THE INFLUENCE OF STATUTORY AUDIT ON SMES GROWTH AND SURVIVAL IN NIGERIA

Abstract

This research work examines the influence of statutory audit on SMEs growth and survival in Nigeria. Audit plays a significant role in growth and survival of small scale business. The research deals with the problems auditors encountered during the audit of small scale business to enable them ascertain that their statement of affairs shows a true and fair view. Questionnaires, personal and oral interview were used to collect data. The data collected through the research tools were analyzed using percentage and chi-square (X2) were used to test the hypotheses. The result reveals that some small scale business do not keep good accounting or records of transaction. The study concludes that small scale business can do well if their accounting system is streamlined to meet the standard accounting system procedures and practice. Based on the findings, the study recommends amongst others that the government should encourage these small scale businesses by giving them reasonable amount of years when they will not be required to pay tax.

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Auditing, as it exist today was established as a result of the separation of ownership from the control of business. The owners entrusted their business to managers and the owners are then presented with a stewardship accounting. This stewardship
accounting is usually done by means of financial statement. The financial statement is in form of profit and loss account and the balance sheet of the business.

In these circumstances, the need arise for some means by which the accounts presented to them by their managers can be relied upon of error in advertently made.

It was for this reason therefore that the practiced is to verify on behalf of the owners. Obviously it is impracticable and impossible for the owner of business to examine the books and records of the business. The owner appoint auditor to act for them. Auditing is an examination by an independent expert i.e. the auditor to act for them. Auditing is an examination by an independent expert i.e. the auditor of a set of financial statements and of the underlying books and records which result in the auditors providing an opinion on the financial statement.

Auditors concerned themselves primarily with the proof of accuracy of Client’s records, utilizing evidence available within the confines of the business. The subsequent growth of the demand for reliable financial information by third parties supplying credit or capital to expand enterprises, auditors turned to the examination of financial statement. Here the external evidence to corroborate company figure increased in importance is still important auditors recognize that the accounting system that produces the financial and operating information to be reported is a key factor in the accuracy andreliability of the results.

Since it is not mandatory that all forms of business must prepare and submit annual statement of accounts. This write-up is to assess the problems encountered by the auditor in assessing the books of accounts, of small scale business in Nigeria and the problems and prospect of these business of accounts audited annually.

This research work examines the auditing of small scale business, problems and prospects with. This became relevant because small scale industry is a catalyst towards economic growth in developing countries such as Nigeria.

1.2 Statement of Problem

It was noted that the operating transaction used by small scale business often differ significantly from those of large companies.

Some small-scale business do not keep good accounting system or records of transaction, they did it out of ignorance. Many proprietors do not know the amount of pro lit he is making and whether he could do better and by how much the problem is attributed to the qualification and exposure of the proprietors.

The research has shown that only few of proprietors contribute to the fund of initial capital. Most entrepreneur of small scale business is aversive to audit their accounts because of the cost and other sees it as a way of probing into their privacy.

Most of these small scale business lack controls over the running activities of their business organization. Their activities are run haphazardly. Since most of’ mall scale business do not audit their accounts they don’t pay tax to the government, even few that pay tax, pay it out their direction and not their profit. Personal interview with auditors from two accounting firms visited revealed that accounts business could be adopted, the small scale business inclusive irrespective of the non-maintenance of proper accounting records.

1.3 Research Questions

The purpose of this study is to provide solution to the following problems faced in auditing small scale business.

i. Are proper books of accounts been kept?

ii. To what extend has the accounts of SMEs prepared in accordance to standard and CAMA 1990?

iii. Is the internal control system of the entities effective for the auditor to make an opinion?

iv. What are the educational qualifications of persons in charge of preparing the SMEs account?

1.4 Objective of the Study

The following are the objectives of the study;

i. To know if there is proper books of account been kept.

ii. To determine the extent at which the accounts of SMEs are prepared in accordance to standards and CAMA 1990.

iii. To find out if the internal control system of the entities effective and can be relied upon by the auditor.

iv. To examine their educational qualification of the person in charge of preparing the SMEs account.

1.5 Statement of Hypotheses

For the purpose of this study, the researcher has developed the hypotheses which will be tested in the subsequent chapter; the hypotheses are as follows;

Hypothesis One

HO: SMEs do not maintain proper books of account.

HI: SMEs maintain proper books of account.

Hypothesis Two

HO: The account prepared in SMEs are not in accordance with standard and CAMA 1990.

HI: The account prepared in SMEs are in accordance with accounting standard and CAMA 1990.

Hypothesis Three

HO: There is no significant relationship between internal control system in place in SMEs and audit.

HI: There is significant relationship between internal control system in place in SMEs and audit.

Hypothesis Four

HO: The person in charge of preparing the SMEs account does not have the educational qualification.

HI: The person in charge of preparing the SMEs account has the educational qualification.

1.6 Significance of the Study

In regard to the relevance of this topic, the influence of statutory audit on SMEs growth and survival, the study covers areas which are useful.

1. It will expose users of this research work on the problems of auditing small scale business.

2. The contribution of the small-scale industry to the industrialization of the economy.

3. It may also disclose avenue that will necessitate further research.

1.7 Scope of the Study

This study is restricted to the influence of statutory audit onSMEs growth and survival in Nigeria. The investigate cover between 2010 and 2013 (4 years financial year’s of the case study). Nosakhare
Bakery is used as the case study of the project and the study covers Nosakhare Bakery in Edo State.

1.8 Limitations of the Study

The researcher in the course of this study encountered a lot ofproblems, which are discussed below:

a. Attitude of Respondents: It was difficult for the researcher of the constant information as a result of the constant inability of stall and management to give us adequate attention due to much responsibility and work load at the time we needed their assistance.

b. Financial Constraint: A lot of money was Spent in looking for materials for this research aid this further compounded the researcher’s financial problems.

1.9 Definition of Terms

Auditing: This is the independent examination of the expression ofopinion on the financial statement of an enterprise by an appointed auditor in pursuance of that appointment in compliance with any relevant statutory obligation (UK Audit Practice Committee).

Internal Control: This is as the whole of controls, financial or otherwise, established by the management in other wise, established by the management in order to carry out the business of the enterprise in an orderly and efficient manners, ensure adherence to
managements, policies safeguard other assets and secure as far as possible the completeness and accuracy of records (APC Guidelines).

Auditor: An auditor is a competent accountant, who examines accounting hooks and record with a view to expressing in opinion there in.

Errors: They are unintentional mistakes in the financial statement. Frauds: They are intentional misstatement in or omissions of amount in the accounting records or financial statements.

Financial Statement: Are the profit orloss account and the balance sheet of the business.

Working Papers: These are documents the auditor used to record his work during the process of auditing the client’s accounting records.