ABSTRACT
This
study sought to investigate the
social predictors of compliance with International Public Sector Accounting Standards among
employees in Lagos State, Nigeria. Field
survey design was employed. The sample size was 200 selected from the workers
of KPMG and Deloitte both in Lagos State. Data collected using questionnaire
were analyzed using Statistical Package for the Social Scientists (SPSS).
The followings were the objectives of the study: to
determine the social factors responsible for compliance with International Public Sector Accounting
Standards among employees in Lagos State, to evaluate the effects of compliance with International Public Sector Accounting
Standards among employees in Lagos State and
to investigate
the prevalence of compliance with International Public Sector Accounting
Standards among employees in Lagos State.
CHAPTER
ONE
INTRODUCTION
1.1
Background to the Study
The global anxiety for
better public financial management that guarantees more accountability and
transparency is the concern of both developed and developing countries. In view
of this, the International Federation of Accountants (IFAC) establishes and
promotes the application of International Public Sector Accounting Standards
(IPSAS) by public sector entities around the world when preparing their General
Purpose Financial Reports (GPFR). The objective of IPSAS is to improve the quality
of GPFR by public sector entities so as to have a better informed assessment of
the decisions governments take to allocate resources. Compliance with IPSAS
guarantees that financial reporting by public entities conveys a “true and fair
view” of the financial situation. The adoption of IPSAS therefore, enhances
transparency and accountability by governments in the management of public
resources. It raises the quality of financial management, facilitates
transactions with financiers and simplifies communication with the general
public. IPSAS assure comparability of financial reporting with other countries,
motivation of foreign investors to make investment in the country, and very
helpful in raising capital from the international markets (International Public
Sector Accounting Standards Board, 2013; South Asian Federation of Accountants,
2006). Consequently, public sector accounting carries out a basic purpose of
safeguarding the public treasury by timely preventing and detecting corruption
(Chan, 2003). This basic purpose of government accounting meets enormous
challenges. According to the report of the High Level Panel on Illicit
Financial Flows from Africa commissioned by the African Union (AU) and United
Nations Economic Commission for Africa (UNECA) Conference of Ministers of
Finance, Planning and Economic Development, over the period 1970 and 2008
Africa lost about $850 billion. Nigeria lost about $217.7 billion, Egypt $105.2
billion and South Africa more than $81.8 billion in illicit financial outflows
(African Union and United Nations economic commission for Africa, 2015).
One major reason that makes high quality
public sector reporting necessary in many countries is that government issued
financial instruments are a very important part of their financial markets,
there exist various crisis in many developing countries especially in Africa,
with government debt level sitting at very precarious levels and it is no news
that government finances need to be managed properly in any nation. Annual
financial statements play an essential role in the accountability of government
to their citizens. However, most of these financial statements are not prepared
on consistent and comparable basis in developing countries. The benefits of
achieving consistent and comparable financial information across jurisdictions
are very important and a set of IPSAS have been established by the IPSASB to
assist in that endeavour (Stephen, Mercy & Andy, 2012).
It has been observed that one of the social predictors for compliance in
the use of the International
Public Sector Accounting Standards among employees in Lagos State is its reliability.
Consistent and uniform financial systems provide cost-efficiencies to business
and greater safeguards to the employees. The employees are entitled to have
confidence that, regardless of where a business activity occurs, the same high
quality standards were applied. It is widely known that investors will be more
opened to diversify their investments internationally if they are able to rely
on financial information based on a similar set of standards. Hence, compliance
with international standards, like those developed by the International
Accounting Standards Board (IASB) and the International Auditing and Assurance
Standards Board (IAASB), can undoubtedly lead to greater economic groth.
Additionally,
government policy is another social predictors for compliance in the use of the
International Public Sector Accounting Standards among employees in Lagos
State. The political and economic systems in a country, not only affects
managerial rewards but they also form part of the accounting standards and impact
their implementation and use. For example in economies that encourage investor
protection, the accounting and reporting standards apply force for managers to
authentically report their performance, and as such to produce high-quality
financial reports. With increased familiarity of investors with IFRS, the
publication of accounts enables stakeholders to monitor management activity and
auditors to implement and enforce IFRS, because accounting profession is
generally supporting a single set of accounting.
In
conclusion, the adoption of IPSASs by public sector entities is driven by the need
to strengthen efficiency, accountability and professionalism in management of
public resources (Aggestam, 2010). Accrual accounting improves decision making
through comprehensive reporting of assets and liabilities and increased
financial control as it provides a representation of the entity’s overall
financial position by providing a snapshot comparison between financial periods
while enhancing strategic planning (Aggestam, 2010). IPSASs also improve
comparability, harmonization, transparency and accountability in financial
reporting by public entities as they provide more relevant, reliable and timely
financial information for decision making (IFAC Public Services Committee,
2002). Other benefits attributed to accrual accounting include: identification
of total cost of government programs and activities through better measurement
of costs and revenues; greater focus on outputs; more efficient and effective
use of resources and greater accountability, better presentation of financial
position of the public sector organizations and greater attention to assets and
more complete information on liabilities through better assets and liabilities
management (Mellet, 2002; Olsen, 2001). This study seeks to critically examine
the social predictors of compliance with International Public Sector Accounting Standards among employees in
Lagos State, Nigeria.
1.2 Statement of the Problem
A big challenge to
the adoption of International Public Sector Accounting Standards (IPSAS) is
resistance as it is obvious that not all government administrative machineries
such as ministries, parastatals and extra ministerial departments are
supporting IPSAS adoption in Nigeria. Without second thought, this resistance
is due to the obvious fact that IPSAS being a principle based standard which
will help to unravel all forms of financial malpractices existing in the public
sector, hence it’s a treat to these stakeholder in the public sectors. Another
challenge is the implementation cost and this is due to the fact that part of
the effort toward IPSAS adoption, accounting manual need to written to be able
to incorporate IPSAS terminologies and other finance officers in the public
sector need to be educated and trained on the application of IPSAS. All these will
require huge sum of money which may not be readily available to public
officers. Lack of Qualified Accountant in the Public Sector is another problem
confronting the adoption of International Public Sector Accounting Standards
(IPSAS) as most of the organizations in the country and government agencies
lack the necessary accounting personnel to effectively carryout the changes in
IPSAS as opposed to the financial reporting frame work that currently exist in
Nigeria.
1.3 Research
Questions
This
research will be carried out to answer the following research questions:
i)
what are the social factors responsible
for compliance with International
Public Sector Accounting Standards among employees in Lagos State?
ii)
what
are the effects of compliance with International
Public Sector Accounting Standards among employees in Lagos State?
iii)
what is the prevalence of compliance with International Public Sector Accounting
Standards among employees in Lagos State?
1.4 Objectives of the Study
The broad objective of this study
is to investigate the social
predictors of compliance with International Public Sector Accounting Standards among
employees in Lagos State, Nigeria. The specific objectives include:
i)
to determine the social factors responsible for compliance with International Public Sector Accounting
Standards among employees in Lagos State
ii)
to evaluate the effects of compliance
with International
Public Sector Accounting Standards among employees in Lagos State
iii)
to investigate the prevalence of compliance with International Public Sector Accounting
Standards among employees in Lagos State
1.5 Significance
of the Study
The study will add
value to accounting theory, considering that accounting theory is dynamic and
the accounting principles evolve based on practice. Thus the findings from this
study will contribute in the development of International Public Sector Accounting Standards and the conceptual framework for the public sector entities. The study
will also benefit the stakeholders’ theory whereby the users of financial
information provided through general purpose financial statements would have
relevant and reliable information for decision making. The study will be
beneficial to the Public Sector Accounting Standards Board as this would inform
on the level of adoption of the accrual based IPSASs by the public sector institutions,
the challenges faced, the applicability of the IPSASs in Nigeria context, any
changes to be made locally to fit the Nigeria Context. Scholars would also
benefit from the study as it would add to the body of knowledge on the adoption
of IPSASs by the employees both in the private and public sector. The research
findings would be used for further research work to fill identified gaps.