Page 1 of 12

Journal for Studies in Management and Planning

Available at http://edupediapublications.org/journals/index.php/JSMaP/

e-ISSN: 2395-0463

Volume 02 Issue 5

May 2016

Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 165

Corporate Governance for Nigeria Entrepreneurs:

The role of Audit Committee

Dr. Doshiro Musa Umar, PhD1 and Iliya Bawa2

1Department of Entrepreneurial Studies Faculty of Administration Nasarawa State University, Keffi

Nigeria

Email: Dmumar2000@yahoo.com

2Department of Marketing School of Business Studies Federal Polytechnic Nasarawa

Nigeria

Email: iliyabawa84@gmail.com

ABSTRACT

In order to ensure that a financial report

reflects the true and fair view of the financial

statement of a business concern. This study

examines the role of audit committee

members to good corporate behaviour on the

quality of financial report of a business

concern with emphasis on entrepreneurs. It

is anchored on the fact that the

establishment of audit committee is an

attempt to give protection to investors and

users of financial statement. The committee

is expected to act as a channel of

communication between external auditors

and board of directors and facilitate the flow

of such information to the board of directors.

This is to enable them carry out supervision

on the management to achieve good

corporate governance. To achieve the

objective of this study, the data were drawn

mainly from documentary series. The

analysis was mainly descriptive. The paper

concludes that members of the committee

need financial sophistication for corporate

governance to strive and flourish in Nigeria

through the ideals of probity, transparency

and accountability. This will improve the

quality of financial report. On the basis of

this conclusion, it was recommended that

members of the committee should be men of

proven integrity, uprightness, have requisite,

knowledge, skill and training in financial

matters. It is also recommended that section

395 (4) of CAMA 1990 as amended should

be expanded to include sanctions on non

compliance with the implementation of the

recommendation of audit committee report.

Key Words: Corporate governance,

financial report, audit committee,

accountability and transparency,

entrepreneur.

1. Introduction

Entrepreneur is fundamental for economic

and social development of nations, states,

communities, families and individuals. An

understanding of the concept and practice of

entrepreneurship will enable potential

entrepreneurs to overcome the fear of taking

the risk of creating something new and

investing their time and efforts in innovation

in order to grow and sustain their new

ventures so as to reap enormous rewards

associated with entrepreneurship.

Page 2 of 12

Journal for Studies in Management and Planning

Available at http://edupediapublications.org/journals/index.php/JSMaP/

e-ISSN: 2395-0463

Volume 02 Issue 5

May 2016

Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 166

Corporate governance is a continuous

process and organizations relentlessly

pursues it through full regulatory

compliance, transparency, efficient

operational practices, strong internal control

and risk management systems and operating

with fairness and integrity to enhance the

interest of all its stakeholders. So, in order to

present cogent and coherent views on audit

the definition of corporate governance which

one seeks to base his views on (Singh, 2006).

According to Mathiesen (2002) “corporate

governance is a field in economics that

investigates how to secure/motivate efficient

management of corporations by the use of

incentive mechanisms such as contracts,

organizational designs and legislation. This

is often limited to the question of improving

financial performance, for example, how the

corporate owners can secure or motivate that

the corporate managers will deliver a

competitive rate of return”

Similarly Singh (2006) says corporate

governance is all about the relationship

between the owners and managers in

directing and controlling companies as

separate legal entities. It is a system of

directing and controlling the corporate

entities, be they in the private sector, public

sector or be they financial institutions to

fulfill long-term strategic goals, taking care

of the welfare of their employees and the

local communities, maintaining harmonious

relationships with their suppliers and

customers and working in compliance with

the legal framework that exists in the country

and using such processes of production that

generate minimum externalities of the

negative kind for the notion as a whole.

Ige (2008) observes that in order to help

raise the standards of corporate governance

and the level of confidence in financial

reporting and auditing. Cadbury (2003) went

on to spell out what it considered the

respective responsibilities of those involved

in the board of directors, the auditors and the

shareholders. In particular, he stressed the

crucial role of the audit committee in

enhancing the standards of corporate

practice. As far as audit committee is

concerned, perhaps it is sufficient to mention

at this juncture that it is a committee of

board of directors which was brought into

existence through legal provisions and at the

risk of over-simplifying it may be said that it

is supposed to play a crucial role in

increasing the reliability of financial reports

published by a company. Asein (2008) is

also of the view that the appointment of audit

committees was designed to serve as checks

on the board of directors who occupy

fiduciary positions necessitated by the

separation of ownership from control under

the Anglo Saxon economic arrangements.

Therefore, the objective of this paper is to

examine the role of audit committee in

achieving good corporate governance in

Nigerian companies with emphasis on

entrepreneurs.

2. Research Methodology

In carrying out this study, the major sources

of data for the paper were from a vast array

of relevant literature that deals with

Page 3 of 12

Journal for Studies in Management and Planning

Available at http://edupediapublications.org/journals/index.php/JSMaP/

e-ISSN: 2395-0463

Volume 02 Issue 5

May 2016

Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 167

corporate governance and audit committee.

The pieces of information gleaned from the

foregoing sources are weighed in relation to

corporate governance and audit committee,

using both deductive and inductive reasoning

to arrive at the conclusion and

recommendations.

3. Conceptual Framework

Corporate Governance for Entrepreneurs

The entrepreneur is proactive to change,

willing to explore, experiment, and translate

ideas into profitable innovations, expecting

returns on investment and a willingness to

accept failure if there is. The managerial

process involves careful planning and

control, adherence to administrative process

and procedure, avoidance of risk, preference

for predictability and intolerance for failure.

As the new venture grows, a great deal of

corporate management has to be introduced.

This will ensure efficiency in the utilization

of scarce resources and provision of

adequate information for decision making.

Management also serve as a check on

excessive exuberance of activities of the

entrepreneur so that the business does not

grow without plan and encounter difficulties

or failures. The separation between

ownership and control ensures good

corporate governance as well as

accountability and transparency as

management performs their stewardship

function, i.e. reporting to owners or

shareholders.

Corporate governance, as a concept, can be

viewed from at least two perspectives: a

narrow one is which it is viewed merely as

being concerned with the structures with

which a corporate entity receives its basic

orientation and direction (Rwegasira, 2000);

and a broad perspective in which it is

regarded as being the heart of both a market

economy and a democratic society (Sullivan,

2000). The narrow view perceives corporate

governance as relating to shareholder

protection, management control and the

principal-agent relationship. In contrast, the

broader view uses the examples of the

resultant problems of the privatization that

has been sweeping through developing

countries and the transition economies of the

former communist economies in the 1990s

that issues of institutional, legal and capacity

building as well as the rule of law are at the

heart of corporate governance.

Corporate governance is an integral system

encompassing policies, processes and

people, which serves the needs of

shareholders and other stakeholders, by and

controlling management activities with good

business savvy, objectivity, marketplace

commitment and legislation, plus a healthy

board culture which safeguards policies and

processes (Wikipedia, 2009).

The Cadbury Report (2003) defines

corporate governance “as the system by

which companies are directed and

controlled”. Adding “Board of directors are

responsible for the governance of their

companies. The shareholders’ role in

governance is to appoint the directors and

the auditors and to satisfy themselves ‘that

an appropriate governance structure is in