Business Failure And Accounts Profession
The field of accounting plays a pivotal role in identifying, analyzing, and communicating financial information critical for decision-making within businesses. However, despite its significance, businesses can still face failure due to various factors such as mismanagement, economic downturns, or unforeseen market changes. In such cases, the role of accounting professionals becomes even more crucial as they are tasked with evaluating the financial health of the business, identifying the root causes of failure, and providing insights to mitigate risks and improve future performance. By meticulously analyzing financial statements, cash flows, and operational data, accountants contribute valuable insights that aid in restructuring, strategic planning, and ultimately, in steering businesses towards recovery and long-term success.
The Nigeria economy within the first half of this century experienced quite a lot of business failure. Business failure can be defined as the inability of a particular business enterprise to continue to function as a going concern this development has started generating anxiety by both international and local investors in arriving at investment decision.
However, the task of identifying the root causes of corporate collapse in what this study seeks after. This study is carried out at ensuring a survival dosage of business in Enugu through the use of accounting profession (Auditing) to appraise operational performance.
Some of the causes of business failure includes mismanagement, bribery and corruption, and poor remuneration etc. the brain behind the failure of business in the political under tune in the appointment and selection of key officer to management positions.
Based on the findings in this study, the following conclusion were drawn, mismanagement mode of appointment and selection of key officers, poor coordinated management device, government interference and privatization and commercialization programme.
Finally, it is recommended that business should appreciated the importance of audit as a tool of evaluating performance, appointment of Board of Directors and top management officers should be based on skill, experience and qualification and government should also institute its commercialization and privatization programme in place etc.
Title page
Approval page
Dedication
Acknowledgement
Abstract
Table of content.
CHAPTER ONE
1.0 INTRODUCTION
1.1. Objective of the study
1.2. Statement of problems
1.3. Significant of the study
1.4. Hypothesis formulation
1.5. Scope of the study
1.6. Limitation of the study
1.7. Definition of terms
CHAPTER TWO
2.0 REVIEW OF RELATED LITERATURE
2.1 Introduction
2.2 The going concern concept of business
2.2.1. Definition of business
2.2.2. Forms of business
2.2.3. Importance of business
2.2.4. When a business is not going concern
2.2.5. When a business may not a going concern
2.3 Symptoms of imminent business failures
2.4 Nature and causes of business failures
2.5 The development of accounting profession (Auditing)
2.5.1 Definition of Auditing
2.5.2 Types of Audit
2.5.3 Importance of Auditing
2.5.4 The Auditor and the danger of self fulfilling prophesy
2.5.5 The Audit committee
2.5.5.1. Nature of Audit committee
2.5.5.2 Composition of Audit Committees
2.5.5.3 Functions of Audit committee
2.5.5.4. Qualification of Audit committee members
2.5.5.5. Size of Audit committee
2.5.5.6.Size committee relationship with management
2.5.5.7. Audit committee and the external auditor
2.6 The effect of business failures on a depressed economy.
CHAPTER THREE
3.0 RESEARCH DESIGN AND METHODOLOGY
3.1 Introduction
3.2 Research design
3.3 Sampling techniques
3.4 Questionnaire design
3.5 Data collection techniques
3.6 Questionnaire distribution and collection.
CHAPTER FOUR
4.0 DATA PRESENTATION AND ANALYSIS
4.1 Introduction
4.2 Data presentation
4.3 Test of hypothesis
CHAPTER FIVE
5.0 SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATION
5.1 Discussion of findings
5.2 Summary of findings
5.3 Conclusion
5.4 Recommendation
5.5 Suggestion for further studies
BIBLIOGRAHPY
APPENDIX
1.1 INTRODUCTION
The Nigeria economy within the first half of this century (20th century, 1901 – 2000) experienced quite a lot of business failures. There was a rapid growth in the number of indigenous companies in the country, but these companies collapsed with the same rapidity with which they were established.
Business failures are actually one of the most difficult and complex concern faced by investors in the equity market or the stock exchange market in the recent times. Even with the best of strategic cooperate planning, business failure are still a common occurrence. Business failure can be defined as the inability of a particular business enterprise to continue to function as a going concern. The going concern concept presumed that an enterprise will continue in operation for the foreseeable future and that there is neither the necessity nor the intention to liquidate
In general it was gathered that some of the causes of business failure includes:
a. Lack of capital (inadequate capitalization)
b. Inefficient management
c. Poor remuneration packages
d. Inadequate accounting records
e. Unprofitable expansion (premature expansion)
f. Mode of appointment of chief executives etc.
g. Lack of feasibility study report.
h. Fraud.
Given the divesting effect of business ailments, it become necessary to undertake a research into the problems and failures of business life as well as making suggestion on ways of ameliorating their adverse effects.
According profession (Auditing) is one of the effective tool of evaluating and predicting business failures. Auditing is a process carried out by suitable qualified auditing) where by the accounts of business entities, including limited companies characterize, trusts and professional firms are subjected to scrutiny in such details as will enable the auditors to form an opinion as to their truth and fairness (Emile W. 1997)
So many parties such as creditors, investors owners, the firm itself and the government etc. are interested with the present and expected future earning and the stability of these earning, and financially business as a good concern. Therefore they need accounting profession to evaluate and compare the profitability as well as to predict the survival of the business.
Therefore, this study seeks to use statistical tools to appraise and predict corporate failure with the aim of putting into place an integrated framework on the subject.
1.2 OBJECTIVE OF THE STUDY
It has been argued in recent times that the monetary value of corporate failures is of colossal notation which could faster economic growth. Therefore the following are the main aim of this study
i. To know why business are failing.
ii. Investigate whether government policies and actions affect operational performance
iii. Do business rely on accounting profession (Auditing) as tool for their performance
iv. Identify and analyze strategic corporate plans adopted byh business.
v. Assess the preparedness of companies to respond to remedial dosage of companies corporate objectives
1.3 STATEMENT OF PROBLEMS
Problem is a phenomenon occurring in most, if not all area of human endeavor. The existence of problem call for the finding of solution aimed at obviating such problems. The seriousness and urgency of solution to problems are largely dependent on the threat posed to problems. However, some problems appears to defy certain worked out solution to them. Such a situation demands a close examination of the issues involved.
1. Why are business failures on the increase in Enugu
2. Why do auditors qualify their reports when such are failing
3. How effective are Accounting profession (auditing0 they use in the measurement of their business
4. To what extent has this failures affected the economy
5. To what extend do companies rely on accounting profession (Auditing) as a tool for their performances.
6. What is the remedial dosage needed by these failure concer.
SIGNIFICANCE OF THE STUDY
Obviously candidates who are undertaking a study of business failures are likely to encounter similar problems. Accordingly, this study examines business failures in companies identifying problems and stating visible suggestion that will be useful to corporate bodies and any establishment with survival strategies in a period of economic depression.
Apart from the research workers, government agencies will also benefit immensely from this study.
HYPOTHESIS FORMULATION
Hypothesis I
Ho: Business failure are not as a result of inadequate accounting records.
Hi: Business failures are as a result of inadequate accounting records.
Business Failure And Accounts Profession:
Business failure and the role of accounting professionals are closely intertwined. Accounting professionals play a crucial role in identifying, analyzing, and sometimes even preventing business failures. Let’s explore this relationship in more detail:
1. Financial Monitoring and Reporting:
- Financial Statements: Accountants are responsible for preparing and maintaining accurate financial statements, including the income statement, balance sheet, and cash flow statement. These statements provide a snapshot of a company’s financial health and can reveal early warning signs of trouble.
2. Risk Assessment:
- Ratio Analysis: Accountants use financial ratios like liquidity ratios, profitability ratios, and solvency ratios to assess a company’s financial risk. An increase in debt ratios or a decline in profitability ratios can signal potential problems.
3. Budgeting and Forecasting:
- Budgets: Accountants help create budgets that allow businesses to plan their income and expenses. Deviations from the budget can indicate issues that need attention.
4. Internal Controls:
- Fraud Prevention: Accountants design and implement internal controls to prevent fraud and mismanagement, which can lead to business failure.
5. Tax Planning and Compliance:
- Tax Liabilities: Accountants ensure businesses meet their tax obligations. Tax issues, if not addressed properly, can lead to financial distress.
6. Insolvency and Bankruptcy:
- Bankruptcy Filing: When a business is facing insolvency, accountants often assist in preparing the necessary financial documents for bankruptcy filings.
7. Restructuring and Turnaround:
- Cost Analysis: Accountants are involved in cost analysis and efficiency improvement efforts when a business is trying to turn around its operations.
8. Due Diligence:
- Mergers and Acquisitions: Accountants conduct financial due diligence when a business is considering acquiring or merging with another company to assess the financial health and risks associated with the target company.
9. Advisory Role:
- Financial Advice: Accountants provide financial advice to business owners and executives, helping them make informed decisions that can prevent financial troubles.
10. Compliance and Regulation: – Compliance with Accounting Standards: Accountants ensure that businesses comply with accounting standards and regulations, reducing the risk of financial misstatements that can lead to business failure.
11. Business Strategy: – Financial Strategy: Accountants often collaborate with management to develop financial strategies that align with the overall business goals, which can contribute to long-term success.
In summary, accounting professionals are instrumental in monitoring and managing financial aspects of a business, which is essential for preventing, mitigating, or addressing issues that could lead to business failure. Their expertise in financial reporting, analysis, compliance, and strategic planning is invaluable in helping businesses navigate the challenges and uncertainties of the business world.