The main objective of this work is to critically examine cost-effective reporting standard in small and medium scale enterprises in Nigeria.  There is a considerable debate over the appropriate role for small and medium scale enterprises.  Years back, there has been controversy as to whatever the current financial reporting system for small and medium scale enterprise (SMEs) is adequate.  It has been encountered in different countries of the world, including Nigeria.  This study tries to look into the financial reporting by SMEs in various countries and in Nigeria in particular.  It was also discovered that there was a high preference for the use of two sets of generally Accepted Accounting Principles (GAAP) for preparing financial reports, the most preferred was the current financial reporting system of a single set of GAAP with some exclusions for SMEs.  Finally, the study also recommended that the current financial reporting system should continue but with improvement in order to reduce weakness continued in the system.