2011). Developing activities involves developing the results from extractive activities. This usually requires huge amount and paragraph 10 of (IFRS) 6 states that these expenditures should be categorized as intangible assets and treated as per the guideline provided in IAS 38 (intangible assets).
Accounting for the upstream sector is quite controversial and companies may choose from either the successful efforts method or full cost method.
Successful effort is a method of accounting for petroleum exploration and development expenditures that permits capitalization of expenditures only a successful projects while expenditures in unsuccessful wells are expensed. A drilling effort is classified as successful if it results in the extraction of economically recoverable oil and gas and classified as unsuccessful if it results I a dry hole.
On the other hand, the full cost method allows for the capitalization and amortization of all exploration and development expenditures i.e. both successful and unsuccessful efforts.
The main difference between the two accounting method is that only cost in proven wells are capitalized in the successful effort method while every cost is capitalized under the full cost method.
The research, therefore, seeks to investigate the nature of oil and gas accounting practice, its challenges and solutions excerpts Ejiroghene E. (2013) Accounting for oil and gas Reserve; implication for investors.
BACKGROUND OF THE STUDY
The oil and gas industry is one of such industries that have specific accounting standards. This is as a result of its peculiarity in-terms of high capital requirement, earnings violability, regulation, type of business ownership, taxation, non-correlation between the account of investment made and returns obtained (Wright and Gullen et al, 2008) and high sensitivity to risk like price risk and foreign exchange risk etc. Therefore, when the international Financial Reporting Standards (IFRS) was adopted by exploration companies in Nigeria, it became imperatives for oil and gas companies in the sector to prepare financial statements in line with the statement of accounting standards.
Upstream oil and gas organizations must meticulously record, track, distribute and report sales of oil and gas and other products. Accurate and timely oil and gas revenues accounting require tracking complex contracts and owner lease agreements. It must also reflect joint venture and capital expenditure accounts among others.
The nature of the complexity of the oil and gas operations makes the nature of its accounting reporting even more complex by new challenges such as horizontal drilling etc.
The research, therefore, intends to explore the nature of oil and gas accounting in Nigeria, challenges and solutions.
1.2 STATEMENT OF THE PROBLEM
The complex nature of the operations of the upstream oil and gas industry makes the oil and gas accounting more complex in nature. However, the International Financial Reporting Standards (IFRS) requires that oil and gas companies in the upstream sector prepare their financial statement in-line with the statement of accounting standards 14 (accounting in the petroleum industry; upstream activities) and SAS 17 (accounting in petroleum) formulated by the Nigerian Accounting Standard Board.
This is as a result of the guidelines stipulated by the International Accounting Standard Board (IASB
However, oil and gas accounting is made increasingly difficult by new challenges and risks such as horizontal drilling, price risk, foreign exchange risk etc.
Therefore, this research seeks to investigate oil and gas accounting in Nigeria, practice, challenges and solution.
1.3 RESEARCH QUESTIONS
1. What is the nature of oil and gas accounting?
2. What constitute the challenges of oil and gas accounting?
3. What possible solution are necessary in oil and gas accounting?
4. What is the nature of oil and gas accounting in Nigeria?
1.4 OBJECTIVE OF THE STUDY
1. To determine the nature of oil and gas accounting
2. TO determine the discharges and solutions in oil and gas accounting
3. To determine the nature of oil and gas accounting in Nigeria.
1.5 SIGNIFICANCE OF THE STUDY
1. It shall provide a detail analysis of the nature of oil and gas accounting as a framework for further studies.
2. It shall provide a framework to evaluate the challenges in oil and gas accounting and proper solution.
3. It shall serve a reference part of information for accounting professionals etc.
4. It shall elucidate the nature of oil and gas practice in Nigeria.
1.6 STATEMENT OF HYPOTHESIS
1. H0 oil and gas accounting practice is not standardized in Nigeria
H1 oil and gas accounting practice is standardized in Nigeria
2. H0 Challenges in oil and gas accounting in Nigeria is high
H1 Challenges in oil and gas accounting in Nigeria is low
3. H0 The prospect of oil and gas accounting in Nigeria is low
H1 The prospect of oil and gas accounting in Nigeria is high
1.7 SCOPE OF THE STUDY
The scope of the study is centered on the oil and gas accounting practice in Nigeria, its challenges and solutions IN Shell Nigeria Plc
1.8 DEFINITION OF TERMS
IFRS: International Financial Reporting Standard
SAS: Statement of Accounting Standard
IASB: International Accounting Standard Board.
HOW TO GET THE FULL PROJECT WORK
PLEASE, print the following instructions and information if you will like to order/buy our complete written material(s).
HOW TO RECEIVE PROJECT MATERIAL(S)
After paying the appropriate amount (#5000) into our bank Account below, send the following information to
08068231953 or 08168759420
(1) Your project topics
(2) Email Address
(3) Payment Name
(4) Teller Number
We will send your material(s) immediately we receive bank alert
BANK ACCOUNTS
Account Name: AMUTAH DANIEL CHUKWUDI
Account Number: 0046579864
Bank: GTBank.
OR
Account Name: AMUTAH DANIEL CHUKWUDI
Account Number: 2023350498
Bank: UBA.
HOW TO IDENTIFY SCAM/FRAUD
As a result of fraud in Nigeria, people don’t believe there are good online businesses in Nigeria.
But on this site, we have provided “table of content and chapter one” of all our project topics and materials in order to convince you that we have the complete materials.
Secondly, we have provided our Bank Account on this site. Our Bank Account contains all information about the owner of this website. For your own security, all payment should be made in the bank.
No Fraudulent company uses Bank Account as a means of payment, because Bank Account contains the overall information of the owner
CAUTION/WARNING
Please, DO NOT COPY any of our materials on this website WORD-TO-WORD. These materials are to assist, direct you during your project. Study the materials carefully and use the information in them to develop your own new copy. Copying these materials word-to-word is CHEATING/ ILLEGAL because it affects Educational standard, and we will not be held responsible for it. If you must copy word-to-word please do not order/buy.
That you ordered this material shows you have agreed not to copy word-to-word.
FOR MORE INFORMATION, CALL:
08068231953 or 08168759420
AFFILIATE LINKS:
myeasyproject.com.ng
easyprojectmaterials.com
easyprojectmaterials.net.ng
easyprojectsmaterials.net.ng
easyprojectsmaterial.net.ng
easyprojectmaterial.net.ng
projectmaterials.com.ng
Tags: CHALLENGES AND SOLUTIONS IN NIGERIA (A CASE STUDY OF SHELL NIGERIA PLC), OIL AND GAS ACCOUNTING: PRACTICE, Publish immediately Edit Move to TrashPublish Tags Tags Add Separate tags with commas X OIL AND GAS ACCOUNTING: PRACTICEX CHALLENGES AND SOLUTIONS IN NIGERIA (A CASE STUDY OF SHELL NIGERIA PLC) Choose
ATTENTION:
BEFORE YOU READ THE CHAPTER ONE OF THE PROJECT TOPIC BELOW, PLEASE READ THE INFORMATION BELOW.THANK YOU!
INFORMATION:
YOU CAN GET THE COMPLETE PROJECT OF THE TOPIC BELOW. THE FULL PROJECT COSTS N5000 ONLY. THE FULL INFORMATION ON HOW TO PAY AND GET THE COMPLETE PROJECT IS AT THE BOTTOM OF THIS PAGE. OR YOU CAN CALL: 08068231953, 08168759420
OIL AND GAS ACCOUNTING: PRACTICE, CHALLENGES AND SOLUTIONS IN NIGERIA (A CASE STUDY OF SHELL NIGERIA PLC)
1.0 INTRODUCTION
Accounting regulatory bodies usually formulate industry specific standards when an industry has peculiar characteristic of accounting for banks and non-bank financial institutions. The oil and gas industry is one of such industries that have specific accounting standards. This can be attributed to its peculiarity in terms of high capital requirement, earning volatility, regulation, type of business ownership, taxation, non-correlation between the amount of investment made and returns obtained (Wright and Hallun et al, 2008) and high sensitive to risk price risk and foreign exchange risk.
Up and 2012 when the International Financial Reporting Standard (IFRS) was adopted by exploration companies in Nigeria, Nigerian companies in the upstream sector prepared their financial statement in line with the statement accounting standard 14 (accounting in the petroleum industry; upstream activities and SAS 17 (accounting in the petroleum industry) formulated by the Nigerian Accounting Standard Board.
By its adoption of IFRS, Nigeria joined over 100 countries who either use or have adopted t he accounting guidelines as stipulated by the International Accounting Standard Board (IASB). This will ensure harmony and easy comparison of financial statements. This is particularly useful in the oil and gas industry considering that it is one of the most global industries. The adoption of a common accounting framework also widens access to investment opportunities.
IFRS 6 applies to expenditure incurred by an entity in connection with the search for mineral resources. The standard divides upstream activities into two groups namely: exploration and evaluation activities and development activities. The standard under paragraph 9 discusses exploration and evaluation activities. Examples of expenditure that can be categorized as exploration and evaluation according to paragraph 9 are acquisition of right to explore, topographical, geological, geochemical and geophysical studies, exploratory drilling, trenching, sampling cost, costs incurred in trying to evaluate the technical feasibility and commercial violability of extracting resources. These cost are capitalized and classified as tangible or intangible (IFRS 2011). Developing activities involves developing the results from extractive activities. This usually requires huge amount and paragraph 10 of (IFRS) 6 states that these expenditures should be categorized as intangible assets and treated as per the guideline provided in IAS 38 (intangible assets).
Accounting for the upstream sector is quite controversial and companies may choose from either the successful efforts method or full cost method.
Successful effort is a method of accounting for petroleum exploration and development expenditures that permits capitalization of expenditures only a successful projects while expenditures in unsuccessful wells are expensed. A drilling effort is classified as successful if it results in the extraction of economically recoverable oil and gas and classified as unsuccessful if it results I a dry hole.
On the other hand, the full cost method allows for the capitalization and amortization of all exploration and development expenditures i.e. both successful and unsuccessful efforts.
The main difference between the two accounting method is that only cost in proven wells are capitalized in the successful effort method while every cost is capitalized under the full cost method.
The research, therefore, seeks to investigate the nature of oil and gas accounting practice, its challenges and solutions excerpts Ejiroghene E. (2013) Accounting for oil and gas Reserve; implication for investors.
BACKGROUND OF THE STUDY
The oil and gas industry is one of such industries that have specific accounting standards. This is as a result of its peculiarity in-terms of high capital requirement, earnings violability, regulation, type of business ownership, taxation, non-correlation between the account of investment made and returns obtained (Wright and Gullen et al, 2008) and high sensitivity to risk like price risk and foreign exchange risk etc. Therefore, when the international Financial Reporting Standards (IFRS) was adopted by exploration companies in Nigeria, it became imperatives for oil and gas companies in the sector to prepare financial statements in line with the statement of accounting standards.
Upstream oil and gas organizations must meticulously record, track, distribute and report sales of oil and gas and other products. Accurate and timely oil and gas revenues accounting require tracking complex contracts and owner lease agreements. It must also reflect joint venture and capital expenditure accounts among others.
The nature of the complexity of the oil and gas operations makes the nature of its accounting reporting even more complex by new challenges such as horizontal drilling etc.
The research, therefore, intends to explore the nature of oil and gas accounting in Nigeria, challenges and solutions.
1.2 STATEMENT OF THE PROBLEM
The complex nature of the operations of the upstream oil and gas industry makes the oil and gas accounting more complex in nature. However, the International Financial Reporting Standards (IFRS) requires that oil and gas companies in the upstream sector prepare their financial statement in-line with the statement of accounting standards 14 (accounting in the petroleum industry; upstream activities) and SAS 17 (accounting in petroleum) formulated by the Nigerian Accounting Standard Board.
This is as a result of the guidelines stipulated by the International Accounting Standard Board (IASB
However, oil and gas accounting is made increasingly difficult by new challenges and risks such as horizontal drilling, price risk, foreign exchange risk etc.
Therefore, this research seeks to investigate oil and gas accounting in Nigeria, practice, challenges and solution.
1.3 RESEARCH QUESTIONS
1. What is the nature of oil and gas accounting?
2. What constitute the challenges of oil and gas accounting?
3. What possible solution are necessary in oil and gas accounting?
4. What is the nature of oil and gas accounting in Nigeria?
1.4 OBJECTIVE OF THE STUDY
1. To determine the nature of oil and gas accounting
2. TO determine the discharges and solutions in oil and gas accounting
3. To determine the nature of oil and gas accounting in Nigeria.
1.5 SIGNIFICANCE OF THE STUDY
1. It shall provide a detail analysis of the nature of oil and gas accounting as a framework for further studies.
2. It shall provide a framework to evaluate the challenges in oil and gas accounting and proper solution.
3. It shall serve a reference part of information for accounting professionals etc.
4. It shall elucidate the nature of oil and gas practice in Nigeria.
1.6 STATEMENT OF HYPOTHESIS
1. H0 oil and gas accounting practice is not standardized in Nigeria
H1 oil and gas accounting practice is standardized in Nigeria
2. H0 Challenges in oil and gas accounting in Nigeria is high
H1 Challenges in oil and gas accounting in Nigeria is low
3. H0 The prospect of oil and gas accounting in Nigeria is low
H1 The prospect of oil and gas accounting in Nigeria is high
1.7 SCOPE OF THE STUDY
The scope of the study is centered on the oil and gas accounting practice in Nigeria, its challenges and solutions IN Shell Nigeria Plc
1.8 DEFINITION OF TERMS
IFRS: International Financial Reporting Standard
SAS: Statement of Accounting Standard
IASB: International Accounting Standard Board.
HOW TO GET THE FULL PROJECT WORK
PLEASE, print the following instructions and information if you will like to order/buy our complete written material(s).
HOW TO RECEIVE PROJECT MATERIAL(S)
After paying the appropriate amount (#5000) into our bank Account below, send the following information to
08068231953 or 08168759420
(1) Your project topics
(2) Email Address
(3) Payment Name
(4) Teller Number
We will send your material(s) immediately we receive bank alert
BANK ACCOUNTS
Account Name: AMUTAH DANIEL CHUKWUDI
Account Number: 0046579864
Bank: GTBank.
OR
Account Name: AMUTAH DANIEL CHUKWUDI
Account Number: 2023350498
Bank: UBA.
HOW TO IDENTIFY SCAM/FRAUD
As a result of fraud in Nigeria, people don’t believe there are good online businesses in Nigeria.
But on this site, we have provided “table of content and chapter one” of all our project topics and materials in order to convince you that we have the complete materials.
Secondly, we have provided our Bank Account on this site. Our Bank Account contains all information about the owner of this website. For your own security, all payment should be made in the bank.
No Fraudulent company uses Bank Account as a means of payment, because Bank Account contains the overall information of the owner
CAUTION/WARNING
Please, DO NOT COPY any of our materials on this website WORD-TO-WORD. These materials are to assist, direct you during your project. Study the materials carefully and use the information in them to develop your own new copy. Copying these materials word-to-word is CHEATING/ ILLEGAL because it affects Educational standard, and we will not be held responsible for it. If you must copy word-to-word please do not order/buy.
That you ordered this material shows you have agreed not to copy word-to-word.
FOR MORE INFORMATION, CALL:
08068231953 or 08168759420
AFFILIATE LINKS:
myeasyproject.com.ng
easyprojectmaterials.com
easyprojectmaterials.net.ng
easyprojectsmaterials.net.ng
easyprojectsmaterial.net.ng
easyprojectmaterial.net.ng
projectmaterials.com.ng
Tags: CHALLENGES AND SOLUTIONS IN NIGERIA (A CASE STUDY OF SHELL NIGERIA PLC), OIL AND GAS ACCOUNTING: PRACTICE
