THE RELATIONSHIP BETWEEN CORPORATE GOVERNANCE AND AUDIT QUALITY IN THE INSURANCE SECTOR IN NIGERIA
CHAPTER ONE
INTRODCUTION
1.1    Background to the study
The modern business environment poses a number of challenges that require sounddecisionmaking and appropriate corporate governance practices. According to Edwards & Clough (2005)recent failures in corporate governance have led to the proliferation of corporate governancecodes which emphasize, in particular, accountability and conformance measures inorganizations. The essence of these codes is to determine what entails good corporategovernance in an organization. For any organization to succeed in achieving good performance,it must be able to embrace conventional good corporate governance attributes as stipulated    in
codes such as the Cadbury code in the United Kingdom (UK) (Edwards & Clough, 2005).
    Maher and Anderson (1999) assert that corporate organizations have a responsibility to variousparties such as shareholders and other stakeholders such as employees, suppliers and even thesociety. They further argue that the corporate governance practices in an organization are verysignificant in determining the incentives and disincentives faced by all the above stakeholderswho potentially contribute to firm performance. Corporate governance is primarily concerned
with how effective different governance systems are in promoting long term investment andcommitment amongst the various stakeholders. Kester (1992) indicates that the central problemof governance is to devise specialized systems of incentives, safeguards, and dispute resolutionprocesses that will promote the continuity of business relationships that are efficient in thepresence of self-interested opportunism.
Corporate governance practices dictate the means through whichperformance is achieved andmeasured. According to Yacuzzi (2005), in every organization there are always forces thatoppose change. Corporate governance ensures that there exist policies that can encourageperformance. It is the work of the governing body to ensure that corporate performance ismeasured appropriately. This involves putting in place the measures that the organization willadopt in measuring or evaluating the level of performance.
The National Insurance Commission (NAICOM) recently launched Code of CorporateGovernance for the Insurance Industry in Nigeria as part of its strategic effortstorebuild and sustain the waning confidence of stakeholders in insurance. Indeed,theinsurance industry regulator expects that “the hidden potential of the sector will beunleashed for maximum impact that will induce economic growth in Nigeria”throughcompliance to the Code. It is trite to state that the initiative could not have come at abetter time than now when the major causal factor of the current global economicmeltdown is attributed to unwholesome and sharp practices of corporate leaders in advanced jurisdictions and in our localenvironment. The global economy has lost a lotfinancially in terms stock market crashes, credit squeeze, unemployment, depreciationof the various currencies, fall in growth rates, etc. and as a result, the necessity for the empirical analysis into corporate governance and performance of insurance companies in Nigeria.
1.2    STATEMENT OF RESEARCH PROBLEM
As an importance element of the financial system, insurance plays a vital role in the Nigeria fast growingeconomy. Notwithstanding its numerouscontributions, this sector is faced with some problems that havehindered its progress and goal actualization. This problems ranges from: ethical issues, poorpremiummanagement, poor labour practices, weak regulatory mechanism and enforcement mechanism (Akingbola, 2010). Also insurance in Nigeria lacks proper code of conduct on how its activities should be carried outand lack of ethical behavior in insurance business practice (Soares, 2014 and Irukwu, 2009).To add voice to the poor performance of insurance practice, Nduna, (2013) opined “that lack of bankaccount by citizens hinders the collection of life insurance premium which has also slowed downdevelopment of insurance in Africa. In year 2003, three top officers of Skanda insurance company inSweden were interrogated for not utilizing properly, the corporate assets (Momoh&Ukpong, 2013). Itis in the light of the identified problems above, and to bridge the gap in body of existing literature, anempirically investigation is carried out to ascertain corporate governance impact on financial performanceof quoted insurance companies in Nigeria.
1.3    Research Question
1.    What is the relationship between board size and performance of insurance companies
2.    What is the relationship between board meeting and performance of insurance companies
3.    What is the relationship between independent directors and performance of insurance companies
4.    What is the relationship between audit committee meetings and performance of insurance companies
1.4 OBJECTIVES OF THE STUDY
The main objective of this study is to empirically investigate the relationship between corporate governance and performance of insurance companies in Nigeria, while the specific objectives are to;
1.    Examine the relationship between board size and performance of insurance companies.
2.    Determine the relationship between board meeting and performance of insurance companies.
3.    Ascertain the relationship between independent directors and performance of insurance companies.
4.    Investigate the relationship between audit committee meeting and performance of insurance companies.
1.5    RESEARCH HYPOTHESES
H1: there is no significant impact of board size on audit quality in insurance firms in Nigeria.
H2: there is no significant impactof board independence on audit quality in insurance firms in Nigeria.
H3: there is no significant impact of insurance firms size on audit quality in insurance firms in Nigeria.
H4: there is no significant impact of directors’ shareholding on audit quality in insurance firms in Nigeria.
1.6    SCOPE OF THE STUDY
A period of 7 years will be considered for the study between taking variable data used in this study like board size, board meeting, independent directors, and audit committee meetings from the financial records of selected insurance companies from 2009-2015 as this will capture current trend in corporate governance as it relates to the performance of insurance companies in Nigeria.
1.7    SIGNIFICANCE OF THE STUDY
Management:The study will improve quality of principal-agent relationship that exist between the management and owners of the firm and reduce the conflict of interest using the result of the findings if implemented will create the expected value on firm performance.
Stakeholders:Furthermore, it will enhance the knowledge of all stakeholders and serve as a reference material to other researcher interested in the subject matter
Regulatory Authorities: this study will be insightful to the body in charge of formulating the policy of the code of corporate governance in Nigeria. As emphasis will be drawn from this research work as to the right mixture or attributes of corporate governance that will facilitate firm performance especially in the insurance industry.