Role Of The Public Accountant In The Formation, Acquisition And Liquidation Of Companies

1.1 INTRODUCTION
The public accountant is an independent practitioner who works on a gee basis for business management or for individuals wishing to use his services or as member of an accounting firm. Most public accountants are also external authors.

The commonly known services offered by the public accountant include the following:
1. Those that are substantially of auditing nature
2. Those who involve primarily accounting
3. Those pertaining to taxes.

Most people perceive the roles of the public accountant as being limited to the traditional one balance sheet in the process of auditing the financial statements of companies.

The have failed to realize and appreciate that the public accountants provides services in respect of problems relating to conceptualization of business ideas, formation, registration and development of business most importantly on how to do with the collection and presentation of accounting data. They also undertake routine book-keeping for enterprises without adequate book-keeping personnel.

Very often, the accountant is consulted with respect to income tax implication of proactive transactions. In his contribution, Okugi said consultant of his client, the task will be more cost effective and efficient. Hence, he will be able to make comprehensive report to avoid as much tax as possible and avoid unnecessary duplication.

C.A. Okafor2 see the designing of accounting systems for clients as one of the frequently ignored aspects of public accounts in Nigeria.

The public accountant helps in the planning stage of company preparing feasibility studies, writing the expected financial flow-making realistic projections and determining the cost implication of intended projects. He also co-ordinates and uses the input from other professionals to compute, analyze and expose the financial implications of the entire line of action.
Nnam3 added that the accountancy firms perform appraisal of investor to determine their viability and profitability and to check the stability of expected cash flow.

The public accountant draft the Articles of Association, memorandum of Association and formulate the internal policy of the firms. These documents are then filed with the Register of companies. He can also help in the preparation of budget, business plan and installs control systems and procedmes that generate necessary data from which information needed by business if processed. In same circumstances, a new or existing company may rely on the public accountant for recruitment of some specialized manpower or he can send his staff on recommendation to a new business for specified period during which the firm is expected to stand on its own4

He also has important roles to play in the diversification and enhancing of the company’s profitability and stability of income. This is done through regular, advisory service on the best way to utilize ideal funds. He should be able to advise on the more profitable lines in the production process, the services which generate more value added, which services, products or departments should, which services, products or departments should be initiated and which should be discontinued. The accountant gathers and analyzes quantitative information and gives opinion as to which alternative makes economic sense5.

The public accountant can also act, as an insolvency practitioner by examining the company to the whether immediate liquidation is needed or whether the company still stands a chance to succeed.

He can act as a receiver by taking possession of the assets as charged to debenture holders and realizing them and which he withdraws from the company.

He can also act as liquidation by selling and collecting (in case of debts) the assets of the company and pays the proceeds to the entitled.

1.2 THE NATURE OF ACQUISITION, MERGER AND LIQUIDATION
Acquisition refers to all form of merger, amalgamation and take-over bids. It is the process of becoming a holding company or subsidiary involving significant cash out flow from the acquiring company to the acquired company’s shareholders as consideration for acquired interest.

Mergers, also called pooling of interests, describe an acquisition through the exchange of equity shares. Specifically, the parent company issues its own share certificate in exchange of equity shares certificate of the subsidiary. There is no purchase/ sale transaction between the affiliates, so the long term investment by the parent company is carried at the book value of the shares issued as consideration.

Amalgamation is the merger of two or more companies or undertakings of the interest in business or undertakings. The merger could be temporary and involve only certain aspects of a business operation (eg the pooling of orders or sales or formalized co-operation in production or procurement of inputs) this is referred to as partial merger.

It can also be a complete amalgamation and usually involves the absorption of one or two companies by an existing company by new company specially formed for that purpose.

In its narrowest sense, it is the formation of entirely new company to acquire existing separate concern. This necessitate the winding up of the existing companies. In its wider sense, it could be used to mean absorption whereby there is new company formation and is a two company situation, there will be only one liquidation.7

Liquidation can be described as a situation whereby authorization is given to sell business of the old company to a new company and in consideration to accept, shares in the new company for the agreed asset value. The only asset in the hands of the liquidator is now these new shares and he distributes them to the old shareholders. The end result is the shareholders now hold share in the new company at the agreed reduced valuation and the new company owns the business.

The principal advantage from the point of view of the shareholders is that dissenting shareholders have the right to acquire the liquidator either to abstain from carrying the resolution of effect or to purchase their shares at an agreed price.

1.3 REASONS FOR ACQUISITION, MERGER AND LIQUIDATION
Expansion is a major objectives of most organizations. Usually a large and profitable company with adequate records invests on other companies.

The investment can be short term or long term; it can be an investment in debt securities or in the share capital of the other company. When a company invests in the shares (ordinary or preference) of another company, the reason may be just to employ idle case and earn some additional revenue or it could be to enhance growth through the production and sale of new products and services.

Additional reasons may be to gain access to new markets and supply sources or to exercise influence and control over the company whose shares are acquired. When the desire is to effect control a company invests in the ordinary shares of the other company.
Companies who could not stand the presume of the government economic policy collapsed due to structural Adjustment programme (SAP) introduced in 1986 which was directed towards encouraging Nigerian companies to source their raw materials locally and the self-sustaining. To provide themselves with a strong common front against the industrial constraints, many other average companies came together to form a merger. And yet the big one emerged to acquire the weak companies. For instance, seven-up Bottling company acquired’ schwapps’, lever Brothers Limited also merged with liptons Nigeria limited.
In Nigeria today, the number or record of company, failures mergers and acquisition is intriguing and the trends from all indications are expected to continue as more and more companies continue to absorb the stringent impact of ASP. And only those companies with the correct and adequate mix of resources can survive.

1.4 STATEMENT OF PROBLEMS
Peter Langard stated that the most proprietors of small businesses look upon the statutory audit as an imposition and do not feel that there is any value to the business firm from it.
Thinking makes it imperative on the accountants to emphasis the non-audit roles in order to retain the prestige, improve their income, ensure the satisfaction of their clients and enhance national economic development.
Thus, most people including potential investors and entrepreneurs do not understand the expert services the professional accounting firm can provide them.
The above problem, that is the lack of understanding of the accountants other capabilities has called for some questions, answers to which will give an insight into the non-auditing roles of accounting firms, especially at the formation and infancy staged of business. The quest are:
(i) What are the usual problems proprietors encounter prior to, at the formation and at the initial stage of their business?
(ii) Which of the accountants usual function are specifically relevant to the needs of new firms?
(iii) Can public accountants assist in the planning, registration and management of young firm? To what extent can the accountant’s involvement help the firms to achieve growth and profitability?
(iv) Is it feasible and advisable for public accounting firms to initiate enlightenment programme through organization of lectures, symposia, seminars and so on with an aim of encouraging potential entrepreneurs to set, up business?

1.5 PURPOSE OF STUDY
The purpose of this study is to bring to the notice of the public particularly potential investors and entrepreneurs, the services the professional accountants can provide them.
It is at exposing to them the problems firms will undergo at infancy and highlighting those areas where the public accountants will readily provide succour.
Besides, it seeks to bring to the notice of the chartered accountants, the pressing needs of today’s small firms in the Nigerian context with a view to making them respond swiftly and decisively to such needs.
In summary, the purpose of this study is to answer the questions raised at the problem statement which this writer believes will be of mutual benefit to the public as well as the accountant.

1.6 SIGNIFICANCE OF STUDY
The main beneficiaries of this study are public, the accounting firms, professional accounting bodies and government.
a. PUBLIC: This study will enable the public appreciate the duties of the accountants and their capabilities. In particular it will be useful to budding entrepreneurs who may find in the accounting firms, a useful instrument for realizing their dreams of owing their business and making profit through
b. ACCOUNTANT FIRMS: Though this work, the accounting firms may understand more clearly the problems firms and individuals encounter which they are in position to solve.
Subsequently, it will enable them to broaden their services, acquire new clients and provide other related services to their audit clients. This undoubtedly will help improve their image and ultimately their income.|
c. PROFESSIONAL ACCOUNTING BODIES: The outcome of the study may aid the understanding of the new challenges facing accountancy professional in their peculiar environment.
Consequently, this will guide professional accountancy bodies life institute of chartered Accountants of Nigeria, (ICAN) in determining and designing the type of training and exposure that, will be given to its existing and intending members in order to equip them adequately to tackle such problems. Thus, it may find the need to introduce courses and organize lectures with a view to making qualified accountants acquire new skills relevant to the needs of clients and the economy.
d. GOVERNMENT: The active participation of accountancy firms in the formation and development of new firms will help in the realization of governments objectives of encouraging small and medium scale industries. This study may show necessity of government to review certain laws that hinder the accountants from performing their roles in ensuring survival and growth of such firms and make new laws where necessary. Besides, government will benefit from the survival of such companies as it will derive income through taxes and job opportunities will be created.

1.7 HYPOTHESIS
The hypotheses developed for this study are:
(1) That the most compelling constraint to company formation survival and growth in Nigeria is lack of adequate business information and expertise and not, capital shortage.
(2) That Nigerian investors have failed to understand fully the roles and relevance of the accountant to the survival and growth of their businesses.
(3) The Nigerian public Accountants have consistently emphasized their traditional roles of Book-keeping Accountancy and Auditing and neglected their non-audit functions.

1.8 LIMITATION AND SCOPE OF STUDY
The study does not dwell much on the audit function of the accountancy firms since most people seem to be aware of it already and it is perhaps the most popular role of public accountants in Nigeria.
Due to financial and time constraints, this researcher will only take a sample of firms and businessmen in judging the extent to which accountants play roles in development of new enterprises. The sample may be too small for reasonable conclusion to be drawn from it.
Unavailability of related literature on the topic imposes serious limitation on the writer.

1.9 DEFINITION OF TERMS
(a) FORMATION: Implies bringing into being or “bringing into existence.
(b) COMPANIES: Denotes to partnership firms, sole proprietorship, public or private companies, or all forms of business operated.
(c) PUBLIC ACCOUNTANT: Those accountants whose services are rendered to the general public on fee basis.
(d) ACQUISITION: Here refers to all forms of merger, amalgamation, and take-over bids. It is the subsidiary involving significant outflow of cash from the acquiring company.
(e) LIQUIDATION: Act of bringing an existing company that could not continue in business to a close.
(f) ACCOUNTANCY FIRMS: This means business organization consisting primarily of professional accountants registered with ICAN and are qualified to be external auditors to other firms.
(g) CHARTERED ACCOUNTANTS: Refers to follows and Associate members of institute of chartered Accountants of Nigeria and other bodies of accountant recognized in Nigeria which qualifies one to be external auditor of a company.