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AN ASSESSMENT OF ETHICAL THOUGHTS IN ACCOUNTING AND EFFECTS ON ACCOUNTING PRACTICE,

This study examined the effect of ethical thoughts in accounting on accounting practice in Nigeria. To achieve this objective, data were collected from primary sources through a well-structured questionnaire of four sections of twenty questions administered to a sample of one hundred and sixty one (161) out of which one hundred and forty eight (148) were completed and returned.  The questionnaires were administered to the registered members of the ICAN District Society in Calabar, Nigeria and data generated from the questionnaires were analysed using IBM SPSS V.20. The results revealed a significantly negative relationship between ethical thoughts and the accounting practices of corporate organizations in Nigeria. On the basis of the findings, the study recommended the following among others: Professional accountants as custodians and producers of accounting information should adhere to the codes of professional best practices issued by relevant professional bodies. Each organization in Nigeria should establish ethics departments to ensure that activities are in line with the codes of ethics, including the financial reporting process. The composition of the Board of Directors and Audit Committees should be made up of people with corporate experience, proven integrity and financial expertise. Greater efforts should be made by the relevant professional bodies to review their various ethical codes guiding members’ conduct or behaviour in practice and widespread enlightenment coupled with stiffer penalties for professional misconduct could also be a way out.

INTRODUCTION

During the seventeenth century at the instance of the growth of the Corporations andthe industrial revolution,the thought of ethical concept in Accounting began as observed by Rhotark(2004) that the industrial revolution, which is conventionally regarded as beginning in the 1760swith the invention of power machinery, had several consequences of far-reachingimportance to the history of accounting. One was the growth of the large-scale enterprise,beyond anything previously known, requiring quantities of capital greater than could beprovided by one man or one family. Another was the introduction of the variable time period into production in the two senses of the time period required to amortize machinery and other equipment, and the time period required for production itself.

The demand for capital involved increasing numbers of savers in investment situations,either directly or through financial intermediaries such as banks and insurance companies.

The corporation proved to be the most satisfactory form of business organization from this point of view. As more and more individuals and institutions were involved as stockholders, the financing function became separate from the management function,which has been designated the managerial revolution. In this situation the owners of the business were no longer able to inform themselves by keeping accounts for its operations, because they took no part in the management of the enterprise.

To afford these outside investors a measure of protection, the British government introduced a succession of Companies Act. These laws placed certain obligations on the promoters and managers of corporations as part of the price they had to pay for the privilege of incorporation. The 1844 Act required the directors of a company to supply the stockholders with audited balance sheets annually, and the 1865 Act provided a model form of balance sheet for this purpose. This legislation has been progressively supplemented and refined to the present day. It is aimed at providing investors and other financiers with audited information in the form of accounts on which to base their investment and disinvestment decisions and from which to judge the manner in which the directors of the corporation have managed the business.

In spite of these legal provisions for the protecting of stockholders and creditors, unscrupulous managers nevertheless found ways to make capital look like profits, to pay dividends to one set of shareholders out of capital paid in by another set, and to defraud creditors’ extent, they always will. One of the objectives of accounting theory isto develop rules of conduct which will make this behaviour more difficult. This explains the normative nature of many propositions in accounting; they are attempts to dissuade people from behaving dishonestly (Rohtak2004).Historically, there have been three basic approaches to the development of accounting theory and ethical thoughts. Attention was first directed to the account itself, and attempts were made to construct rules for the operation of accounts. This led to the celebrated personification theories in which the account was ascribed the qualitiesof a person who received and gave. But an account is not a person, and recognition ofthis fact directed attention to the transactions and events which are in great part thesubject-matter of accounts. This led to attempts to formulate rules and standardsdesigned to ensure that objective economic facts were recorded and reported. It thenbecame clear that accounts contained values other than those represented by transactionsand events, and that the very concept of value was subjective. Attention is now directedto the user of accounting, and contemporary accounting research is heavily influencedby such questions as : is it useful ? to whom ? is it used ? (Rohtak. 2004)

The principles and application of ethics in the accounting profession is aconcept that deals with the expected behaviour and accountability of the accounting profession (Uwuigbe and Ovia 2011). Every profession tends to formulate theirstandards of conduct in writing as ‘code of ethics’. These codes are set to give guidance to the behaviour of the accountant as he discharges his duties, relates with his contemporaries, his client, his employer and the public atlarge. Finn, Munter and McCaslin (1994) posit that the accounting profession has been founded on the notion that ethical behaviour is a cornerstone of providing professional services to the client.

To this end, this study seeks to determine theeffects of ethical thoughts in accounting on the practice of accounting and specifically set out to determine the effects of ethical principles as contained in the IESBA CODE OF ETHICS, such as integrity, objectivity, independence, confidentiality and professional competence on accounting practice.

Statement of Hypothesis

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