THE INFLUENCE OF ACCOUNTING SYSTEM ON THE PERFORMANCE OF BANKS IN NIGERIA (A STUDY OF DIAMOND BANK PLC)
CHAPTER ONE
INTRODUCTION
In order to generate and present accounting information effectively, every organization needs an accounting system. The system depends on the nature and the size of the organization concerned.
In this study, the researcher will make emphasis on the accounting system applicable in banking sectors and how its effective use and misuse affect differently the performance of the banks. Banks are playing a very vital role in the economic development of a nation. The healthiness of the economy is directly connected to the soundness of its banking system. The role of banks has placed them as a very valuable partner in the process of economic development, so the need to apply a sound and effective accounting system should not be overemphasized.
The accounting system refers to the set of procedures, and principles that are responsible for the collection and processing’s of data to produce information useful to decisions makers in planning and controlling of business activities. The system deals primarily with financial information. An accounting system is use to collect, process and report needed data about a business, government unit, or other type of association. Information is usually collected, processed and reported in financial terms, which simply means that ‘money’ is the bases of measurement.
A bank is a financial institution and a financial intermediary that accepts deposit and channels those deposits into lending activities, either directly by loaning, or indirectly through capital market, (Hoggson, 1926). Banking sector at all levels requires accurate and reliable financial records, so as to ascertain its financial position at any given time. And this is made possible through accounting system.
According to HUSSEY and HUSSEY (1999) cost and management accounting, all efficiently managed organization need to keep some form of accounting system. The role of accounting is concerned with classifying and recording transactions in a monetary term. Accounting is mainly concerned with classifying, recording, interpreting and reporting to external and internal users of accounting data that are used to evaluate the performance of any organization. For the business organization to have better development, an effective accounting system is very critical, hence the topic of the researcher “The Influence of Accounting System” should have appropriate measure of control, standard implementation methods, and qualified accounting personnel, updated information technology control and should comply with General Accepted Accounting Principle, (GAAP).
This assist in one way or another to achieve the overall objectives of the organization. For business organization (bank) to be more successful and accountable for their day-to-day activities, the application of effective accounting system should be considered in a highly position.
It has been observed with keen interest the level of fraudulent practices occurring in most of our banking industries. These fraudulent practices include: theft, embezzlement, defalcation, forgeries, substitution, suppressions, lending to “ghost” borrowers, unofficial borrowing, foreign exchange malpractice, impersonation, manipulation of vouchers, over and under-valuation of properties, false declaration of cash shortages, duplication of cheque books, mail transfer, computer frauds, fake payment, teeming and lending, and robbers.
In more specific terms, the problem is lack of adequate accounting system and inability of the management to employ trained and professional accountant in the banking industries and serves as a threats to the success of many banks. If effective accounting system and strong internal control are not set up, it will lead to complete failure of the financial institutions especially banks in Nigeria.
The proposed study is designed to provide information on how effective and weak accounting system affects positively or negatively the performance of banks.
The specific objectives include:
- To determine how accounting system aid management in decision making.
- To find out major problems of accounting system in banks
- To examine whether accounting system use in banks follows the General Accepted Accounting Principles, (GAAP).
- To make useful recommendations based on the findings.
The following research questions have been formulated for this study:-
- Does sound accounting system facilitate decision making in banks?
- Why is good reporting standard a necessary tool for enhancing accountability in the banking system?
- Does audit problem affect credibility of accounts in the banking system?
- What can be said to be the cause or causes of the increasing rate of frauds in banks?
- What are the effects or damages fraud has caused banks and her customers?
- What is the impact of internal control in the prevention and detection of fraud in banks?
HO: There is no significant relationship between accounting system and banking performance.
H1: There is a significant relationship between accounting system and bank performance.
- SIGNIFICANCE OF THE STUDY
The results of the study will be beneficial to different people in different ways. It will be beneficial to stakeholders in commercial banks, management and staff of the commercial bank sector where achievement has been minimal.
The study will benefit the public who will understand the role played by banks in the economy. It will equally be beneficial to investors who will apply for long and medium term loan. It will also stimulate new thought and ideas on how banks in Nigeria carry out its activities.
Finally, the study will form the basis upon which further researchers can be actuated.
The study is limited to Diamond Bank Plc, Abak Road Branch, Uyo, and is based on The Influence of Accounting System on the Performance of Banks in Nigeria.
The inability of management to disclose certain information which they consider sensitive, the publication of which might be detrimental to their operations proved to be a limitation on the study. Distance and its attendant cost of travel in order to obtain information with which to write this study was also a major limitation.
Hence, the project has not been able to cover all areas which it should have covered, if one were to write freely. And this called for the streamline of the scope of study to allow for successful handling of these hindrances without bias.
- DEFINITION OF TERM AND ACRONYM
