| Content | Abstract
The research survey was carried out to determine the effect of ethical issues on the quality of financial reports of banks in Nigeria. This study adopts the survey research design. Data was collected from primary sources using a structured questionnaire. A sample size of sixty (60) respondents was used for this study. Data collected was subjected to descriptive statistics for analysis and hypotheses were tested using a t-test. Linkert scale was used for decision rule in the experiment. A mean score of 2.50 is a cut-off point for determining the adequacy of each of the variables. It was discovered from the result of this study that ethical issues such as objectivity, disclosure, integrity, confidentiality, and professional behavior have a significant effect on the quality of financial reports of banks in the study area. | MARKETING OF BANKING SERVICES IN NIGERIA A STUDY OF FIRST BANK PLC
CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND OF THE STUDY
This project is on Marketing of banking services in Nigeria a study of first bank plc. A bank is a financial institution licensed by a government. Its primary activities include borrowing and lending money. Banks no longer restricted themselves to traditional banking activities, but explored newer avenues to increase business and capture new market. Grönroos., (1990)
- In the 1990s, greater emphasis being placed on technology and innovation.
- New concept like personal banking, retail banking, total branch automation, etc. were introduced
Banks’ activities can be divided into retail banking, dealing directly with individuals and small businesses: business banking, providing services to mid-market business; corporate banking, directed at large business entities; private banking, providing wealth management services to high network individuals and families: and investment banking, relating to activities on the financial markets. Most banks are profit-making, private enterprises. However, some are owned by government, or are non-profit organizations.
Marketing approach in banking sector had taken significance after 1950 in western countries and then after 1980 in Turkey. New banking perceptiveness oriented toward market had influenced banks to create new market. Banks had started to perform marketing and planning techniques in banking in order to be able to offer their new services efficiently. Marketing scope in banking sector should be considered under the service marketing framework, Performed marketing strategy is the case which is determination of the place of financial institutions on customers’ mind. Bank marketing does not only include service selling of the bank but also is the function which gets personality and image for bank on its customers’ mind. On the other hand, financial marketing is the function which relates uncongenitalies, differences and non similar applications between financial institutions and judgement standards of their customers.
The reasons for marketing scope to have importance in banking and for banks to interest in marketing subject can be arranged as:
Change in demographic structure: Differentiation of population in the number and composition affect quality and attribute of customer who benefits from banking services. Intense competition in financial service sector: The competition became intense due to the growing international banking perceptiveness and recently being non limiting for new enterprises in the sector. Increase in liberalization of interest rates has intensified the competition.
Bank’s wish for increasing profit: Banks have to increase their profits to create new markets, to protect and develop their market shares and to survive on the basis of intense competition and demographic chance levels.
1.2 HISTORICAL BACKGROUND OF FIRST BANK NIG. PLC.
First Bank is one of the oldest financial institutions in Nigeria and was the first bank to be established in West Africa. The bank was incorporated as a limited liability company in March 1894 and was listed on The Nigerian Stock Exchange in March 1971. Following the Central Bank of Nigeria’s (“CBN”). induced industry-wide consolidation in 2005, the bank acquired its merchant banking subsidiary. FBN (Merchant Bankers) Limited and MBC International Bank Plc. The bank offers a wide array of financial services to a diverse customer base through its local and offshore offices, including 465 branch offices country wide and 532 ATM’s. In addition to growing organically through new products and branch development, other viable domestic acquisitions are being explored. The intention is to extend the branch network to 600 by the end of 2008.
1.3 STATEMENT OF THE PROBLEM
Primarily, Banks are regarded as only interested in loan and saving and other related transaction but it is quite certain that beyond that, banks do engages themselves in marketing activities. To this effect, the problem of this research work is to know the extents and ways in which the banks carry out their marketing serving such as making use of E-banking, Core - Banking, corporate banking, Mobile banking, Plastic money. NRI banking etc in carrying out their marketing services.
1.4 OBJECTIVES OF THE STUDY
The aim of this research work is to analyze the marketing of banking services and the means in which the services are rendered by the banks. It will go a long way to unveil the new innovative method of marketing services used by banking sector such as E-banking, Core - Banking, corporate banking, Mobile banking. Plastic money. NRI banking etc., it will also investigate into the use of Marketing mix of banking sector in marketing services which involve the analysis of the Banks Products, Price, Pricing, Place, Promotion, Process, Physical evidence. To examine the level of market service delivery in First Bank plc. Owerri in relation to Information Technology (IT) innovations To examine the employees’ perception of the effects of IT innovations on market service delivery in First Bank plc. Owerri
1.5 SIGNIFICANCE OF THE STUDY
This work though will be carried out in reference First Bank PLC, the findings can be significantly applied to the banking industries at large. The essence of investigating into the role of marketing of banking services is to objectively unveil to improvement it has made in the banking industries in regard to the banking services delivery.
1.6 RESEARCH QUESTION
In order to achieve it aims, these project will try to offer answers to the following questions:
- Has the marketing of banking services in the banking industries improved the banking Industries?
- To what extent have the E-banking helped in marketing of banking services
- Is the use of Core - Banking still in existence?
- Is corporate banking necessary in service delivery’?
These and more are the questions this research work has set out to solve.
1.7 RESEARCH HYPOTHESES
For a clearer understanding of the research work and validation of information gotten for the purpose of this research, some hypothetical statement was formulated which will be tested later in chapter four (4). The hypotheses comprise of two: Null hypothesis (H0) and Alternate hypothesis (Hi). the null hypothesis is bound for rejection if the calculated value is greater than the observed value.
Hypothesis I
Ho: The use of New innovative method of marketing services in the marketing of banking has not contributed to the improvement of the services delivery in first bank plc.
Hi: The use of New innovative method of marketing services in the marketing of banking has contributed to the improvement of the services delivery in first bank plc.
Hypothesis II
H0: The application of marketing Mix strategies has not enhanced the quality of service delivery and customer satisfaction in first bank Nigeria plc.
Hi: The application of marketing Mix strategies has enhanced the quality of service delivery and customer satisfaction in first bank Nigeria plc.
1.8 SCOPE OF THE STUDY
This study concentrated on First Bank PLC and it does not in totality analyzed the functionality of the bank but limits it self on the marketing of banking services. This study therefore examines the role the marketing of banking services ,a enhancing the marketing of banking services. Considering these factor the data and response to the questionnaire were limited to staff and customers of First Bank PLC Owerri.
1.9 DEFINITION OF TERMS MARKETING
According to the Oxford Advanced Learner’s dictionary, marketing is the activity of presenting, advertising and selling an organizational products or services in the best possible way.
BANKING SERVICES: Banking services can be seen as those business transactions and services the banks carries out among them and their customers to generate income for the banks and to serve the bank’s need.
E-BANKING: The remote deliver of new and traditional banking products and services through electronic delivery channels. (FFIECJ).
E-banking is an abbreviation for electronic banking. E-banking allows you to conduct bank transactions online, instead of finding a bank and interacting with a teller. Most U.S. banks offer E-banking, though the extent of the services may vary. For instance, some banks may offer unlimited bill pay options while others restrict online activity.
CORE BANKING: Core Banking is normally defined as the business conducted by a banking institution with its retail and small business customers. Many banks treat the retail customers as their core banking customers, and have a separate line of business to manage small businesses. Larger businesses are managed via the corporate banking division of the institution. Core banking basically is depositing and lending of money.
COOPERATE AND INVESTMENT BANKING: Corporate & Investment banking is a term used to describe a range of banking and investment products and services delivered to corporate clients, financial institutions, governments, agencies and, in some cases, to wealthy or ‘high-net-worth’ individuals and families,
MOBILE BANKING: Mobile banking (also known as M-Banking, SMS Banking etc.) is a term used for performing balance checks, account transactions, payments etc. via a mobile device such as a mobile phone or Personal Digital Assistant (PDA).
PLASTIC MONEY: Generic term for all types of bank cards, credit cards, debit cards, smart cards, etc. | The Role of Auditors in the Nigerian Banking Crisis
CHARPTER ONE
- Introduction
In societies marked by divisions of expert labour, external auditing is promoted as a trust engendering technology with the capacity to promote a certain kind of social order (Power, 1999). Accountants, as auditors, have cemented their status and privileges on the basis of claims that their expertise enables them to mediate uncertainty and construct independent, objective, true and fair accounts of corporate affairs (Sikka, 2009). It has been argued, however, that such claims are not good indicators of corporate performance, because capitalist economies are inherently prone to crises (O’Connor, 1987; Sikka, 2009). Furthermore, the claims of expertise are frequently affected by unexpected corporate collapses, fraud, financial crime and the general crisis of capitalism (Baker, 2007; Sikka, 2009; Sikka et al, 2009)
Since 2007, major Western economies have been experiencing a deepening banking and financial crisis arising from subprime lending practices by banks, which in turn has restricted the availability of credit and has led to what has been described as the ‘credit crunch’ (Sikka et al, 2009). Some commentators have attributed this economic crisis to the unethical practices of corporate bank managers and to the inability of auditors to expose such anti-social practices from previous audits (Broad Street Journal, 21 October 2009; Sikka, 2009). Some auditors may have failed to comply with expected standards. If a company fails shortly after being audited, the auditors may be blamed for conducting an inferior audit (Dopuch, 1988). Thus, whenever there is a financial scandal, it must be questioned whether the auditors carried out their duties and obligations with due care and diligence.
In Nigeria the spate of corporate failures witnessed in the financial sector in the early 1990s brought auditors into sharp focus and caused the Nigerian public to question the role of accountants and auditors (Okike, 2004; Bakre, 2007; Ajibolade, 2008). Furthermore, the investigations launched by the regulators and other stakeholders into the cases of distress and disclosure revealed that accountants and auditors were implicated (NDIC, 1995). With the recent banking crisis in Nigeria members of the auditing profession in Nigeria are once again in the limelight, as the banking crisis and the revelation of unethical practices by bank executives and board members has raised many questions about the ethical standards of the accounting profession and about the integrity of financial reports issued by professional accountants (ThisDay, 9 December 2009). The question has been raised as a result of the failure on the part of accountants and auditors to alert regulators when they have discovered fraud and other irregularities in company records (Bakre, 2007; Ajibolade, 2008; Okike, 2009; Neu et al, 2010).
In respect of the banking crisis, attention has focused on the role of accountants and auditors who have been involved. Accountants and auditors may be expected to report financial irregularities in company accounts by enhancing transparency and accountability and by developing techniques for fraud detection. However, an emerging body of literature argues that accounting professionals have increasingly used their expertise to conceal and promote anti-social practices (Sikka, 2008a; US Senate Permanent SubCommittee on Investigations, 2005; Bakre 2007). For example, Akintola Williams and Deloitte (AWD) was indicted for facilitating the falsification of the accounts of Afribank Plc and for deliberately overstating the profits of Cadbury Nigeria Plc. It has been reported that between 1990 and 1994 the Nigerian economy lost more than N6 billion ($42.9 million) to fraud within the banking sector alone (Bakre, 2007).
The social cost of the banking crisis is difficult to estimate, but huge amounts of public money are being used to bail out distressed banks (Sikka, 2009). In 2008, almost every Reserve Bank across the globe, in collaboration with finance ministries, was forced to adopt extraordinary measures to stave off the collapse of the financial institutions and to restore confidence in the banking system. Some countries, such as the UK, took direct stakes in their banks as a temporary measure in order to ensure that they kept lending. The German and French governments offered to guarantee inter-bank deposits to achieve the same purpose, while the US government rolled out the Emergency Economic stabilization Act authorizing the US Treasury
Department to spend up to $700 billion to purchase distressed assets from sick banks and to make a direct capital injection into those institutions (The Guardian, 30 August 2009).
While the global recession was biting hard on advanced economies, the governors of the Central Bank of Nigeria (CBN) had stated that ‘what the rest of the world is now trying to do as the bailout option was what Nigeria did about four years ago, through a pro-active initiative, the result of which we are celebrating today’ (ThisDay, 16 October 2008). Less than a year later, however, Nigerians were awoken to the reality that the Nigerian banks were not so stable after all (The Guardian, 21 August 2009). The audit conducted by the CBN into the activities of the 24 registered banks in 2009 revealed that they were experiencing huge financial difficulties in their operations. As a consequence, in August 2009, CBN injected N420 billion ($2.8 billion) into the first five banks (Afribank, Finbank, Intercontinental Bank, Oceanic Bank and Union Bank) which had failed the CBN audit. Two months later, an additional N200 billion ($1.33 billion) was injected to stimulate the liquidity of four other banks (Bank PHB, Equitorial Trust Bank, Spring Bank and Wema Bank) (Nigerian Tribune, 8 December 2009; ThisDay, 12 December 2009). This injection of money was done in order to stabilize the banks and to ensure that they remained going concerns after their former managers had been sacked for reckless lending and for lax corporate governance which had rendered the institutions undercapitalized (Nigerian Tribune, 17 August 2009; ThisDay, 12 December 2009).
Although the global financial and banking crises have attracted the attention of policy-makers (TI, 2009) and scholars (Njanike et al, 2009; Sikka, 2009; Sikka et al, 2009), comparatively little scholarly attention has focussed on the role of auditing firms in facilitating the mismanagement of bank assets, liabilities and depositors’ funds in developing countries. This paper therefore provides evidence on the inadequacy of audit reports for disclosing nonperforming loans and the mismanagement of banking assets. Such evidence can help understand the auditing practices which have been adopted, but which are in direct conflict with the express claims of auditors and accountants to be acting in an ethical and socially responsible way. This paper contributes to the on-going debate on the usefulness of auditing and the need for accounting professionals to ensure that they continue to play a leading role in providing credibility to published financial statements and in maintaining the confidence of depositors in banks and investors in the capital market.
The paper is organized as follows. Part II examines the literature on the role of auditing in corporate collapse, particularly in respect of banking failures. Part III considers the theoretical framework of professionalism and the pursuit of profits. It is argued that, despite the regulatory framework governing the professional activities of auditors and accountants, the pursuit of profits and systemic pressure to increase corporate performance have been prioritized. Part IV describes the auditing environment in Nigeria in order to provide an understanding of the socio-political and economic contexts within which such accounting and auditing practices are embedded. Part V provides empirical evidence on the role of auditors in bank failures and the recent banking crisis in Nigeria by way of case-studies. Part VI concludes the paper by providing a summary and discussion of the issues raised and offers suggestions for reform. | PUBLIC EXPENDITURE AND THE ROLE OF ACCOUNTING IN THE CONTROL OF IN NIGERIA (A CASE STUDY OF BANK)
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
This project is on Public expenditure and the role of accounting in the control of in Nigeria (a case study of bank). The role of accounting in enterprises in Nigeria is primary to ensure accurate accountability in these sectors and true and fair financial position of the enterprise. This role is of utmost importance in any organization. An organization can only grow or profit when the resources at its disposal are well managed. The role of accounting seems to be more pronounced public enterprises. In recent times, there are cases of mis-appropriation of funds in the public enterprises and improper accountability. These factors have led to a lot of public enterprises into oblivion, if the government had recognized the role of accounting all most of the problems witnessed would not have occurred. No Enterprise can move forward without having a well-organized and functional account department which will provide accurate financial information for the Enterprise and other interest group(s).
Public expenditure is the spending made by the government of a country on the collective needs and wants of her citizenries such as spending on; the provision of infrastructures, pension provision etc. Until the 19th century, Public expenditure was limited as Laissez faire philosophies which believed that money left in private could bring better returns. In the 20th Century John Maynard Keyness argued the role of Public Expenditure in determining levels of income and distribution in the economy. Since then government expenditures has shown an increasing trend. In the 17th and the 18th Century Public Expenditure was considered as wastage of money. Thinkers are of the view that Government should stay with their traditional functions of spending on defense and maintaining law and other.
Public Expenditures are incurred through budget implementation. The macro-economic goals of the state budget are administered in specific and complex systems which were developed in the managerial information unit of the General Accounting department under the name of “Budget Implementation macro system” The role of accounting in the control of public expenditures relates mostly on setting of standards via budgeting and ensuring that the standard set are adhered to. The accounting controls also ensure the actualization of the macro-economic goals which are viz:
- Maintaining the total framework of the planned expenses.
- Adjustment of expenditure rate to the rate of the reception of incomes.
- Regular follow-up of compliance with deficit goals.
- Planning of the financing of the deficit in order to reduce the national debt-product ratio etc.
In Nigeria, public enterprises are engaged in a wide spectrum of economic activities including agriculture, mining, construction, manufacturing commerce and services. The classification of public enterprises in Nigeria has been made according to varieties of criteria by different authorities. The Public Service review commission (1975:101) classified public sector into:
- Public Utilities
- Regulatory of Service body
- Financial Institutions
- Commercial and Industrial Enterprises.
Nigeria being a mixed enterprises. Eze (2013) opined that a firm is classified as private enterprises when it is funded, owned and managed by an individual or group of individuals.
These firms are expected to be registered in the state within which they operate. The activities of the public enterprises have been on the increase in recent times which necessitated the introduction of the accounting to check and monitor the financial activities of these enterprises.
According to Onyekwelu (2010:2) Accounting is defined as the process by which data relating to the economic activities of an organization are measured, recorded and communicated to interested parties for making informed decision. The earliest methods of accounting records were kept in physical quantities. These records came from Eastern early civilization which involved countries around the Mediterranean sea such as Mesopotamia, Egypt, Greece Italy etc. Money was recorded as soon as it was received. Money took the place of barter as a medium of exchange and unit of account. This practice has been closely related to economic development of countries. If the operation of Public enterprise grow in size and complexity, management and other stakeholders will like to be informed on the enterprise’s operation. Accounting is the only means via which such information which are financial in nature can be communicated to the stakeholders.
In summary, the role of accounting in the control of public expenditure deals with the process of setting cost standards and ensuring that the standard set are maintained, However, if the already set standards appear to be in realistic such standard can be reviewed and adjusted for it to be more realistic. Control of public expenditure can be done through adequate budget implementation.
1.2 STATEMENT OF PROBLEM
The amount of public expenditure to be incurred by the government in any fiscal year is contained in the annual budget. It is the goal of government to maintain balanced budget, but many countries especially the developing ones have rather witnessed budget deficit this implies excess of expenditure over revenue. The resources to finance this deficit are always unavailable and most government has failed to acknowledge the need for adequate forecasting and adjustment of forecast to ensure that a balanced budget is attained.
There are increasing cases of financial mismanagement and misappropriation in virtually all public enterprises in Nigeria, this is occasioned by non-existence of proper accounting system that will ensure accountability and transparency in the execution of public expenditures. Furthermore, non-application of standard costing during forecasting by public administrators has made the control of public expenditures a difficult task. Standard costing, which is a good accounting technique for cost forecasting and control has not been adopted by public administrator hence, there are numerous cases or incidents of unfavorable or adverse variance between the budgeted or standard amount of public expenditure and the actual amount of public expenditure. Thus, there is need to evaluate the role of accounting in the control of public expenditure in Nigeria.
1.3 OBJECTIVES OF STUDY
The aim of this research work in general is to vividly evaluate the role of accounting in the control of public expenditures in Nigeria. The specific objectives for this research work are:
- To ascertain whether adequate government budgeting can regulate public expenditures and improve the productivity of public expenditures.
- To ascertain whether an effective and efficient accounting system in public institutions can ensure accountability and transparency in the execution of public expenditures.
- To evaluate the impact of standard costing on the control of public expenditures and also on the productivity of public expenditures when adopted by public institution administrators.
1.4 RESEARCH QUESTIONS
- How can adequate government budgeting regulate public expenditures and improve its productivity?
- How does an effective and efficient accounting system guarantee transparency and accountability in the execution of public expenditures?
- How does the application of standard costing in the administration of public institutions regulate public expenditures and enhance the productivity of such expenditures?
1.5 RESEARCH HYPOTHESES
HYPOTHESIS ONE
H0 - Adequate government budgeting does not regulate public
Expenditures and improve the productivity of public expenditures.
HYPOTHESIS TWO
H0 - Effective and efficient accounting system in public institution
Does not ensure transparency and accountability in the execution of public expenditures.
HYPOTHESIS THREE
H0 - Application of standard costing in the management of public institution will not enhance the regulation of public expenditure and its productivity.
1.6 SIGNIFICANCE OF THE STUDY
This research work which focuses on the impact or role of accounting in the control of public expenditure in Nigeria will be of great importance to federal, state and local governments who are basically responsible for incurring public expenditure.
This is because this research work will awaken their consciousness on the enormous role accounting plays on the control of public expenditures.
This research will also be of great importance to administrators of public institutions who before now may be ignorant of the roles accounting plays in ensuring transparency and accountability in the execution of public expenditures.
Finally, this research will also serve as a stepping stone for students of institution of higher learning who may be researching on similar or topic related to this. It could help precisely on the review of related literature.
1.7 SCOPE AND LIMITATIONS OF THE STUDY
In the course of this research the researcher examined the role of accounting in the control of public expenditure in Nigeria. However, this research covered only the FIST Bank of Nigeria, Enugu branch.
This research work is not free of limiting factors. The researcher was constrained by the following factors:
FINANCE: Previously, research project such as this use to be a joint or group work, but now is embarked upon individually. Thus, the meager fund at the disposal of the researcher constrained her from extending the research to other branches. Some other public (government) establishment in addition to the FIST bank would have been visited by the researcher if not for this constraint.
SCARCITY OF RELATED LITERATURE: Most of the libraries visited lacked journals with articles related to the topic of this study. Even when there is related article, such article will not give detailed analysis of the topic. More so, there is scarcity of already made research on this topic. Although one was gotten in the course of the research for it, but its contents were insufficient for this study. All of these constrained the research from making intense analysis.
STAFF NON COORPERATION: The uncooperative attitude of some of the staff of the FIST bank of Nigeria, Enugu in terms of releasing data constituted a major setback for the researcher. Most of the staff is not willing to let out some of the needed data for this research.
1.8 DEFINITION OF TERMS
PUBLIC EXPENDITURE: Okwo (2011:40) defined it as the spending made by the government of a country on the collective needs and wants of her citizenry. It normally leads to the provision of infrastructures.
ACCOUNTING: Onyekwelu (2010:2) defined it as the process by which data relating to economic activities of an organizational are measured recorded summarized interpreted and communicated to users to enable them make informed decisions.
STANDARD COSTING: Nweze (2014:80) defined it as a system of cost accounting which makes use of predetermined cost relating to each element of cost layout, material and overhead for each line of product manufactured or service supplied.
BUDGETING: Adeniji (2009) defined it as the processes involved in making a budget. That is the act of constructing a budget.
BUDGET: Adeniji(2009:596) defined it as a financial summary of estimated incomes and expenditure of government for a fiscal year.
BUDGET IMPLEMENTATION: The is defined as the execution of budget through either revenue generation or public expenditure.
BUDGETARY CONTROL: This is the methodical control of an organization’s operations through establishment of standards and targets regarding income and expenditure and a continuous monitoring and adjustment of performance against them.
ACCOUNTING CONTROLS: These are measures instilled by a good accounting system to ensure accurate recording of transaction, adherence to rules, safety of assets and accuracy of financial statement.
ACCOUNTING SYSTEM: This is defined as an organized set of manual and computerized accounting methods, procedures and controls established to gather, record, classify, analyze, summarize, internet and present accurate and timely financial data for management decisions.
PUBLIC INSTITUTION: This is defined as an institution or organization owned and majority managed by the government for the interest of the general public.
ADMINISTRATOR: This is an individual who administers affairs, one who directs, manages, executes or dispenses, whether in civil judicial, political or ecclesiastical affairs. He is also known as a manager.
MIXED ECONOMY: This is defined by Udeabah (2004:22) as an economic system in which public and private ownership of means of production exist and in which government participates extensively in the regulation management and supervision of economic activities.
PRODUCTIVITY OF PUBLIC EXPENDITURE: This is defined as the ability of government expenditure to yield the required outcome for which such expenditure was incurred. | IMPACT OF FINANCIAL INFORMATION ON THE PROFITABILITY OF BUSINESS ORGANIZATION IN NIGERIA
CHAPTER ONE
INTRODUCTION
Background of the Study
This research is on Impact of financial information on the profitability of business organization in Nigeria. The impact of financial information on the profitability of a business organization is becoming more apparent to user groups of a financial statement.
Information is a not an exact science neither are business operations without some subjective and judgmental errors when it comes to reporting them. A financial reporting therefore is a document statement which informs the various interest groups to a business on the operations and performance of their business in a period under review its present state of affairs as well as its anticipated future, in accordance with the statutes. If a financial report is to service its purpose it ought to be characterized by the following;
- Relevance
- Understandability
- Reliability
- Completeness
- Objectivity
- Timeliness
In the information process of an organization is to provide the information required to prepare a financial report which shall have the above characteristics then the transaction doing the period must be recorded prompt by and accurately and interpreted in conformity with the Generally Accepted Information Principles (GAAP), Statements of Information Standard Board (NASB), International Information Standard committee and the companies and Allied Matters Act cop LFN (CAMA).
Financial information reporting become necessary with the obvious need for accountability of stewardship from the managers to whom investors entrusted their financial resources. The Railway age in the UK. Occurred between 1830 to 1870 and for the first time the world same the emergence of multimillion corporations with large numbers of shareholders. It was a period of disorder but it brought the basis for the present day system of corporate financial report. Financial reporting is a duty of stewardship assigned to the directors of a company by section 334 of the company and Allied Matters Act Cap L20 LFN, equally the mandatory responsibility of companies to keep information records derives its strength from section 331 and 382 of the same act. These sections explicitly defined the necessary content and manner in which financial records should be kept.
1.2 STATEMENT OF THE PROBLEM
The study “The impact of Financial information on the profitability of business organization” aims at investigating the financial reports of selected companies in Enugu State with a view to determine the following ;
- The extent to which a standard financial report contributes to or detracts from the growth of a business organization.
- The extent to which the financial reports of corporate business organization comply with statutory provisions.
- The uniformity and conflict which exist in the financial reporting regulations given the multiplicity of regulators.
Therefore, bused on the above statements, the researcher shall investigate the financial information reporting standards and every regulation their bear on the financial statement and to the extent the selected company (s) has either complied with or disobeyed the relevant statutes.
1.3 OBJECTIVES OF THE STUDY
The objectives of this study are to critically examine the financial reports of the selected company and to probe into the fundamental for their preparation as well as its presentation with a view to determining:
- The adequacy of the basis and the fundamental that guides its preparation.
- The degree to which the financial report meets the needs of its various users.
- The extent to which the financial report conform to the established standard.
- The influence that financial report has on business performance.
- Finally, to present suggestions and recommendations based on my findings.
1.4 RESEARCH QUESTIONS
In order to determine the impact of financial reporting on the corporate performance of business organizations, it is pertinent to test the following question;
- Does the information disclosed in the financial statements adequate to support good decision making?
- Does the disclosure requirement of the statutes affect corporate performance positively or negatively?
- Do companies comply strictly with the regulation?
- Does the financial report meet the needs of the various users?
This study will offer solutions to ones raised it is my believe that the result of these finding will go a long why to helping researchers in this area of study, it will also enhance the understanding of the structure of published reports and accounts by the users.
The various users groups of the published financial report have their benefits from this study as follows:
- The Potential Investors: These are groups who are interested in committing their financial resources to the buying of the company’s shares. These set of people will benefit from this study as the result of this study still arm them with the necessary tools with which to evaluate the financial report of a corporate organization as it affects them.
- The General Public: This group shall benefit from this report by the knowledge that the business organization exists for them and not against them, as such has to live up to its full responsibilities.
- The Regulators of Financial information Report: This group includes the Nigerian Information Standard Board (NASB), the companies and Allied Matters Act 2004 Cap (20 LFN (CAMA) the Banking and Other Financial Institutions Act of 1991 (BOFIA), prudential guidelines for licensed Banks. The Insurance Act 2003. The study will help them to standardize and harmonize their operations.
- The Employee Group Including Existing: Potential and past employees.
- The Government Including Tax Authorities Department who have Interest in the Financial Reports of Companies: The result of this work shall be of immense assistance to each to these user groups in the advancement of their interest.
1.5 RESEARCH HYPOTHESES
The following null and alternative hypothesis shall be tested in this research works:
- H0: The information provided in financial statements is not adequate to support good decision making.
Hi: The information provided in financial statements is not adequate to support good decision making.
- H0: The disclosure requirements of statements do not affect corporate performance positively.
Hi: The disclosure requirements of statements do not affect corporate performance positively.
- H0: corporate organizations do not comply strictly to the statutory regulations.
Hi: corporate organizations do not comply strictly to the statutory regulations.
- H0: Financial reports do not meet the needs of the various users of financial information.
Hi: financial reports do not meet the needs of the various users of financial information.
1.6 SIGNIFICANCE OF THE STUDY
This study is a very important one and most significant at this period of economic situation which has witnessed the collapse of giant corporate with impressive profit and loss accounts and balance sheet statement, because the financial report serves is a “prima facie” evidence on the state of attains of such companies as well as its performance and could be relied upon as a certificate because it had the auditors certification, financial reporting could be done with every serious business, utmost good faith and diligence.
1.7 SCOPE OF THE STUDY
This study could have covered the impact of financial information reporting on corporate performance of all the sectors of the Nigerian economy but due to the challenges of such a task especially the financial resources with which to execute it, it is limited to braving industry. The study used the Nigerian Breweries plc, Enugu.
1.8 LIMITATIONS OF THE STUDY
The limitations encountered by the researcher of this work are given as follows:
- The confidential nature of financial information information in the business organization posed as a problem to this business organization posed as a problem to this study.
- The researcher was unable to reach all the members of the sample as a result of their frequent travels and busy schedule.
- The sample used in the research though representative but it is relatively small compared to the population, as a result of lack of financial with which to carry out the research on a greater sample.
1.9 DEFINITION OF TERMS
Auditor: A person who is qualified to examine the accounts of an organization to see that they are in order. 17
Balance Sheet: A business as at a specified date.
Bank: A financial institution whose responsibilities among others is to keep deposits for their client and customers.
Government: An institution of the state whose responsibility is to maintain law and order in the society.
Prima facie: Sufficient to establish something legally until disprove later.
Researcher: An enquiring basically concerned with search knowledge. | THE ROLE OF FINANCIAL CONTROL INSTITUTIONS IN PROMOTING FINANCIAL ACCOUNTABILITY IN THE PUBLIC SECTOR: A STUDY OF PLATEAU STATE NIGERIA UNDER DEMOCRATIC REGIMES
CHAPTER ONE
INTRODUCTION
This project focuses on the role of financial control on selected institutions in promoting financial accountability in the public sector with a study of plateau state under democratic regimes. Nigeria, a federation of thirty-six States and Seven Hundred and seventy-four local governments, was a colony of Britain but became an independent State in 1960. It has a population of nearly one hundred and twenty million people and the dominant source of income is oil (Oladosu and Oyelakin 2003:1).
Nigeria has been divided into six geo-political zones - South-South, South-West, South- East, North- East, North -West and North- Central. Plateau State falls within the geo-political zone of North-Central. The State was first created as Benue-Plateau in 1967. It later became Plateau State with the creation of Benue State in 1976. Nassarawa State was also created out of Plateau State in 1996.
The Nigerian public sector consists of the governments at the Federal, States, Federal Capital Territory, Local Governments and all government parastatals. The public sector plays an important role in economic development. It provides services which the private sector may not be willing or able to provide. Chan (1988:15) argues that
the public sector provides many essential services to society. It plays an essentially compensatory function; that is, it performs those functions that the market economy does not do efficiently or lacks the incentive to do at all.
Musgrave and Musgrave (1976) classify these functions as
- Resource Allocation - the provision of public goods and services.
- Income Distribution - the adjustment of the distribution of wealth or income in the society to conform to some principle of fairness.
- Stabilization - the use of fiscal policies to achieve high employment, price stability and economic growth.
In a Federal system like Nigeria, the different tiers of government perform these functions in varying degrees. Governments at all levels desire to deliver good governance to all their citizens. This is because “good governance is central to creating and sustaining an enabling environment for development” (Asselin, 1995:3). A strong link exists between economic development and good governance, and between good governance and fiscal transparency.
The importance of good financial management in achieving the objectives of government has not lost its relevance. Because of this, the financial accountability of most countries is enshrined in the Constitution to facilitate the discharge of financial accountability. Oshisami and Dean (1984:36) remark that in recognition of the importance of finance as a basis for political power, and the opportunities which absolute control offers for its abuse, power over finance is divided, the division being formally recognized Constitutionally in virtually all countries.
Global practice shows that power over finance is shared between the Executive and the legislature and in some cases with an independent body - the Supreme Audit Institution. Has this Constitutional sharing of power over finance achieved the desired result?
In view of the enormous responsibilities placed on government for the welfare of its citizens, the public sector needs a lot of resources. In pursuit of this, the government needs to put up a framework for the management and control of the public purse. The formalities established in relation to accounting and financial control support the process of governance
The term ‘control’ has long been recognized as one of the principles of management. Control exists in most human endeavors. Most authorities agree on what constitutes control. Lucey (1996:137) states that control is concerned ‘with the efficient use of resources to achieve a previously determined objective, or set of objectives, contained within a plan’. Similarly, Koontz, Donnel and Wiehrick (1980:81) define control as the measurement and correcting of activities of subordinates to assure that events conform to plans. Ekwonu (1996:35) states that control ‘is the measurement of the performance of the activities of subordinates in order to make sure that objectives and plans devised to attain them are being accomplished’. All these definitions point to the fact that control exists to ensure that organizational objectives are met through measurement of performance. The control process according to (Koontz et al 1980:722) involves three steps:
- Establishing standards
- Measuring performance against these standards and
- Correcting deviations from standards and plans
Finance occupies a special place in the conduct of government business. Public finance has been defined by Buhari (1993:66) as ‘a branch of economics concerned with the finance and economic activities of the public sector’.
From these definitions, we can state that public finance not just deal with the ways government raises money, but also the manner such money is expended with the aim of achieving economic growth.
In Nigeria, the Federal government raises money through the following major sources: Petroleum profit tax, Mining, Company income tax, Import duties, Export duties, Excise duties, Interest and repayment of loans granted by the government (Buhari, 1993:169).
Others include; Education tax, Value added tax, Pay-as-you-earn, Fees and charges, Royalties, Rent of government property, Grants, aids and loans.
The money raised through the above sources is expended on the following items: Administration, Infrastructural services, Productive services, Defense, Interest on internal and external loans, and Diplomatic missions (Buhari, 1993:168)
In connection with government finance, we can identify two basic groups of control- administrative and financial control; the former referring to those techniques which have indirect bearing upon expenditure operation while the latter denote techniques of control relating to fiscal control. The emphasis of this study is on financial control.
Financial control is a very important type of control in the management of government finance. Oshisami (1992:29) defines it as the process which ensures that financial resources are obtained at cost considered to be economical and utilized efficiently and effectively for the attainment of established objectives.
A comprehensive definition of financial or fiscal control is given by Ekwonu (1996:33) as the sum total of the work, which guides, directs and interprets the budget cycle. It covers the activities of the Executive branch, involving finance and the ministries... the audit department and the legislature...
In a democratic era, financial control may operate internally and externally.
Within the Executive arm of government control by the finance ministry is internal while audit by the Auditor-General and legislative oversight constitute external control.
- Institutions of Financial Control in the Public Sector
There are formal and informal institutions of financial control over public revenue and expenditure. The formal institutions of financial control include the Executive arm of government, Legislature and Office of the Auditor-General or Supreme Audit Institution. The informal institutions of financial control include; the media, the organised civil society and donor agencies.
With respect to the formal institutions of financial control, the Constitution of the Federal Republic of Nigeria, 1999, establishes a cycle of financial accountability for public funds. The cycle provides that:
- Legislature authorizes expenditure
- The Executive controls the collection and issue of funds. In addition, it prepares the accounts.
- The prepared accounts are audited by the Auditor-General and
- The Auditor-General submits the results of his audit to the Legislature through its Public Accounts Committee (PAC). PAC acts on the report by inviting accounting officers to appear before it where need be.
The wisdom in sharing these responsibilities is that absolute conferment of this power on one arm of government can create abuses in financial administration. In other words, financial administration requires a series of checks and balances so that public funds are not wasted or misapplied. But, is this what we find in practice? Are these checks and balances observed?
The financial accountability cycle provides that the Executive arm of government collects, disburses and prepares the accounts of government. The other formal institutions of financial control are excluded from this very vital stages. Their involvement in public sector financial control is only visible when funds have been expended. Is this not the same as calling a medical doctor to give an autopsy report? What guarantee do we have that this sharing of financial responsibilities promote sound financial management in the public sector? Haven been excluded from the critical stages of collection and disbursement of public funds, can the Legislature and State Audit significantly influence public finance?
In the cycle of financial accountability established by the Constitution, the budget is a legislative instrument of financial control over the Executive. Funds should be expended according to legislative intent as expressed in the budget. Has the Legislature been able to control public expenditure using the budget?
The Office of the Auditor-General is a creation of the Constitution. Therefore his status and duties are constitutionally determined. His basic duty is to report on the accounts prepared by the Executive. In his report to the Legislature he states whether the Executive has complied with legislative approval in its execution of the budget. For the Auditor-General to be able to play this important role he has to rely on the financial data supplied by the Executive. He also needs a strong Legislature to help implement his findings. In practice, does the Auditor-General derive the required support from the Executive and Legislature to perform his Constitutional duty? Has he been able to discharge the functions of his office as stipulated by the Constitution?
Informal institutions of financial control may promote financial accountability over public finance and these include; the mass media, the organized civil society, the World Bank and other international donors.
A vibrant media may promote financial accountability by reporting the findings of the Auditor-General. By exposing wrong doings the media may influence the behavior of public officials who may not want to be publicly exposed.
The organized civil society too, may play a significant role in promoting financial accountability in the public sector. This can be achieved by an active inter-reaction between them and the legislature. Krafchick and Wehner (2002:1) argue that inter-reaction between legislatures and civil society organizations is increasing in many countries... From the legislature’s perspective, the input of civil society can help to make the legislature’s engagement with the budget more effective.
The donor community today is an important institution that promotes financial accountability in recipient countries. They encourage borrowers to strengthen domestic institutions of financial control. Sahgal (2001:1) states that “most donors are now looking for ways to improve their performance in terms of promoting good governance and accountability.”
While these informal institutions may also promote financial accountability, however, it is the formal institutions that are the focus of this research.
Researches targeted at strengthening the institutions of financial control over public funds have ignored the influence of the link between the institutions of control, especially the influence of the Legislature on State Audit performance. For example the researches of Ball et al (1999); Bartel (1996); Asselin (1995); Premchand (1989); Hogy (2004); Dye and Stapenhurst (1998); Martinez-Soliman (2003); Krafchik (2002); Sahgal (2001) and Ahsan (1994) emphasize strengthening the institutions of financial control over public funds in isolation, without establishing the interaction between them.
These researches address the problem of public sector financial accountability arrangements on institutional basis only. They fail to identify the shortcomings of the present cycle of financial accountability over public funds in Nigeria. This research intends to address these shortcomings in the context of Plateau State of Nigeria.
Control of public finance is very important to public governance. That is why power over public finance is enshrined in the Nigerian Constitution. To promote financial accountability in Plateau State, power over finance is shared between the Executive, Legislature and the Supreme Audit Institution or the Office of the Auditor General. Have these institutions been able to play the roles assigned to them?
It is observed that there is the problem of non or partial implementation of the budget by the Executive arm of government in Plateau State. The budget is the legislative instrument of control over public finance.
Related to the issue just raised above, is the problem of spending without legislative authority. The checks and balances on public finance requires that the Executive cannot spend without legislative approval. Even where voted funds fall short of requirements, the spending agency must apply for supplementary appropriations provisions and obtain legislative approval for such additional expenditure before incurring them. It has been alleged that this requirement of the law is not usually followed.
The Executive arm of government which implements budgets is required to ensure that expenditures are properly covered in the relevant Appropriation Acts. Funds are supposed to be apportioned to spending departments in line with the approved budget. It has been noted that public expenditure are frequently made on items not budgeted for, which of course means that such expenditure have no legislative approval. Once the budget has been approved, it is alleged that funds are shifted to purposes other than those for which they were meant.
Limits of expenditure are imposed by the budget. However, spending agencies do not observe these limits when incurring expenditure. In the course of budget implementation, a vote book is maintained to ensure that approved budgetary limits are not exceeded. This aspect of expenditure control is often abused. We may ask, why should spending agencies not respect limits when incurring expenditure? With all these abuses, what has happened to the legislative oversight function?
The performance of the Auditor General in Plateau State has been called to question. It is alleged that the Auditor General is incapable of discharging the functions of his office which is constitutionally prescribed. If this is true, why?
The Plateau State Legislature is seen to be weak and unable to discharge its constitutional responsibility of exercising its power of financial oversight on the
Executive arm of government. This problem is alleged to have adverse effects on the performance of the State Auditor General.
Public financial control in Plateau State also suffers from poor financial record keeping. Where financial records are poorly maintained, can the reliance of the Auditor General on these records adversely affect his performance? In addition, if it is true that financial records are poorly maintained in Plateau State, is this a function of the qualification of those who keep these records? How do these problems listed above impact on financial accountability in Plateau State?
The questions of this research are as follows:
- Is the Budget a significant instrument of Legislative control over public finance in Plateau State?
- Are the rules and regulations governing the use of public funds being observed in Plateau State?
- Does the quality of legislative financial oversight enhance the performance of State Auditors?
- Does the reliance of the Auditor-General on financial statements prepared by the Executive enhance his performance?
- Is there any relationship between educational/professional qualification and the number of financial records kept in Plateau State?
- Do the formal institutions of financial control play their roles as spelt out by the Constitution?
This research sets out to evaluate the role of the formal institutions of financial control over public finance in Plateau State. Specifically the research has the following objectives:
- To evaluate the significance of the public budget as an instrument of legislative control over public finance in Plateau State.
- To determine whether the reliance of the Auditor-General on the financial data supplied by the Executive enhances his audit work.
- To examine the quality of legislative oversight function on State Audit performance.
- To investigate the significance of the qualification of Treasury staff on the number of financial records kept.
- To recommend measures on how to improve financial accountability in Plateau State.
Hypothesis One
Ho The public budget is not a significant instrument of Legislative control over
public finance in Plateau State.
H1 The public budget is a significant instrument of Legislative control over
public finance in Plateau State.
RATIONALE/JUSTIFICATION
The budget is an expression of legislative approval on how public funds should be disbursed. Budget implementation is used to judge the Executive’s conformance to this legislative approval.
This hypothesis is formulated to find out whether or not the Executive complies significantly with Legislative approval during budget implementation.
Hypothesis Two
Ho The performance of the Auditor-General is not significantly dependent on the
financial statements prepared by the Executive arm of government.
H1 The performance of the Auditor-General is significantly dependent on the
financial statements prepared by the Executive arm of government.
RATIONALE/JUSTIFICATION
The Auditor-General is an agent of the Legislature. The Auditor-General has the duty of overseeing the management of public funds and the quality and credibility of governments’ reported financial data. The Auditor-General ensures that the budget is implemented according to legislative approval. This hypothesis will reveal whether or not the Auditor-General is able to exercise his duties inspite of his reliance on the financial statements prepared by the Executive.
Hypothesis Three
Ho State Audit performance is not significantly dependent on the quality of
legislative financial oversight.
H1 State Audit performance is significantly dependent on the quality of
legislative financial oversight.
RATIONALE/JUSTIFICATION
This hypothesis seeks to establish whether the quality of legislative oversight (through its public accounts committee) has any influence on State Audit work. Does the quality of legislative financial oversight influence the work of State Auditors?
Hypothesis Four
Ho: There is no significant difference between the qualification of treasury
operating staff and the number of financial records kept.
H1: There is significant difference between the qualification of treasury staff and
the number of financial records kept.
RATIONALE/JUSTIFICATION
Where there is a culture of poor financial record keeping, no meaningful control can be exercised. Good financial record keeping is a necessary condition for the production of auditable financial statement. The aim of this hypothesis is to evaluate whether qualification has a significant effect on financial record keeping in Plateau State.
- SIGNIFICANCE OF THE RESEARCH
A research on the public sector, especially on financial control is very important. This research is significant in a number of ways.
The research will assist financial policy makers in Plateau State and indeed other States in Nigeria formulate policies that will promote financial accountability. The academic community will benefit tremendously from this research. Other researchers may use this research to investigate further issues on public finance control.
The three formal institutions of financial control in Plateau State, that is, the Executive, the Legislature and the Auditor General will discharge their financial responsibilities effectively if the recommendations of this research are implemented.
This research evaluates the role of the formal institutions of financial control over public finance under a democratic setting. This is because the institutions of financial control are fully operational only during democratic dispensations. The Legislature does not exist during military rule.
The role of the informal institutions of financial control such as the media, the organised civil society and international donor agencies though important are not the immediate focus of this research.
Plateau State which is chosen as the case study is an old State - first created as Benue-Plateau State in 1967. The State has witnessed flashes of democratic rule from 1979 to date.
The research period covers years under democratic regimes. These are 19791983; 1991-1992; and 1999-2003. The research period covers ten years of democratic rule. The broken periods are periods of military rule.
The research covers only ministries. Parastatals are excluded because the 1999 Constitution S. 85 (3) does not authorize the Auditor-General to audit or appoint external auditors for government parastatals. Local governments are also excluded since they are guided by a different financial rule called the financial memoranda.
A number of limitations were encountered in this research. The major ones included:
- Literature Review - Getting materials for literature review was difficult - An extensive search for literature took over one year. The cost incurred in obtaining the relevant materials was also enormous.
- Questionnaire Administration - During the main research, we had to deal with an enlarged number of participants in the research. Since the questions were randomly administered, many of the participants were seeing the questions for the first time. Many of them felt that participating in this research would amount to “leaking of government secret”. They were visibly uncomfortable - that was even in spite of assurances given by research assistants that the information required was strictly for research purposes. Some of them asked for time to make up their minds as to whether to complete the questionnaires. For this category of respondents, research assistants had to plead and make repeated visits before the questionnaires were completed and returned.
- Secondary Data Collection - Getting information on public sector activity is difficult. But it is even more difficult getting information on financial activities. Information that is supposed to be publicly available is treated as confidential. Enquiries for financial information are viewed with suspicion. A very high official must authorize the release of such financial information. But getting such an official to authorize the release of the information is pretty difficult. The research assistants were suspected to be agents of opposing political parties. They were thus to be kept at arms’ length. It took a long time to convince the custodians of the required information to release the information.
- State of Emergency - The state of emergency declared in Plateau State on the 18th of May 2004 adversely affected this research. The Plateau State House of Assembly, it will be recalled was also suspended during the period. Reaching out to the suspended members to participate in the research was difficult. Even where contacts were established eventually, completing the questionnaire was not seen to be of any immediate importance. Some of the lawmakers told me that their immediate concern was whether they would be reinstated. They eventually participated. Democratic structures were restored at the end of the state of emergency in November 2004. To God be the glory.
|
Reviews
There are no reviews yet.