CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Public sector accounting ensures that government resources are used responsibly and reported clearly. In Nigeria, this function is essential for maintaining transparency and accountability. However, poor financial reporting practices have weakened public trust in government institutions (Adebisi & Gbegi, 2013).

To solve these challenges, the International Public Sector Accounting Standards (IPSAS) were introduced. IPSAS provides a consistent global framework for preparing public sector financial statements (IFAC, 2018). It helps countries adopt uniform reporting systems that improve comparability, reliability, and transparency. According to Akinleye and Adediran (2019), IPSAS also promotes better decision-making by offering clearer financial information to stakeholders.

Nigeria adopted IPSAS in 2014 after its approval by the Federal Executive Council in 2010. The reform aimed to replace the traditional cash-based accounting system with an accrual-based approach that records all assets and liabilities (Okere, Eluyela, & Lawal, 2017). This shift was expected to enhance financial accountability and support good governance.

Although IPSAS adoption brought positive changes, several issues remain. Many public sector accountants lack technical knowledge of the standards. Some institutions still face poor funding, limited infrastructure, and inadequate training (Onalo, Lizam, & Kaseri, 2014). These problems affect full compliance and, as a result, reduce the potential impact of IPSAS on financial reporting quality. Therefore, this study examines whether IPSAS has truly improved the quality of public sector financial reporting in Nigeria.

1.2 Statement of the Problem

Financial reporting in Nigeria’s public sector has often been unreliable. The former cash-based system recorded only cash transactions and ignored non-cash items such as assets and liabilities (Ofoegbu, 2014). This approach made it difficult to present a true and fair view of public finances.

Even after IPSAS adoption, implementation has faced several setbacks. Many public institutions lack the skilled personnel required to apply the new standards effectively (Eke, Okechukwu, & Ijeoma, 2019). Training programs have been inconsistent, and monitoring mechanisms are often weak. Furthermore, some government bodies show limited commitment to full compliance due to bureaucratic delays and poor supervision.

These issues raise an important concern: Has IPSAS adoption truly improved the quality of public financial reporting in Nigeria? This study seeks to answer this question by assessing the relationship between IPSAS and financial reporting quality, as well as the barriers to its effective implementation.

1.3 Objectives of the Study

The main objective of this study is to evaluate the impact of IPSAS adoption on the quality of public sector financial reporting in Nigeria.

The specific objectives are to:

1. Examine the relationship between IPSAS adoption and financial reporting quality in Nigeria’s public sector.

2. Identify the key challenges that affect IPSAS implementation.

3. Assess how IPSAS adoption promotes transparency and accountability in public financial management.

1.4 Research Questions

The study seeks to answer the following questions:

1. What is the relationship between IPSAS adoption and financial reporting quality in Nigeria?

2. What challenges affect the implementation of IPSAS in the public sector?

3. To what extent has IPSAS improved transparency and accountability in public financial management?

1.5 Research Hypotheses

The study tests the following hypotheses:

Null Hypotheses (H₀):

1. IPSAS adoption has no significant relationship with financial reporting quality in Nigeria.

2. IPSAS adoption has not significantly improved transparency and accountability in the Nigerian public sector.

Alternative Hypotheses (H₁):

1. IPSAS adoption has a significant relationship with financial reporting quality in Nigeria.

2. IPSAS adoption has significantly improved transparency and accountability in the Nigerian public sector.

1.6 Significance of the Study

This study is important for both academics and practitioners. It contributes to the existing body of knowledge on public sector accounting reforms in developing countries. By focusing on Nigeria, it provides insights into how IPSAS influences transparency and financial discipline (Okere et al., 2017).

For policymakers, the findings will highlight areas where IPSAS implementation needs improvement. They can use this information to design stronger financial management policies. Accountants and auditors will also benefit by understanding how to apply IPSAS principles more effectively. In addition, professional bodies such as ICAN and ANAN can use the findings to strengthen their training programs and enhance members’ skills.

Finally, the research will serve as a reference for future studies on public sector financial reforms. Students and researchers can build upon these findings to explore other aspects of financial governance in Nigeria and similar economies.

1.7 Scope of the Study

The study focuses on Nigerian public sector institutions, including selected ministries, departments, and agencies. It examines how IPSAS adoption affects the quality of financial reporting, especially in terms of transparency, accountability, and comparability. The study also identifies challenges limiting IPSAS implementation and compliance across different government levels.

1.8 Definition of Terms

IPSAS: International Public Sector Accounting Standards developed by the International Public Sector Accounting Standards Board (IPSASB) to guide financial reporting in the public sector (IFAC, 2018).

Public Sector: Government-owned organizations responsible for delivering public services.

Financial Reporting: The process of preparing and presenting financial statements that show an organization’s financial activities and position (Adebisi & Gbegi, 2013).

Transparency: Openness in disclosing accurate and timely financial information to the public.

Accountability: The duty of public officials to justify how they use public resources.