The Effect Of Financial Accounting Reporting On The Corporate Performance Of Business Organization

Project and Seminar Material for Accountancy / Accounting

Abstract

This research work ‘’The Effect of Financial Accounting reporting on the corporate performance of business organization; basically aims at ascertaining how financial accounting report has helped in advancing the objectives of corporate organization. In the process, it investigated the effects that financial accounting bear on the performance of a business. Furthermore, the sought to ascertain the compliance of relevant status by corporate organizations and the overall satisfaction of stakeholders in a corporate organizations. The study obtained its data basically from primary source. The primary sources of data collection employed were questionnaires oral interview and observation. The study revealed that a lot of problems were inherent in financial reporting ranging from non disclosure of vital information, subjective judgment of the financial information and most time non-compliance to relevant status. The recommendation given such as strict compliance to the relevant status were made to the organization, the government needs to strengthen its regulatory agencies in order to ensure that the financial statements show a “true and fair view” and comply with the relevant status at all times.

Chapter One

Introduction

1.1 Background of the Study

The impact of financial accounting reporting on the corporate performance of a business organization is becoming more apparent to user groups of a 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 a documental statement which forms the various interest groups to a business on the operations and performance of their business in a period under reviewing its present state of affairs as well as its anticipated future, in accordance with the statutes. If a financial report is to service its purpose it ought to be characterized by the following.

Relevance
Understandability
Reliability
Completeness
Objectivity
Timeliness

If the 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 properly, accurately and interpreted in conformity with the Generally Accepted Accounting Principles (GAAP), Statements of Accounting Standard Board (NASB), International Accounting Standard Committee and the Companies and Allied Matters Act Cop LFN (CAMA). Financial accounting reporting become necessary with the obvious need for accountability of stewardship from the managers to whom investors entrusted their financial resources.

1.2 Statement of the Problem

The study “The impact of Financial Accounting Reporting on the Corporate Performance of Business Organization” aims at investigating the financial issues in accounting as a result of the global economic and financial crisis, there has been a continued attempt to grapple with accounting and economic issues.

In many cases, these issues remain unsolved from generation to generation. The fundamental nature of accounting is still actively being debated with no sign of resolution. The conceptual theory is, for example currently being revisited by the ISAB. A particular problem is whether the stewardship or the decision making objective should be paramount.

1.3 Objectives of the Study

The broad objective of the study is to examine the impact of financial accounting reporting on the corporate performance of business organization, other specific objective are as follows:

To assess the impact of financial accounting reporting on corporate performance of business organization
To examine the adequacy of financial statement in decision making
To examine how disclosure requirement affect corporate performance
To assess company’s compliance with the regulation
To evaluate whether financial report meets the needs of the various users

1.4 Research Questions

In order to determine the impact of financial accounting reporting on the corporate performance of business organizations, it is pertinent to test the following questions;

Does financial accounting have any significant impact on the corporate performance of business organization?
Does the information disclosed in the financial statements adequate to support good decision making?
Does the disclosure requirement of the statutes affect corporate performance positively or negatively?
Do companies comply strictly with the regulation?
Does the financial report meet the needs of the various users?

1.5 Significance of the Study

This study is a very important one and most significant at this period of economic situation which has witnessed the collapse of giant corporate with impressive profit and loss accounts and balance sheet statement, because the financial report serves is a “prima facie” evidence on the state of affairs of such companies as well as its performance and could be relied upon as a certificate because it had the auditors certification, financial reporting could be done with every ser business, utmost good faith and diligence.

1.6 Scope of the Study

This study could have covered the impact of financial accounting reporting on corporate performance of all the sectors of the Nigerian economy but due to the challenges of such task especially the financial resources with which to execute it, it is limited to commercial banks. The study used the Nigerian Commercial banks in Kaduna.

1.7 Definition of Terms

Auditor:

A person who is qualified to examine the accounts of an organization to see that they are in order.

Balance Sheet:

Is a business as at a specified date.

Bank:

Is a financial institution whose responsibilities among others is to keep deposits for their client and customers.

Government:

Is an institution of the state whose responsibility is to maintain law and order in the society.

Prima Facie:

Sufficient to establish something legally until disprove later.

Researcher:

An enquiring basically concerned with search knowledge.

Chapter Five

Summary of Findings, Conclusion and Recommendation

5.1 Summary of Findings

This research is aimed at providing an insight into the impact of financial reporting on the corporate performance of business organizations. On the course of the research work, data were gathered, collected and analysed, also various hypotheses were tested with a view to finding the extent to which financial accounting reporting bear on the performance of a business organization. It was discovered that not much significance difference existed between the respondents who were of the opinion that the information contents of the financial report was not enough to inform a good investment decision and the respondents who though otherwise. Again it was observed in question N0 10 of the questionnaire, that 52 percent of the respondents were of the opinion that the minimum disclosure as stipulated in the statutes for companies was enough, the remaining 48 percent were of the opposite view.

The hypothesis number two of the research work was tested and it was discovered that the disclosure requirements of the statutes affects corporate performance of business organizations positively. This is because of the desire in every stakeholder to know about their business organizations.

The extent to which this need is satisfied is the gravity of the weight if will bear on the positive or negative performance of the business organization. The hypothesis number four that was tested yielded quite an interesting result. The number should that the financial information. If the operation does not satisfy the needs of the people whose stake in the business is enormous, then there is need for proper check.

5.2 Conclusion

In the light of the observation and discussions carried out on the impact of financial accounting reporting on the corporate performance of business organizations, the following conclusions were drawn.

That the financial accounting report is a veritable document through which the status and performance of a business organization could be evaluated.
Their given the weight of the financial accounting report, a lack of adequate information exists.
The stakeholders place heavy reliance on the financial accounting report or desist from venturing into the business organization whose financial information rail to meet their taste.
That there is no water-tight check which ensures that there is no compromise to an objective and fair reporting.
That the information content in the financial report does not meet the needs of the various users of financial accounting information.

5.3 Recommendations

For the purpose of drawing a well balance insight into the impact of financial accounting reporting on the corporate performance or business organizations, I recommend as follows:

If stakeholder’s confidence is to be restored and sustained for the growth of the business organization, care must be exercised to ensure that the financial accounting report furnishes them with the required information they need.
Reports on the organization operations should be made available to its users timely so that it can be put to adequate use.
The regulators of the financial accounting reporting should ensure that business organizations adhere strictly to the reporting rules.
The directors who have the traditional role of preparing this financial report should ensure that it is prepared in accordance to the best international practices.

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