The Influence Of Nigeria Accounting Standard Board In Financial Reporting

Project and Seminar Material for Accountancy / Accounting

Abstract

This study was carried out on the influence of Nigeria accounting standard board in financial reporting. To achieve this 5 research questions were formulated. Respondents were obtained from Institute of Chattered Accountants of Nigeria. The survey design was adopted and the simple random sampling techniques were employed in this study. The population size comprise of the entire members ofInstitute of Chattered Accountants of Nigeria. In determining the sample size, the researcher purposively selected 63 respondents while 50 respondents were validated. Self-constructed and validated questionnaire was used for data collection. The collected and validated questionnaires were analyzed using frequency tables and percentage. The result of the findings reveals that; accounting standards have not improved the quality of financial reports in Nigeria, non-enforcement of strict compliance measures by the board to ensure conformity with the standards has negative effect on financial reporting in Nigeria, and the standards do not cover all areas of financial reporting and therefore, do not meet up with time challenges. Based on the above findings, the researcher recommended that in terms of compatibility and compliance, that Nigeria should fully adopt the IAS and IFRS as it covers so many areas not hitherto covered by the Nigerian Generally Acceptable Accounting Principles and enforce laws that will ensure compliance. Also on the areas that are not covered by the IFRS but covered by the SAS, the Federal Reporting Council of Nigeria should liaise with the International Accounting Standard Board on ways of adopting such into International Financial Reporting Standards after the normal due process, it is imperative that peer review programme among auditors must be taken seriously since they are a useful oversight mechanism and do provide information on difficulties encountered in the financial reporting and/or audit process (especially where the challenges are sector specific).

Chapter One

Introduction

1.1 Background of the Study

According to Ilaoya (2005), financial reports are the means of communicating to interested parties, information on the resources, obligation and performance of the business entity. These are described as the end product of accounting transactions or economic events aimed to providing qualitative and quantitative financial information to evaluate and predict the performance of the business entity. Financial reporting inductees not only financial statements but also other means of communicating information that relates direct or indirectly to the information provided by the accounting system. That is, information about an entity’s resources, obligation and earning.

In Nigeria, there are various regulatory requirements that must be considered in the preparation of financial reports. They are as follows;

The Companies and Allied Matters Act, 1990 as amended
The Accounting Standards produced by the Nigerian Accounting Standards Board (NASB).
Subsidiary of CBN presidential Guidelines, Stock exchange.
The General Accepted Accounting Practice (GAAP)

Other statutory requirements such as Banks and other financial institutions Decree (BOFID) 1991, the insurance 1991.

Accounting standards are rules comprising of best of practices issued from time to time by a duly empowered body to reviewing existing accounting principles and practices and recommend the best through a standard. In Nigeria, the standard setting body is the Nigeria Accounting Standard Board (NASB), which was set up by the institute of Chartered Accounting of Nigeria. The board was taken over by the government and formally inaugurated on September 9, 1982.

The National Assembly of the federal republic of Nigeria enacted the Nigeria Accounting Standard Board Act on July 10, 2003. The explanatory memorandum to the act shows that the act seeks to establish NASB to be charged with the responsibility and publishing accounting standards to be observed in the preparation of financial statement and to promote and enforce compliance with accounting standard, developed and reviewed by the board.

The Board has the following objectives;

To formulate and publish, in the public interest, accounting standards to be observed in the preparation of financial statements and to promote the general acceptance and adoption of such standards by preparer and users of financial statements;
To promote and sponsor legislation when necessary in order to ensure that the standards developed and published by the Board receive nationwide acceptance, adopting and compliance;
To review, from time to time, the standards developed by the Board in the light of changes in the socials, economic and political environment.

The need for independent standard setting body was what formed the inauguration of Nigerian Accounting Standard Board with fourteen member bodies as follows;

Central Bank of Nigeria
Corporate Affairs Commission
Federal Inland Revenue Service
Nigeria Deposit Insurance Corporation
Security and Exchange Commission
Auditor – General of the Federation
Accounting – General of the Federation
Institute of Chartered Accounting of Nigeria
Association of National Accountants of Nigeria
Federal Ministry of Commerce
Chartered Institute of Taxation of Nigeria
Federal Ministry of Finance
Nigeria Accounting Teachers Association
Nigeria Association of Chambers of Commerce, Industries, Mines and Agriculture.

So far, the Board has issued up to 23 Statements of Accounting Standards and about 26 exposure drafts. An exposure draft is a standard in the making. It is usually issued for a period of six months so as to allow the public and others to make meaningful contribution to the proposed standard.

1.2 Statement of Problem

The Nigeria Accounting Standard Board has produced different accounting standards to ensure a high degree of standardization in the published financial reports in Nigeria. the standards are considered in the preparation of these reports but then the question arises.

How far has the Nigerian Accounting Standards Board achieved its aim in ensuring standardization in the financial reports produced in the country? Could the level of achievement be as a result of compliance or otherwise, with the standard. Virtually all the financial reports are prepared based on the historical cost accounting with rate at which price level changes in recent time. One wonders how these reports which do not the changes in price levels will meet the needs of various users.

The problem necessitated the research into the influence of the Nigeria Accounting Standard Board on financial reporting in Nigeria.

1.3 Objective of the Study

The objective of this research work are:

To check the compliance or otherwise, of the accounting standards by business entities.
To study the effects of the various accounting standards produced by Nigerian Accounting Standard Board on the financial report.
To draw conclusion on their effectiveness and make recommendation where necessary.

1.5 Hypotheses

The study is concerned with testing of the following hypotheses;

Ho: The accounting standards have not improved the quality of financial reports in Nigeria.
H1: The accounting standards have improved the quality of financial reports in Nigeria.
Ho: Non-enforcement of strict compliance measures by the board to ensure conformity with the standards does not have negative effect on financial reporting in Nigeria.
H1: Non-enforcement of strict compliance measures by the board to ensure conformity with the standards has negative effect on financial reporting in Nigeria.
Ho: The Standards do not cover all areas of financial reporting and therefore, do not meet up with time challenges.
H1: The Standards do not cover all areas of financial reporting and meet up with time challenges.

1.5 Significance of the Study

Every business organization uses the financial reports to communicate information about its performance, resources and obligations to interest parties. The reports are prepared in such a way as to meet the different needs of these parties.

It is expected that, at the end of the research work, solutions would be provided to the problem, recommendations on the effectiveness of the standards will be made and also if need be, suggest the review of the standards which may no longer meet the present day requirement of the financial reports.

1.6 Scope of the Study

The study is geared towards reviewing the effects of the standards provided by the Nigerian Accounting Standard Board financial reports in Nigeria. the research will cover how the standards have impacted the quality of information communicated to the users through the financial reports. The researcher is also looking into how the board can copy out its duties more effectively so as to improve financial reporting in the country. The prepare r of the report will not be left out, as the project is aimed at studying how the standards could be used to improve their reporting skills and also to reflect the true and fair view of the position of organization in all financial reports.

1.7 Limitation of Study

It should be noted that this study is limited to only Accounting Standards produced by the Nigeria Accounting Standard Board, as its affects financial reporting in the country. Other regulatory requirements (and frameworks) are not considered.

In gathering data needed for this research work, the scope of the study might be limited by the knowledge of the respondents, their unwillingness to give out data and also validity of the data derived/collected. Also, the staff of the Board might not be able to give the research enough attention since they have to carry out their primary duties in their various offices.

Data analysis is another limitation. The statistical methods and samples that may/would be used in the analysis might not represent whole population.

Chapter Five

Summary, Conclusions and Recommendations:

5.1 Introduction

This chapter summarizes the findings into the influence of Nigeria accounting standard board in financial reporting. The chapter consists of summary of the study, conclusions, and recommendations.

5.2 Summary of the Study

In this study, our focus was on the influence of Nigeria accounting standard board in financial reporting. The study specifically was aimed at checking the compliance or otherwise, of the accounting standards by business entities, study the effects of the various accounting standards produced by Nigerian Accounting Standard Board on the financial report and draw conclusion on their effectiveness and make recommendation where necessary.

The study adopted the survey research design and purposively enrolled participants in the study. A total of 50 responses were validated from the enrolled participants where all respondent are active members of Institute of Chattered Accountants of Nigeria.

5.3 Conclusions

Based on the findings of this study, the researcher made the following conclusion.

Accounting standards have not improved the quality of financial reports in Nigeria.
Non-enforcement of strict compliance measures by the board to ensure conformity with the standards has negative effect on financial reporting in Nigeria.
The Standards do not cover all areas of financial reporting and therefore, do not meet up with time challenges.

5.4 Recommendation

Based on the findings of this study, the researcher recommended in terms of compatibility and compliance, that Nigeria should fully adopt the IAS and IFRS as it covers so many areas not hitherto covered by the Nigerian Generally Acceptable Accounting Principles and enforce laws that will ensure compliance. Also on the areas that are not covered by the IFRS but covered by the SAS, the Federal Reporting Council of Nigeria should liaise with the International Accounting Standard Board on ways of adopting such into International Financial Reporting Standards after the normal due process.

It is imperative that peer review programme among auditors must be taken seriously since they are a useful oversight mechanism and do provide information on difficulties encountered in the financial reporting and/or audit process (especially where the challenges are sector specific).

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