CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The impact of financial reporting on the corporate performance of a
business organization is becoming more apparent to user groups of
financial statement.
Accounting is a not an exact science neither are business operations
without some subjective and judgmental errors when it comes to reporting
them. A financial report therefore is statement which informs the
various interest groups of a business on the operations and performance
of their business in a period under review, its present state of affairs
as well as its anticipated future, in accordance with the statutes. If a
financial report is to serve its purpose it ought to be characterized
by the following.
a. Relevance
b. Understandability
c. Reliability
d. Completeness
e. Objectivity
f. Timeliness
If accounting process of an organization is to provide the
information required to prepare a financial report which shall have the
above characteristics then the transaction during the period must be
recorded promptly and accurately and interpreted in conformity with the
Generally Accepted Accounting Principles (GAAP), Statements of
Accounting Standards (SAS), International Financial Reporting Standards
and the companies and Allied Matters Act (CAMA)
Financial Accounting becomes necessary with the obvious need for
managers to render accounts of stewardship to owners of the business.
Financial reporting is a duty of stewardship assigned to the directors
of a company by section 334 of the company and Allied Matters Act Cap
L20 LFN, equally the mandatory responsibility of companies to keep
accounting records derives its strength from section 331 and 382 of the
same act. These sections explicitly defined the necessary content and
manner in which financial records should be kept.
1.2 STATEMENT OF THE PROBLEM
The study “financial accounting; a panacea on the corporate
performance of business organisation” aims at investigating the
financial reports of selected companies with a view to determining the
following;
a. The extent to which a standard financial report contributes to the growth of a business organization.
b. The extent to which the financial reports of corporate business organization comply with statutory provisions.
Therefore, based on the above statements, the researcher shall
investigate the financial reporting standards and every regulation that
bears on the financial statement and the extent of compliance of the
selected companies to relevant statutes.
1.3 OBJECTIVES OF THE STUDY
The master or general objectives of this study is to critically
examine the financial reports of the selected companies and to probe
into the fundamentals for their preparation as well as its presentation.
The specific objectives of the study however are:
a. To determine the extent to which a standard financial report contributes to growth of a business organization.
b. To determine the extent to which the financial reports of corporate business organization comply with statutory provisions.
1.4 RESEARCH QUESTIONS
In order to determine the impact of financial reporting on the
corporate performance ofbusiness organizations, it is pertinent to ask
the following questions;
a. To what extent does a standard financial report contributes to the growth of a business organization?
b. To what extent does a financial report of corporate business organization comply with statutory provisions?
1.5RESEARCH HYPOTHESES
The following null and alternative hypothesis has been tested in this research work:
H01: There is no significant relationship between standard financial reports and business growth.
H11: There is a significant relationship between standard financial reports and business growth
H02: financial report of corporate business organizations does not comply with statutory provisions.
H11: financial reports of corporate business organizations comply with statutory provisions.
1.6 SIGNIFICANCE OF THE STUDY
This study is very important and most significant at this period when
companies with impressive income statement and statement of financial
position are still faced with continuity issues. Financial report
is“prima facie” evidence on the state of affairs of companies as well as
its performance and could be relied upon as a certificate because it
has the auditors’ certification.
This study offers solutions to the above questions raised, it is
the believe of the researcher that the result of these finding will go a
long way to helping other researchers in this area of study, it will
also enhance the understanding of the structure of published reports and
accounts by the users.
The various user groups of published financial statements will benefit from this study as follows:
1. The Potential Investors:These are groups who are interested in
committing their financial resources to the purchase of a company’s
shares. The result of this study will arm them with the necessary tools
with which to evaluate the financial report of a corporate organization
as it affects them.
2. The General Public:This group shall benefit from this report by
the knowledge that the business organization exists for them and not
against them and as such has to live up to its full responsibilities.
3.The Regulators of Financial Accounting Report:This group includes
the Financial Reporting Council of Nigeria (FRCN), The companies and
Allied Matters Act (CAMA), Banking and Other Financial Institutions Act
of 1991 (BOFIA), prudential guidelines for licensed Banks, the Insurance
Act 2003. The study will help them to standardize and harmonize their
operations.
4.The Employee Group: existing, Potential and past
employees.
5.The Government Including Tax Authorities, Department who have Interest
in the Financial Reports of Companies: The result of this work shall be
of immense assistance to each to these user groups in the advancement
of their interest.
1.7 SCOPE OF THE STUDY
This study could have covered the impact of financial reporting on
corporate performance of all the sectors of the Nigerian economy but due
to the challenges of such a task especially the financial resources
with which to execute it, it is limited to braving industry. The study
used selected company in Nigeria.
1.8 LIMITATIONS OF THE STUDY.
The limitations encountered by the researcher of this work are given as follows:
a. The confidential nature of financial accounting information in the business organization posed a problem to this study.
b. The researcher was unable to reach all the members of the sample as a result of their frequent travels and busy schedule.
c. The sample used in the research though representative but is
relatively small compared to the population, as a result of lack of
finance with which to carry out the research on a greater sample.
1.9 OPERATIONAL DEFINITION OF TERMS
AUDITOR: a person who is qualified to examine the accounts of an organization to see that they are in order.
STATEMENT OF FINANCIAL POSITION: formerly called balance sheet. a
statement that shows the state of affairs of a company by depicting its
assets, liabilities as well as its equity.
Bank: a financial institution whose responsibilities among others is to keep deposits for its clients and customers.
Government: an institution of the state whose responsibility is to maintain law and order in the society.
Prima facie: sufficient to establish something legally until disproved later.
Researcher: an enquirerbasically concerned with search knowledge.