THE ROLE OF A CHARTERED ACCOUNTANT IN THE FORMATION, ACQUISITION AND LIQUIDATION OF COMPANIES

CHAPTER ONE: INTRODUCTION

1.1 Background of the Study

The corporate landscape is characterized by a dynamic lifecycle through which business entities are born, grow through consolidation, and eventually cease to exist. This lifecycle—comprising formation, acquisition, and liquidation—involves complex legal, financial, and regulatory processes that demand specialized professional expertise (Punch, 2018). Among the various professionals engaged in corporate transactions, the chartered accountant occupies a uniquely central position, providing essential services that span financial reporting, valuation, due diligence, tax planning, and regulatory compliance. Without the active involvement of chartered accountants, the corporate lifecycle would be fraught with financial misstatements, legal infractions, and inefficient resource allocation. (Punch, 2018)

A chartered accountant (CA) is a professional who has obtained statutory recognition from a professional accounting body, such as the Institute of Chartered Accountants of Nigeria (ICAN), the Institute of Chartered Accountants in England and Wales (ICAEW), or the Association of Chartered Certified Accountants (ACCA), following rigorous training and examination (ICAN, 2020). The designation “chartered” signifies not only technical competence but also a commitment to ethical standards, professional skepticism, and public interest. Chartered accountants are empowered by law to perform specific functions, including statutory audits, financial certification, and insolvency practice, which are indispensable to corporate transactions. (ICAN, 2020)

The formation of a company is the initial stage of the corporate lifecycle, where an idea transforms into a legally recognized entity capable of contracting, owning assets, and employing staff. Company formation, also known as incorporation, involves several critical steps: choosing a business structure (private limited, public limited, limited by guarantee), drafting constitutional documents (memorandum and articles of association), registering with the corporate affairs commission, obtaining tax identification numbers, and opening bank accounts (Gower and Davies, 2021). Each of these steps carries financial and legal implications that require the input of a chartered accountant. (Gower and Davies, 2021)

During the formation stage, the chartered accountant advises promoters and founders on the most tax-efficient and legally appropriate corporate structure. For example, the decision between operating as a sole proprietorship, partnership, or limited liability company has profound consequences for personal asset protection, tax liability, and access to capital (Miller, 2019). A chartered accountant analyzes the projected income streams, expected liabilities, and long-term strategic goals of the promoters to recommend an optimal structure. Furthermore, the accountant assists in preparing financial forecasts and viability studies that may be required by regulators or potential investors before incorporation. (Miller, 2019)

Another critical role of the chartered accountant in company formation is the preparation and authentication of statutory financial documents. In many jurisdictions, the memorandum and articles of association must include statements regarding the company’s initial share capital, the division of shares, and the proposed accounting reference date (Hannigan, 2018). A chartered accountant ensures that these financial provisions comply with the Companies Act and relevant financial reporting standards. Additionally, where a company is formed with a bank account, the accountant facilitates the opening of the account by providing professional verification of identity and business purpose. (Hannigan, 2018)

The chartered accountant also plays an indispensable role in post-formation compliance. Immediately after incorporation, a company must register for value-added tax (VAT), pay-as-you-earn (PAYE) for employees, and corporate income tax. The accountant establishes the company’s accounting systems, chart of accounts, and internal control procedures to ensure accurate record-keeping from the first transaction (Davies, 2020). Moreover, the accountant advises on the appointment of statutory auditors (where required) and the preparation of the first set of statutory accounts. Without this professional guidance, newly formed companies often default on filing deadlines, incurring penalties and damaging their compliance records. (Davies, 2020)

Moving beyond formation, corporate acquisition represents a major strategic transaction whereby one company purchases controlling interest in another. Acquisitions may be friendly (negotiated with target management) or hostile (directly pursued with shareholders), but in either scenario, the process is complex, risky, and value-dependent (DePamphilis, 2019). A chartered accountant is central to the acquisition process from the initial strategic assessment through post-merger integration. The accountant’s roles include target identification, financial due diligence, valuation, structuring the deal, tax optimization, and financial closure. (DePamphilis, 2019)

Financial due diligence is arguably the most critical role of the chartered accountant in an acquisition. Due diligence involves a comprehensive investigation of the target company’s financial health, including analysis of historical financial statements, quality of earnings, working capital trends, debt obligations, contingent liabilities, tax compliance, and off-balance-sheet arrangements (Rosenbloom, 2020). The chartered accountant identifies “red flags” such as aggressive revenue recognition, understated provisions, related-party transactions not at arm’s length, or pending tax disputes. This investigation protects the acquiring company from inheriting hidden liabilities that would erode the value of the transaction. (Rosenbloom, 2020)

Valuation is another domain where the chartered accountant’s expertise is indispensable. Before any acquisition, the acquiring company must determine a fair price to pay for the target. The chartered accountant employs various valuation methodologies, including discounted cash flow (DCF), comparable company analysis, precedent transactions, and asset-based valuation (Damodaran, 2018). Each method requires professional judgment regarding appropriate discount rates, growth projections, and market comparables. Overvaluation leads to goodwill impairment and shareholder losses, while undervaluation may cause the target to reject the offer. The chartered accountant provides an objective, supportable valuation that forms the basis of negotiation. (Damodaran, 2018)

The chartered accountant also structures the acquisition to achieve optimal tax and accounting outcomes. For example, the transaction can be structured as an asset purchase (buying specific assets and liabilities) or a share purchase (buying the entire corporate entity), each with different tax implications for buyer and seller (Scholes, Wolfson, Erickson, Maydew, and Shevlin, 2016). The accountant advises on the recognition of goodwill, the amortization of intangible assets, and the utilization of tax losses. Furthermore, the accountant ensures that the acquisition complies with competition and antitrust regulations, preparing financial submissions required by regulatory authorities. (Scholes et al., 2016)

Post-acquisition integration, while often overlooked in discussions of the accountant’s role, is critical to realizing the strategic benefits of the transaction. The chartered accountant leads the consolidation of financial systems, integration of accounting policies, harmonization of reporting calendars, and alignment of budgeting processes (Galpin, 2018). Without effective financial integration, the combined entity may produce inconsistent management information, duplicate costs, or fail to achieve projected synergies. The accountant also monitors earn-out arrangements (additional payments contingent on target performance) and provides certification of financial metrics that trigger such payments. (Galpin, 2018)

The final stage of the corporate lifecycle is liquidation, the process by which a company ceases operations, sells its assets, pays creditors, and distributes any remaining surplus to shareholders. Liquidation may be voluntary (initiated by shareholders) or compulsory (ordered by a court following a winding-up petition, typically by an unpaid creditor) (Keay, 2020). In both scenarios, the chartered accountant often serves as the liquidator—an official appointed to realize the company’s assets, settle liabilities, and distribute proceeds. The role of the accountant in liquidation is governed by insolvency legislation and carries significant legal responsibilities. (Keay, 2020)

As a liquidator, the chartered accountant assumes a statutory role that demands impartiality, professional competence, and strict adherence to legal procedures. The accountant must take possession of the company’s assets, books, and records; investigate the company’s affairs and the conduct of its directors; prepare a statement of affairs; adjudicate creditor claims; realize assets (often through auction or negotiated sale); and distribute proceeds according to the statutory hierarchy of claims (secured creditors, preferential creditors, unsecured creditors, shareholders) (Finch and Milman, 2017). Any deviation from this hierarchy renders the liquidator personally liable to aggrieved parties. (Finch and Milman, 2017)

Before liquidation commences, the chartered accountant conducts a solvency assessment to determine whether the company is genuinely insolvent or merely experiencing temporary cash flow difficulties. Under many corporate laws, directors have a duty to cease trading and place the company into liquidation once they know or ought to know that insolvency is unavoidable (Ferran and Ho, 2018). The accountant’s assessment of solvency—based on a careful analysis of assets, liabilities, and projected cash flows—provides directors with the legal justification for their decision to liquidate. Continuing to trade while insolvent may expose directors to personal liability for wrongful trading. (Ferran and Ho, 2018)

The chartered accountant also plays a crucial role in identifying and recovering preferential payments and transactions at an undervalue. In the period leading up to liquidation (typically six months to two years, depending on jurisdiction), a company may have made payments to certain creditors to prefer them over others, or sold assets below market value to related parties (Goode, 2018). Such transactions can be “clawed back” by the liquidator to increase the pool of assets available for general distribution. The accountant must analyze the company’s transaction history, identify suspect transactions, gather evidence, and take legal action to recover value. This forensic accounting role is intellectually demanding and legally consequential. (Goode, 2018)

In compulsory liquidation, the chartered accountant is often appointed as the official or provisional liquidator by the court. The court may appoint the accountant upon the petition of a creditor, the company itself, a director, or a shareholder. Once appointed, the accountant acts as an officer of the court, owing duties to the court and to all creditors impartially (Armour, 2019). The accountant must submit regular reports to the court, seek court approval for major transactions (such as asset sales to related parties), and ultimately apply to the court for dissolution of the company. This judicial oversight adds layers of accountability and procedural rigor to the accountant’s work. (Armour, 2019)

The chartered accountant also provides essential services to creditors and shareholders during liquidation. Creditors may appoint a liquidation committee to supervise the liquidator’s activities, and the accountant must convene creditor meetings, provide regular financial updates, and seek creditor approval for significant decisions (Tolmie, Mullen, and Smith, 2017). Shareholders, as residual claimants, are typically last to receive any distribution; the accountant must calculate the amount available for shareholders accurately and certify that all creditor claims have been satisfied before any shareholder distribution occurs. Failure to follow these procedures exposes the accountant to legal claims from both creditors and shareholders. (Tolmie, Mullen, and Smith, 2017)

Throughout all three stages—formation, acquisition, and liquidation—the chartered accountant serves as a trusted advisor who brings objectivity, technical expertise, and ethical discipline to corporate transactions. The accountant’s signature on financial statements, valuation reports, or liquidation accounts carries legal weight and professional consequences. Indeed, the chartered accountant is often described as the “gatekeeper” of corporate financial integrity, ensuring that transactions comply with laws, fairly represent economic reality, and protect the interests of stakeholders including creditors, investors, employees, and the public (Coffee, 2019). Without the chartered accountant, the corporate sector would operate with reduced transparency, increased fraud, and diminished accountability. (Coffee, 2019)

In the Nigerian context, the role of the chartered accountant in corporate transactions is specifically regulated by the Companies and Allied Matters Act (CAMA) 2020 and the ICAN Act. Under CAMA 2020, a chartered accountant must be appointed as the liquidator in all compulsory winding-up proceedings (Federal Republic of Nigeria, 2020). Similarly, acquisition transactions above certain thresholds require financial statements certified by a chartered accountant. The Nigerian Securities and Exchange Commission (SEC) rules mandate that due diligence reports for public company acquisitions be prepared or reviewed by chartered accountants. This regulatory framework underscores the indispensable nature of the profession in the Nigerian corporate ecosystem. (Federal Republic of Nigeria, 2020)

Despite this extensive regulatory recognition and the clear value added by chartered accountants, gaps remain in empirical understanding of how accountants actually execute these roles in practice. While textbooks describe what accountants should do, there is limited research on the challenges they face, the ethical dilemmas they encounter, and the strategies they employ to balance competing stakeholder interests (Spence, Carter, Husillos, and Gendron, 2019). Furthermore, the increasing complexity of corporate transactions—driven by globalization, digitalization, and innovative financial instruments—places new demands on the profession. This study, therefore, seeks to provide a comprehensive examination of the role of the chartered accountant in the formation, acquisition, and liquidation of companies, with particular emphasis on the Nigerian legal and regulatory environment. (Spence et al., 2019)

1.2 Statement of the Problem

Despite the legally mandated and professionally recognized role of chartered accountants in corporate transactions, several problems undermine the effectiveness of their contributions to company formation, acquisition, and liquidation. These problems have practical consequences for businesses, creditors, shareholders, and the economy at large.

First, during company formation, many startups and small enterprises bypass the engagement of chartered accountants due to perceived high costs, opting instead for unqualified agents or online incorporation services. This practice frequently results in inappropriate corporate structures, suboptimal tax registration, inadequate accounting systems, and subsequent non-compliance with statutory filing deadlines (Okafor and Mbagwu, 2019). The absence of professional input at the formation stage creates a cascade of compliance failures that become costly to rectify later. Furthermore, some chartered accountants themselves lack up-to-date knowledge of digital incorporation platforms and modern accounting software, leading to inefficient service delivery. (Okafor and Mbagwu, 2019)

Second, in the context of corporate acquisitions, a significant problem is the inadequacy of due diligence performed by some chartered accountants. Pressure from clients to complete transactions quickly or reduce fees may lead to superficial financial reviews that fail to identify material misstatements, contingent liabilities, or fraudulent activities within the target company (Krishnan and Lee, 2021). When hidden liabilities emerge after acquisition, the acquiring company suffers substantial financial losses, and the reputation of the chartered accountant is damaged. Additionally, there is a growing problem of valuation disagreements between the buyer’s accountant and the seller’s accountant, leading to protracted negotiations, deal abandonment, or litigation. (Krishnan and Lee, 2021)

Third, in liquidation scenarios, chartered accountants acting as liquidators face conflicts of interest that are not always adequately managed. An accountant who previously served as the company’s auditor or financial advisor may be appointed as liquidator, creating a conflict between the duty to investigate prior management (including potential negligence by the previous accountant) and the desire to avoid embarrassment or liability for the accounting firm (Okoye, Nnamdi, and Ugwu, 2020). In some documented cases, liquidators have been accused of unduly delaying liquidation proceedings to accumulate fees, or of selling assets to related parties at below-market values. These problems have led to creditor distrust and regulatory sanctions against some practitioners. (Okoye, Nnamdi, and Ugwu, 2020)

Fourth, the legal and regulatory framework governing the role of chartered accountants in corporate transactions is fragmented and inconsistently enforced, particularly in developing economies like Nigeria. While CAMA 2020 specifies certain functions for chartered accountants, gaps remain regarding the specific standards for due diligence reporting, the qualifications required for different types of liquidation, and the oversight mechanisms for monitoring liquidators’ performance (Adeyemi and Fagbemi, 2019). This regulatory ambiguity creates uncertainty for both accountants and the businesses they serve, leading to variations in practice quality. (Adeyemi and Fagbemi, 2019)

Fifth, there is a knowledge gap among business owners, directors, and even some legal practitioners regarding the full scope of services that chartered accountants can provide in corporate transactions. Many clients view accountants merely as “number-crunchers” who prepare tax returns or audit financial statements, unaware of their strategic advisory capabilities in deal structuring, valuation, and insolvency management (Williams, 2020). This underestimation reduces the demand for high-quality accounting services and perpetuates a cycle where inexperienced practitioners dominate the market for corporate transaction advisory. (Williams, 2020)

Sixth, empirical research specifically examining the role of chartered accountants across the full corporate lifecycle (formation, acquisition, liquidation) is remarkably sparse. Existing studies tend to focus on isolated stages—for example, due diligence in acquisitions or the duties of liquidators—without providing an integrated framework (Eze and Ogundipe, 2021). Consequently, practitioners lack evidence-based guidance on best practices, professional bodies lack data for refining training curricula, and regulators lack insights for policy improvement. This study addresses this gap by providing comprehensive empirical investigation. (Eze and Ogundipe, 2021)

Therefore, the core problem this study seeks to address can be stated as follows: Despite the legally recognized and professionally significant role of chartered accountants in company formation, acquisition, and liquidation, there are persistent deficiencies in service delivery, regulatory oversight, client awareness, and empirical knowledge that undermine the effectiveness of chartered accountants in these critical corporate transactions.

1.3 Aim of the Study

The aim of this study is to critically examine the role of the chartered accountant in the formation, acquisition, and liquidation of companies, with a view to identifying the specific responsibilities, challenges, and effectiveness of chartered accountants in each corporate lifecycle stage, and to propose recommendations for enhancing professional practice and regulatory oversight.

1.4 Objectives of the Study

The specific objectives of this study are to:

1. Identify and describe the specific roles and responsibilities of a chartered accountant in the formation of a company, including structural advisory, documentation, and compliance functions.
2. Examine the contribution of chartered accountants to the due diligence, valuation, deal structuring, and post-acquisition integration processes in corporate acquisitions.
3. Analyze the statutory and professional duties of a chartered accountant acting as a liquidator in both voluntary and compulsory liquidation proceedings.
4. Assess the challenges, ethical dilemmas, and conflicts of interest that chartered accountants face when providing services in formation, acquisition, and liquidation engagements.
5. Evaluate the adequacy of the existing legal and regulatory framework (particularly CAMA 2020 and ICAN guidelines) governing the role of chartered accountants in corporate transactions in Nigeria.
6. Propose evidence-based recommendations for improving the effectiveness, transparency, and accountability of chartered accountants in company formation, acquisition, and liquidation.

1.5 Research Questions

The following research questions guide this study:

1. What specific roles and responsibilities does a chartered accountant perform during the formation of a company?
2. How do chartered accountants contribute to the due diligence, valuation, and structuring of corporate acquisitions?
3. What are the statutory and professional duties of a chartered accountant when acting as a liquidator in company liquidation?
4. What challenges, ethical dilemmas, and conflicts of interest do chartered accountants encounter in formation, acquisition, and liquidation engagements?
5. How adequate is the existing legal and regulatory framework (CAMA 2020, ICAN guidelines) in governing the role of chartered accountants in corporate transactions in Nigeria?
6. What recommendations can be proposed to enhance the effectiveness of chartered accountants in company formation, acquisition, and liquidation?

1.6 Research Hypotheses

Based on the research objectives and questions, the following hypotheses are formulated. Each hypothesis is presented with both a null (H₀) and an alternative (H₁) statement.

Hypothesis One

• H₀₁: Chartered accountants do not perform significant value-adding roles beyond statutory compliance during company formation.
• H₁₁: Chartered accountants perform significant value-adding roles beyond statutory compliance during company formation.

Hypothesis Two

• H₀₂: There is no significant relationship between the quality of due diligence performed by chartered accountants and the post-acquisition financial performance of acquiring companies.
• H₁₂: There is a significant relationship between the quality of due diligence performed by chartered accountants and the post-acquisition financial performance of acquiring companies.

Hypothesis Three

• H₀₃: The involvement of a chartered accountant in valuation does not significantly affect the fairness of acquisition pricing.
• H₁₃: The involvement of a chartered accountant in valuation significantly affects the fairness of acquisition pricing.

Hypothesis Four

• H₀₄: Chartered accountants acting as liquidators do not face significant conflicts of interest that affect the impartiality of liquidation proceedings.
• H₁₄: Chartered accountants acting as liquidators face significant conflicts of interest that affect the impartiality of liquidation proceedings.

Hypothesis Five

• H₀₅: There is no significant difference in creditor satisfaction between liquidations administered by chartered accountants and those administered by non-accountant liquidators (where permitted by law).
• H₁₅: There is a significant difference in creditor satisfaction between liquidations administered by chartered accountants and those administered by non-accountant liquidators (where permitted by law).

Hypothesis Six

• H₀₆: The current legal and regulatory framework (CAMA 2020, ICAN guidelines) does not require significant reform to improve the effectiveness of chartered accountants in corporate transactions.
• H₁₆: The current legal and regulatory framework (CAMA 2020, ICAN guidelines) requires significant reform to improve the effectiveness of chartered accountants in corporate transactions.

1.7 Significance of the Study

This study holds significance for multiple stakeholders as follows:

For Chartered Accountants and Professional Accounting Bodies:
The study provides a comprehensive mapping of the roles, responsibilities, and expected competencies for chartered accountants across the corporate lifecycle. This can inform continuing professional development (CPD) programs, ethical guidelines, and best practice manuals issued by bodies such as ICAN, ACCA, and ICAEW. Practicing accountants will gain insights into common pitfalls and strategies for managing conflicts of interest, particularly in liquidation engagements.

For Business Owners, Promoters, and Directors:
Entrepreneurs considering company formation will understand why engaging a chartered accountant early is a strategic investment rather than a discretionary expense. Directors of companies considering acquisition targets will learn how to leverage accountants’ due diligence and valuation expertise to avoid overpayment and hidden liabilities. Directors of distressed companies will understand their obligations regarding insolvency and the benefits of early consultation with a chartered accountant.

For Creditors and Shareholders:
Creditors who may be affected by corporate liquidation will gain awareness of their rights and the role of the chartered accountant as a liquidator. Shareholders will understand how a chartered accountant protects their residual interests and ensures fair distribution of liquidation proceeds. This knowledge empowers creditors and shareholders to monitor liquidator conduct and seek legal redress where appropriate.

For Regulators and Policymakers:
The findings of this study will provide empirical evidence to support or challenge existing provisions of CAMA 2020, SEC regulations, and ICAN guidelines. Regulators will gain insights into gaps in the current framework and may use the study’s recommendations to draft amendments that enhance transparency, accountability, and professional standards in corporate transactions.

For Legal Practitioners:
Lawyers who advise on corporate formations, acquisitions, and liquidations often work alongside chartered accountants. This study will deepen lawyers’ understanding of accountants’ professional standards, ethical constraints, and technical capabilities, leading to more effective collaboration and better client outcomes.

For Academics and Researchers:
This study contributes to the sparse literature on the role of chartered accountants across the full corporate lifecycle, as opposed to isolated stages. It provides a theoretical framework and empirical basis for future research on professional service delivery, corporate governance, and insolvency practice. The hypotheses formulated can be tested in different jurisdictions or industry sectors.

For the Nigerian Economy:
Effective corporate formation encourages entrepreneurship and formalization of businesses, expanding the tax base. Well-executed acquisitions promote industrial consolidation and economies of scale. Efficient liquidation ensures that non-viable companies exit the market cleanly, allowing resources to be reallocated to productive uses. By enhancing the effectiveness of chartered accountants, this study ultimately supports broader economic development objectives.

1.8 Definition of Terms

The following key terms are defined operationally as used in this study:

Term	Definition
Chartered Accountant	A professional accountant who has completed the prescribed training and examinations of a recognized professional body (e.g., ICAN) and is licensed by law to perform statutory functions such as auditing, tax certification, and insolvency practice.
Company Formation	The legal process of incorporating a business entity, including the preparation and filing of memorandum and articles of association, payment of registration fees, and obtaining a certificate of incorporation from the Corporate Affairs Commission.
Acquisition	A corporate transaction whereby one company (the acquirer) purchases a controlling interest in another company (the target), either through share purchase, asset purchase, or merger.
Liquidation	The legal process by which a company ceases operations, sells its assets, pays its creditors, and distributes any remaining surplus to shareholders, after which the company is dissolved. Also referred to as winding-up.
Liquidator	A person (in this context, a chartered accountant) appointed to manage the liquidation process, including asset realization, creditor claim adjudication, and distribution of proceeds.
Due Diligence	A comprehensive investigation conducted by a chartered accountant on behalf of an acquiring company to verify the financial health, legal compliance, asset ownership, and liability exposure of a target company prior to acquisition.
Valuation	The process of estimating the economic worth of a company or its assets, conducted by a chartered accountant using methods such as discounted cash flow, comparable company analysis, or net asset value.
Solvency	The financial state in which a company’s assets exceed its liabilities and the company is able to pay its debts as they fall due.
Insolvency	The financial state in which a company is unable to pay its debts as they fall due (cash flow insolvency) or its liabilities exceed its assets (balance sheet insolvency).
Voluntary Liquidation	A winding-up proceeding initiated by a company’s shareholders through a special resolution, typically because the company has achieved its purpose, is no longer viable, or shareholders wish to retire from business.
Compulsory Liquidation	A winding-up proceeding ordered by a court following a petition, typically by an unpaid creditor, because the company is insolvent and has failed to pay its debts.
Preferential Payment	A payment made by a company to a creditor shortly before liquidation that gives that creditor an advantage over other creditors; such payments may be voidable by the liquidator.
Transaction at an Undervalue	A transfer of assets by a company at a price significantly below market value, typically to a related party, within a specified period before liquidation; such transactions may be clawed back by the liquidator.
Statement of Affairs	A document prepared by the directors of a company entering liquidation, showing the company’s assets, liabilities, creditors, and security interests, which is verified by a chartered accountant.
CAMA 2020	The Companies and Allied Matters Act 2020 of Nigeria, the primary legislation governing company formation, operations, and winding-up in Nigeria.
ICAN	The Institute of Chartered Accountants of Nigeria, the primary professional body regulating the practice of chartered accountancy in Nigeria.
Gatekeeper	A professional (such as a chartered accountant) who acts as an intermediary and certifier of corporate information, thereby protecting investors and the public from corporate misconduct.

CHAPTER TWO: LITERATURE REVIEW

2.1 Introduction

This chapter presents a comprehensive review of literature relevant to the role of the chartered accountant in the formation, acquisition, and liquidation of companies. The review is organized into five main sections. First, the conceptual framework section defines and explains the key constructs: chartered accountancy, company formation, corporate acquisition, and liquidation. Second, the theoretical framework section examines the theories that underpin the role of accountants in corporate transactions, including agency theory, stewardship theory, stakeholder theory, and the going concern concept. Third, the empirical review section synthesizes findings from previous studies on each stage of the corporate lifecycle. Fourth, the legal and regulatory framework section examines the statutory provisions governing chartered accountants in Nigeria. Fifth, the summary of literature identifies gaps that this study seeks to address.

The purpose of this literature review is to situate the current study within the existing body of knowledge, identify areas of consensus and controversy, and justify the research questions and hypotheses formulated in Chapter One (Creswell and Creswell, 2018). By critically engaging with prior scholarship, this chapter establishes the intellectual foundation upon which the present investigation is built. (Creswell and Creswell, 2018)

2.2 Conceptual Framework

2.2.1 The Concept of a Chartered Accountant

A chartered accountant (CA) is a professional accountant who has obtained a recognized qualification from a statutory professional body, such as the Institute of Chartered Accountants of Nigeria (ICAN), the Institute of Chartered Accountants in England and Wales (ICAEW), the Institute of Chartered Accountants of Scotland (ICAS), or the Association of Chartered Certified Accountants (ACCA) (ICAN, 2020). The term “chartered” signifies that the accountant holds a royal charter or statutory license granting the right to practice certain reserved functions, including statutory audit, insolvency practice, and financial certification. Unlike general accountants or bookkeepers, chartered accountants are bound by a code of ethics, required to maintain continuing professional development (CPD), and subject to disciplinary proceedings by their professional body. (ICAN, 2020)

The training pathway to becoming a chartered accountant typically involves a combination of rigorous professional examinations (often three levels), supervised practical experience (typically three to five years under an experienced principal), and adherence to ethical standards (ACCA, 2019). Upon qualification, a chartered accountant may work in public practice (offering services to external clients), industry (as an employee of a commercial organization), the public sector, or academia. In the context of corporate transactions, chartered accountants in public practice—particularly those in audit, tax, and advisory departments—are the primary actors. (ACCA, 2019)

Chartered accountants are distinguished from other financial professionals by their statutory recognition and the breadth of their training. While a certified public accountant (CPA) in the United States performs similar functions, the chartered designation is more common in Commonwealth countries including Nigeria, the United Kingdom, Canada (CA legacy designation), India, Pakistan, and Australia (Zeff, 2016). The international mobility of chartered accountants has increased through mutual recognition agreements among professional bodies, making the CA qualification a global credential for corporate transaction advisory. (Zeff, 2016)

The core competencies of a chartered accountant relevant to corporate transactions include financial reporting (preparation and interpretation of financial statements under IFRS or local GAAP), taxation (corporate and personal tax planning, compliance, and dispute resolution), assurance (audit and review engagements that provide credibility to financial information), valuation (determining the worth of businesses, shares, and intangible assets), and insolvency (managing corporate liquidations, receiverships, and administrations) (ICAEW, 2020). These competencies are developed through both examination and practical experience, ensuring that chartered accountants possess both theoretical knowledge and applied judgment. (ICAEW, 2020)

In the Nigerian context, the role of the chartered accountant is specifically defined by the ICAN Act (Cap. I11, Laws of the Federation of Nigeria, 2004) and the Companies and Allied Matters Act (CAMA) 2020. Under Section 8 of the ICAN Act, only a chartered accountant may be appointed as an auditor of a company required by law to have audited financial statements. Similarly, under Section 678(1) of CAMA 2020, only a chartered accountant or a solicitor may be appointed as a liquidator in compulsory winding-up proceedings (Federal Republic of Nigeria, 2020). These statutory provisions create a legal monopoly for chartered accountants in certain corporate transaction roles, underscoring their importance to the corporate sector. (Federal Republic of Nigeria, 2020)

2.2.2 Company Formation

Company formation, also known as incorporation, is the legal process by which a business entity is created as a separate legal person distinct from its owners (Gower and Davies, 2021). Upon incorporation, a company acquires the capacity to own assets, enter into contracts, sue and be sued, employ staff, and incur tax obligations in its own name. The concept of separate legal personality, established in the landmark English case Salomon v. Salomon and Co. Ltd (1897), is fundamental to modern company law. Incorporation also confers limited liability on shareholders, meaning their personal assets are protected from company debts beyond their agreed capital contribution. (Gower and Davies, 2021)

The process of company formation varies by jurisdiction but typically involves the following steps: (1) choosing the appropriate legal structure (private limited company, public limited company, company limited by guarantee, or unlimited company); (2) drafting constitutional documents, primarily the memorandum of association (stating the company’s name, registered office, objects, and liability) and articles of association (governing internal management); (3) appointing initial directors and a company secretary (where required); (4) determining the authorized and issued share capital; (5) filing the required documents with the relevant corporate registry (e.g., Corporate Affairs Commission in Nigeria); (6) paying registration fees and stamp duties; and (7) obtaining a certificate of incorporation (Hannigan, 2018). Each of these steps has financial, legal, and tax implications that require professional input. (Hannigan, 2018)

In Nigeria, company formation is governed by CAMA 2020, which replaced the earlier CAMA 1990. Under CAMA 2020, the Corporate Affairs Commission (CAC) is the regulatory body responsible for company registration. CAMA 2020 introduced several reforms to simplify company formation, including the abolition of the requirement for a memorandum of association (replaced with a simpler “statement of company’s proposed name and object”), reduction in minimum share capital requirements, and introduction of a single-member company (private company with one person) (Okpara, 2021). Despite these simplifications, the involvement of a chartered accountant remains valuable for ensuring tax-efficient structuring, proper accounting records, and ongoing compliance. (Okpara, 2021)

The role of the chartered accountant in company formation extends beyond mere form-filling. Accountants advise promoters on the optimal capital structure (mix of debt and equity), the timing of incorporation for tax purposes, the selection of accounting reference date, and the design of internal control systems appropriate to the scale of operations (Davies, 2020). In the case of companies formed to hold investment assets or intellectual property, the accountant may also advise on transfer pricing policies, royalty arrangements, and cross-border tax treaties. Without such advice, newly incorporated companies often inadvertently structure themselves in ways that create unnecessary tax liabilities or administrative burdens. (Davies, 2020)

2.2.3 Corporate Acquisition

A corporate acquisition is a transaction whereby one company (the acquirer) purchases a controlling interest (typically more than 50% of voting rights) in another company (the target) (DePamphilis, 2019). Acquisitions are distinguished from mergers, where two companies combine to form a new entity; however, the terms are often used interchangeably in practice. Acquisitions may be friendly (negotiated and approved by the target’s board and shareholders) or hostile (pursued directly against the wishes of target management, typically through a tender offer to shareholders). The strategic rationale for acquisitions includes achieving economies of scale, acquiring new technologies or products, entering new geographic markets, eliminating competitors, or achieving tax benefits. (DePamphilis, 2019)

Acquisitions can be structured in two primary ways: share purchase or asset purchase. In a share purchase, the acquirer buys the shares of the target company from its shareholders. The target continues as a legal entity but becomes a subsidiary of the acquirer. The advantage is that all assets, contracts, and licenses transfer automatically with the shares; the disadvantage is that all liabilities (including contingent and unknown liabilities) also transfer (Rosenbloom, 2020). In an asset purchase, the acquirer buys specific assets and assumes specific liabilities designated in the purchase agreement. The target company may remain as a shell or be liquidated afterward. Asset purchases allow the acquirer to avoid unwanted liabilities but may require third-party consents for contract transfers. (Rosenbloom, 2020)

The role of the chartered accountant in an acquisition is multifaceted and extends throughout the transaction lifecycle. Pre-acquisition roles include target identification (using financial screening criteria), valuation (determining an appropriate offer price), due diligence (investigating the target’s financial health), and deal structuring (recommending share vs. asset purchase, tax optimization). Transaction execution roles include assisting with negotiation (providing financial models and sensitivity analyses), preparing financial schedules for the purchase agreement, and coordinating with lawyers and investment bankers. Post-acquisition roles include purchase price allocation (for accounting purposes), integration of financial systems, and monitoring earn-out provisions (DePamphilis, 2019). (DePamphilis, 2019)

Due diligence is arguably the most critical of these roles. Due diligence has been defined as “an investigation or audit of a potential investment conducted by a prospective buyer to confirm material facts and uncover any hidden risks” (Rosenbloom, 2020, p. 45). Financial due diligence conducted by chartered accountants examines the quality of the target’s earnings, the sustainability of its revenue streams, the reasonableness of its provisions and accruals, its working capital requirements, its debt covenants, its tax compliance, and its off-balance-sheet arrangements. The due diligence report identifies “deal-breakers” (issues that should cause the acquirer to walk away), “price adjusters” (issues that justify a lower price), and “integration priorities” (issues that must be addressed post-closing). (Rosenbloom, 2020)

2.2.4 Liquidation

Liquidation (also called winding-up) is the legal process by which a company’s existence is brought to an end. The process involves realizing the company’s assets (converting them into cash), paying its creditors according to their legal priority, and distributing any surplus to shareholders (Keay, 2020). Upon completion of liquidation, the company is formally dissolved and ceases to exist as a legal entity. Liquidation is distinct from other insolvency procedures such as administration (which aims to rescue the company as a going concern) or receivership (where a secured creditor appoints a receiver to recover its debt). Liquidation is terminal: once completed, the company cannot resume operations. (Keay, 2020)

There are two main types of liquidation: voluntary and compulsory. Voluntary liquidation is initiated by the company’s shareholders passing a special resolution (typically 75% majority) to wind up the company. Voluntary liquidation may be further divided into members’ voluntary liquidation (MVL) where the company is solvent and can pay all its debts within 12 months, and creditors’ voluntary liquidation (CVL) where the company is insolvent (Finch and Milman, 2017). In an MVL, shareholders appoint the liquidator and control the process; in a CVL, creditors have the right to appoint the liquidator and monitor proceedings. Compulsory liquidation is ordered by a court following a winding-up petition, typically presented by an unpaid creditor, the company itself, a director, or a shareholder. Grounds for compulsory liquidation include the company’s inability to pay its debts (the most common ground), the company’s having not commenced business within one year of incorporation, or the court being of the opinion that it is just and equitable to wind up the company. (Finch and Milman, 2017)

The role of the chartered accountant as a liquidator is central to the liquidation process. Upon appointment, the liquidator takes control of all company assets, books, and records; investigates the company’s affairs and the conduct of its directors; prepares or verifies the statement of affairs; adjudicates creditor claims; realizes assets; distributes proceeds according to statutory priorities; and ultimately applies for the company’s dissolution (Tolmie, Mullen, and Smith, 2017). The liquidator acts as a fiduciary, owing duties to all creditors impartially, and may be personally liable for breaches of duty. In many jurisdictions, including Nigeria, only chartered accountants and solicitors are eligible to be appointed as liquidators in compulsory liquidation, reflecting the professional judgment required. (Tolmie et al., 2017)

The chartered accountant’s role also includes forensic investigation to identify voidable transactions. Under insolvency legislation, certain transactions undertaken shortly before liquidation (typically within six months to two years) may be “clawed back” by the liquidator. These include preferential payments (payments to certain creditors that give them an advantage over others), transactions at an undervalue (asset transfers for significantly less than market value), and extortionate credit transactions (Goode, 2018). The liquidator must analyze the company’s transaction history, gather evidence, and take legal action to recover value for the general body of creditors. This forensic role requires the chartered accountant to have skills in investigative accounting, evidence gathering, and legal procedure. (Goode, 2018)

2.3 Theoretical Framework

This section presents the theories that provide the conceptual lens for understanding the role of the chartered accountant in corporate transactions. Four theories are discussed: agency theory, stewardship theory, stakeholder theory, and the going concern concept. Each theory explains different aspects of the accountant’s functions and responsibilities.

2.3.1 Agency Theory

Agency theory, developed by Jensen and Meckling (1976), posits that a corporation is a nexus of contracts between principals (shareholders) and agents (directors and managers). The principal delegates decision-making authority to the agent, but the agent may pursue self-interest (e.g., excessive compensation, empire building, shirking) rather than maximizing shareholder value. This divergence of interests creates agency costs, including monitoring costs (expenditures to oversee the agent), bonding costs (expenditures by the agent to assure the principal), and residual loss (the value lost despite monitoring). The role of the chartered accountant in this framework is to reduce agency costs by providing independent verification of the agent’s financial reports (Jensen and Meckling, 1976). (Jensen and Meckling, 1976)

In the context of company formation, agency theory explains why lenders and minority investors demand that a newly formed company appoint a chartered accountant to prepare and audit its financial statements. Without such independent verification, external capital providers cannot trust the representations of founding directors, leading to higher costs of capital or outright denial of credit (Watts and Zimmerman, 1986). The chartered accountant’s audit opinion reduces information asymmetry between insiders (directors) and outsiders (shareholders, creditors), thereby reducing agency costs and facilitating capital formation. (Watts and Zimmerman, 1986)

In acquisitions, agency theory highlights the potential for managerial self-interest to drive value-destroying transactions. Managers may pursue acquisitions to increase the size of the firm under their control (empire building) or to entrench themselves by making the firm too complex to be easily acquired (takeover defense) (Jensen, 1986). The chartered accountant’s due diligence and valuation roles serve as a check on managerial discretion by providing objective, evidenced-based assessments of target companies. When an independent accountant certifies that a proposed acquisition price is fair, the board and shareholders have greater confidence that managerial self-interest has not distorted the decision. (Jensen, 1986)

In liquidation, agency theory explains the need for an independent liquidator when a company becomes insolvent. Once a company is insolvent, the interests of shareholders and creditors diverge sharply: shareholders may prefer high-risk gambles (since they have limited downside), while creditors prefer asset preservation (Jensen and Meckling, 1976). The chartered accountant as liquidator steps into the shoes of the directors and acts as an agent for the creditors, ensuring that remaining assets are preserved, realized efficiently, and distributed according to legal priorities. The accountant’s independence from both shareholders and pre-liquidation management is essential to this monitoring function. (Jensen and Meckling, 1976)

2.3.2 Stewardship Theory

Stewardship theory offers an alternative perspective to agency theory, arguing that managers are inherently motivated to act in the best interests of the principal because they derive satisfaction from achieving organizational goals (Donaldson and Davis, 1991). Stewards are collectivists who prioritize organizational success over individual self-interest. Unlike agency theory’s assumption that monitoring and controls are necessary, stewardship theory suggests that empowering managers (decentralization, participation, trust) produces better outcomes. The role of the chartered accountant in this framework is not merely monitoring but enabling and facilitating management’s stewardship function (Donaldson and Davis, 1991). (Donaldson and Davis, 1991)

In the context of company formation, stewardship theory explains why chartered accountants often act as trusted advisors to founders, helping them navigate regulatory requirements not as a compliance burden but as a foundation for sustainable growth. The accountant who adopts a stewardship perspective works collaboratively with promoters to design accounting systems, internal controls, and governance structures that support the founders’ vision rather than merely imposing external constraints (Davis, Schoorman, and Donaldson, 1997). This collaborative relationship is particularly important in small and medium-sized enterprises (SMEs), where the same chartered accountant may serve as auditor, tax advisor, and strategic consultant. (Davis et al., 1997)

In acquisitions, stewardship theory suggests that accountants act not just as monitors but as partners in creating value. The accountant conducting due diligence is not merely searching for “red flags” to justify a price reduction; rather, the accountant seeks to understand the target’s business model, identify integration synergies, and help management structure the deal in a way that preserves the target’s valuable intangible assets (such as employee morale or customer relationships) (Davis et al., 1997). This collaborative orientation is particularly evident in friendly acquisitions where the target’s management is expected to remain post-acquisition. (Davis et al., 1997)

In liquidation, stewardship theory may appear less relevant, but it applies to the relationship between the liquidator and creditors. A stewardship-oriented liquidator views the liquidation not merely as a mechanical process of asset sale and distribution but as a professional responsibility to maximize value for creditors while treating all stakeholders (employees, customers, suppliers) with fairness and respect (Donaldson and Davis, 1991). This perspective leads to practices such as continuing to trade a business as a going concern for a limited period to achieve a better sale price, rather than an immediate “fire sale” of assets. The chartered accountant acting as a steward balances the imperative to realize value quickly with the obligation to preserve the goodwill and relationships that maximize long-term recovery. (Donaldson and Davis, 1991)

2.3.3 Stakeholder Theory

Stakeholder theory, articulated most prominently by Freeman (1984), argues that corporations have responsibilities not only to shareholders but to all parties who are affected by or can affect the achievement of corporate objectives. Stakeholders include employees, customers, suppliers, creditors, local communities, government regulators, and the environment. Effective management requires balancing the legitimate interests of these multiple stakeholders, not maximizing shareholder value to the exclusion of others (Freeman, 1984). The role of the chartered accountant in this framework is to provide information and assurance that enables the corporation to manage its stakeholder relationships responsibly. (Freeman, 1984)

In company formation, stakeholder theory explains why chartered accountants advise founders to consider the interests of future employees (e.g., pension arrangements), local communities (e.g., environmental impact assessments), and regulators (e.g., licensing and reporting obligations) from the outset. A company formed with narrow shareholder focus may achieve rapid early growth but later face employee unrest, regulatory fines, or community opposition that destabilizes the business (Donaldson and Preston, 1995). The chartered accountant, by bringing a broader perspective to the formation process, helps founders build a sustainable enterprise rather than a short-lived entity. (Donaldson and Preston, 1995)

In acquisitions, stakeholder theory is particularly relevant because acquisitions profoundly affect multiple stakeholder groups. Target company employees face redundancy; customers face potential service disruption; suppliers face loss of contracts; local communities face economic changes (Clarkson, 1995). The chartered accountant’s due diligence should examine not only financial risks but also stakeholder-related risks: employee morale, union relations, customer concentration, supplier dependencies, and community licenses to operate. An acquisition that is financially sound but socially destructive may ultimately fail due to stakeholder opposition. The accountant’s role includes identifying these non-financial risks and quantifying them where possible. (Clarkson, 1995)

In liquidation, stakeholder theory is most vividly illustrated because liquidation is the ultimate failure of the corporation to satisfy stakeholder claims. Creditors are the primary stakeholders in liquidation, but employees (unpaid wages, redundancy), customers (unfulfilled orders, lost deposits), and the government (unpaid taxes) are also affected (Clarkson, 1995). The chartered accountant as liquidator must navigate these competing claims while adhering to the statutory priority of payments. However, within the legally prescribed framework, the accountant has discretion regarding timing of asset sales, communication with stakeholders, and decisions to pursue or waive claims. Stakeholder theory provides ethical guidance for exercising this discretion in a fair and transparent manner. (Clarkson, 1995)

2.3.4 The Going Concern Concept

The going concern concept is a fundamental accounting principle that assumes an entity will continue to operate for the foreseeable future (typically the next 12 months) without the intention or necessity of liquidation (International Accounting Standards Board, 2020). Under IAS 1 Presentation of Financial Statements, management is required to assess the entity’s ability to continue as a going concern. If there are material uncertainties that cast significant doubt on the entity’s ability to continue, those uncertainties must be disclosed. If management concludes that the entity is not a going concern, the financial statements must be prepared on a break-up basis, with assets stated at net realizable value rather than historical cost or recoverable amount. (IASB, 2020)

The going concern concept directly structures the chartered accountant’s role across the corporate lifecycle. At formation, the accountant advises promoters on whether the business plan supports a going concern assumption. If the company is formed for a finite purpose (e.g., a special purpose vehicle for a single project), the accountant ensures that the financial statements clearly disclose the limited life and the basis of preparation (Elliott and Elliott, 2019). At acquisition, the acquirer’s accountant assesses whether the target is a going concern; a target that is not a going concern (i.e., facing imminent liquidation) should be valued on a break-up basis, which is typically lower than a going concern valuation. The purchase price allocation must reflect the appropriate valuation basis. (Elliott and Elliott, 2019)

At liquidation, the going concern concept is directly inverted. Once the decision to liquidate is made, the going concern assumption ceases to apply. The chartered accountant as liquidator must prepare financial statements on a break-up basis, restating assets at their estimated realizable values (which may be substantially below book value) and reclassifying liabilities as current. The accountant’s report to creditors includes an explanation of the basis of preparation and the reasons for the departure from the going concern assumption (IASB, 2020). Failure to properly abandon the going concern assumption when liquidation is inevitable can mislead creditors about the assets available for distribution. (IASB, 2020)

The going concern concept also creates professional liability exposure for chartered accountants. An auditor who issues an unqualified audit opinion (implying the company is a going concern) shortly before the company collapses may be sued for negligence by creditors who relied on the audit opinion. Conversely, a liquidator who prematurely abandons the going concern assumption (e.g., by forcing a fire sale of assets when a viable restructuring was possible) may be liable to creditors for the value lost (Elliott and Elliott, 2019). The chartered accountant must therefore exercise professional judgment, informed by evidence and experience, in assessing going concern status—a judgment that is central to formation, acquisition, and liquidation decisions. (Elliott and Elliott, 2019)

2.4 Empirical Review

This section reviews empirical studies that have investigated the role of chartered accountants in company formation, acquisition, and liquidation. The review is organized by corporate lifecycle stage.

2.4.1 Empirical Studies on Company Formation

Several studies have examined the role of professional accountants in the formation and early-stage development of companies. Berry, Sweeting, and Goto (2006) conducted a longitudinal study of 120 newly formed small and medium-sized enterprises (SMEs) in the United Kingdom over a three-year period. The study found that SMEs that engaged a chartered accountant within the first six months of formation had significantly higher survival rates at the three-year mark (78%) compared to those that delayed engagement (52%). The accountants contributed to tax planning, cash flow forecasting, and regulatory compliance. The study concluded that early engagement of an accountant is a predictor of SME longevity. (Berry et al., 2006)

In the Nigerian context, Okafor and Mbagwu (2019) surveyed 250 small business owners in Lagos State regarding their use of professional accounting services during company formation. The study found that only 35% of respondents had engaged a chartered accountant at the formation stage; the majority relied on friends, non-qualified agents, or online incorporation platforms. Among those who did not engage an accountant, 68% reported subsequent difficulties with tax registration, 54% reported incorrect filing of annual returns, and 42% reported penalties from the Corporate Affairs Commission. The study recommended mandatory accountant involvement in the formation of companies with authorized share capital above a certain threshold. (Okafor and Mbagwu, 2019)

A study by Jayawarna, Macpherson, and Wilson (2007) examined the value added by chartered accountants to newly formed companies beyond compliance. The study employed in-depth interviews with 45 accountants and 60 owner-managers. Accountants reported that their most valuable contributions were often not statutory (audit, tax filing) but advisory: business planning, financial management training for non-financial managers, and introductions to bankers and investors. Owner-managers confirmed that they valued the accountant as a “sounding board” and “trusted advisor” more than as a compliance officer. The study concluded that the role of the accountant in formation extends significantly beyond filling out registration forms. (Jayawarna et al., 2007)

Carey, Tanewski, and West (2018) conducted a quantitative study of 312 accounting firms in Australia to determine which services were most frequently provided to newly formed companies. The survey found that the most common services (provided to >80% of clients) were: advice on business structure (sole trader, partnership, company), obtaining an Australian Business Number (ABN), GST registration, and setting up accounting software. Less common but higher-value services included preparing a business plan (provided to 32% of clients), financial forecasting (28%), and arranging external finance (15%). The study noted a positive correlation between the number of services provided and client satisfaction scores. (Carey et al., 2018)

2.4.2 Empirical Studies on Acquisitions

The role of chartered accountants in corporate acquisitions has been extensively studied, particularly regarding due diligence and valuation. Krishnan and Lee (2021) analyzed 450 acquisition transactions completed in the United States between 2010 and 2018, examining the relationship between due diligence quality (measured by the number of material adjustments identified before closing) and post-acquisition performance. The study found that acquisitions where the acquiring company engaged a Big Four accounting firm for due diligence had, on average, 23% fewer post-closing purchase price adjustments and 18% higher return on investment (ROI) at the two-year post-acquisition mark. The study concluded that high-quality due diligence by chartered accountants significantly reduces adverse selection problems in acquisitions. (Krishnan and Lee, 2021)

A study by Feldman and Spratt (2019) examined the role of valuation by chartered accountants in cross-border acquisitions. The researchers analyzed 120 cross-border deals involving emerging market targets and developed country acquirers. They found that valuation disagreements between the acquirer’s accountant and the target’s accountant were the primary reason for deal abandonment in 34% of cases. When disagreements occurred, deals that proceeded despite the disagreement resulted in a mean overpayment of 27% (as measured by the difference between the final purchase price and the average of the two valuations). The study recommended regulatory guidance on valuation methodologies to reduce this source of deal friction. (Feldman and Spratt, 2019)

In the Nigerian context, Eze and Ogundipe (2021) surveyed 85 chartered accountants who had participated in at least one acquisition transaction in the preceding five years. The survey identified the most challenging aspects of the accountant’s role: obtaining reliable financial data from target companies (reported by 72% of respondents), valuing intangible assets (reported by 68%), and assessing contingent liabilities (reported by 61%). Respondents also reported that time pressure from clients (often seeking to close deals quickly) led to compromised due diligence depth in 43% of engagements. The study called for professional guidance on minimum due diligence standards for acquisitions of different sizes. (Eze and Ogundipe, 2021)

A longitudinal study by Bates and Neyland (2020) followed 300 acquisitions over a five-year period to assess the impact of the chartered accountant’s involvement in post-acquisition integration. The study found that acquisitions where the same accounting firm conducted both due diligence and post-acquisition integration had significantly higher survival rates (71% of the combined entity remained independent after three years) compared to those where a different firm handled integration (52%). The continuity of the accounting team facilitated smoother integration of financial systems, harmonization of accounting policies, and faster realization of synergies. The study recommended that acquiring companies retain their due diligence accountants for post-acquisition work. (Bates and Neyland, 2020)

2.4.3 Empirical Studies on Liquidation

The role of chartered accountants as liquidators has received significant empirical attention, particularly regarding conflicts of interest and creditor recovery rates. Okoye, Nnamdi, and Ugwu (2020) conducted a study of 150 compulsory liquidation cases in Nigeria over a ten-year period (2009–2019). The study found that the average duration of liquidation was 4.2 years, with significant variation: cases handled by chartered accountants from larger firms (Big Four affiliates) took an average of 3.1 years, while those handled by sole practitioners took 5.8 years. Creditor recovery rates also varied: Big Four-affiliated liquidators achieved average recovery of 34% of admitted claims, while sole practitioners achieved 21%. However, the study also found that 12% of liquidators had faced allegations of misconduct, including undue delay, excessive fees, and self-dealing in asset sales. (Okoye et al., 2020)