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THE USE OF ACCOUNTABILITY FRAMEWORK AS AN ALTERNATIVE APPROACH FOR CORPORATE SOCIAL RESPONSIBILITY REPORTING AND DISCLOSURE PRACTICES IN NIGERIA

CHARPTER ONE

INTRODUCTION

1.1   BACKGROUND OF THE STUDY

Nigeria with an estimated population of over 180 million people is the largest market for goods and services in Africa. Its gross domestic product was U. $ 568.51 billion in 2014. There are 864902 companies registered with the corporate affairs companies registered with the corporate affairs commission. The Nigeria stock exchange has 209 listed companies with a combined market capitalization close at #9.851 trillion as at December 2015. (Asein, 2010), noted that despite this huge resources it is neither satisfying the need of the people nor increasing the growth of the economy. A key policy strategy in repositioning the economy of Nigeria is the attraction of foreign direct investment (FDI) into the economy to provide investible fund for corporate entities. Foreign direct investment in Nigeria has been declining for the past decade primarily due to the perception of risk in Nigeria Obazee, (2010). The perception of Nigeria as a risky country for the flow of foreign direct investment can in part be attributable to the limitations and short comings noticed in the corporate reporting and disclosure practices by Nigerian companies this is owning to the fact that some of these companies cannot provide investors and other stakeholders with sufficient and reliable economic information that will enable the users of such information to understand the risk profiles inherent in such companies and to permit informed judgment and decisions.

Nowadays, business has become more global and indeed Nigeria is part of this globalization. The competitive and dynamic nature of Business environment has brought about pressure for more information disclosure to assist shareholders and others stakeholders in taking economic and other investment decisions. Asein (2009) to the end concluded that the global adoption of a single set of financial reporting standard will enhance comparability and create an enabling environment for all investors to compare effectively investment opportunities across the global market. It has been observed and frequently asserted by scholars of accounting history that the practice of accounting and corporate reporting and disclosure requirement of corporate entities have been closely interlocked with the social, political and economic situation of a country. However, there are two very clear elements in the conventional basis of legitimating for current accounting practices. Role of law and the concept of generally accepted accounting principles (GAAP). The legal basis for reporting and disclosure practices in Nigeria is derived from the relevant laws and legislation notably the Companies and Allied Matters Act (CAMA, 1990) and secondly from the recent adopted international financial reporting standards in 2012  which is to be observed in the preparation  and presentation of financial statement by corporate entities in the country.

However, the relevance and adequacy of such standard (i.e. IFRSs) to Nigeria face with social and economic problems in the real life. Given that accounting systems have the potential for supporting change in a society and are never neutral, it seems therefore that there is an urgent need for recognition of a greater social role of accounting in Nigeria. Indeed, there is an urgent need for an approach to corporate reporting and disclosure practices that will be of greater use than the current one which is based upon the companies and allied matters act (CAMA 1990) and the IFRS. There is a need for an approach that can contribute to the understanding, debate and hence, proffers solution to the social and economic problems that Nigeria experiences. Therefore, the main question underlying this research study is: what are the alternative approaches that can provide an appropriate basis in terms of relevance and sufficiency for corporate reporting and disclosure practices in Nigeria.

1.2   STATEMENT OF THE PROBLEM

The problem area that spurred the interest in researching into this topic are Specifically attributable to the limitations and shortcomings noticed in the current framework of corporate reporting and disclosure practices of Nigerian companies which previous research has  proved to be deficient. According to Wallance, 1988; Adeyeyemi, 2006; Nzekwe, 2009; Okike, 2000; and Ofoegbu & Okoye, 2006. They all found Nigerian reporting to be deficient. According to Ali et al (2004), the government regulatory bodies and the accounting profession of developing nations suffer from structural weakness and often take a lenient attitude toward default of accounting regulations. The mandatory and voluntary disclosure of financial and non financial information in the corporate annual reports have attracted a considerable attention their by necessitating the need for an accountability framework as an alternative approach for corporate social responsibility reporting and disclosure practices for Nigerian listed companies that will provide a wider disclosure of corporate social responsibility information to a wider audience.

1.3   OBJECTIVES OF THE STUDY

This study has four principal objectives. First is to examine and evaluate the current framework of CRDPs in Nigeria (which is mainly based upon the companies and allied matters Acts and the recently adopted international financial reporting standards (IFRSs) in order to highlight the possible limitations and shortcomings of such a frame work.

The second objectives is to explore the views and perceptions amongst members of the accounting communities in Nigeria as to the basic features for the current CRDPs of Nigerian listed companies, the reasons for the adoption of IFRSs in Nigeria in terms of their relevance and sufficiency to the country, the disclosure of corporate social responsibility information and the notion of social responsibility and accountability.

The third objective is to establish a framework as a basis for alternative practices within which wider disclosure in terms of corporate social responsibility (CSR) information may be provided to a wider set of stakeholders.

The final objective is to outline a specific proposal for such an accountability framework as a basis for such practices. 

The research objectives are guided by the following research question:

i. What are the limitations and shortcoming of the current frame work in use?

ii. What is the alternative approach to the current corporate reporting and disclosure practices in Nigeria?

iii. How efficient will the alternative approach to corporate social responsibility reporting and disclosure be in terms of adequacy and sufficiency?

iv. What are the primary factors attributable to the overall levels of disclosure?

v. Are there differences in the views and perceptions of preparers, auditors, academics in accounting field and official bodies concerned on corporate reporting and disclosure practices of Nigerian listed companies?

1.4   RESEARCH HYPOTHESIS

H0 There is no significant difference in the views of the entire group under investigation.

H1: There is a significant difference in the views of the entire group under investigation.

1.5   SIGNIFICANT OF THE STUDY

Accurate, sufficient and reliable corporate reporting is a necessary tool for short and long term survival of any organization. the current corporate reporting and disclosure practices in the country  that is characterized inefficiency  on the part of the regulatory bodies and the insufficiencies of the generally accepted accounting principles has spurred interest into this studyand the economic and social problem confronting the country at this moment, and the country is facing at this moment, and the suggestion and recommendation of this study one can conclude that the study is of great importance to corporate reporting and disclosure practices of Nigeria companies in the following areas.

· It can be seen as an attempt to draw into the attention of the authority, and the professional bodies

a) The limitations and shortcomings of the current approach to corporate reporting and disclosure practices in Nigeria in the light of the country’s economic, social and political environment.

b) The importance of under disclosure in terms of corporate social responsibilities (CSR) information and an accountability framework as a basis for corporate and disclosure is weekly to be provided to a wider set of users.

·  To the Knowledge of the researcher, it can be seen as unique in that it attempt to address the social role that accounting can play in the environment of Nigeria. It attempts to address the importance of wider disclosure in terms of corporate social responsibilities information in assisting the understanding enhancing debate and hence solution to the social, cultural and economic problem confronting the country and  enhancing the principles and doctrines emphasized in the constitution of the country.

· It can be seen as significant since it tries to establish the need for an alternative framework as a basis for corporate reporting and disclosure practices in Nigeria within which wider disclosure in terms of CSR information may be provided to a more extensively suggesting that such a framework work the need for the adoption of (IFRSs). Stakeholders and

· The study will serve as a reference material for other researchers who may be researching into this field in the future.

· To the researcher, the study has contributed to his knowledge in terms of the notion behind corporate social responsibility and the need for an accountability frame work that will enable an organization to fully disclose necessary information about its corporate social responsibilities in its corporate report.

· It can be useful as a subject matter for comparative accounting.

1.6       DEFINITION OF TERMS

i.  Accountability: The obligation of an individual or organization to account for its activities, accept responsibilities for them and to disclose the results in a transparent manner.

ii. Framework: The basic structure of something, a set of ideas or facts that provide support for something

iii. Corporate Report: Is an annual statement prepared and presented by a corporate entity such as statements of financial position, statement of cash flow, statement of profit or loss, directors report, sustainability report e.t.c

iv. Corporate social Responsibility: Is a corposration initiative to assess and take responsibility for the company’s effects on the environmental and social wellbeing. It is a short-term cost that does not provides an immediate financial benefit to the company, but instead promotes positive social and environmental changes.

v. Practices:  The actual application or use of an idea, belief or method as opposed to theories relating to it.

vi. Approach: A way of dealing with a situation or problem

vii. Alternative: One of a numbers of possible choices or courses of action.

viii. Responsibility: The state of having a duty to deal with something or having control over someone or ability to act independently and take decisions without authorization or state of being accountable.

ix. Social Accounting: Is the process of measuring, monitoring and reporting to stake holders the social and environmental effects of an organization actions

x. GAAP ; Generally accepted accounting principles

xi. International Financial Reporting Standards: are standards issued by international Accounting Standard Board IASB.

xii. Report: Is an account given of a particular matter, especially in the form of an official document after thorough investigation or consideration by an appointed person or body.

xiii. Disclosure: Is the appearance of quantitative and/ or qualitative economic information relating to a business enterprise in the annual reports 

xiv. Environment: the surroundings or conditions in which a person or an organization operates which include physical, social, political and economic environment.

1.7   GENERAL STATEMENT ABOUT THE RESEARCH APPROACH

In order to explore the above research objectives, the research utilizes more than one type of method, namely a descriptive method. Theoretical and conceptual analysis: and empirical survey. A descriptive method is used to review, evaluate and examine the current framework practices in Nigeria: the method is used to review and examine the accounting and its environment, in which it operates in Nigeria, the nature and qualities of accounting practiced in Nigeria which research has proved to be deficient, and some alternative approach for improving accounting practices in Nigeria, the current framework of corporate reporting and disclosure practice in Nigeria. A Theoretical and conceptual analysis is undertaken in order to examine and analyze the need for and to suggest an accountability framework as a basis for corporate reporting and disclosure practices in Nigeria within which wider disclosure of CSR information may be provided to wider set of audience. An empirical survey is carried out for exploring views and perceptions as to:

1. The perceived basic features of the current CRDPS of the Nigerian companies in terms of the intended purposes for the preparation of annual reports by these companies.

2. The possibility of wider disclosure in terms of CSR reporting, as perhaps leading to source beneficial socio-economic effects, and the possibilities that legal requirements and accounting standards calling for wider disclosure might be feasible.

3. The extent to which notions of social responsibility and accountability are acceptable since the essence of the empirical survey is to examine views and perceptions, the major element of the empirics is based on the questionnaire as an information gathering instrument.  

1.8   ORGANIZATION OF THE REST OF THE RESEARCH

This study is presented in five (5) chapters. These chapters are organized in a sequential manner that will aid careful investigation and easy achievement of the objectives of the study. Chapter one is a preview of the back ground of the study and the problem that necessitated the study. This lead to the outline of the objectives ,significance, research question and hypothesis within which sample size of accounting communities are drawn and finally operational definition of terms. Chapter two presents the review of relevant literature concerning this study. Also theories about the dependent and independent variables were discussed. A discussion and analysis that attempt to establish the need for an accountability framework for CRDPs in Nigeria which includes: An examination and Analysis of CSR reporting in the Nigeria context; An examination of the theories, approaches and/or perspective which have been provided in the literature in order to identify the one will provide the most appropriate basis for a wider disclosure in term of CSR reporting suggested for Nigeria; An outline of a proposed accountability framework as a basis for CRDPs in Nigeria. Chapter three reveals the method of data collection, in relation to the research design , questionnaire, population and samples  with emphasis on model specification,estimation validation and reliability of research instrumentation. Chapter four under takes the data analysis of the respondent’s perceptions, and views and presents the empirical findings obtained from the data analysis accordingly, it includes:

a. A description of the statistical techniques utilized in the data  analysis

b. Background information of the respondents to this survey.

c. Analysis of perceptions of the intended purpose for annual report in Nigeria.

d. An analysis of perception of the reasons for the adoption of IFRSs in Nigeria.

e.  An analysis of perceptions of the wider disclosure of CSR information

f. An analysis of perceptions of social responsibility and accountability

Chapter five provides the summary; the findings and conclusion and recommendations of the research. In addition, the appendix provides details of the questionnaire, in the empirical survey and detailed summaries of the responses received.

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