ACCOUNTANT’S ATTITUDE TO THE DEVELOPMENT AND IMPLEMENTATION OF SOCIAL AND ENVIRONMENTAL ACCOUNTING IN NIGERIA

 

ABSTRACT

Accountants occupies a very unique position in any organization as, he is always referred to as the life-wire of his establishment. Accounting as a profession has come of age and current developments demand of Accountant to go an extra mile before he could be adjudged as an achiever. However, since the Accountant does not operate in a vacuum, he has several forces to contend with if only he is to succeed in this environment that is saddled with political and economic manipulations. This study examines some of those problems such as political, economic, and ethical facing the profession. Being a theoretical review it went further to discuss their influences on the Accountants performance in the light of the environment in which he operates. The study was concluded by recommending some policy options, which the Accountant should observe as necessary qualities for the accomplishment of the Herculean task ahead of him. These include: the maintenance of the professional integrity, prudency in spending, accountability in operations and, transparency in disposition all of which, will enable him succeed in the face of all those hindering.

INTRODUCTION

Accountants occupy various roles in world commerce. Many accountants (of varying descriptions - financial accountants, management accountants, internal auditors, etc.) occupy vital - and often highly placed - positions in industry and commerce and in the public sector. Others work in professional firms of auditors. These firms provide auditing, taxation, accounting and a range of consultancy services to every conceivable branch of society - from multi-nationals to governments, from small and medium sized enterprises to international charities and local non-governmental organizations.

Although the accounting sector itself might be considered a relatively low-impact sector in terms of direct environmental and social impacts, it is the accountant's involvement in the twin issues of organizational decision-making and external reporting that imposes on the accounting profession the responsibility for understanding, absorbing and articulating the implications of the sustainable development debate. The importance of the role of the accounting profession should not be under-stated. Global capital markets are heavily dependent on the intermediary / assurance role that accountants occupy - whether as auditors of listed company financial statements or as reporting accountants in initial public offerings. The continuing reverberations from the collapse of US energy trader Enron demonstrate the intimacy of the relationship between the profession and the market.

As will be explored in more detail below, the accounting profession first addressed environmental issues directly in 1990 and, since then, progress has been achieved on many fronts. Progress is, however, contingent on the availability of an appropriate mix of resources and concern on the one hand, and the pressure from competing issues on the other. There is little doubt that the accounting profession has - at some levels - a sufficiency of tangible and intellectual resources and concern to be able - theoretically - to address social, environmental and sustainable development issues with the appropriate degree of urgency. It is perhaps the competing issues of the 1990's that have meant that progress in engaging with the sustainable development debate has not been as rapid as some would have hoped.

This sectorial term paper presents a description of the accountant’s attitude to the development and implementation of social and environmental accounting in Nigeria.

THE UNIQUENESS AND TYPOLOGIES OF NIGERIAN ACCOUNTANT

Out of all the known professionals, the Accountant seems the most mobile as he is unavoidable in almost all the facets of human endeavors. While most of the other professionals are restricted to their areas of operations such that, the Medical Doctor is found in the hospital, the Lawyer in the Chamber or Court, and the Engineer in the factory or workshop. In the case of the Accountant, he is everywhere and hence we have hospital Accountant, factory/workshop Accountant, Accountant in government service,

Industry\ academia and of course consultancy and professional services. It is no gain saying that, what blood is to the body is what money is to business and by inference what the Accountant (the custodian of money) is to his organization and indeed, the Nation. For the enhancement of the performance of his duties according to Edet (2001), Accountant has to undertake the followings: record keeping (book keeping); cost accumulation for decision making (performance evaluation, control, predictions and crises management); auditing and investigation: tax management and other management advisory services such as: liquidation, acquisition and mergers, privatization and commercialization. In conducting or performing those duties, the profession is governed by rules of conduct which include: independence; prudence; consistency and objectivity.

Here in Nigeria the Accountant by the nature of the job he does can be classified into different categories which for the purpose of this paper, is discussed under only four headings of government, industry, academic and practice.

Governmental Accountants

These are Accountants who by natural location find themselves holding the keys to the

Treasures within the three tiers of government, be it Local, State or Federal set up. To operate within the system in this status, you have to be versed in the government financial policies, regulations and instructions, government gazettes, budgetary provisions, store regulations/instructions and the general mode of presentation of governmental financial reports.

This set of Accountants cannot but be involved in the political manipulations and wrangling within the system. To excel in this position he has to be articulate, diplomatic and God fearing. All these attributes will endow him with the sixth sense with which to balance the various contending forces. This is because he is in a position to part-take in such a decision that would have a far reaching effect on the general public. The Accountant here is obviously placed in a precarious situation of either joining them or facing their wrath. In most cases, the accountants are seeing joining them because it is not easy to face their wrath as the end result of daring them is better imagined than experienced.

This is not to say that this place is no-go-area, the Accountant only need to get his bearing, maintain his focus, be above board and of course do not ask for justice with unclean hands.

Industrial Accountant

These set of Accountants are made up of those operating in the various sectors of the economy such as: financial (i.e. banks, insurance, etc.), commercial (i.e. importing, exporting or buying and selling outfits) and industrial (i.e. production units) outfits.

In order to be properly placed as an Accountant under this category, you have to be well knowledgeable in both the internal and external regulations governing the operations of your industry in general and that of your organization in particular. He is also required to be up to date in the financial regulations and operations of those sister organizations with which, his organization has either or either horizontal or vertical relationships. This is because they cannot but have dealings with one another in their day to day operations. The extent to which these sets of Accountants are saddled with political maneuver is usually to the limit of what operates within their immediate organization. However since he is not operating in a vacuum but rather, within a larger economic system, the onus is on him to observe the principles of objectivity, prudence and honesty within his areas of operations to ensure financial sanity.

Academic Accountant

This refers to the educators of the coming generations. This is because he is basically preoccupied with the duties of imparting knowledge to the younger generation. To be suitably qualified for this job, you must be academically sound, versed in professional refinements, have a good sense of presentation and an acceptable level of eloquence. He cannot but be an orator of sort. One unique thing about this set of Accountant is that, they set the standard of both the knowledge and practice of the profession. This they maintain by constant touch and review from time to time.

Practicing Accountant

This is an Accountant with specialized training skills, who having satisfied the entire required prerequisite, has thus obtained a practicing license. By the level of his training, he is expected to be capable of solving any practical problems on financial matters in whatever field of human endeavor. By the consultancy nature of his duties he is often than not an itinerant worker who moves from one organization to the other.

Being a generalist of sort, he is versed in the Company and Allied Matters Act (CAMA), Accounting and Auditing standards and pronouncements, government financial regulations, the various business Acts, Decrees and Enactment which affect their financial operations. He must equally be up to date in accounting refinements and developments. In short, he should know at least, a little about almost everything concerning financial matters of the various industrial, governmental, financial and institutional set up, if he is to worth the sort. By the nature of his placement and disposition within the scheme of things, he is regarded as the image maker for the noble profession. If he will operate at a level expected of him, he cannot but be above board in all his dealing both within and without. The adjustment, advancement and sustenance of a qualified standard of practice rest squarely in his shoulder.

PROBLEMS FACING THE ACCOUNTING PROFESSION

Political and Economic Environments

Much of the operations of the Accountants are affected by both the political and economic environments in which he operates. Given that organizations (in which Accountants operates) exists within a political environment, it is imperative that political changes impede the Accountant’s task of predicting future influences and planning to meet them. This to a very large extent hinders the successful implementation of budget and renders estimates worthless.

Hence, performance evaluation becomes a difficult task since the existing standards at the time of planning would have been eroded by political instability and incessant adjustments to measuring parameters. Furthermore, the economic environment is so complex that even professional forecasters do fail to predict its behaviors accurately. The necessary parameters needed for measuring the economic performance such as, inflation rate, exchange rate and interest rate are so unstable that they do not allow for meaningful decision making which can assist the Accountant to prepare himself for the challenges ahead. All these unpredictable forces make the work of Accountant to be cumbersome, less reliable unpredictable and hence qualitative.

Ethical question of Integrity

The old joke was told where the firm asks its Accountant “how much is 2+2? The

Accountant replied, “How much do you want it to be?” The implication of this is that,

Accountants can manipulate to suit the bottom line requirement. In many cases Accountants see themselves as employees or agent of their clients. On the one hand, such an attitude is quite understandable and predictable. On the other hand, it seems to be undermining the notions of independence and objectivity that have so long marked the profession of advocacy.

Today, major accounting firms will offer cafeteria of finical services. Many accounting firms will offer virtually anything. A client waits without necessarily thinking of how it affects the culture of their professional calling. As more and more non-Accountants become involved in major decision making situation, they might not in fact, be imbued with all the commitments and understanding of what public accounting ought to be. Because of lack of consumer protection and appropriate regulation to checkmate the moral hazards occasioned by unethical conduct, there is a real danger. Since we are not such a legalistic society. Accountants are afraid to even make determinations for them of what is right or wrong.

Non-qualification of Financial Reports

It is a common knowledge here in Nigeria that, a larger percentage of Auditor’s report is not qualified. It does not mean that all these statements are not qualifiable but the onus lie with the auditor who did the audit job. As a result of unqualified financial statements, the general public assumes that all is well and continue to make investment. By this, the auditor had abused the ethics of Independence and Objectivity. It is as a result of this that the issue of the distress in the banking industry from 1996 to date came to focus. A look at this will reveal that if there were no ethical abuses most of the distressed banks would have been saved.

Resulting from the above, the profession once ran into crisis which almost got her integrity eroded. This was when the Accounting and the Legal professions had a face-off on the issue of Lawyer’s attestation.

Social accounting

Social accounting (also known as social and environmental accounting, corporate social reporting, corporate social responsibility reporting, non-financial reporting, or sustainability accounting) is the process of communicating the social and environmental effects of organizations' economic actions to particular interest groups within society and to society at large.
Social accounting is commonly used in the context of business, or corporate social responsibility (CSR), although any organization, including NGOs, charities, and government agencies may engage in social accounting.
Social accounting emphasizes the notion of corporate accountability. D. Crowther defines social accounting in this sense as "an approach to reporting a firm’s activities which stresses the need for the identification of socially relevant behavior, the determination of those to whom the company is accountable for its social performance and the development of appropriate measures and reporting techniques."
Social accounting is often used as an umbrella term to describe a broad field of research and practice. The use of more narrow terms to express a specific interest is thus not uncommon. Environmental accounting may e.g. specifically refer to the research or practice of accounting for an organization’s impact on the natural environment. Sustainability accounting is often used to express the measuring and the quantitative analysis of social and economic sustainability.
Social accounting challenges conventional accounting, in particular financial accounting, for giving a narrow image of the interaction between society and organizations, and thus artificially constraining the subject of accounting.
Social accounting, a largely normative concept, seeks to broaden the scope of accounting in the sense that it should:

• concern itself with more than only economic events;
• not be exclusively expressed in financial terms;
• be accountable to a broader group of stakeholders;
• Broaden its purpose beyond reporting financial success.

It points to the fact that companies influence their external environment (both positively and negatively) through their actions and should therefore account for these effects as part of their standard accounting practices. Social accounting is in this sense closely related to the economic concept of externality.
Social accounting offers an alternative account of significant economic entities. It has the "potential to expose the tension between pursuing economic profit and the pursuit of social and environmental objectives".
The purpose of social accounting can be approached from two different angles, namely for management control purposes or accountability purposes.

Accountability

Social accounting for accountability purposes is designed to support and facilitate the pursuit of society's objectives. These objectives can be manifold but can typically be described in terms of social and environmental desirability and sustainability. In order to make informed choices on these objectives, the flow of information in society in general, and in accounting in particular, needs to cater for democratic decision-making. In democratic systems, Gray argues, there must then be flows of information in which those controlling the resources provide accounts to society of their use of those resources: a system of corporate accountability.
Society is seen to profit from implementing a social and environmental approach to accounting in a number of ways, e.g.:

• Honoring stakeholders' rights of information;
• Balancing corporate power with corporate responsibility;
• Increasing transparency of corporate activity;
• Identifying social and environmental costs of economic success.

Management control

Social accounting for the purpose of management control is designed to support and facilitate the achievement of an organization's own objectives.
Because social accounting is concerned with substantial self-reporting on a systemic level, individual reports are often referred to as social audits.
Organizations are seen to benefit from implementing social accounting practices in a number of ways, e.g.

• Increased information for decision-making;
• More accurate product or service costing;
• Enhanced image management and Public Relations;
• Identification of social responsibilities;
• Identification of market development opportunities;
• Maintaining legitimacy.

According to BITC the "process of reporting on responsible businesses performance to stakeholders" (i.e. social accounting) helps integrate such practices into business practices, as well as identifying future risks and opportunities.
The management control view thus focuses on the individual organization.
Critics of this approach point out that the benign nature of companies is assumed. Here, responsibility, and accountability, is largely left in the hands of the organization concerned.

Environmental accounting

Environmental accounting is a subset of social accounting, focuses on the cost structure and environmental performance of a company. It principally describes the preparation, presentation, and communication of information related to an organization’s interaction with the natural environment. Although environmental accounting is most commonly undertaken as voluntary self-reporting by companies, third-party reports by government agencies, NGOs and other bodies posit to pressure for environmental accountability.
Accounting for impacts on the environment may occur within a company’s financial statements, relating to liabilities, commitments and contingencies for the remediation of contaminated lands or other financial concerns arising from pollution. Such reporting essentially expresses financial issues arising from environmental legislation. More typically, environmental accounting describes the reporting of quantitative and detailed environmental data within the non-financial sections of the annual report or in separate (including online) environmental reports. Such reports may account for pollution emissions, resources used, or wildlife habitat damaged or re-established.
In their reports, large companies commonly place primary emphasis on eco-efficiency, referring to the reduction of resource and energy use and waste production per unit of product or service. A complete picture which accounts for all inputs, outputs and wastes of the organization, must not necessarily emerge. Whilst companies can often demonstrate great success in eco-efficiency, their ecological footprint, that is an estimate of total environmental impact, may move independently following changes in output.
Legislation for compulsory environmental reporting exists in some form e.g. in Denmark, Netherlands, Australia and Korea. The United Nations has been highly involved in the adoption of environmental accounting practices, most notably in the United Nations Division for Sustainable Development publication Environmental Management Accounting Procedures and Principles (2002).


POSITIVE ASPECT OF SOCIAL AND ENVIRONMENTAL ACCOUNTING

• Developing the conceptual underpinnings for environmental and sustainability reporting

Drawing upon nearly half a century's thinking on the conceptual framework under-pinning financial reporting, the accounting profession has been able to contribute significantly to the environmental and sustainability reporting frameworks developed by FEE and GRI respectively. The conceptual frameworks and related statements developed by accounting standard setters (such as IASC and FASB) have proved very adaptable to an alternative reporting scenario - whether environmental, social or sustainability focused.

• Encouraging environmental, social and sustainability reporting

The national and regional environmental and sustainability reporting award schemes established by almost 20 of the world's leading accounting bodies have had a significant influence on the take-up of environmental and related forms of reporting and, due to the inclusive nature of the award procedures, have established a consistent benchmark for the quality of wider public reporting.

• Exploring corporate governance and accountability issues

Probably the first principles based code of corporate governance to emerge after the excesses of the 1980's was the UK's "Cadbury Code" in 1992. Adopted by many countries, this code has been revisited and expanded in subsequent studies, culminating in the recent Turnbull (1999 - UK) and King (2001 - South Africa)

reports, both of which embrace issues such as non-financial reporting (including social and environmental issues) and reputational risk management processes (covering ethical, environmental and social risk issues). The accounting profession has been deeply involved in the development of these governance codes.

• Expanding the boundaries of accounting

The accounting profession has been centrally involved - as one would expect - in the development of new areas of accounting, areas that are increasingly seen to be important tools in the drive for sustainability at the corporate level. A subsequent section of this report will deal with this issue in more depth, but particular issues where progress has been made include:

- Environmental financial accounting (for external reporting to financial stakeholders)

- Environmental management accounting (for internal decision-making and reporting purposes)

- Sustainability accounting (accounting for the social, economic and environmental aspects of decision-making)

• Developing appropriate verification methodologies

The major internationally-based accounting firms have moved swiftly to develop verification methodologies appropriate to the new forms of corporate reporting. Shell, for example, might have found it more difficult to recoup its reputation subsequent to Brent Spa and Nigeria, had it not been for the global coverage and global reputation of PwC and KPMG, the joint verifiers of Shell's annual "Report to Society". That said, the verification approaches developed by the accounting firms and their non-accounting profession rivals have been criticized for saying too little about real-terms performance.

• Influencing corporate behavior

A significant part of the sustainable development role that the accounting profession plays reflects the consulting and advisory roles of the professional firms - especially the so-called Big 5. Despite the business risks involved, these large accounting firms have recognized the need to create multi-disciplinary teams and contribute financial and intellectual resources commensurate with the need of the multi-national companies they service.

• Contributions outside

The accounting profession has contributed significantly to initiatives originating from outside the profession. Examples include:

- The UNCTAD/ISAR environmental accounting programme which has undertaken training in a dozen developing or transitional economies

- the sustainability reporting guidelines of the Global Reporting Initiative (GRI) - covering both the conceptual framework, boundary issues and verification aspects of sustainability reporting where both the Canadian Institute of Chartered Accountants (CICA) and the Association of Chartered Certified Accountants (ACCA) have provided substantial long-term financial resources