Impact of International Financial Reporting Standard on the Statutory Auditing Practice of Private Sector Organization (a Study of First Bank Nig. Plc Afikpo, Ebonyi State)

Impact of International Financial Reporting Standard on the Statutory Auditing Practice of Private Sector Organization (a Study of First Bank Nig. Plc Afikpo, Ebonyi State)

ABSTRACT

This study focuses on the impact of international financial reporting standard on the statutory auditing practice of the private sector organisation with reference to first bank Nig. Plc Afikpo in Ebonyi state. The private sector organization, all the accounting measurement and reporting procedure are governed by the generally accepted accounting principle, the objective of this research is to determine the effectiveness and the imperativeness of IFRS in facilitating the operation of statutory auditing practice and to ascertain the extent to which the IFRS creates awareness to private sector organization. Data were collected for the study using questionnaires, interviews and observations. The data collected were analyzed, tabulated and presented using simple percentages. The major finding made in this research project is that international financial reporting standard have significant impact on the statutory auditing practice of private sector organization. The recommendation were made that the top management should accept and stick to the statutory auditor’s information for proper control.

CHAPTER ONE

1.00 INTRODUCTION

1.01 GENERAL DESCRIPTION OF THE AREA OF STUDY

International Financial Reporting Standard (IFRS) is a set of accounting standard developed by the International Accounting Standards Board (IASB) stating how particular types of transactions and other events should be reported in financial statements. (Grey 2007:31)

International Accounting Standard (IASs) started in 1966, with the proposal to establish an international study group comprising the institute of charted Accountants of England and Wales (ICAEW), American Institute of Charted Accountants (AICA).

In February 1967, this resulted in the foundation of the accountants international study group (AISG) which began to publish paper on important topics every few months and created an appetite for change. Many of these papers led the way for the standards that follows, In March, 1973, it was finally agreed to establish an international body writing accounting standards for international use. In June 1973, the IASC came into existence with the stated intent that the new international standards release must be capable of rapid acceptance and implementation world-wide. The IASC survived for 27 years until 2001 when the organization was restructured and the ISAC was replaced by the IASB

In April 2001, the IASC restructure its organization at the end of 20^th century, which resulted in the formation of the ISAB, this changes came into effect on 1^st April 2001 between 1973 and 2001, the Accounting Standards Committee (IASC) released a series of standard called international accounting standards in a numerical sequence that began with IAS1 and ended with IAS41, which is Agriculture. Epstein (2009:10).

In 23, July 2001, meeting of the Accounting Advisory Council of International Accounting Standards Board Submitted a proposal to rename the standing Interpretation Committee (SIC) as the International Reporting Issues Committee (IFRIC) which was subsequently accepted.

In 23 July, 2001 meeting of the accounting advisory council of international standard board submitted a proposal to rename the standing interpretation committee (SIC) as the international reporting issue committee (IFRIC) which was subsequently accepted. The international accounting standard committee which in 2001 transmitted into international accounting standard board published a press release on 23^rd May 2001 announcing the publication of the international financial reporting standards. The international accounting standard board Chairman, Sir David Tweedie, said a brief description of the purpose and function of IFRS in setting global standard. Kathy, (2001:52).

In December 2010, the Federal Executive Council, the Nigerian Accounting Standards Board (Now designated as Financial Reporting Council of Nigeria) issued an Implementation road map for Nigerian’s adoption of IFRS which set up on January 2012 for compliance of publicity quoted companies and banks in Nigeria. IFRS adoption will entail significant cost and will have far reaching consequences on a wide variety of stakeholders in the financial reporting process, including financial statement preparers, investors, analysts, auditors and regulators. Conversion will require companies to realign their system, train employee and users of financial statement on the changes to financial reports. Auditors will be required to implement extensive training programs and build appropriate infrastructure to ensure that audit engagement teams are equipped to audit IFRS accounts Bradshow (2010:20).

Furthermore, IFRS is designed as a common global accounting standard for business affairs so that banks and companies accounts are under standable and comparable across international stakeholders and traders. It is important for companies that have dealings in several companies. It also provides recognition, measurement, presentation and disclosure requirement relating to transactions and events that reflected in the financial statement. Smith (2012:102).

However, the statutory auditing practice of private sector organisation is to maintain the technical competence and approach to the work with high degree of care, skill and diligences. Convergence with international financial reporting standard makes it indispensable requirement that the statutory auditors be effective and efficient in carrying out their duties. The International financial Statement that can be read world wide and use as an alternative to national accounting standard. In arriving at this point, the statutory auditor will consider the following matters, before expressly from his opinions on them in his report like,

Whether adequate internal control procedures is instituted to safeguard asset, prevent, detect fraud and other irregularities.
Whether suitable accounting policies are consistently applied
Whether proper accounting records are maintained
Whether he obtain all information and explanation which he is considered necessary for the purpose of his audit. Penny (2007:8).

The goals of IFRS are as follows:

To provide a global frame work on how the public and private companies prepare and disclose their financial statement
To provide general guidance for the preparation of financial statement, rather than setting rules for companies specific reporting.
To Standardized large companies and banks that have subsidiaries in different countries.
To provide facilities to investor and auditors with a cohesive view of finances. Biller (2006:36)

1.02 HISTORY OF STUDY

The first Bank of Nigeria Plc was founded and incorporated as a limited liability company on March 31, 1894 with Head Office in Liver Pool by Sir Alfred Jones, a shipping Magnetic.

In 1896, a branch was opened in Accra, Ghana and another in Free town, Sierra Leone in 1898.

The bank commenced business on a modest scale in the premises of Elder Dampster and company limited in Lagos under the Bank of British West Africa (BBWA) with paid-up capital of 12,000 pounds sterling.

In 1900, a branch was opened in old Calabar. In 1912, the bank also acquired its first competitors, the bank of Nigeria (previously) called Anglo-African Bank which was established in 1899 by the Royal Niger Company.

In 1957, the bank changed it’s name from Bank in British West Africa (BBWA) to bank of West Africa (BWA).

In 1968, the bank was incorporated legally as standard Bank of Nigeria limited.

In 1991, the bank was changed to First Bank with head office in Lagos and branch in Abuja, Imo, Kanu Edo, River and Enugu state etc. First Bank Nigeria Plc of Afikpo in Ebonyi state branch was established in 1993 and the branch before was established in 1993 and the branch before was at Enugu and the first manager was Mr. John Uzomba, the second manager was Mr. Giner Eke and since then, they have been a lot of managers in the bank and the present manager now is Mr. Eke. E. he started being the manager from 2009 to date.

The branch started with a hired house owned by Mr. Eze .O. Eze and borrowing facilities as well as low transaction and low customer but now First Bank of Nigeria Plc Afikpo branch have a permanent site which they moved to in 2008 and they have enough facilities and customers.

They also have almost 20 staff to work with the banking system. first Bank Nig. Plc Afikpo has adopted the international financial accounting Reporting Standards as certified by the International accounting standard board. By so doing, First Bank aligns with the strongest global standards of transparence in financial reporting. The adoption of IFRS at First Bank takes immediate effect and they apply to the banks financial report in March 31, 2013.

However, IFRS affected first bank Nig. Plc of Afikpo in their banking performance in the following ways:

Change in accounting quality of the bank
Change on identified financial ratio of the bank for example, profitability, growth, leverage and liquidity performance.

1.03 STATEMENT OF THE PROBLEM

Despite the impact of international financial reporting standards on statutory auditing practice of private sector organisation, there are many hindrances to statutory auditing in adopting IFRS.

This hindrance are;

Lack of effectiveness and imperativeness of IFRS in facilitating the operation of statutory auditing practice.
Non-disclosure of accounting records used in preparing financial statement.
Inability to ascertain the extent to which the IFRS creates awareness to private sector organisation.
1. OBJECTIVE THE STUDY

This study is intended to find out the impact of IFRS (International Financial Reporting Standards) on statutory auditing practice of private sector organisation (with a particular reference to first bank Nig. Plc, Afikpo in Ebonyi state) specifically, the study tends to

Determine the effectiveness and imperative of IFRS in facilitating the operation of statutory auditing practice.
To examine the accounting concept used in preparing and disclosing their financial stamens.
To ascertain the extent to which the IFRS creates awareness to private sector organisation.
To examine the inevitable in accomplishing a sound checks on financial records of private sector organisation.
To ascertain the effectiveness of IFRS in preventing the misstatement and manipulation of financial statement through statutory auditing practice.

1.05 RELEVANT RESEARCH QUESTIONS

The following questions will be formulated to guide this study:

1. Does lack of adequate IFRS facilitate the imperative and effective operation of statutory auditing practice on the private sector?
2. To what extent does non-disclosure of information on financial statement affect statutory auditing practice on the private sector?
3. Does lack of adequate sound check on the financial records affect statutory auditor of private sector?
4. To what extent does IFRS create awareness to private sector organisation?
5. Does IFRS have any significant impact on statutory auditing practice of private sector organization?

1.06 DELIMITATION OF THE STUDE

This study will be dwelling mostly on the effect of IFRS on the operation of statutory auditing practice, accounting concept used in preparing and disclosing financial statement and create awareness of IFRS on private sector organisation with reference to first Bank Nig. Plc Afikpo in Ebonyi state.

1.07 ASSUMPTION

Before confidence could be placed on the validity of this work, the following assumptions were made.

1. It is assumed that IFRS will play a significant role on statutory auditing practice.
2. It is also assumed that the staff and management of First Bank Nig. Plc, Afikpo in Ebonyi state will be of utmost help to the researcher.
3. It is assumed that the staff of the bank will fill the questionnaire sent to them by the researcher and also give feed back.
4. It is assumed that the researcher meet the requirement of the purpose of this study.
5. It is also assumed that this study will help to acquire and experience more knowledge.
6. It is assumed that the researcher received the relevant information needed for this study.
7. Finally, it is assumed that the project supervisor will give the necessary guideline and advice for the successful completion of this study.

1.08 Significances of the Study

The study is to find out the impact of international financial reporting standard on statutory auditing practice of private sector organisation with reference to First Bank Nig. Plc Afikpo in Ebonyis state.

Those to benefit from this study includes: Students, staff of the bank and general public.

The students will become well acquainted with the IFRS, how it works and how to apply it in their careers. They will also become conscious of the wide use and application of IFRS in solving accounting problems. This is because IFRS offers opportunities for students to visualize all they are being taught to facilitate easy application retention of skill acquired.

The study will help the staff of the bank to appreciate the contributions of IFRS on the financial performance of the organization. they will be able to learn how to apply the IFRS in accessing, evaluating and recording the financial statement of the organisation. they will also have opportunity of device simpler means of encouraging their third party (shareholder).

Lastly, this study will benefit the general public because the tertiary institution will be able to graduate students who are skilled in IFRS and who can apply such skills in solving everyday problems with IFRS. This will in turn provide job opportunities for many of such students thereby making them meaningful in the society and improving the economy of the society.

1.09 DEFINITIONS OF UNFAMILIAR TERMS/CONCEPT

The following terms found in this research work are hereby defined in the sense that they are used to facilitate the readers understanding of the study:

Financial statement or financial report: This is a formal record or an account of the financial activities of a business.
Shareholders: These are individual or institution (including a corporation) that legally owns a share of stock in public or private corporation.
Internal check: This is described as a day-to-day check on transactions which operate continuously as part of the routine system whereby the work of one person is proved independently or complimentary to the work of the other, the objective being prevention a carly detection of error or fraud.
Internal control: This is a tool for effective management measures to safeguard its asset, check the accuracy and reliability of its accounting data.
Statutory auditor: This is an external auditor in-change of certifying the financial statements according to specific professional auditing standards.
Private sector organisation; These are organisations that primarily engage in the production of goods and services to maximize profit.
Investor: This is someone who allocates capital with the expectation of a financial return.
Financial performance; This process takes too much time and effort to connect with money of the organisation.
Erroneous: This is not correct based on wrong information.
Convergence: This is an idea, policies and aims that is very similar or the same

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