Academic journal article Journal of Economic and Social Development

Application of Financial Ethics in Annual Financial Reporting of Banks

Academic journal article Journal of Economic and Social Development

Application of Financial Ethics in Annual Financial Reporting of Banks

Article excerpt

1. INTRODUCTION

Contrary to the impression that it is only the public service that is heavily infested with corruption and inefficiency, the trend has since changed in Nigeria. The private sector of which the financial institutions constitute an integral part has also been caught up in identical unethical muddle. Financial ethics are those principles that guides in the preparation of financial transactions. Oladoyin et al (2005) stated that "Ethics" generally refers to those principles and codes of behaviour that guide the conduct of a profession. The term usually carries along moral values normative judgments and moral obligations. At any rate, every profession possesses its own ethics. These Ethics are commonly derived from the general expectations of the public from a public officer or a professional practitioner. The issue of ethics usually goes along with allocation of value judgment such as good or bad; right or wrong. Every professional strives to keep to the guiding ethics of his/her profession.

The end product of financial accounting process is the preparation and publication of financial statements. A substantial number of alternative postulates, assumption principles and methods adopted by a reporting entity in the preparation of its accounts can significantly affect its results of operations, financial position and changes thereof. It is therefore essential to the understanding; interpretation and use of financial statements, whenever there are several acceptable accounting methods which may be followed, that those who prepare them disclose the main assumptions on which they are based. The Nigerian Accounting Standards Board (NASB) issued accounting standards which are developed to ensure a high degree of standardization in the published financial statements. They provide the necessary information about how accounting information should be prepared and presented in order to enhance the value of its contents and facilitate thorough understanding. In the banking sector, confidence, trust, reliability and goodwill are requisite characteristics for effective service and all these are intimately associated with ethical norm and transparency in discharging financial transaction. The case of impropriety therefore is a negation of transparent banking. It is against this background that this study is designed to examine the application of financial ethics in annual financial reporting of banks in Nigeria.

2. STATEMENT OF THE PROBLEM

Despite the role of the Nigerian Accounting Standard Board, Central Bank of Nigeria and Professional Accountancy Bodies in ensuring standardized financial reports as well as compliance with financial ethics in their preparation, the problem of falsification and manipulation of figures in the financial statements has been on the increase. In light of this, that there is the need to sanitize Nigerian financial reporting system.

3. OBJECTIVES OF THE PAPER

The main objective of the study is to examine the application of financial ethics in annual financial reporting of banks in Nigeria.

Other specific objectives were to:

(i) examine the emerging trend of unethical practices and professional misconduct in the Nigerian banking industry.

(ii) identify those ethical standards that are relevant to the preparation of financial reports of banks.

(iii) assess whether financial reports of banks are in conformity with Nigerian Accounting Standards and Central Bank of Nigeria prudential guidelines.

(iv) assess the information contained in the financial reports are fair and accurate.

4. HYPOTHESES

Ho1: There is no significant relationship between ethical standard and bank's financial reports preparation in Nigeria.

Ho2: There is no significant unethical practice in the preparation of financial reports of banks in Nigeria.

5. CONCEPTUAL FRAMEWORK/LITERATURE REVIEW

Accountability in the financial institutions is best explained through the theory of Agency. …

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