An Evaluation of the Challenges of Financial Reporting Compliance in Nigerian SMEs: A Study of SMEs in Port Harcourt
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Background of the Study
Financial reporting compliance involves adhering to established accounting standards and regulatory requirements in the preparation and presentation of financial statements. For SMEs in Port Harcourt, compliance is essential for building investor confidence, securing credit facilities, and meeting tax obligations. However, many SMEs face challenges such as limited knowledge of reporting standards, lack of qualified personnel, and inadequate infrastructure (Bassey & Okon, 2023).
The regulatory environment for SMEs in Nigeria includes frameworks like the International Financial Reporting Standards (IFRS) for SMEs. While these standards aim to simplify compliance, the lack of enforcement mechanisms and capacity-building initiatives has resulted in widespread non-compliance. Studies show that addressing these challenges can significantly enhance transparency, accountability, and growth prospects for SMEs (Ekanem & Etuk, 2024).
Statement of the Problem
Non-compliance with financial reporting standards remains a persistent issue among SMEs in Port Harcourt. Factors such as limited awareness, high costs of compliance, and a lack of professional accountants contribute to this problem. Despite its importance, there is insufficient research on the specific challenges SMEs in Port Harcourt face in achieving compliance, leaving a gap in practical solutions and policy recommendations.
Objectives of the Study
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To identify the challenges of financial reporting compliance among SMEs in Port Harcourt.
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To evaluate the impact of non-compliance on SME operations and growth.
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To propose strategies for improving financial reporting compliance.
Research Questions
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What are the challenges of financial reporting compliance among SMEs in Port Harcourt?
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How does non-compliance affect SME operations and growth?
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What strategies can enhance financial reporting compliance among SMEs in Port Harcourt?
Research Hypotheses
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H₀: Challenges in financial reporting compliance do not significantly affect SME growth in Port Harcourt.
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H₀: Non-compliance with financial reporting standards does not significantly impact SME operations.
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H₀: Strategies for improving compliance do not significantly enhance SME performance.
Scope and Limitations of the Study
This study examines the challenges of financial reporting compliance among SMEs in Port Harcourt. It excludes larger enterprises and SMEs in other regions. Limitations include variability in compliance practices and potential unwillingness of respondents to disclose financial details.
Definitions of Terms
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Financial Reporting Compliance: Adherence to accounting standards and regulatory requirements in financial statement preparation.
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Non-Compliance: Failure to meet established standards and regulations.
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Port Harcourt: A commercial hub in Rivers State, Nigeria, with diverse SME activities.
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