Business Failure And Accounts Profession In Nigeria

Project and Seminar Material for Accountancy / Accounting

Business Failure And Accounts Profession In Nigeria


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 program.

Chapter One


1.1 Background of the Study

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:

  1. Lack of capital (inadequate capitalization)
  2. Inefficient management
  3. Poor remuneration packages
  4. Inadequate accounting records
  5. Unprofitable expansion (premature expansion)
  6. Mode of appointment of chief executives etc.
  7. Lack of feasibility study report.
  8. 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 Statement of the 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 Nigeria?
  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.

1.3 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

  1. To know why business are failing.
  2. Investigate whether government policies and actions affect operational performance
  3. Do business rely on accounting profession (Auditing) as tool for their performance
  4. Identify and analyze strategic corporate plans adopted byh business.
  5. Assess the preparedness of companies to respond to remedial dosage of companies corporate objectives

1.4 Research Questions

In order to address the above stated problem, the following research are essential, hence they are reflected in the questionnaire.

  1. What are the causes of small scale business failure in Nigeria?
  2. Does the government provide conducive environment for Small Scale business?
  3. Do workers implement management policies?
  4. Does finance options affect small scale business?
  5. Does the employment of incompetent hands lead to the failure of small scale business?

1.5 Significant of the Study

It is believed that at the end of this study that the information gathered could be used by Managers of Small and medium Scale Enterprises for planning appropriate measures for business growth and survival as well as the effective allocation of resources. To students in every higher institution of learning, providing them with some vital information concerning strategies for small scale business survival. Also, it will provide basis for which further research could be conducted. Finally, it is believed that this research study will be of great use to general public by expanding their knowledge on small scale business.

1.6 Scope and Limitation of the Study

The scope of this study centers on business failure and accounting performance, analyzing the nature and causes of business failure with the view of developing accounting profession in Nigeria. The researcher encountered some constraint in the course of the study which include:

Time Factor:

The time allocated to the researcher during the period of the study was limited coupled with lectures and exams.

Financial Constraint:

The finance at the disposal of the researcher during the course of the study wasn’t sufficient enough to run the expenses of the research work.

Research Materials:

It was not easy to source for the adequate material to be used to carry out this research. The researcher found it difficult to collect certain information from the management staff of the organization and it was quite uneasy to educate the respondents on the best ways of filling the questionnaire.

1.7. Definition of Terms


Is the state or condition of not meeting a desirable or intended objective, and may be viewed as the opposite of success. For instanceproduct failure ranges from failure to sell the product to fracture of the product, in the worst cases leading to personal injury, the province of forensic engineering.


A business (also known as an enterprise, a company or a firm) is an organizational entity involved in the provision of goods and services to consumers. Businesses serve as conductors of economic activity, and are prevalent in capitalist economies, where most of them are privately owned and provide goods and services.

Business Failure:

Business failure refers to a company ceasing operations following its inability to make a profit or to bring in enough revenue to cover its expenses. A profitable business can fail if it does not generate adequate cash flow to meet expenses.


Accountingis the systematic and comprehensive recording of financial transactions pertaining to a business, and it also refers to the process of summarizing, analyzing and reporting these transactions to oversight agencies and tax collection entities.

Accounting Profession:

Financial Accountants are manage, update, correct, and report the firm’s accounts to parties outside the firm. The financial accountant, therefore, is literally “keeper of the accounts,” hence the name of theprofession. Managerial accountants (or costaccountants) provide account information to those within the firm.

Chapter Five

Summary, Conclusion and Recommendation

5.1 Introduction

It is important to ascertain that the objective of this study was to examine business failure and account performance.

In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the business failure and account performance in Nigeria.

5.2 Summary

The purpose of the study was to investigate the rate of business failure and account performance; however, the fact that management determines the causes of the failure of small scale business in Nigeria implies that the problems of such enterprises are half solved. Given that management develops policies for solving the problem of the small scale enterprises, it implies that most of the enterprises will be properly guided in the pursuit of their goals. The fact that management sometimes has poor attitude to training implies that the organization’s human resources has to wake up in the performance of their duties.

5.3 Conclusion

Poor management affects the growth of small scale enterprise. Management determines the cause of failure of small scale business in Nigeria. Organization have poor attitude to training Government does not always create conducive environment for small scale businesses. Workers sometime implement management policiesManagement develops policies for solving the problems of small scale enterprises. Competent hands are sometimes involved in business strategies. Management does not always have financial management strategies. The profitability of small scale organizations have not greatly improved. Marketing strategies and financial strategies are not strong enough to run the business.

5.4 Recommendation

The researcher recommends that poor management of business resources should be avoided. Organizations should have good attitude to training. Management should always determine the causes of failure of small scale business in Nigeria. Government should try as much as possible to provide/create a conducive environment for business activities. Workers should ensure that they abide by the rules, regulations, policies laid down by the management. Management should have good financial strategies which encompass revenue generation and how it should be spent. Organizations should always strive hard in order to make sure that the organizations profit base is increased.

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