1.1 INTRODUCTION
Background of the study
Accounting ethical standards and financial reporting has become so necessary that they help to determine the profitability, success and growth of any organization more so a financial organization and therefore is one of the cardinal principles that be implemented in the banking sector. Ethical accounting standard is simply the standard and up to date happening especially when it comes to the finances of the organization and thus is absolutely important that every organization employees this in actualizing up to date happenings on finances.
The rapid spread of corruption in the society and the failure of organizations to perform in every part of the world have once again increased the cravings for accounting professionals to stick strictly to the codes of professional practice. The rapid spread corruption in the business worldhas become the talk of the day in all societies. For instance, in the United Kingdom, corporate scandals affected BCCI. According to Ajibolade (2008),there witnesses who observed the collapse of a number of corporate giants in the United States like, Enron Corporation, Tyco International, WorldCom, Global Crossing, Arthur Anderson etc. Nigeria as a wholecan also attest to the collapse of numerous companies in the financial and non-financial sectors of the economy. It has been argued that any organization that deficient of good moral considerations may not survive for a long time to meet its desired goals and objectives and that of its stakeholders. These failures of corporate entities have been linked to accountants not sticking to the instructions, codes of professional ethics in the accounting profession. These failures have finally led to careful examination the work of the accountant from both within the profession and from outside. Every profession has a built in code of ethics that drivesgood morals on its members. The reason for this is obvious. Individuals from time to time have to face ethical situations and the problem of weakness of will. Accountants are also included. In their working life they encounter all manner of situations where they are compelled to do something ethically wrong. That is why a feature of accountancy’s claim to professionalism is its commitments to ethical standards. This includes a pledge that the accountancy bodies and their members will not pursue their material self and selfish interests in ways that conflict with their duties to the public interest. Thus, accountants as professionals liable to be called for the preparation of financial reports need to stick to the codes of ethical accounting standards in order to produce reliable, relevant, timely, accurate, understandable and comprehensive financial reports. According to Nzotta (2008), financial reporting forms the basis for economic decision making. The various shareholders also need financial reports for decision making on the investment and financial aspect of the organization. The financial reports produced by the accountant should be centered on certain fundamental qualities for the specified or different users to completely understand the content of the report. The chief objective of financial reports is to communicate economic measurements of and information about resources and performance of the reporting entity needed to those having reasonable rights to such information. IASB (2008) also pointed that providing high quality financial reporting information is paramount because it will hugely and positively influence capital providers and other stakeholders in making investment, credit, and similar resource allocation decisions enhancing overall market efficiency. Thus, the aim of this study is to examine the effect of ethical accounting standards on the quality of financial reports of banks in Nigeria.
1.2. Statement of the general problem
The incessant problem of poor organization performance in financial organizations like banks and other related organizations has left so much pain on the masses. The incessant case of unethical practices of banks like corruption of all kinds ranging from graft, theft to fraud has led to bank liquidation or distress. This has negatively affected the economy as the financial sector is a critical part of the economy. The poor performance of Nigerian banks when compared to their contemporaries in West African has led to the lack of investment opportunities in the sector which may be one of those that may have led to the current economic hardship currently experienced in the country. In the past, the banking industry in Nigeria has been the most vibrant; contributing immensely to the growth and development of the country but unfortunately these hasn’t been the case in recent times as a result of corporate governance problems where so much finances of the masses have gone down with liquidated banks and the sack and trail of chief executive officers of banks suspected to be in distress. All these have had its toll on the economy of country and may have contributed to the current economic quagmire we have found ourselves in today.
1.3. Aims and objectives of the study
The major objectives of the study are to examine the ethical accounting standard and the quality of management representation in some selected Nigerian banks. Other specific objectives of the study include;
1. To analyze the advantages of ethical accounting standards on financial reporting inNigerian banks.
2. To examine the level of business ethics in the banking industry in Nigeria.
3. To determine if business ethics can be used as a competitive tool in the Nigerian banking industry.
4. To examine the influence of ethical accounting standard on investors confidence.
5. To infer ways through which sustainable ethical business principles and standards can be entrenched in the Nigerian banking industry.
1.4. Research Questions
1. What are the advantages of ethical accounting standards on financial reporting in Nigerian banks?
2. Does accounting ethical standards and financial reporting affect return on investment earnings per share and dividend share of Nigerian banks?
3. Can business ethics be used as a competitive tool in the Nigerian banking industry?
4. What is the influence of ethical accounting standard on investors’ confidence?
5. What are the ways through which sustainable ethical business principles and standards be entrenched in the Nigerian banking industry?
1.5. Research Hypotheses
H0: There is no significant relationship between business ethics and reliability of financial reporting in Nigerian banks.
H1: There is a significant relationship between business ethics and reliability of financial reporting in Nigerian banks.
H0: Ethical accounting standards do not significantly influence the faithful management of Nigerian banks.
H1: Ethical accounting standards significantly influence the faithful management of Nigerian banks.
H0: Ethical accounting standards do not affect investors’ confidence on the management expectation of Nigerian banks.
H1: Ethical accounting standards affect investors’ confidence on the management expectation of Nigerian banks.
H0: Ethical accounting standards do not affect comparability of financial reports in banks.
H1: Ethical accounting standards do not affect comparability of financial reports in banks.
1.6. Significance of the study
The study would be of immense importance to the banking sector on the need for maintaining a high standard of ethical practices. The study would also benefit government at all levels in the implementation of a condusive business environment in Nigeria. The study would also benefit students, researchers and scholars who are interested in making further study on the subject matter.
1.7. Scope of the study
This study is on ethical accounting standards and the quality of management representation in selected banks in Nigeria.
1.8. Definition of terms
Ethics: The basic concepts and fundamental principles of decent human conduct. It includes study of universal values such as the essential equality of all men and women, human or natural rights, obedience to the law of land, concern for health and safety and, increasingly, also for the natural environmentGraft:Graft is the personal gain or advantage earned by an individual at the expense of others as a result of the exploitation of thesingular status of, or an influential relationship with, another who has a position of public trust or confidence. The advantageor gain is accrued without any exchange of legitimate compensatory services.
Fraud:Financial fraud can be broadly defined as an intentional act of deception involving financial transactions for purpose of personal gain.
Management representation: process of producing statements that disclose an organization's financial status to management, investors and the government.
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