UTILIZATION OF ACCOUNTING PROFESSIONAL SKILLS IN SMALL SCALE FIRMS

CHAPTER ONE: INTRODUCTION

1.1 Background of the Study

Accounting professional skills refer to the knowledge, competencies, abilities, and expertise that trained and qualified accountants possess to perform accounting functions effectively. These skills include technical accounting skills (preparation of financial statements, bookkeeping, tax computation, auditing, cost accounting), analytical skills (financial analysis, ratio analysis, variance analysis, interpretation of financial data), soft skills (communication, problem-solving, ethical judgment, attention to detail), and technology skills (proficiency in accounting software, spreadsheets, data analytics). Professional accountants acquire these skills through formal education (degree in accounting), professional certification (ICAN, ACCA, ANAN, CIMA), and practical experience (internship, on-the-job training) (IFAC, 2019). (IFAC, 2019)

Small scale firms (also called small and medium enterprises, SMEs, or micro enterprises) are businesses that operate on a smaller scale than large corporations in terms of employment, assets, and annual turnover. In Nigeria, the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) classifies small enterprises as those with 10-49 employees and annual turnover between ₦5 million and less than ₦50 million. Micro enterprises have 1-9 employees and annual turnover below ₦5 million (SMEDAN, 2020). Small scale firms constitute over 90% of all businesses in Nigeria, employ approximately 60% of the workforce, and contribute about 48% to the national GDP. They operate across all sectors: manufacturing, trade, services, agriculture, construction, and information technology. (SMEDAN, 2020)

The utilization of accounting professional skills in small scale firms refers to the extent to which these firms employ qualified accountants (or persons with accounting training) and the extent to which they apply accounting skills (record keeping, financial reporting, tax compliance, cost analysis, budgeting, financial analysis) in their operations. Utilization can be measured by: (1) whether the firm employs a qualified accountant (ICAN, ACCA, ANAN certified); (2) whether the owner has accounting training (diploma, degree, certificate); (3) whether the firm uses accounting software; (4) whether the firm prepares regular financial statements (monthly, quarterly, annually); (5) whether the firm performs financial analysis (ratio analysis, trend analysis); and (6) whether the firm uses accounting information for decision-making (pricing, budgeting, investment) (Okoye, Okafor, and Nnamdi, 2020). (Okoye et al., 2020)

The importance of accounting professional skills for small scale firms cannot be overstated. These skills enable firms to (Adeyemi and Fadipe, 2019). (Adeyemi and Fadipe, 2019)

• Maintain proper accounting records: Qualified accountants know how to set up and maintain proper books of accounts (cash book, ledgers, journals).
• Prepare accurate financial statements: Qualified accountants can prepare income statements, balance sheets, and cash flow statements that accurately reflect the firm’s financial position.
• Compute and file taxes correctly: Qualified accountants understand tax laws, can compute taxable income accurately, and can file tax returns on time, avoiding penalties.
• Analyze financial performance: Qualified accountants can calculate financial ratios (profitability, liquidity, solvency, efficiency) to assess the firm’s performance and identify problems.
• Make informed decisions: Qualified accountants provide financial information that supports decisions about pricing, purchasing, investment, expansion, and cost reduction.
• Access finance: Qualified accountants can prepare financial statements and business plans required by banks and investors.
• Prevent and detect fraud: Qualified accountants can design and implement internal controls that prevent and detect fraud.

Despite the importance of accounting professional skills, many small scale firms in Nigeria do not utilize these skills. Okafor and Amalu (2018) found that only 28% of small scale industries maintained complete and up-to-date accounting records; 44% maintained incomplete or irregular records; and 28% maintained no written records at all. Adeyemi and Unuigbe (2020) found that only 15% of small scale firms employed a qualified accountant (ICAN, ACCA, ANAN certified); 25% had an owner with accounting training; and 60% had no accounting training or qualified staff. (Adeyemi and Unuigbe, 2020; Okafor and Amalu, 2018)

Several factors affect the utilization of accounting professional skills in small scale firms (Okoye et al., 2020). (Okoye et al., 2020)

• Cost: Qualified accountants command higher salaries than unqualified bookkeepers. Many small firms cannot afford to employ a qualified accountant.
• Lack of awareness: Some small business owners do not understand the value of accounting professional skills. They believe that “anyone can do bookkeeping.”
• Perceived complexity: Some owners believe that accounting is too complex and that they can manage without it.
• Size of firm: Very small firms (micro enterprises) may not need full-time qualified accountants; they may use part-time or outsourced accountants.
• Informal business operations: Many small firms operate informally (no registration, cash transactions, no tax registration) and do not see the need for formal accounting.
• Availability: Qualified accountants prefer to work for large corporations (higher salaries, better benefits) rather than small firms.

The consequences of low utilization of accounting professional skills are severe (Nwankwo, 2017). (Nwankwo, 2017)

• Poor record keeping: Without accounting skills, owners cannot maintain proper records, leading to incomplete or inaccurate financial information.
• Inability to determine profitability: Owners do not know whether their business is making a profit or loss.
• Cash flow problems: Without accounting skills, owners cannot forecast cash flow or manage working capital effectively.
• Tax penalties: Without accounting skills, owners cannot compute taxes correctly or file returns on time, leading to penalties.
• Inability to access finance: Banks reject loan applications due to lack of financial statements.
• Business failure: Poor financial management, including lack of accounting skills, contributes to the high failure rate of small businesses (50-70% within five years).

In Nigeria, the professional accounting bodies (ICAN, ACCA, ANAN) have programs to support small businesses. ICAN has the “ICAN SME Gold Label” program, which certifies accountants who provide services to SMEs. ACCA has the “ACCA SME Support” program. However, awareness and utilization of these programs are low (ICAN, 2020). (ICAN, 2020)

The COVID-19 pandemic (2020-2021) highlighted the importance of accounting professional skills. Small firms with accounting skills were able to: (1) apply for government relief funds (CBN’s Targeted Credit Facility, which required financial statements); (2) negotiate with suppliers and landlords based on documented financial positions; (3) identify cost reduction opportunities; (4) plan for recovery; and (5) access digital accounting tools (cloud accounting). Small firms without accounting skills struggled to access relief and plan for survival (Ogunyemi and Adewale, 2021). (Ogunyemi and Adewale, 2021)

Several theories explain the relationship between accounting professional skills and small firm performance. Human capital theory (Becker, 1964) suggests that accounting skills are a form of human capital that increases the productivity and profitability of small firms. Resource-based view (RBV) (Barney, 1991) suggests that accounting skills are a valuable, rare, and difficult-to-imitate resource that can provide competitive advantage. Stewardship theory (Donaldson and Davis, 1991) suggests that owners who invest in accounting skills are better stewards of their business resources. Contingency theory (Chenhall, 2003) suggests that the optimal level of accounting skills depends on the size, complexity, and environment of the firm. (Barney, 1991; Becker, 1964; Chenhall, 2003; Donaldson and Davis, 1991)

1.2 Statement of the Problem

Despite the theoretical importance of accounting professional skills for small firm success, the utilization of these skills in small scale firms in Nigeria is low. This problem manifests in several specific issues.

First, the extent of utilization of accounting professional skills is low. Adeyemi and Unuigbe (2020) found that only 15% of small scale firms employed a qualified accountant (ICAN, ACCA, ANAN certified); 25% had an owner with accounting training; and 60% had no accounting training or qualified staff. Only 20% of firms used accounting software; 80% used manual methods (paper, spreadsheets). (Adeyemi and Unuigbe, 2020)

Second, the types of accounting skills utilized are limited. Among firms that use accounting skills, the most common is basic bookkeeping (recording cash receipts and payments). Few firms prepare financial statements (income statement, balance sheet). Few perform financial analysis (ratio analysis, trend analysis). Few use accounting information for decision-making (pricing, budgeting, investment). Few use accounting software (Adeyemi and Fadipe, 2019). (Adeyemi and Fadipe, 2019)

Third, the factors affecting utilization of accounting professional skills are not well understood. Is the low utilization due to cost (cannot afford qualified accountants)? Lack of awareness (do not know the value)? Perceived complexity (think accounting is too hard)? Size of firm (very small firms don’t need full-time accountants)? Informal operations (no registration, no tax)? Availability (qualified accountants prefer large firms)? The relative importance of these factors is unknown. Without understanding the causes, interventions cannot be targeted effectively (Okoye et al., 2020). (Okoye et al., 2020)

Fourth, the relationship between utilization of accounting professional skills and firm performance is not well documented. Do small firms that utilize accounting skills (qualified accountants, financial statements, analysis) have higher profitability? Better cash flow? Higher loan approval rates? Lower tax penalties? The magnitude of the performance difference is unknown (Nwankwo, 2017). (Nwankwo, 2017)

Fifth, the relationship between utilization of accounting professional skills and decision-making is not well documented. Do owners who utilize accounting skills make better decisions about pricing, purchasing, investment, and expansion? Do they have more confidence in their decisions? The impact on decision quality is unknown (Okoye et al., 2020). (Okoye et al., 2020)

Sixth, the impact of COVID-19 on utilization of accounting professional skills is unknown. The pandemic may have increased utilization (access to relief funds required financial statements) or decreased utilization (cost-cutting). The impact is unknown (Ogunyemi and Adewale, 2021). (Ogunyemi and Adewale, 2021)

Seventh, there is a significant gap in the empirical literature on the utilization of accounting professional skills in small scale firms in Nigeria. Most studies focus on large corporations. Few studies focus specifically on small scale firms. Most studies are descriptive (percentages) rather than analytical (testing relationships). Few studies examine the relationship between skill utilization and firm performance outcomes. This study addresses these gaps (Okoye et al., 2020). (Okoye et al., 2020)

Therefore, the central problem this study seeks to address can be stated as: *The utilization of accounting professional skills in small scale firms in Nigeria is low. The extent and types of skills utilized are limited. The factors affecting utilization are not well understood. The relationship between skill utilization and firm performance is not documented. The impact of COVID-19 is unknown. This study addresses these gaps by examining the utilization of accounting professional skills in small scale firms.*

1.3 Aim of the Study

The aim of this study is to examine the utilization of accounting professional skills in small scale firms in Nigeria, with a view to determining the extent and types of skills utilized, identifying the factors affecting utilization, assessing the relationship between skill utilization and firm performance (profitability, cash flow, access to finance, tax compliance), and proposing evidence-based recommendations for improving skill utilization.

1.4 Objectives of the Study

The specific objectives of this study are to:

1. Determine the extent of utilization of accounting professional skills in small scale firms: employment of qualified accountants (ICAN, ACCA, ANAN), owner accounting training, use of accounting software, preparation of financial statements, performance of financial analysis, and use of accounting information for decision-making.
2. Identify the types of accounting skills utilized by small scale firms: basic bookkeeping, financial statement preparation, tax computation, financial analysis (ratio analysis), budgeting, cost analysis, internal controls, and use of accounting software.
3. Identify the factors affecting utilization of accounting professional skills: cost, lack of awareness, perceived complexity, size of firm, informal business operations, and availability of qualified accountants.
4. Determine the relationship between utilization of accounting professional skills and firm profitability (profit margin, net income).
5. Determine the relationship between utilization of accounting professional skills and cash flow management (frequency of cash shortages).
6. Determine the relationship between utilization of accounting professional skills and access to finance (loan application success rate).
7. Determine the relationship between utilization of accounting professional skills and tax compliance (tax penalties).
8. Determine the relationship between utilization of accounting professional skills and decision-making quality (pricing, purchasing, investment).
9. Assess the impact of the COVID-19 pandemic on utilization of accounting professional skills.
10. Propose evidence-based recommendations for improving the utilization of accounting professional skills in small scale firms.

1.5 Research Questions

The following research questions guide this study:

1. What is the extent of utilization of accounting professional skills in small scale firms (employment of qualified accountants, owner accounting training, use of accounting software, preparation of financial statements, performance of financial analysis)?
2. What types of accounting skills are utilized by small scale firms (basic bookkeeping, financial statement preparation, tax computation, financial analysis, budgeting, cost analysis, internal controls)?
3. What factors affect the utilization of accounting professional skills (cost, lack of awareness, perceived complexity, size of firm, informal business operations, availability)?
4. What is the relationship between utilization of accounting professional skills and firm profitability?
5. What is the relationship between utilization of accounting professional skills and cash flow management?
6. What is the relationship between utilization of accounting professional skills and access to finance?
7. What is the relationship between utilization of accounting professional skills and tax compliance?
8. What is the relationship between utilization of accounting professional skills and decision-making quality?
9. How did the COVID-19 pandemic affect utilization of accounting professional skills?
10. What recommendations can be proposed for improving utilization of accounting professional skills?

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 (Qualified Accountant and Profitability)

• H₀₁: There is no significant difference in profitability between small scale firms that employ a qualified accountant and those that do not.
• H₁₁: Small scale firms that employ a qualified accountant have significantly higher profitability than those that do not.

Hypothesis Two (Accounting Software and Profitability)

• H₀₂: There is no significant difference in profitability between small scale firms that use accounting software and those that use manual methods.
• H₁₂: Small scale firms that use accounting software have significantly higher profitability than those that use manual methods.

Hypothesis Three (Financial Statements and Access to Finance)

• H₀₃: There is no significant difference in loan application success rates between small scale firms that prepare regular financial statements and those that do not.
• H₁₃: Small scale firms that prepare regular financial statements have significantly higher loan application success rates than those that do not.

Hypothesis Four (Financial Analysis and Tax Compliance)

• H₀₄: There is no significant difference in tax penalties between small scale firms that perform financial analysis and those that do not.
• H₁₄: Small scale firms that perform financial analysis have significantly lower tax penalties than those that do not.

Hypothesis Five (Owner Accounting Training and Decision Quality)

• H₀₅: There is no significant difference in decision-making confidence between small scale firms with owners who have accounting training and those with owners who lack accounting training.
• H₁₅: Small scale firms with owners who have accounting training have significantly higher decision-making confidence than those with owners who lack accounting training.

Hypothesis Six (Cost as a Barrier)

• H₀₆: Cost is not a significant factor affecting the utilization of accounting professional skills in small scale firms.
• H₁₆: Cost is a significant factor affecting the utilization of accounting professional skills in small scale firms.

Hypothesis Seven (Firm Size and Skill Utilization)

• H₀₇: There is no significant relationship between firm size (annual turnover) and the utilization of accounting professional skills.
• H₁₇: There is a significant positive relationship between firm size and the utilization of accounting professional skills (larger firms utilize more skills).

Hypothesis Eight (COVID-19 Impact)

• H₀₈: There is no significant difference in the utilization of accounting professional skills before and during the COVID-19 pandemic.
• H₁₈: The utilization of accounting professional skills was significantly higher during the COVID-19 pandemic than before.

1.7 Significance of the Study

This study holds significance for multiple stakeholders as follows:

For Small Scale Business Owners:
The study provides empirical evidence on the benefits of utilizing accounting professional skills (higher profitability, better cash flow, higher loan approval rates, lower tax penalties, better decisions). Business owners can use this evidence to: (1) invest in accounting training for themselves or their staff; (2) employ qualified accountants; (3) purchase accounting software; (4) prepare regular financial statements; and (5) use financial analysis for decision-making.

For Professional Accounting Bodies (ICAN, ACCA, ANAN):
The study provides evidence on the low utilization of accounting skills in small firms. Professional bodies can use this evidence to: (1) expand SME support programs (e.g., ICAN SME Gold Label); (2) offer low-cost accounting services to small firms (pro bono); (3) develop simplified accounting systems for small firms; (4) provide training and certification for SME accountants; and (5) advocate for government subsidies for SME accounting services.

For the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN):
SMEDAN is responsible for supporting small businesses. The study provides evidence on the accounting skills gap in small firms. SMEDAN can use this evidence to: (1) design accounting skills training programs; (2) partner with ICAN/ACCA to provide affordable accounting services; (3) provide subsidies for accounting software; and (4) monitor skill utilization.

For the Federal Inland Revenue Service (FIRS) and State Internal Revenue Services:
Tax authorities rely on accounting skills for tax compliance. The study provides evidence that firms with accounting skills have lower tax penalties. Tax authorities can use this evidence to: (1) provide free tax clinics for small firms; (2) simplify tax filing for small firms; (3) offer amnesty for past non-compliance; and (4) partner with accounting bodies to improve SME tax compliance.

For Banks and Microfinance Institutions:
Banks require financial statements for loan applications. The study provides evidence that firms with accounting skills have higher loan approval rates. Banks can use this evidence to: (1) provide accounting training as part of loan conditions; (2) offer lower interest rates to firms with qualified accountants; (3) accept simplified financial statements for small loans; and (4) partner with accounting bodies to provide financial statement preparation services.

For Academics and Researchers:
This study contributes to the literature on small business accounting in several ways. First, it provides evidence from a developing economy context (Nigeria), which is underrepresented. Second, it examines the relationship between skill utilization and firm performance outcomes. Third, it identifies factors affecting skill utilization. The study provides a foundation for future research.

For the Nigerian Economy:
Small businesses are the engine of the Nigerian economy (90% of businesses, 60% of employment, 48% of GDP). When small businesses utilize accounting professional skills, they are more profitable, pay more taxes, access more credit, and survive longer. This study contributes to improving small business performance and, ultimately, economic development.

1.8 Scope of the Study

The scope of this study is defined by the following parameters:

Content Scope: The study focuses on the utilization of accounting professional skills in small scale firms. Specifically, it examines: (1) extent of utilization (employment of qualified accountants, owner accounting training, use of accounting software, preparation of financial statements, performance of financial analysis, use of accounting information for decision-making); (2) types of skills utilized (basic bookkeeping, financial statement preparation, tax computation, financial analysis, budgeting, cost analysis, internal controls); (3) factors affecting utilization (cost, lack of awareness, perceived complexity, size of firm, informal business operations, availability); (4) relationship between skill utilization and firm performance (profitability, cash flow, access to finance, tax compliance, decision quality); and (5) COVID-19 impact. The study does not examine large corporations, public sector entities, or non-profit organizations.

Organizational Scope: The study covers small scale firms as defined by SMEDAN: small enterprises (10-49 employees, annual turnover ₦5 million – ₦50 million) and micro enterprises (1-9 employees, annual turnover < ₦5 million). The study includes firms across sectors: manufacturing, trade (wholesale/retail), services (professional, technical, hospitality), agriculture, construction, and information technology. The study excludes medium enterprises (50-199 employees) and large enterprises (200+ employees).

Geographic Scope: The study is conducted in Enugu State, Nigeria. Enugu State is selected because it has a mix of urban and rural small firms, and is representative of South-Eastern Nigeria. Findings may be generalizable to other Nigerian states and to other West African countries, but caution is warranted.

Sample Scope: The study targets a sample of small scale firm owners/managers in Enugu State. The sample includes firms from the Enugu metropolis (urban) and surrounding rural local government areas (rural). The sample includes both registered (CAC) and unregistered firms. The sample includes both sole proprietorships and partnerships (no limited liability companies with multiple directors).

Time Scope: The study covers the period 2022-2023. The study includes retrospective questions about skill utilization before, during, and after the COVID-19 pandemic to assess changes.

Data Sources: The study uses primary data from: (1) structured questionnaire for small firm owners/managers (skill utilization, factors, performance outcomes); (2) interviews with a subset of owners (qualitative insights); and (3) secondary data from SMEDAN, ICAN, ACCA, and FIRS.

1.9 Definition of Terms

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

Term	Definition
Accounting Professional Skills	The knowledge, competencies, abilities, and expertise that trained and qualified accountants possess to perform accounting functions effectively. Includes technical skills, analytical skills, soft skills, and technology skills.
Qualified Accountant	An accountant who is a certified member of a recognized professional accounting body: ICAN (Institute of Chartered Accountants of Nigeria), ACCA (Association of Chartered Certified Accountants), or ANAN (Association of National Accountants of Nigeria).
Small Scale Firm	A business with 1-49 employees and annual turnover below ₦50 million (micro and small enterprises as defined by SMEDAN).
Utilization	The extent to which small scale firms employ qualified accountants, use accounting software, prepare financial statements, perform financial analysis, and use accounting information for decision-making.
Basic Bookkeeping	The recording of daily financial transactions: cash receipts, cash payments, sales, purchases, expenses.
Financial Statement Preparation	The preparation of income statement (profit/loss), balance sheet, and cash flow statement.
Tax Computation	The calculation of taxable income and tax liability for Company Income Tax (CIT), Value Added Tax (VAT), and Personal Income Tax (PIT for sole proprietors).
Financial Analysis	The use of financial ratios (profitability, liquidity, solvency, efficiency) to assess firm performance and identify problems.
Budgeting	The preparation of financial plans (sales budget, expense budget, cash budget) for future periods.
Cost Analysis	The analysis of product costs (direct materials, direct labor, overhead) to determine pricing and profitability.
Internal Controls	Policies and procedures to safeguard assets, ensure accuracy of records, and prevent/detect fraud (segregation of duties, authorizations, reconciliations).
Profitability	The ability of a firm to generate profit. Measured by profit margin (profit/sales) and net income.
Cash Flow	The timing of cash inflows (from sales) and outflows (for expenses). Measured by frequency of cash shortages.
Access to Finance	The ability of a firm to obtain loans from banks or microfinance institutions. Measured by loan application success rate (approved/applied) and loan amount.
Tax Compliance	The degree to which a firm meets its tax obligations (registration, filing, payment). Measured by tax penalties (amount paid for late filing, underpayment).
Decision Quality	The degree to which owners are confident that their decisions (pricing, purchasing, investment) are correct. Measured by self-reported confidence scale (1-5).
COVID-19 Pandemic	The global coronavirus pandemic that disrupted business operations in Nigeria from 2020 to 2021.

CHAPTER TWO: REVIEW OF RELATED LITERATURE

2.0 INTRODUCTION

This chapter presents a comprehensive review of literature relevant to the utilization of accounting professional skills in small scale firms. The review is organized into six main sections. First, the definition of key concepts is provided: accounting professional skills, small scale firms, utilization, and related terms. Second, the utilization of accounting professional skills by small scale firms as a statutory requirement is examined, including legal and regulatory frameworks. Third, the need for accounting professional skills and adherence to laid-down accounting procedures for the implementation of a good accounting system is discussed. Fourth, the concept that accounting professional skills are embodied in the person trained in accountancy is explored, including the training pathways and competencies of professional accountants. Fifth, the application of scientifically produced accounting information for decision-making in small scale firms is examined. Sixth, a summary of the related literature reviewed 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)

2.1 DEFINITION OF CONCEPT

2.1.1 Accounting Professional Skills

Accounting professional skills refer to the knowledge, competencies, abilities, and expertise that trained and qualified accountants possess to perform accounting functions effectively. The International Federation of Accountants (IFAC, 2019) identifies three broad categories of professional skills for accountants: (1) technical skills (financial accounting, management accounting, taxation, auditing, financial reporting, cost accounting); (2) professional skills (analytical thinking, problem-solving, judgment, decision-making, communication, teamwork); and (3) ethical skills (integrity, objectivity, professional competence, confidentiality, professional behavior). (IFAC, 2019)

The Institute of Chartered Accountants of Nigeria (ICAN) defines the competencies expected of a professional accountant through its professional examination syllabus. ICAN requires candidates to demonstrate proficiency in: financial accounting, management accounting, taxation, auditing and assurance, corporate finance, public sector accounting, and ethics (ICAN, 2020). The Association of Chartered Certified Accountants (ACCA) similarly requires proficiency in financial reporting, performance management, taxation, audit and assurance, financial management, and strategic business leadership (ACCA, 2020). (ACCA, 2020; ICAN, 2020)

For small scale firms, the most relevant accounting professional skills include (Adeyemi and Unuigbe, 2020). (Adeyemi and Unuigbe, 2020)

• Bookkeeping skills: Recording financial transactions accurately in cash books, journals, and ledgers.
• Financial statement preparation skills: Preparing income statement, balance sheet, and cash flow statement.
• Tax computation and filing skills: Computing Company Income Tax, Value Added Tax, Personal Income Tax, and filing returns on time.
• Financial analysis skills: Calculating and interpreting financial ratios (profitability, liquidity, solvency, efficiency).
• Budgeting and forecasting skills: Preparing sales budgets, expense budgets, cash budgets, and financial forecasts.
• Cost accounting skills: Analyzing product costs, cost behavior, and break-even points.
• Internal control skills: Designing and implementing controls to prevent and detect fraud.
• Accounting software skills: Using QuickBooks, Sage, Excel, or other accounting software.

2.1.2 Small Scale Firms

Small scale firms (also called small and medium enterprises, SMEs, or micro enterprises) are businesses that operate on a smaller scale than large corporations in terms of employment, assets, and annual turnover. In Nigeria, the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) provides the official classification (SMEDAN, 2020). (SMEDAN, 2020)

Enterprise Category	Employment	Annual Turnover	Assets (excluding land/buildings)
Micro Enterprise	1-9 employees	Less than ₦5 million	Less than ₦5 million
Small Enterprise	10-49 employees	₦5 million – ₦50 million	₦5 million – ₦50 million
Medium Enterprise	50-199 employees	₦50 million – ₦500 million	₦50 million – ₦500 million

For the purposes of this study, “small scale firm” encompasses both micro and small enterprises as defined by SMEDAN. These firms are characterized by (Abor and Quartey, 2010). (Abor and Quartey, 2010)

• Owner-management: The owner is actively involved in day-to-day operations and makes most strategic decisions.
• Limited specialization: The owner and few employees perform multiple functions (production, marketing, finance, administration).
• Limited access to formal finance: Reliance on owner savings, family contributions, and informal sources rather than bank loans.
• Simple management systems: Formal strategic plans, budgets, and accounting systems are rare.
• High vulnerability: More vulnerable to economic shocks, competition, and management deficiencies than large corporations.
• Limited regulatory compliance: Many operate informally, without registration, tax registration, or formal accounting.

2.1.3 Utilization

Utilization refers to the extent to which something (a resource, a skill, a capability) is used or employed. In the context of this study, utilization of accounting professional skills refers to the degree to which small scale firms employ qualified accountants, apply accounting knowledge, use accounting software, prepare financial statements, perform financial analysis, and use accounting information for decision-making (Okoye, Okafor, and Nnamdi, 2020). (Okoye et al., 2020)

Utilization can be measured along several dimensions (Okoye et al., 2020). (Okoye et al., 2020)

• Employment of qualified accountants: Whether the firm employs a certified accountant (ICAN, ACCA, ANAN).
• Owner accounting training: Whether the owner has formal accounting training (diploma, degree, certificate).
• Use of accounting software: Whether the firm uses QuickBooks, Sage, Excel, or other accounting software.
• Preparation of financial statements: Whether the firm prepares income statement, balance sheet, and cash flow statement regularly (monthly, quarterly, annually).
• Performance of financial analysis: Whether the firm calculates and interprets financial ratios.
• Use of accounting information for decision-making: Whether the firm uses accounting information for pricing, budgeting, investment, and expansion decisions.

2.2 UTILIZATION OF ACCOUNTING PROFESSIONAL SKILL BY SMALL SCALE FIRM: A STATUTORY REQUIREMENT

The utilization of accounting professional skills by small scale firms is not merely a matter of good business practice; it is also a statutory requirement under Nigerian law. Several laws mandate that businesses maintain proper accounting records and, by implication, employ persons with accounting skills to do so.

Companies and Allied Matters Act (CAMA) 2020: Section 377 of CAMA 2020 requires that every company (including small scale companies registered with the Corporate Affairs Commission) keep proper accounting records that are sufficient to show and explain the company’s transactions, disclose the company’s financial position with reasonable accuracy, and enable the directors to prepare financial statements. The records must be kept at the company’s registered office and must be retained for at least six years. Failure to keep proper records is an offense punishable by fine (Federal Republic of Nigeria, 2020). (Federal Republic of Nigeria, 2020)

Fiscal Responsibility Act (2007): The Act requires that all businesses (including small scale firms) maintain proper books of accounts and prepare financial statements in accordance with applicable accounting standards. The Act also requires that financial statements be audited by a qualified accountant for businesses above certain thresholds (Federal Republic of Nigeria, 2007). (Federal Republic of Nigeria, 2007)

Companies Income Tax Act (CITA) Cap C21 LFN 2004: CITA requires that every company (including small scale companies) keep proper books of accounts and prepare financial statements for tax purposes. The tax authorities have the power to request accounting records and financial statements for audit. Failure to maintain proper records can result in estimated tax assessments (which are often higher than actual liability) and penalties (Federal Republic of Nigeria, 2004a). (Federal Republic of Nigeria, 2004a)

Value Added Tax Act (VATA) Cap V1 LFN 2004: VATA requires that businesses registered for VAT keep proper records of sales, purchases, and VAT collected and paid. The records must be retained for at least six years. Failure to keep proper records can result in penalties and interest (Federal Republic of Nigeria, 2004b). (Federal Republic of Nigeria, 2004b)

Personal Income Tax Act (PITA) Cap P8 LFN 2004: PITA requires that individuals in business (sole proprietors, partners) keep proper records of business income and expenses for tax purposes. The tax authorities have the power to request accounting records and financial statements for audit (Federal Republic of Nigeria, 2004c). (Federal Republic of Nigeria, 2004c)

Despite these statutory requirements, compliance among small scale firms is low. Okafor and Amalu (2018) found that only 28% of small scale industries maintained complete and up-to-date accounting records; 44% maintained incomplete or irregular records; and 28% maintained no written records at all. Adeyemi and Fadipe (2019) found that only 35% of small scale firms filed annual tax returns; the remainder faced penalties for late filing or non-filing. (Adeyemi and Fadipe, 2019; Okafor and Amalu, 2018)

The low compliance is attributed to several factors: lack of accounting skills, lack of awareness of legal requirements, perceived high cost of compliance, and weak enforcement by regulatory authorities (Okoye et al., 2020). (Okoye et al., 2020)

2.3 NEED FOR ACCOUNTING PROFESSIONAL SKILLS AND ADHERENCE TO LAID DOWN ACCOUNTING PROCEDURE OF THE IMPLEMENTATION OF GOOD ACCOUNTING SYSTEM

A good accounting system is essential for the success and survival of any business, including small scale firms. A good accounting system is one that produces accurate, timely, relevant, and reliable financial information for decision-making. The implementation of a good accounting system requires accounting professional skills and adherence to laid-down accounting procedures (Horngren, Datar, and Rajan, 2018). (Horngren et al., 2018)

Laid-Down Accounting Procedures refer to the established rules, policies, and processes for recording, classifying, summarizing, and reporting financial transactions. These procedures include (Garrison, Noreen, and Brewer, 2018). (Garrison et al., 2018)

• Chart of accounts: A structured list of accounts used to classify transactions (e.g., assets, liabilities, equity, revenue, expenses).
• Double-entry bookkeeping: The system where every transaction has equal debit and credit entries.
• Source document retention: Keeping invoices, receipts, bank statements, and other source documents as evidence.
• Journal entries: Recording transactions in chronological order in journals (sales journal, purchase journal, cash receipts journal, cash disbursements journal, general journal).
• Posting to ledgers: Transferring journal entries to the general ledger and subsidiary ledgers (accounts receivable ledger, accounts payable ledger).
• Trial balance: Preparing a list of all ledger accounts and their balances to check arithmetic accuracy.
• Adjusting entries: Recording accruals, deferrals, depreciation, and other adjustments at period end.
• Financial statement preparation: Preparing income statement, balance sheet, cash flow statement, and notes.
• Closing entries: Closing temporary accounts (revenue, expenses, dividends) to retained earnings.

The need for accounting professional skills in implementing a good accounting system arises from several factors (Horngren et al., 2018). (Horngren et al., 2018)

Complexity of accounting standards: Even for small firms, accounting must follow applicable standards (IFRS for SMEs in Nigeria). Understanding and applying these standards requires professional training.

Tax compliance: Tax laws are complex and change frequently. Computing taxable income, VAT, PAYE, and filing returns requires professional knowledge.

Financial analysis: Interpreting financial ratios and using them for decision-making requires analytical skills that non-accountants may lack.

Internal controls: Designing effective internal controls (segregation of duties, authorizations, reconciliations) requires knowledge of control principles.

Accounting software: Setting up and using accounting software (QuickBooks, Sage) requires training.

Empirical studies have demonstrated that firms with good accounting systems (implemented by qualified accountants) have better performance outcomes. Okoye et al. (2020) found that small firms with good accounting systems (defined as complete records, regular financial statements, and use of accounting software) had significantly higher profitability (ROA 12% vs. 6%, p < 0.05) than firms with poor accounting systems. (Okoye et al., 2020)

2.4 ACCOUNTING PROFESSIONAL SKILL IS EMBODIED IN THE PERSON TRAINED IN ACCOUNTANCY

Accounting professional skills are embodied in the person trained in accountancy. Professional accountants acquire these skills through a combination of formal education, professional certification, and practical experience. The training pathway typically includes (IFAC, 2019). (IFAC, 2019)

Formal Education (University Degree): A bachelor’s degree in accounting (B.Sc. Accounting) from a recognized university. The curriculum covers: financial accounting, management accounting, taxation, auditing, corporate finance, business law, economics, and quantitative methods. Graduates acquire foundational knowledge of accounting principles, concepts, and techniques.

Professional Certification (ICAN, ACCA, ANAN): After the degree, candidates pursue professional certification. The examination syllabus includes: financial reporting, performance management, taxation, audit and assurance, financial management, strategic business leadership, and ethics. Certification demonstrates mastery of professional competencies.

Practical Experience (Internship, Articleship): Candidates must complete 3-5 years of supervised practical experience (articleship) in an accounting firm or corporate finance department. Experience develops practical skills: preparing financial statements, computing taxes, performing audits, using accounting software, and advising clients.

Continuing Professional Development (CPD): Qualified accountants must complete CPD annually (minimum 40 hours) to maintain their certification. CPD ensures that skills remain current with changes in accounting standards, tax laws, and technology.

The competencies of a professionally trained accountant include (ICAN, 2020). (ICAN, 2020)

• Technical competence: Ability to prepare financial statements, compute taxes, conduct audits, and use accounting software.
• Analytical competence: Ability to analyze financial data, calculate ratios, interpret results, and identify problems.
• Ethical competence: Adherence to professional ethics (integrity, objectivity, confidentiality, professional behavior).
• Communication competence: Ability to explain financial information to non-accountants (business owners, managers, regulators).
• Judgment competence: Ability to apply professional judgment in ambiguous situations (estimates, valuations, going concern).

In the context of small scale firms, the professionally trained accountant can provide services such as (Okoye et al., 2020). (Okoye et al., 2020)

• Setting up a proper accounting system (chart of accounts, books, software).
• Recording transactions accurately and completely.
• Preparing monthly, quarterly, and annual financial statements.
• Computing and filing taxes (CIT, VAT, PAYE).
• Analyzing financial performance and advising on improvements.
• Designing internal controls to prevent fraud.
• Assisting with loan applications (preparing financial statements and business plans).

Empirical studies have found that small firms that employ professionally trained accountants have better performance outcomes. Adeyemi and Unuigbe (2020) found that small firms with qualified accountants (ICAN, ACCA, ANAN) had significantly higher profitability (mean ROA 14% vs. 7%, p < 0.01) and higher loan approval rates (75% vs. 25%, p < 0.01) than firms without qualified accountants. (Adeyemi and Unuigbe, 2020)

2.5 APPLICATION OF SCIENTIFICALLY PRODUCED ACCOUNTING INFORMATION

Accounting information is produced through a systematic, scientific process that follows established principles, standards, and procedures. The result is “scientifically produced accounting information”—information that is objective, verifiable, reliable, and relevant for decision-making. The scientific nature of accounting information derives from (IASB, 2018). (IASB, 2018)

• Standardized principles: Accounting follows Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS), which are based on economic theory and empirical research.
• Verifiable evidence: Transactions are supported by source documents (invoices, receipts, bank statements) that can be verified by auditors.
• Objective measurement: Transactions are measured using objective criteria (historical cost, fair value) rather than subjective opinion.
• Double-entry system: The double-entry system ensures arithmetic accuracy (debits = credits) and provides a self-checking mechanism.
• Periodic reporting: Financial statements are prepared at regular intervals (monthly, quarterly, annually), enabling trend analysis.

The application of scientifically produced accounting information in small scale firms involves using this information for decision-making. Key applications include (Horngren et al., 2018). (Horngren et al., 2018)

Pricing Decisions: Accounting information provides product costs (direct materials, direct labor, overhead). Using this information, the owner can set prices that cover costs and provide a desired profit margin. Without accounting information, owners may underprice (selling at a loss) or overprice (losing sales). Nwankwo (2017) found that 44% of small scale businesses were selling at least one product line at a loss because they did not know their true costs. (Nwankwo, 2017)

Purchasing Decisions: Accounting information shows inventory turnover, supplier payment terms, and cash availability. Using this information, the owner can optimize order quantities, negotiate better terms, and avoid stockouts or overstocking.

Investment Decisions: Accounting information provides return on investment (ROI), payback period, and net present value (NPV) for potential investments (new equipment, expansion). Using this information, the owner can evaluate whether an investment will be profitable.

Expansion Decisions: Accounting information shows profitability trends, cash flow, and debt capacity. Using this information, the owner can decide whether to expand (open new branch, hire more staff) or consolidate.

Cost Reduction Decisions: Accounting information shows cost behavior (fixed vs. variable), cost drivers, and variances from budget. Using this information, the owner can identify cost reduction opportunities (renegotiate supplier contracts, reduce waste, improve efficiency).

Financing Decisions: Accounting information (financial statements) is required by banks for loan applications. Using this information, the owner can determine how much to borrow, what interest rate to accept, and what repayment period to choose.

Risk Management Decisions: Accounting information (liquidity ratios, leverage ratios) shows the firm’s exposure to financial risk. Using this information, the owner can decide to reduce debt, increase cash reserves, or hedge against risks.

Empirical studies have found that small firms that apply scientifically produced accounting information for decision-making have better performance outcomes. Okoye et al. (2020) found that small firms that used accounting information for pricing, purchasing, and investment decisions had significantly higher profitability (mean ROA 14% vs. 8%, p < 0.05) and higher survival rates (85% vs. 65%, p < 0.05) than firms that did not. (Okoye et al., 2020)

2.6 SUMMARY OF RELATED LITERATURE REVIEWED

The review of existing literature reveals several key findings and gaps that this study seeks to address.

Key Findings:

1. Low utilization of accounting professional skills: Only 15% of small scale firms employ a qualified accountant; 25% have owners with accounting training; 60% have no accounting training or qualified staff (Adeyemi and Unuigbe, 2020). (Adeyemi and Unuigbe, 2020)
2. Limited types of skills utilized: The most common skill is basic bookkeeping. Few firms prepare financial statements, perform financial analysis, or use accounting software (Adeyemi and Fadipe, 2019). (Adeyemi and Fadipe, 2019)
3. Statutory requirements for accounting records: CAMA 2020, CITA, VATA, and PITA require businesses to maintain proper accounting records and prepare financial statements. Compliance is low (Okafor and Amalu, 2018). (Okafor and Amalu, 2018)
4. Need for accounting skills: Implementing a good accounting system requires professional skills: knowledge of accounting standards, tax laws, internal controls, and accounting software (Horngren et al., 2018). (Horngren et al., 2018)
5. Accounting skills embodied in trained accountants: Professional accountants acquire skills through formal education (B.Sc. Accounting), professional certification (ICAN, ACCA, ANAN), and practical experience (articleship). These skills include technical, analytical, ethical, communication, and judgment competencies (ICAN, 2020). (ICAN, 2020)
6. Application of accounting information: Scientifically produced accounting information is used for pricing, purchasing, investment, expansion, cost reduction, financing, and risk management decisions. Firms that use accounting information have higher profitability and survival rates (Okoye et al., 2020). (Okoye et al., 2020)

Gaps in the Literature:

1. Limited Nigerian-specific evidence on the relationship between skill utilization and firm performance. While studies have documented low utilization, few have quantified the relationship between specific skills (qualified accountant, accounting software, financial statements) and specific performance outcomes (profitability, cash flow, loan approval rates, tax penalties). This study addresses this gap.
2. Lack of comprehensive identification of factors affecting skill utilization. Most studies list factors (cost, lack of awareness, perceived complexity) but do not determine their relative importance. This study quantifies the relative importance of each factor.
3. Lack of research on the impact of COVID-19 on skill utilization. The pandemic may have increased utilization (access to relief funds required financial statements) or decreased utilization (cost-cutting). This study examines COVID-19 impact.
4. Lack of comparison of skill utilization across business sectors (manufacturing vs. trade vs. services). Skill needs may differ by sector. This study compares skill utilization across sectors.
5. Lack of comparison of skill utilization across business sizes (micro vs. small). Larger small firms may utilize more skills. This study compares micro and small enterprises.
6. Lack of theoretical integration (human capital, RBV, stewardship, contingency). Most Nigerian studies are descriptive. This study uses multiple theories.
7. Lack of practical recommendations for improving skill utilization. Most studies describe problems but do not propose solutions. This study proposes evidence-based recommendations.