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PROJECT TOPIC AND MATERIAL ON THE IMPACT OF IFRS ON THE SERVICES DELIVERED BY PRICE WATERHOUSE COOPERS (PWC) LAGOS, NIGERIA
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- Name: The Impact Of Ifrs On The Services Delivered By Price Waterhouse Coopers (Pwc) Lagos, Nigeria
- Type: PDF and MS Word (DOC)
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1.1. Background to the Study
Financial statements, apart from stating the financial position of an organization, provides other information such as value added, changes in equity, if any, and cash flows of the enterprise within a defined period time to which it relates (Iyoha and Faboyede, 2011). This information is useful to a wide range of users making informed economic decisions. The quality of financial reporting is indispensable to the need of users who require them for investment and other decision making purposes.
Financial reports can only be regarded as useful if it represents the “economic substance” of an organization in terms of relevance, reliability, comparability and aids interpretation simplicity (Okpala, 2012); to prepare and audit financial statements, some accounting conventions and principles known as standards have been put in place by appropriate bodies set up for the purpose of encouraging uniformity and reliability. The implementation and adoption of IFRS would therefore reduce information irregularity and strengthens the communication link between all stakeholders. It also reduces the cost of preparing different version of financial statements where an organization is a multi-national (Healy and Palepum, 2001).
Globalization of business requires a unified global accounting, reporting and disclosure set of standards. As a result of increasing volume of cross border capital flows and the growing number of foreign direct investments via mergers and acquisitions in the globalization era, the need for the harmonization of different practices in accounting and the acceptance of worldwide standards has arisen (Akindele, 2012). This worldwide standard is called International Financial Reporting Standards (IFRS).
Before IFRS adoption era, most countries had their own standards with local bodies responsible for developing and issuance. The Nigerian Accounting Standards Board (NASB) was responsible for developing and issuing standards known as Statements of Accounting Standards (SAS) and in the new dispensation, the body was renamed Financial Reporting Council (FRC) of Nigeria as the regulatory body overseeing the adoption and implementation of IFRS. The International Accounting Standards Board (IASB) adopted the IFRS framework on 1st April, 2001; the standards were adopted by over 90 countries around the world. IFRS was established and approved by the IASB.
Accounting Framework has been shaped by International Financial Reporting Standards (IFRS) to provide for recognition, measurement, presentation and disclosure requirements relating to transactions and events that are reflected in the financial statements. IFRS was developed in the year 2001 by the International Accounting Standard Board (IASB) in the public interest to provide a single set of high quality, understandable and uniform accounting standards. Users of financial statement worldwide require sound understanding of financial statement but this can only be made possible based on Generally Accepted Accounting Practice (GAAP). With globalization of finance gaining ground, convergence with IFRS will enable the world to exchange financial information in a meaningful and trustworthy manner (Ikpefan and Akande, 2012).
Realization of the anticipated benefits to be derived as a result of the change from national Generally Accepted Accounting Principles (GAAP) to IFRS in terms of improved quality of financial reporting is the core motive of the proponents of general adoption of IFRS. Supporters of IFRS adoption argue that benefits will flow from expanded financial statement disclosures, differences in company reporting arising when a variety of national GAAP is used (Schipper,2005; Whittington, 2005).
As a result of the global acceptance of IFRS, some developing nations who considered the global impact would have on their economies either through foreign aids, Foreign Direct Investments (FDI) or the development of the capital market in terms of capital inflow decided to go for IFRS (Irvine and Lucas, 2006).
1.2. Statement of the Problem
IFRS is a new and emerging issue globally, with the objective of formulating and publishing accounting standards to be observed in the presentation of financial statements and equally as a benchmark for countries which are developing their own national regulation and by companies listed on the world Stock Exchange. The adoption of IFRS can bring significant additional short-term costs to businesses such as fees to train staffs and pay specialist external accountants. Equally, there are no enough experts in the country who are specialized in IFRS field. Adjustments to comply with IFRS can make performance comparisons difficult for investment analysis and also, it will reduce the level of confidence the shareholder have in the company.
Indeed, Nigeria had in 2010 signaled its willingness to adopt the IFRS in 2012. This dateline is anchored on the understanding of a progression along the milestones and timeliness enunciated in the country roadmap. However, as the Financial Reporting Council (FRC), formerly Nigeria Accounting Standards Board (NASB), duly acknowledged, the transition framework for effective and meaningful adoption may be derailed if any of the milestones and timeliness is ignored (NASB, 2010).
The adoption of IFRS reflects a fundamental shift in national accounting systems and profession. Critical constituents of a national system for a successful transition to IFRS include the tertiary educational system and the accounting profession. On this premise, the joining of anecdotal evidence with the paucity of published research about the dimensions of IFRS adoption in Nigeria tends to suggest that not much is known about this new financial language in the Nigerian academic environment and even globally (Doyle, 2010).
1.3. Research Questions
Based on the objectives of the study, the following research questions were carefully raised:
(i) What is the extent of IFRS familiarity by auditors, accountants and other experts in auditing firms in Nigeria?
(ii) Do accountants, auditors and other experts in auditing firms have different perspectives about IFRS readiness?
(iii) Do accountants, auditors and other experts have different perception regarding the enhancement of financial reporting quality through the adoption of IFRS?
1.4. Justification for the Study
Various researchers have asserted that the introduction of the IFRS has given room for uniformity in global financial reporting, although much emphasis is laid on the impact of IFRS on the economy generally and non-financial institutions among others.
Okoye and Ezejiofor (2014) worked on the impact of IFRS adoption on stock market movement in Nigerian corporate organization. The research assessed the extent at which the impact of IFRS on stock market movement can improve the position of corporate organization in Nigerian capital market. Ezeani and Rotimi (2012) worked on the adoption of IFRS to enhance financial reporting in Nigerian universities. They examined the extent to which adoption of IFRS can enhance financial reporting system in Nigerian universities.
Evans and Enahoro (2014) worked on the comparative study of the IFRS implementation in Ghana and Nigeria. The research was conducted to compare the IFRS adoption and implementation of Ghana and Nigeria. Markku V. and Hannu S. (2012) examined the impact of IFRS transition on audit and non-audit fees. The study focused on fees paid to auditors during a major accounting change associated with extra audit risk and work. They analyzed how a major accounting change from local GAAP and IFRS affects the audit and non-audit fees paid to auditors.
Nicholas A. and Ateboh B. (2014) examined the impact of IFRS adoption by Nigerian listed firms on key financial ratios used by investors. G. Demaki (2013) worked on the prospects and challenges of IFRS to economic development in Nigeria. Okafor and Ogiedu (2011) investigated the potential effects of the adoption and implementation of IFRS in Nigeria from the perspective of stakeholders. KPMG (2010) examined the impact of IFRS on the upstream oil and gas industry. Firoz and Aziz (2010) worked on environmental accounting and IFRS. They made a critical appraisal of the contemporary environmental accounting literature and examined the applicable and relevant paragraphs of the global IFRS.
There has been very little or no emphasis laid on the impact of IFRS on the services delivered by the auditing firms in Nigeria. Hence, this research will go a long way in bridging this identified gap, and to determine the impact of IFRS on the services delivered or by auditing firms in Nigeria.
1.5. Objectives of the Study
The main objective of the study was to investigate the impact of ifrs on the services delivered by price Waterhouse coopers (Pwc) Lagos, Nigeria. Other specific objectives were to:
(i) Examine the extent of IFRS familiarity by accountants, auditors and other experts in auditing firms.
(ii) Investigate whether accountants, auditors and other experts have different perspectives about IFRS readiness.
(iii) Assess whether auditors, accountants and other experts have different perception regarding enhancement of financial reporting quality through the adoption of IFRS.
1.6. Hypotheses of the Study
Based on the research questions, the following research hypotheses were tested:
HO1: There is no difference in the extent of IFRS familiarity by the accountants, auditors and other experts in auditing firms.
HO2: Accountants, auditors and other experts in auditing firms do not have significant differences in their perspectives about IFRS readiness.
HO3: Accountants, auditors and other experts in auditing firms do not have different perception regarding the enhancement of financial reporting quality through the adoption of IFRS.