CHAPTER ONE

INTRODUCTION

1.1     BACKGROUND OF THE STUDY

There are a number of situations in which the guidelines or ethical codes appear not too relevant. In such situations, accountants attempt to resolve such issues by chosing from their actions. Many accountants are likely to resolve conflict of interest, situation that border on loss of revenue or job, personal interest and beliefs cultural background and double standards in the application of sanctions without reference to the expectations of the accountancy profession (Akadakpo and Izedonmi, 2013). The issue of what is wrong or right comes up on a daily basis and the practicing accountant, students of accounting, preparer of accounts, accountants planning to set up professional practice, as well as accountants not in practice have obligation to conduct themselves within the limits of good ethical standards.

A well-run profession or business must have high and consistent standards of ethics in order to stand fast and to stand the test of time (Smith and Smith, 2003).

Finance and accounting departments in industries are taking ethical considerations to be extremely important (Vickers, 2005 as cited in Mathenge, 2012). A tension often exists between a company’s financial goals and strategies to improve profits, and ethical considerations with concerns for right-behavior. When the public loses confidence in the ability of the market to prevent corporate misbehavior, it often demands increased government regulation. For example, frequent cases of misconduct by corporate executives have led to the passage of various Acts in Nigeria, Such Acts include the Companies and Allied Matters Act, 2004 Cap C20, LFN, the Economic and Financial Crimes Commission (EFCC) Act, 2004, the Investment and Securities Act (ISA) 2007, the Independent Corrupt Practices and other Related Offences (ICPC) Act 2003, Banks and other Financial Institutions Decree 2004, the Nigerian Deposit Insurance Corporation Act 2006, Money Laundering Act, and many others.

Professional accountant working in accounting firms are faced with new challenges within the profession as a result of the debacles of large corporations (Swift, 2002). Organizational cultures and environment pose a good opportunity for accountants to exploit the loopholes in reporting and financial management. Though, finance and accounting departments in most organisations are expected to foster the growth of ethical education and awareness but they are often faced with stiff resistance from the top level management (Fisher and Lovell, 2009).

Efforts are being made to introduce and enforce the practice of ethical standards by the regulatory bodies, however, strict adherence to the standards has been a problem (Gowthorpe and Amat, 2005).

Over the years the term ethics in organizational performance has long been associated with management scholars and business leaders 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. According to Etuk (2009) ethics and morality are aspects of axiology concerned with what is good, what is beautiful and what is desired or preferred human conduct.

Ethics is concerned with contemporary norms or standard of conduct that govern the relationship among human beings and their institution. Cole (2002) explains ethics as a set of moral principles or values used by organization to steer the conduct of the organization itself and its employees in all their business activities both internal and in relation to the outside world.

Schermerhorn (1989) argued that ethics in the word of organization business involve “ordinary decency” which encompasses such areas as integrity, honesty and fairness. Behaving in an ethical manner is seen as part of the social responsibility of organization, which itself depends on the philosophy that organizations ought to impact on the society in ways that go beyond the usual profit maximization objective.

The performance of an organization is sometimes based on the ethical work climate. Ethical work climate reflects the collective moral reasoning of organization members. Thus, strong ethical climate provides employees a foundation for thinking about moral issues. Although organization members may reason effectively about the right thing to do, translating reason into action depends on the moderating effect of two additional contextual factors; collective moral emotion (in the form of collective empathy) and collective ethical efficacy. Furthermore, the moral reasoning reflected in ethical climate is more likely to translate to ethical behaviour if members:

(i)      Care about those impacted by their actions (empathy).

(ii)     Believe in their ability to successfully follow through in their decision (efficacy).

Thus, ethical climate, collective moral emotion and collective ethical efficacy interact to create an environment more strongly related to ethical behaviour. Ethical behaviour is characterized by honesty, fairness and equity in interpersonal and professional relationship and it respects the dignity, diversity and the right of individual and groups of people. Therefore for an organization to move forward in the aspect of performance, it is important to have a good understanding of ethics and also take it seriously as this can undermine the competitive strength of the organization and the society at large (Harrington, 1991).

1.2     STATEMENT OF PROBLEM

Over the year, most public organizations in Nigeria have clearly demonstrated their deficiencies in the provision of timely and accurate financial information. The nature of work carried out by accountants and auditors requires a high level of ethics because many users of financial statements rely heavily on the yearly financial statements prepared by them to make informed financial decisions.

Even though recognized professional accounting bodies in Nigeria, like Institute of Chartered Accountants of Nigeria (ICAN) and Association of National Accountants of Nigeria (ANAN), are trying very hard to ensure best practice in the auditing profession via the enforcement of professional code of conduct for their members, the strict observance of such codes is still questionable. This study examine the need for good ethical values in professional practice of public accounting in Nigeria. Since there is growing critism of accountants in public practice and their counterparts in private sectors then it is of significance to embark on a study such as this to further explore the relationship between accounting ethics and the practice of accounting profession in Nigeria.

1.3     OBJECTIVES OF THE STUDY

The main objective of this study is to examine professional ethics and its impact on organization culture in Nigeria. Specific objectives include:

1.       To find out if accounting ethics have any impact on the practice of accounting profession in Nigeria.

2.       To evaluate the challenges of ethics and professionalism

3.       To ascertain the prospects of ethics and professionalism

4.       To investigate if ethical codes of conduct address all the issues that border on ethical practices.

1.4     RESEARCH QUESTIONS

The Following research questions were raised to obtain the various objectives of the study:

1.       Does ethic have much impact on the practice of accounting profession in Nigeria?

2.       What are the challenges of ethics and professionalism?

3.       What are the prospects of ethics and professionalism?

4.       Does ethical codes of conduct address all the issues that border on ethical practices?

1.5     SIGNIFICANCE OF THE STUDY

The study will be of significant importance to accountants and potential accountants as it will examines accounting professional ethics and is impacts on organization culture in Nigeria.

The study will be of significant benefits as it will examine the general rules which are made to guide human activities whereas ethics are specific rules to specific groups for purpose of carrying out their specialized functions

The study will also be relevant as it will serve as a reference material for students undergoing research on related topic.

1.6     SCOPE OF STUDY

The scope of the study is to examine professional ethics and its impact on organization culture in Nigeria. Due to unlimited finance and time factors, this work will be limited to few accountants in some selected organization in Port-Harcourt.

1.7     LIMITATION OF THE STUDY

The following must have in one way of or the other affected the outcome of this study.

2.       Some of the respondents were not met at the point of the collection of data due to their indisposition.

3.       Time constraints: There was insufficient time since lecture time, to an extent examination and the researching of the work is going on at the same time.

4.       Financial constraints: This hinders the researcher from carrying out the research work on time due to financial issues.

1.8     DEFINITION OF TERMS

Organization culture:     is a system of shared assumptions, values, and beliefs, which governs how people behave in organizations. These shared values have a strong influence on the people in the organization and dictate how they dress, act, and perform their jobs.

Professional ethics:        is defined as the personal and corporate rules that govern behavior within the context of a particular profession.

Public sector:        the part of an economy that is controlled by the state.

Accounting standards:   is a guideline for financial accounting, such as how a firm prepares and presents its business income, expenses, assets and liabilities, and may be in accordance to standards set by the International Accounting Standards Board (IASB).

Effectiveness and efficiency: Performing or functioning in the best possible manner with the least waste of time and effort.

Accounting ethics:         is primarily a field of applied ethics and is part of business ethics and human ethics, the study of moral values and judgments as they apply to accountancy.