INFLUENCE OF ACCOUNTING SERVICE ON THE GROWTH OF SMES IN BENUE STATE

TABLE OF CONTENT

Title page

Approval page

Dedication

Acknowledgment

Abstract

Table of content

CHAPETR ONE

1.0   INTRODUCTION 

1.1        Background of the study

1.2        Statement of problem

1.3        Research questions

1.4        Objective of the study

1.5        Significance of the study

1.6        Scope of the study

1.7       Definition of terms

CHAPETR TWO

LITERATURE REVIEW

2.1 introduction

2.2 conceptual review

2.3 empirical review

CHAPETR THREE

3.0        Research methodology

3.1    sources of data collection

3.3        Population of the study

3.4        Sampling and sampling distribution

3.5        Validation of research instrument

3.6        Method of data analysis

CHAPTER FOUR

DATA PRESENTATION AND ANALYSIS AND INTERPRETATION

4.1 Introductions

4.2 Data analysis

CHAPTER FIVE

5.1 Introduction

5.2 Summary

5.3 Conclusion

5.4 Recommendation

Appendix

 

 

 

 

 

 

 

Abstract

Small and medium enterprises (SMEs) are of significant importance to states and nations, especially in the areas of employment creation and economic development. The Benue State government in Nigeria has made several efforts at encouraging and supporting the establishment and growth of small and medium enterprises in the State. Despite these efforts, the SMEs sector in the state seem not to have registered the desired level of performance and growth. One of the problems associated with this slow pace of development and growth of SMEs in the state is the seeming inability of the SMEs to manage their businesses through the use of accounting records. This study therefore investigates the influence of accounting service on the growth of SMEs in Benue state.

 

 

 

 

 

CHAPTER ONE

                                        INTRODUCTION

1.1 Background of the study

There are three broad categories of business enterprises, namely, small, medium and large enterprises, but the small and medium enterprises (SMEs) have been reputed to be of great significance in personal and national economic development as they play positive and essential roles in the process of employment generation, industrialization and sustainable economic growth (Aremu & Adeyemi, 2011). In the same vein, Mukoro (2011) observed that SMEs make-up the largest proportion of businesses all over the world and play tremendous roles in employment generation, provision of goods and services and contribution to the Gross Domestic Products (GDP) of nations. In America, the Certified Public Accountant CPA serves as the ‘trusted adviser’ of the small business owners (Association of National Accountants of Nigeria) (AICPA), 2002). For example, a CPA firm will often assist a small business as it is just starting out, providing guidance on setting up its recordkeeping systems, providing tax and estate planning, and making suggestions to help make its business more successful. The CPA also helps the business as it grows. It is likely that, in many cases, if the accounting firms in Nigeria do not have the ability to act as the trusted adviser to many small businesses as clients, the small business owners will simply not seek their inputs financially and otherwise. It is vital both for the small business persons and for the survival of registered accounting firms in Nigeria, that current laws need be changed in a manner that is sensitive to these concerns. William Balhoff, PCPS Chairman, in his testimony before the Committee on Banking, Housing, and Urban Affairs in the United States Senate, 2002 addressed the concerns faced by small firms and small businesses in the United States in light of the Enron crisis. One of the topics addressed in his testimony was “The adverse impact of restricting the performance of non audit services on small business owners and the CPA’s ability to meet their very diverse needs”. He emphasized the importance of small firms and small businesses and their impact on the economy. According to AICPA (2002), small businesses have long depended on small accounting firms to provide much more than auditing services. Amidst the universal trend, the audit professionals’ primary focus still remains to add value to businesses while applying the highest standards of professional integrity, objectivity, independence and technical excellence. In Nigeria, various audits are normally carried out in the form of accounting and auditing services which are only provided or supplied by registered audit firms that possess a practice certificate from the Institute of Chartered Accountants of Nigeria (ICAN) and Association of National Accountants of Nigeria (ANAN).

The prevalent issue in the country necessitating this study is whether small scale businesses demand for professional services rendered by the audit firms or not. If Nigeria is to reach its full potential in terms of economic and social development, it cannot afford to ignore the importance of necessary quality audits and other relevant accounting services for its indigenous small enterprises. The public confidence in small enterprises’ products and services is as important as that in large companies’ products and services. Investors invest their money in small and large businesses. The small business owners’ perception of business in this regard is very critical. They need not to undermine or disregard the inherent advantages of engaging professional services of accountants and auditors if their financial performance is to be guaranteed and public confidence in their business attained. Globally, accounting and audit services serve key functions in the world’s economic engine. The world’s capital markets rely on financial statements certified by independent auditors. If the integrity of the financial statements is not trusted, investment would come to a halt and economic growth would be paralyzed. For example, in China, since the establishment of the People’s Republic of China’s free market policy, the first CPA firm was set up in 1981 (Yan 2002). The Chinese CPA profession has grown rapidly as the expansion of the stock market increases the demand for independent audit. By the end of 2003, there were about 4,500 CPA firms and 60,000 CPAs in China (Heibatollah and Zhongxia, 2005). In addition, audited accounts of small, medium and large businesses can be very useful in investigating bank loans or overdrafts, undue award of contracts and frauds associated with taxes not paid by enterprises. Accounting services can also help in highlighting the strengths and weaknesses of the internal control system of an enterprise (Izedonmi, 2000). The auditor’s work facilitates the process of economic development through the presentation of reliable information concerning the financial position of the companies (Wahdan, Spronck, Ali, Waassen, and Hernick, 2005). Professional accountants in Nigeria must realize that they do not only play a critical role in contributing to strategy support, planning, decision support and control, adding value to organizations and to the information, needed by operators or management of medium and large companies, but also the small business owners or managers. Their work provides the foundation for credible and reliable financial information, which is vital to building investor confidence. In view of the identified advantages of SMEs, especially in the areas of employment generation and economic development, the Benue State government has tried to promote and support SMEs through several means, which include the followings: Benue State Graduate to farm project supported with a loan of N100, 000.00 each, established in 2017 (Okojie, 2018) Benue State Libyan Returnees SMEs Programme, established in 2018 (Benuejobs, 2018) Alagbado Entrepreneurship Summit, organized in 2018 (Okojie, 2018) Benue State Government Strategic Planning Team (SPT) for youth entrepreneurship, empowerment and leadership (Usoh, 2017) Benue State Employment and Expenditure for Results (SEEFOR) – for entrepreneurship skills developmemt (Onaiwu, 2018) Establishment of the Ministry of Wealth, Cooperatives and Employment (Usoh, 2017) Benue State – NEXIM Partnership – to equip entrepreneurs with training and finance to produce ready goods for export (Usoh, 2017). Unfortunately, in spite of all the efforts made by the government, the performance and growth of SMEs in Benue State seem to be very slow with a lot of start-ups not making it to their fifth birthday (Usoh, 2017). Many factors have been attributed to the slow performance/death of many SMEs in Benue State, one of which was the lack of accounting services ranging from accounting records and statement of comprehensive income to alert the owners of the SMES to the disparities or problems in the income and expenditure profile of the company to enable them take appropriate actions to correct the negative trend and salvage the enterprise. When it comes to improving the business’ internal control procedures as well as clarifying certain financial procedures with regard to the preparation of documents ranging from source documents to financial statements and other aspects of accounting, the accountant or auditor is useful. Sedeke Edet (2019)  Small businesses need trusted financial advisors more than ever if they are to succeed beyond failure. According to Abubakar (2009), “the worst state of a business is that of failure that may result into liquidation. A business owner or other business stakeholders never pray to experience such state. It, however, occurs very frequently, most especially, to small businesses and sometimes to big businesses and it is usually with enormous consequences”.

 

1.2 STATEMENT OF THE PROBLEM

Accounting services are designed to provide reasonable assurance as to the accuracy of financial statements of an enterprise. These services are employed by owners of businesses to guarantee the financial performance of their businesses. Many small businesses have experienced financial failures that eventually collapsed their business. Globally, over 28% of businesses declaring bankruptcy cite problems with the financial structure of their businesses as the main cause of failure (Zahorsk, 2008). Many others have existed and are still existing with no proper financial records ranging from books of accounts to financial statements that reflect credible financial performance which attracts investors. This trend of demand for audit services by many small business operators in the country have amounted to numerous incidences of falsification of financial documents and wrongful appropriation of business assets to the personal use of business owners.

The problem therefore is to ascertain the influence of accounting services for small businesses in Nigeria particularly Benue state, and inquire whether the small business operators’ perception of audit services is actually right or wrong.

1.3    OBJECTIVES OF THE STUDY

The study has two objectives, the general objective and the specific objective, the main objective is to examine the influence of accounting service on the growth of SMEs Benue state, the specific objectives are:

1. i) To examine the relationship between accounting service and economic growth in Benue state
2. ii) To examine the role of the accountant on the profitability and survival of SMEs in Benue state

iii) To examine the effect of accounting service on the profitability of SMES

1. iv) To proffer suggested solution to the identified problem

1.4 RESEARCH QUESTION

The following research questions were formulated by the researcher to aid the completion of the study

1. i) Is there any relationship between accounting service and economic growth in Benue state?
2. ii) Does accountant play any role on the profitability and survival of SMEs in Benue state?

iii) Does accounting service have any effect on the profitability of SMES?

1.5 RESEARCH HYPOTHESES

The following research hypotheses were formulated by the researcher to aid the completion of the study

H₀: There is no relationship between accounting service and economic growth in Benue state

H₁: There is a relationship between accounting service and economic growth in Benue state

1.6    SIGNIFICANCE OF THE STUDY

The report and findings of this study will be relevant to small scale business owners/operators, investors and the public in general in the Nigerian economy as it attempts to provide an insight into the operations of small businesses in terms of the nature of accounting services necessary for such businesses in a developing country.

Professional accountants in the country will also benefit from the findings of the study because it will reveal the state and quality of the accounting and audit services they render to small enterprises in Edo state.

The study is of significance to the Nigerian government and institutionalized financial regulators in the country because it will show where legislation needs to be made or modified to provide for more effective regulation of the business activities of small scale businesses in the country.

1.7    SCOPE AND LIMITATION OF THE STUDY

This study focuses on small businesses in Nigeria particularly, Benue state. Generally, a small scale business can be said to be that business that requires a small amount of capital to establish it. But in the course of the study, there are some factors that limit the scope of the study;

AVAILABILITY OF RESEARCH MATERIAL: The research material available to the researcher is insufficient, thereby limiting the study

TIME: The time frame allocated to the study does not enhance wider coverage as the researcher have to combine other academic activities and examinations with the study.

FINANCE: The finance available for the research work does not allow for wider coverage as resources are very limited as the researcher has other academic bills to cover.

 1.8 OPERATIONAL DEFINITION OF TERMS

SMEs

SME stands for Small to Medium Enterprise. However, what exactly an SME or Small to Medium Enterprise depends on who’s doing the defining.

Accountant

An accountant is a practitioner of accounting or accountancy, which is the measurement, disclosure or provision of assurance about financial information that helps managers, investors, tax authorities and others make decisions about allocating resource

Accounting service

Accounting Services means the measurement, processing and communication of financial information about economic entities including, but is not limited to, financial accounting, management accounting, auditing, cost containment and auditing services, taxation and accounting information systems.

Economic Growth

Economic growth is the increase in the inflation-adjusted market value of the goods and services produced by an economy over time. It is conventionally measured as the percent rate of increase in real gross domestic product, or real GDP

1.9 ORGANIZATION OF THE STUDY

This research work is organized in five chapters, for easy understanding, as follows

Chapter one is concern with the introduction, which consist of the (overview, of the study), statement of problem, objectives of the study, research question, significance or the study, research methodology, definition of terms and historical background of the study. Chapter two highlight the theoretical framework on which the study its based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding.  Chapter five gives summary, conclusion, and recommendations made of the study.

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