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This presentation is a review of the trends and issues in accounting and auditing
practices drawn within the context of institutional framework that has contributed
towards corporate financial reporting.
Accountancy within this context can be defined as the process of communicating
financial information about a business entity to users such as Shareholders and
Managers. The communication aspect of accounting is generally in the form of financial
statements that show in money terms the economic resources under the control of
Management; the art lies in selecting the information that is relevant to the user and its
reliability. The principles of Accountancy are applied to business entities in three
divisions of practical sciences, these are namely accounting, bookkeeping, and auditing

History of Accounting
Accounting is as old as civilization, its infancy dates back to the earliest days of human
agriculture and civilization. Simple accounting is mentioned in the Christian Bible (New
Testament) in the Book of Matthew, in the Parable of the Talents, so also the slamic
Quran mentioned simple accounting for trade and credit arrangements. t is among the
most important professions in economics and business, and its concept is fascinating
and governed by standards issued by approved governing bodies both locally and
internationally.

Accountants as the practitioners' are known to have participated in the development of
cities, trade, and the concepts of wealth and numbers. Accountants invented writing,
participated in the development of money and banking, invented double entry
bookkeeping that fueled the talian Renaissance, saved many ndustrial Revolution
inventors and entrepreneurs from bankruptcy, helped develop the confidence in capital
markets necessary for western capitalism, and are central to the information revolution
that is transforming the global economy today.

Luca Pacioli (1445 - 1517), is credited for the "birth" of Accountancy. He wrote the first
textbook on accounting in 1497 that was used in the abbaco schools of northern taly,
where the sons of merchants and craftsmen were educated. t was a compendium of
the mathematical knowledge of his time, which includes the first printed description of
the method of keeping accounts that Venetian merchants used at that time, known as
the double-entry accounting system. Luca Pacioli is widely regarded as the "Father of
Accounting".
The system he published included most of the accounting concept as we know them
today. He described the use of journals and ledgers, and warned that a person should
not go to sleep at night until the debits equaled the credits. His ledger had accounts for
assets (including receivables and inventories), liabilities, capital, income, and expenses
which are the account categories that are reported on an organization's balance sheet
and income statement, respectively. He demonstrated year-end closing entries and
proposed that a trial balance be used to prove a balanced ledger. His treatise also
touched on a wide range of related topics from accounting ethics to cost accounting.


The post-Pacioli era witnessed the emergence of many authors of books on accounting:
examples are John Gouge of England in 1543, John Mellis of Southward, England in
1588 etc., These men published various set of books on how to learn to know the good
order of keeping the famous record of Debtors and Creditors, these books are
described as the merchants mirror, or directions for the perfect ordering and keeping of
accounts by way of Debtor and Creditor.
t is difficult to overestimate the importance of double entry book keeping. t was central
to the success of talian merchants, necessary to the birth of the Renaissance. ndustrial
Revolution firms required Accountants to provide the information necessary to avoid
bankruptcy and their role developed into a profession. Big business required capital
markets that depended on accurate and useful information. This was supplied by the
expanding accounting profession.
Today, a global real-time integrated information system is a near reality, suggesting new
accounting paradigms. Understanding these historical linkages is necessary to review
the trends and issues for which to predict the future of accountancy profession.

INSTITUTIONAL FRAMEWORK OF ACCOUNTING PRACTICE IN NIGERIA
There is a multiplicity of laws and bodies that are involved in the regulation of
accounting, financial reporting, and auditing requirements of companies in Nigeria.

1. The Companies and Allied Matters Act (CAMA), is the key legislative instrument that
has voluminous provisions that include requirements for auditing, disclosures, and
preparation and publication of financial statements. t also provides for the Registrar of
Companies at the Corporate Affairs Commission to monitor compliance with these
requirements and specifies penalties (although outdated) for companies and their
officers in cases of noncompliance.
Under CAMA the auditor is liable for negligence if, as a result of failing to discharge the
fiduciary duty properly, the company suffers loss or damage. The Companies and Allied
Matters Act also prescribes the format and content of company financial statements and
disclosure requirements in copious details. t requires that financial statements comply
with the Statement of Accounting Standards (SAS) issued by the Nigerian Accounting
Standards Board (NASB) and that the audit be carried out in accordance with Generally
Accepted Auditing Policies Standards (GAAPS).

t furthermore requires submission of
audited financial statements to the Corporate Affairs Commission within 42 days of the
annual general meeting and publication of audited financial statements by all public
limited liability companies in at least one national daily newspaper. Less stringent
requirements exist for "small companies.

CAMA requires that the Directors of a small
company may deliver modified statements to the Corporate Affairs Commission,
including only a modified balance sheet

that contains accounting policies but excludes
compliance with accounting and auditing standards required to the extent modified by
the CAMA provisions.


The Companies and Allied Matters Act provides for appointment, remuneration, rights,
functions, powers, and termination of auditors and the establishment of an audit
committee. The CAMA specify the auditors' qualifications and the process of their
annual appointment at the annual general meeting. Prospective auditors must be
members of the nstitute of Chartered Accountants of Nigeria (CAN) and be licensed to
practice as an auditor.

2. The Securities and Exchange Commission (SEC) and the Nigeria Stock Exchange
regulate financial reporting and disclosures by listed companies The SEC regulates
securities market participants under the nvestments and Securities Act of 1999 and the
Securities and Exchange Commission Rules and Regulations (1999). The Nigerian
Stock Exchange, a self-regulating organization established by the Nigerian Stock
Exchange Act of 1961, supports the Securities and Exchange Commission, supervises
the securities market operations, and regulates the second-tier capital market. Audited
financial statements must be filed with the SEC, Stock Exchange, and the Corporate
Affairs Commission and be approved by the Stock Exchange before publication in
newspapers within three months after the year-end.
3. The Central Bank of Nigeria is the main statutory regulator of banks and nonbanking
financial institutions under the terms of the Banks and Other Financial nstitutions Act
(1991).

The Banks and Other Financial nstitutions Act contain provisions on financial
reporting by banks in addition to CAMA requirements. The Banks Act requires banks to
submit audited financial statements to the Central Bank of Nigeria for approval before
publication in a national daily newspaper within four months of year-end. The governor
of the Central Bank may order a special examination of a bank's books and affairs for
any variety of reasons. Auditors of banks have a legal duty to report certain matters,
including contraventions of legislation and irregularities, to the Central Bank.
4. The National nsurance Commission regulates financial reporting practices of
nsurance companies under the Nigerian nsurance Act of 2003. Audited financial
statements are submitted to the National nsurance Commission within 6 months of
year-end, and published in newspapers. Compliance with CAN auditing standards is a
legal requirement. n addition, the auditor is legally required to certify the solvency of the
insurer and approve the margin of solvency required under the Act. The Act does not
adequately provide mechanisms to enforce compliance, other than to state that the
National nsurance Commission is responsible for the administration and enforcement
of the provisions of the Nigerian nsurance Act.

The Accountancy Profession in Nigeria


The nstitute of Chartered Accountants of Nigeria is the dominating accountancy body in
Nigeria. There are two accountancy bodies in Nigeria, (CAN) and the Association of
National Accountants of Nigeria (ANAN). They are in essence self-regulating; both
memberships elect Governing Council members. n the case of CAN, the Government
of Nigeria appoints five members to the 25-member Council; however CAN nominates
the appointees whom the Government confirms. There is no separate statutory
regulator of the audit profession. CAN acts as both an examining body for awarding
Chartered Accountant Certification and the Licensing Authority for members engaged in
public auditing practice. ts members are recognized under the Companies and Allied
Matters Act as the sole auditors of company accounts.
CAN is a member of the nternational Federation of Accountants (FAC), and it has
strong international foundation and relationships. Their members dominate accounting
and auditing services in the private sector while ANAN members are mostly employed
in the public sector. The CAN designation is the most sought after in both private and
public sectors. As of December 2010, there were over 30,000 CAN members and
17,136 ANAN members who work in both private and the civil service. Although the
CAMA (1990, as amended) restricts audit of companies to Chartered Accountants
whose activities are regulated by the CAN Act, ANAN members do work as statutory
auditors of some companies.


The Nigerian accountants professionaI Code of Conduct
All CAN Members are expected to follow CAN's Code of Professional Conduct despite
having no obvious legal requirement or guidance for its mandatory application in
Nigeria. ssued in 2000, CAN's Code needs updating in vital areas, like auditor's
independence,

to bring it in line with the FAC, Professional Code of Ethics, which was
significantly revised in 2003. Other areas needing review are application of principles to
specific situations, professional competence and responsibilities regarding the use of
non accountants, and activities incompatible with the practice of public accountancy.
ANAN requires its members to comply with its Professional Code of Ethics, but this
code needs complete revision in line with FAC requirements.
ProfessionaI Education and Training
A registered auditor must have acquired appropriate higher education, obtained
practical experience, and passed the CAN examination to obtain a license to practice
To qualify as a Chartered Accountant (i.e., an CAN member), 30-months supervised
skilled training is required. This training must be in an audit environment. The Chartered
Accountants, who want to be in public practice, need to obtain CAN's Practicing
Licenses.


CAN's main professional entry requirement is in line with FAC, and tertiary institutions
are assessed for accreditation to meet the some requirements. CAN's qualifying
examination

syllabus covers all areas recommended by FAC nternational Education
Guideline (EG), Prequalification Education, Assessment of Professional Competence
and Experience Requirements of Professional Accountants. A review of the syllabus is
currently being undertaken to ensure alignment with FAC.

Generally since the late
1980s, lack of investment in education, low quality of educators, and diminution in the
value system at tertiary institutions has adversely affected the quality of education.
Where national accounting and auditing standards are not available, international
standards should be taught. However, most educators have neither professional
qualifications nor necessary practical experience. Educational institutions in Nigeria do
not teach professional values and ethics as separate subjects in pre-qualification
academic educational programs These subjects are specific requirements in FAC
nternational Education Standard (ES), Professional Values, Ethics, and Attitudes.
There is a perception in Nigeria that some professional accountants ignore ethical
dimensions and conflicts and do not comply with the Code of Conduct. Although the
practical experience requirement is adequate, the mechanism for assessing this
experience gained by prospective Professional Accountants is inadequate. Practical
experience leading to qualification as a Professional Accountant should be conducted
under an approved practical training provider. n practice, CAN enforces the 30-months
practical experience requirement by requiring the supervisor/principal to attest to the
trainee's completion of the relevant work schedule by entry in the trainee logbook.
The quaIifying examination processes of ICAN and ANAN
t is possible in three years after graduation for a non accounting graduate to become a
registered ANAN member.

ANAN has accredited some universities and polytechnics
that do not meet CAN requirements for accreditation.
Continuing ProfessionaI Education
Continuing Professional Education is compulsory, but is not effectively monitored and
enforced for members not in public audit practice CAN members are expected to
accumulate 60 credit hours of continuing professional education in two years, with at
least 50 percent through structured programs. CAN organizes the structured programs
but does not update members with international developments in accounting and
auditing. Large companies are allowed to organize in-house CAN-approved courses. A
member may lose registration (and practicing license in the case of auditors) by failing
to acquire at least 50 percent of the required credit hours during the two-year window.
Accounting and Auditing Standards



The Nigerian Accounting Standards Board sets local Accounting Standards under the
Nigerian Accounting Standards Board Act of 2003. Originally established in 1982 as a
private sector initiative housed in CAN, NASB became a government agency in 1992
and reports to the Federal Minister of Commerce. ts membership includes
representatives of government and relevant interest groups. An adequate due process
is followed in standard setting. Although the NASB-issued standards have statutory
backing, the body itself operated without an enabling legal authority until the 2003
enactment of the NASB Act. As a government agency, NASB has relied mainly on
government subventions and has been exposed to serious budgetary constraints that
prevented it from discharging its statutory role and affected its effectiveness. Legislation
now allows NASB to earn income outside the government.
CompIiance with Accounting and Auditing Standards
t is a legal requirement to file a copy of the audited financial statements and directors'
report with the Commission. No effective mechanism exists to monitor and enforce
requirements for accounting and financial reporting provided for in the Companies and
Allied Matters Act (1990). The CAMA empowers the Registrar of Companies at the
Corporate Affairs Commission to regulate compliance with its financial reporting
presentation requirements. There is however no capacity at the Corporate Affairs
Commission to effectively fulfill this function. There is however no rigorous enforcement
of timely filing.
On behalf of the SEC, the Nigerian Stock Exchange monitors compliance with financial
reporting requirements of companies whose equity or debt securities are publicly traded
There have been a few instances where companies have been suspended from the
Nigerian Stock Exchange for breach of financial reporting requirements.

The Nigerian
Stock Exchange approves annual financial statements of the listed companies before
publication. The Nigerian Stock Exchange reviews submissions by companies for
compliance with the listing requirements, which include accounting standards and
disclosure required under CAMA. The audited financial statements of a listed company
are only published after approval of the Stock Exchange, and de-listing is the only
sanction for noncompliance.
The Central Bank of Nigeria regulates accounting requirements for prudential regulatory
reporting and general-purpose external financial reporting of banks, as well as
nonbanking financial institutions. At present the Central Bank of Nigeria issues
guidelines in consonance with Nigerian Accounting Standards, and reviews and
approves the audited financial statements for compliance before they are published.
The Governor of Central Bank may order a special examination of a bank's books and
affairs for a variety of reasons; an audit report other than unqualified one would attract
such an investigation. Sanctions available under the Banks and Other Financial


nstitutions Act include fines, imprisonment, and suspension or revocation of license,

examples of sanctions imposed to date relate to both management issues and financial
reporting issues.
The National nsurance Commission was reorganized a few years ago. ts current
efforts are geared toward ensuring companies meet a prescribed capital base and the
requirements for submission of annual returns. Enforcement and compliance
departments are being organized. Available sanctions for noncompliance seem
satisfactory, but have not yet been instituted.
The Nigerian Accounting Standards Board is mandated to monitor and enforce
compliance with accounting standards; however, it lacks capacity. Although the
Companies and Allied Matters Act requires that companies comply with standards
issued by NASB, NASB was only statutorily empowered under the 2003 NASB Act to
monitor and enforce compliance with accounting standards. The NASB Act also
prescribes sanctions for noncompliance. No effective and efficient institutional
arrangement exists to ensure compliance with auditing standards and the professional
code of ethics CAN's capacity to effectively monitor and enforce compliance with
auditing guidelines,

and its code of ethics is weak. However, it does enforce compliance
with its code of ethics by disciplining errant members. The Accountants' nvestigation
Panel is complaint-driven rather than pro-active with regard to its monitoring function.
There is reluctance to report cases of negligence to CAN or to sue for damages in the
court of law. CAN has made arrangements for an external quality review of accounting
firms through its Public Practice Section. The legal process is very slow, which
discourages regulators from taking any legal recourse in enforcing compliance with
accounting, auditing, and financial reporting requirements.



ACCOUNTING STANDARDS AS DESIGNED AND PRACTICED

There are gaps between the local and international accounting standards. There are
many areas of accounting issues covered by AS/FRS that are yet to be addressed by
NASB. Also, some current AS-based national standards were effective at the time of
their issuance; but some AS have since either been revised or withdrawn. The Nigerian
Statements of Accounting Standards (SAS) seem incomplete as an authoritative guide
to the preparation of financial statements. The NASB does not have a work plan to
harmonize its SAS with AS.

To date, the NASB has issued 21 SAS compared with 41
AS. The international equivalents of certain national standards have been withdrawn
while 20 active AS have not been reflected in the SAS.

Four SAS exist with no
international equivalent There is no local standard based on agriculture (i.e., an


equivalent of AS 41), despite the prominence of agricultural sector in Nigeria. The
omission of a Framework for Preparation and Presentation of Financial Statements is
especially detrimental as there are several areas where no local standards exist, and
the framework should guide the setting of relevant and reliable accounting policies in
such circumstances

Nigerian experiences on Iitigation against auditors.
The CAMA precludes audit firms from becoming limited liability companies. Audit firms
are either partnerships or sole proprietorships, and auditors are jointly and severally
liable in cases of misleading financial report. With the deregulation of the economy and
the rise in foreign and domestic investments, litigations against auditors for professional
negligence may be more prevalent. Though the Companies and Allied Matters Act
provides for the right of the company or shareholder to sue the auditors for negligence
in the case of loss or damage, there are no reported cases of litigation against auditors
and audit firms.
Accounting scandaIs
The year 2001 witnessed a series of financial information frauds involving Enron
Corporation, auditing firm Arthur Andersen, the telecommunications company
WorldCom, Qwest and Sunbeam, among other well-known corporations. These
problems highlighted the need to review the effectiveness of accounting standards,
auditing regulations and corporate governance principles. n some cases, management
manipulated the figures shown in financial reports to indicate a better economic
performance. n others, tax and regulatory incentives encouraged over-leveraging of
companies and decisions to bear extraordinary and unjustified risk
The Enron scandal deeply influenced the development of new regulations to improve
the reliability of financial reporting, and increased public awareness about the
importance of having accounting standards that show the financial reality of companies
and the objectivity and independence of auditing firms
.

n addition to being the largest bankruptcy reorganization in American history, the Enron
scandal undoubtedly is the biggest audit failure. The scandal caused the dissolution of
Arthur Andersen, which at the time was one of the five largest accounting firms in the
world. t involved a financial scandal of Enron Corporation and their auditors Arthur
Andersen, which was revealed in late 2001. After a series of revelations involving
irregular accounting procedures conducted throughout the 1990s, Enron filed for
bankruptcy protection in December 2001
One consequence of these events was the passage of Sarbanes-Oxley Act in 2002, as
a result of the first admissions of fraudulent behavior made by Enron. The act
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significantly raises criminal penalties for securities fraud, for destroying, altering or
fabricating records in federal investigations or any scheme or attempt to defraud
shareholders. Another example of corporate fraud was the case of Australian
telecommunications company One-tel. The financial manager, Jodee Rich was
subsequently charged with fraud and spent several years in jail after fraudulently stating
the company's financial position, to encourage investment by some of Australia's richest
people including James Packer and Lachlan Murdoch. When it collapsed in 2001, One-
tel lost its shareholders in excess of 920 million dollars.
The Emergence of IFRS
nternational Financial Reporting Standards (FRS) are principles-based Standards,
nterpretations and the Framework
]
adopted by the nternational Accounting Standards
Board (ASB).
Many of the standards forming part of FRS are known by the older name of
nternational Accounting Standards (AS). AS was issued between 1973 and 2001 by
the Board of the nternational Accounting Standards Committee (ASC). On 1 April
2001, the new ASB took over from the ASC the responsibility for setting nternational
Accounting Standards. During its first meeting the new Board adopted existing AS and
SCs. The ASB has continued to develop standards calling the new standards FRS.
Structure of IFRS
FRS are considered a "principles based" set of standards in that they establish broad
rules as well as dictating specific treatments.
nternational Financial Reporting Standards comprise:
O nternational Financial Reporting Standards (FRS)standards issued after 2001
O nternational Accounting Standards (AS)standards issued before 2001
O nterpretations originated from the nternational Financial Reporting
nterpretations Committee (FRC)issued after 2001
O Standing nterpretations Committee (SC)issued before 2001
O Framework for the Preparation and Presentation of Financial Statements (1989)
n making the judgment management shall refer to, and consider the applicability of, the
following sources in descending order:
(a) The requirements and guidance in Standards and nterpretations dealing with similar
and related issues; and
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(b) The definitions, recognition criteria and measurement concepts for assets, liabilities,
income and expenses are as stated in the Framework."
Framework
The Framework for the Preparation and Presentation of Financial Statements states
basic principles for FRS.
The ASB and FASB Frameworks are in the process of being updated and converged.
The Joint Conceptual Framework project aims to update and refine the existing
concepts to reflect the changes in markets, business practices and the economic
environment that have occurred in the two or more decades since the concepts were
first developed.
ts overall objective is to create a sound foundation for future accounting standards that
are principles-based, internally consistent and internationally converged. Therefore the
ASB and the US FASB (the boards) are undertaking the project jointly.
RoIe of Framework
n the absence of a Standard or an nterpretation that specifically applies to a
transaction, management must use its judgment in developing and applying an
accounting policy that results in information that is relevant and reliable. n making that
judgment, AS 8.11 requires management to consider the definitions, recognition
criteria, and measurement concepts for assets, liabilities, income, and expenses in the
Framework. This elevation of the importance of the Framework was added in the 2003
revisions to AS 8.
Objective of financiaI statements
A financial statement should reflect true and fair view of the business affairs of the
organization. As these statements are used by various constituents of the society /
regulators, they need to reflect true view of the financial position of the organization and
it is very helpful to check the financial position of the business for a specific period.
The changing RoIe of the ProfessionaI Accountant
The role of corporate accounting has changed in the last decade, As a result, the
accountant has now become less of a pure numbers man, and has moved more and
more into the role of becoming business advisors. This is probably the biggest change,
because the accountant now works like a salesman selling his ideas internally and
externally, sometimes to a skeptical marketplace. Accounting knowledge is actually
fundamental to having the appropriate insights and analysis for being able to work with
other managers as to what strategic decisions need to be taken in business

The Effect of TechnoIogy on the Accounting Profession
1

The already rapid technology changes in the accounting industry will accelerate over
the next decade. The nternet and high bandwidth wireless networks will continue to
expand and grow. Cloud computing platforms and applications will combine with
advanced analytical tools, ever-larger data sets and social and mobile computing to
reshape the profession. Smart phones, tablets, notebooks and other mobile computing
devices will become the main tools for managing the accounting professional's complex
choreography of work and life. These technologies will reinvent work and the workplace,
allowing greater flexibility around when, where and how work is done. Being onsite will
become much less important, and these tools will enable, and often require, anytime,
anyplace work. ncreasingly advanced, yet cheaper, computing power, networks and
the nternet will lead to the highly developed automation of data collection and
information sharing. They will also improve data quality and greatly reduce, but not
eliminate, the time required for data validation. The shift to digital data will not kill paper,
but the number of "shoebox clients the accounting profession serves will dramatically
decline by 2020. These technologies are also driving the creation of new and more
powerful analytical tools and software. These tools, coupled with automated data
capture, will shift the focus of accounting from computation to consulting, as clients
increasingly rely on their accounting professionals to analyze business information,
support decisions and provide strategic advice.

Technology will increasingly be woven into the fabric of the accounting profession. The
professionals of 2020 will understand data integrity, security and privacy concerns as
well as the broader use of decision-support systems. Accounting professionals and
firms will become expert users of and advisors on financial technology.
The amount of time and effort required and client needs for data collection and
validation will be substantially reduced.
Data analysis tools and software will greatly increase the opportunities to provide
clients with analysis, performance management and decision-support services.
Technology consulting opportunities for accounting professionals will increase. Data
management, security and privacy consulting opportunities will be particularly strong.
System integration, training, installation, support and reselling opportunities will
increase.
Mobile and any time/any place technologies will allow tax and accounting
professionals flexible work options and client interactions while maintaining superior
client service standards.
Accounting firms will need to develop or source online marketing expertise and use
their web presence to highlight their skills, areas of specialization and scope.
Online social networks will become a key source of client referrals, prospects and new
clients.
Social media will increasingly be used to establish firm reputation and brand.
Automating and improving client service through the use of the nternet and CRM
systems will be required to meet growing client support expectations.

This shift will drive consumers and businesses to turn to accounting and tax
professionals for competitive strategies to navigate the global marketplace, not just
prepare financial reports and tax returns. As small businesses embrace social networks,
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so must Accounting professionals. Globalization will be the norm, as small businesses
use web access, real-time manufacturing, and mobile marketing to reach across
borders for customers and suppliers. Accounting professionals who are knowledgeable
in international standards, regulations, and processes will thrive. Accounting firms will
increasingly rely on each other's capabilities and collaborate to compete more
effectively in the international marketplace.