AN IMPACT OF ETHICAL ACCOUNTING PRACTICES ON BANK PRODUCTIVITY IN NIGERIA (A STUDY OF FIRSTBANK PLC)
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CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
In recent years, widespread ethical lapses and corporate financial scandals have brought the topic to the forefront. Financial Institutions are rushing to adopt codes of ethics, strengthen ethical and legal safeguard, and develop socially responsible policies. Every decade sees its share of corporate, political, and social villains, but the pervasiveness of ethical lapses in the early 2000s was astounding. Over the years the term ethics in organizational outcome has long been associated with management intellectuals and business influentials around the world. There is a broad agreement that as a matter of corporate policy, every organization should strive to be committed in a manner that is ethically transparent. The concept of ethics simply deals with how decisions affect other people and organization (Appah, 2010).
One of the distinctive characteristics of most recognized trades and vocations including the highly regulated accounting profession is the existence of ethical accounting practice which are the hallmarks of global best practices. The society evaluates the performance of professionals on the basis of both moral and technical codes. Adherence to these codes by the practitioners of the profession inspires confidence in the work of the professional by shareholders who depends on the auditor’s opinion as a means of evaluating the integrity of financial statements. The huge and embarrassing corporate failures and high profile frauds in the last two decades has called to question the integrity of the accounting profession both within and from outside the profession, leading to increased demands for ethics within the auditing profession. While the inherent risks in the marketplace, the potential for business failure, or the possibility of human mistakes cannot be entirely eliminated, the principle of professional ethics requires professional accountant to conduct themselves honestly, and in accordance with applicable professional standards. Traditionally, the key feature of a profession is anchored on the grant of a special franchise by society who expects the practitioners of that profession to accept responsibility to provide a degree of regulation and enforcement through expert advice and persuasion thus, relieving the society of the burden of providing that control by other means (Mautz, 1988).
Businesses must create an ethical business climate in order to develop an ethical organization. Otherwise saying, companies must focus on the ethics of employees in order to create an ethical business. Most organizations have come up with codes of ethics in dealing with ethical issues challenging them. Ethical accounting practice is characterized by honesty, fairness and equity in interpersonal, professional and academic relationship and it respects the dignity, diversity and the right of individual and groups of people (Legan, 2000).
Therefore, ethical practices spring virtually from every decision, thus organization stability and survival depends on the consistency of quality of ethical financial decision made by managers. Managers are challenged and encouraged to have obligation on organization performance and society at large, to support and assist the society to imbibe the good ethical culture for the interest of all. An organization forms when individuals with varied interests and different backgrounds unite on a common platform and work together towards predefined goals and objectives thereby increasing firm’s productivity. To some managers however, unethical accounting behavior has come to stay and hardly can a growing firm exist in perpetuity without any form of compromise in this volatile world. Most organization management can equally not distinguish between what is moral and immoral business
1.2 STATEMENT OF PROBLEM
Many African Nations are faced with the crisis that is making the competitive strength of the banking industry more challenging. This crisis involves people in business, customer, and at the peak of unethical practices and especially more worrisome is the unethical accounting practices among employees at all level of the financial institution.
Individual from time to time have to face ethical dilemmas and the problem of weakness of will. Accountants are no different. In the working life of an accountant they encounter numerous situations where they are tempted to choose between right or wrong. That is why a feature of accountancy’s claim to professionalism is its commitments to ethical standards. This involves an assurance that the accountancy bodies and their members will not pursue their material self-interests in ways that conflict with their duties to the public interest (Appah, 2010). Mathews and Perera (1996) observes that every profession has a built in code of ethics to compel ethical behavior on its members. The rationale for this is obvious.
Aguolu (2006) says that these failures have brought to greater scrutiny the work of the accountant from both within the profession and from outside. Several ethical issues have been discussed in recent times ranging from conflict of interest, insider’s dealings, objectivity, acceptance of gifts etc. scholars are of the opinion that all these ethical issues affect the quality of financial statements. There is therefore a genuine demand that financial institutions should strengthen ethics, integrity, transparency, accountability and professionalism, in order to protect public resources and enhance firm’s performance.
1.3 OBJECTIVES OF THE STUDY
The main purpose of study was to an impact of ethical accounting practices on bank productivity in Nigeria. Other specific objectives include:
- To ascertain whether ethical accounting practices could influence bank productivity in Nigeria.
- To determine if ethical accounting practices has any relationship with Code of Corporate Governance for banking system.
- To examine the effect of ethics on disclosure of financial reports of Nigerian banks.
- To examine the consequences of unethical practices on banks productivity in Nigeria.
1.4 SCOPE OF THE STUDY
The study investigates the impact of ethical accounting practices on bank productivity in Nigeria. The study revolved round the staff of First Bank Plc, Marina, Lagos .
1.5 RESEARCH QUESTIONS
The following research questions were raised in the study as follows:
- To what extent will ethical accounting practices influence bank productivity in Nigeria?
- What is the relationship between ethical accounting practices and bank productivity?
- To what extent will ethics affect the disclosure of financial reports of Nigerian banks?
- What are the consequences of unethical practices on banks productivity in Nigeria?
1.6 RESEARCH HYPOTHESES
The following research hypotheses were formulated and tested as follows:
- Ho: There is no significant relationship between ethical accounting practices and bank productivity.
H1: There is significant relationship between ethical accounting practices and bank productivity.
- Ho: There is no significant relationship between ethical accounting practices and Code of Corporate Governance for banking system.
H1: There is significant relationship between ethical accounting practices and Code of Corporate Governance for banking system.
1.7 SIGNIFICANCE OF THE STUDY
The significance of this study is multi-faceted as it helps in identifying the essence of ethical accounting practices on bank productivity, as this will enhance employees’ performance as things are done correctly in a coordinated member.
Moreover, newly established firms and organizations will actually know the place of proper ethical practices in the continued existence of such an organization. The research of this nature is very important to developing nations like Nigeria that already has a high level of known corruption and sharp business practices, which have permeated all facets of Nigeria’s national life.
This study will also be of great significance to policy analysts, auditors, investors, as well certified public accountants since it will assist in analyzing the effectiveness of the professional code of ethics on employee and management of an organization.
It will therefore equally be of immense help to the various professional bodies in evaluating the success of its activities with specific reference to the problem of poor ethical accounting practices, elimination of unethical organizational behavior, it would also assist the boards in determining or formulating their future plans. Finally this study will be of great significance to schools and students, it will serve as a reference point for future researchers who will want to research more on the topic.
1.8 POPULATION OF THE STUDY
For the purpose of this study, the target population consists of the staff of First Bank Plc, Marina, Lagos, Nigeria, where the total number of the staff is 127.
- DELIMITATION OF THE STUDY
The study will be delimited to the following: Financial institution such as First Bank Plc, Marina, Lagos; Structured questionnaire; and the activities of the accounting professional bodies.
1.9 OPERATIONAL DEFINITION OF TERMS
Ethics: Ethics refers to the code of moral principles and values that governs the behaviors of a person or group with respect to what is right or wrong.
Code of Ethics: A code of ethics within an organization is a set of principles that is used to guide the organization in its decisions, programs, and policies.
Stakeholder: Any person or group within or outside the organization that has a stake in the organization’s performance.
Whistle-Blowing: this entails the disclosure by an employee of illegal, immoral, or illegitimate practices by the organization
Ethical behavior: ethical behavior is that which is morally accepted as good and œright as opposed to œbad or wrong in a particular setting.
Transparency: It is a metaphorical extension of the meaning a œtransparent object is one that can be seen through.
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