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THE ROLE OF ACCOUNTING ETHICS IN NATIONAL DEVELOPMENT

Name: ELENDU LILIAN IFEOMA

Matriculation No: 11xxxxx9.

Department: ACCOUNTING.

Institution: UNIVERSITY OF ABUJA.

Phone No: 08135326860.

 

         THE ROLE OF ACCOUNTING ETHICS IN NATIONAL DEVELOPMENT

In the world of professionalism, a clarion call has been made for the establishment of standards and principles by professional bodies for the reflection of good conscience and fair judgment in public service for societal development. Accountants and the accountancy profession exist as a means of public service. The distinction which separates a profession from a mere means of livelihood is that the profession is accountable to standards of the public interest and beyond the compensation paid by clients (Robert H Montgomery 1935). Accounting as a process of preparing, interpreting and communicating financial data of an organization in order to enable users make informed decisions, requires well trained personnel who understand the framework of the profession to perform such duties as required for the purpose of contributing to the development of a nation. In understanding the frame work of the profession, ethical code of conducts are laid out which the professional accountant has to adhere to. Ethics refers to a system or code of conduct based on moral duties, values and obligations that indicates how an individual should behave within a constituted body or society.

roleacc1         Therefore, accounting ethics refers to a system or the code of conducts based on moral duties, values and obligations applied in the systematic process of identifying, recording, measuring, classifying, verifying, summarizing, interpreting and communicating the financial data of an economic sector in order to enable  users make informed decisions. Accounting ethics was first introduced by Lucca pacioli in his book titled “summa de arithmetical, geometria. Proportioni et proportionalita” (Venice, 1494). Ethics in accounting can be said to be one of its pillars because it gives support to the notion that accountancy is a noble profession.

In recognizing the relevance of accounting ethics in mitigating the effects of unethical practices such as false disclosures, falsification of corporate records, lying to auditors etc that acts as canker worms eating deep into the fabrics of an economy, the international federation of accountants (IFAC), established the international ethics standard board for accountants (IESBA) in 1977 with the responsibility of setting codes of conducts for accountants in various countries. Also, the institute of chartered accountants of Nigeria (ICAN) established code of conducts for her members in accordance to guidelines of IFAC and it was approved in 2009. IESBA and ICAN share basic code of conducts for accountants in common which are principles of integrity, confidentiality, objectivity, professional behavior, professional competence and due care.

The development of any nation depends to a large extent on the state of her economy. Naomi (1995) believes that development is usually taken to involve not only economic growth but also some notion of equitable distribution, provision of health care, education and other essential services all with a view to improving the individual and collective quality of life. National refers to a phenomenon that embraces a whole nation; therefore, national development is the ability of a nation to improve the life of its citizens. Measures of improvement could be material such as increase in gross national product (GNP), per capita income or social such as increase in literacy rate, employment, adequate infrastructures etc. it is pertinent to observe that in achieving its developmental goals, a nation requires a strong financial base and it is to this end that the role of accounting ethics in national development becomes indelible.

The relevance of accounting ethics is vital in the development of any nation as the effective application of its fundamental principles by professional accountants will assist in the presentation of the true reflection of the financial state of an economy and this will enable the government to make plans and utilize its funds effectively in order to provide for its citizens and ensure sustainable development. Likewise, it plays a role in the budgetary process of public sector through effective budget tracking by the ministry of finance in ensuring that revenues and expenditures are stated and incurred in accordance to the provision of the constitution for effective planning, control and decision making.

Also, the fundamental principle of accounting ethics plays a monitoring and enforcing role in auditing standards through the process of quality control and peer review activity which enhance the quality of audit reports, accounting and attestation services of both the private and public sectors.  It instills on the professional accountant, fiscal discipline in the preparation and communication of budgets and financial data of an economic entity for efficient management.

Similarly, when an accountant observes the principles of integrity, objectivity and confidentiality, the accountant does not allow bias and personal interest overrule public interest and there is no room for fraudulent practices and this enable the professional accountant perform his /her duties without prejudice in ensuring the effective financial management of a sector and reduction in corruption for economic development.

Ribadu (2004) stated that corruption and other economic crimes are the bane of a nation’s economic development efforts. The use of accounting ethics is indispensable in forensic accounting through the application of professional ethics by forensic accountants in investigating areas of financial manipulations that eats deep into a nation’s value system, thereby, enabling the various financial crimes commissions and judiciary in a nation to effectively combat financial crimes for effective utilization of resources and improvement of a nation’s image in the global world.

In addition, a nation with accountants that engage in ethical practices, become a focal point of attraction for investment both foreign and domestic and this give rise to industrialization of the economy leading to greater employment opportunities and wealth creation for improved standard of living. Also, when accountants in business enterprises adopt accounting ethics in their operations, there is no room for tax evasion and tax avoidance thereby contributing to the national development objective of government through efficient tax payment and collection.

Furthermore, the role of accounting ethics is essential in debt financing and avoidance of debt crisis as its application gives a fair view of revenue acquired from operations of all sectors and it becomes easy for the government of a nation to harness this revenue in order to curtail the need for debt financing and enhance payment of existing debts.


 

Significantly, the application of accounting ethics of professional competence and due care in areas such as the banking sector, helps in the preparation, communication and protection of financial data and deposits made by bank customers  through development in innovation, creativity and expertise in the performance of duties. Such expertise includes the use of various accounting software such as Peachtree, QuickBooks, Microsoft dynamics, etc. This aspect of innovation and creativity in the banking sector is evident in the introduction of bank verification number (BVN), made by the central bank of Nigeria (CBN) and this role has encouraged savings in the economy and economic stability.

The use of professional ethics is essential in the effective and efficient financial management of organizations (Akwabo and Aniefok 2015). Through competence, modernized procedures and methods are acquired with expertise in the preparation and presentation of financial data in compliance with international financial reporting standard (IFRS) and this gives a nation an edge to compete in the global market place in foreign exchange management and promotes international relations.

Generally, the use of accounting ethics play an invaluable role in all areas of the accounting system such as financial accounting, management accounting, forensic accounting, auditing and assurance practice, taxation, accounting for non-profit organizations, information system and international accounting etc in contributing to the development of a nation. In recent times, the world has witnessed the collapse of great entities such as ENRON Company in the United States of America (USA) and CADBURY plc in Nigeria as a result of unethical practices which hinders the sustainable development of nations. Therefore, in order to ensure adherence to ethical practices by accountants and financial analysts for national development, recommendations such as the inclusion of accounting ethics as a course of study in institutions of learning for grass root awareness, the establishment of  strong accounting ethics commission for implementation of ethical policies, regular accounting audits and supervision, the independence of the  judiciary and financial crimes commissions to carry out its duties without undue influence, an effective reward system for hardworking and diligent accountants, and a review of financial standards and ethics in organizations is imperative, if giant strides in the financial contribution to national development  has to be achieved in order to leave a future for the next generation.

 

 

References

Adegbie, F, & Fakile, S. (2012). Economic and financial crime in Nigeria: Forensic accounting as an antidote. British journal of Arts and social sciences 2046-9578, vol 6 no1.

Akabom, A, & Aniefok, A. (2012).  Professional ethics as instruments for effective and efficient financial management in the Nigerian public sectors. A study retrieved from

http://www.omicsonline.com/open-acess/professional-ethicsasinstrumentsforeffectiveandefficientmanagementinthenigeriapublicsectors-a-scientificapproach-2277-1891.1000127.pdf

Bobrayner. (2015). Accounting ethics. A study retrieved from

http://www.wikipedia.org/wiki/accounting_ethics?_e_pi_=7%2C page_iD10%2c71485306552

ICAN (2009).  Code of professional ethics: Lagos. V/I publishers

 

 

 

 

 

 

 

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