1.1 Background to the Study
The deposit money banks (DMBs) are financial institutions whose major operations and source of revenue are the loans and deposits respectively. The banks obtain funds from the surplus unit and create risk assets with the funds at the deficit unit which attract interest. The major source of earnings in the DMBs is the interest accrued from the quality risk assets. However, thebanks are confronted with the challenge of poor quality risk assets as a result of weak corporate governance which result in high loan loss provisions, liquidity problem and capital depletion (CBN Special Audit Report,2009). Although, the banks in the last decades have been reporting a clean bill of health on the performance of the loans and their earnings in the financial statements but the issue of high non –performing loan which made Central Bank of Nigeria (CBN) to direct banks to make additional loan loss provision in 2017 has been raising concern on the reliability of accounting information.
The integrity and quality of accounting information for decision making by account users have become contemporary issues among researchers, academicians and regulators. This is not unconnected with the fact that managers tend to use general accrual method, real earnings management and specific accrual technique to manipulate financial information for their selfish interest (Cohen & Zarowin, 2010). However, the manipulation of accounting information has reduced the confidence of the stakeholders in relying on the financial statements for decision making. The accounting information which is a medium for communicating the financial performance of the firm to the stakeholders has therefore become a tool for misleading the stakeholders in decision making.One of the stakeholders who rely on financial statements for decision making are the shareholders who entrust their resources in the hands of the managers with the expectation to maximise their wealth and report back within a stipulated time through financial reporting.
Statement of the Problem
This study is motivated by the issue of account manipulationby managersof deposit money banks (DMBs) in Nigeria.According to CBN and NDIC joint audit of (2009), the account manipulation is predicated on the weak corporate governance and risk management whichled to a huge loss of investment by the shareholders of DMBs in Nigeria to a tune of N2. 216 trillion between 2007 and 2009. The predicament arise from illegal manipulation of accounts by managers, poor reporting system, speculations of depositors‟ funds in the capital market, insider lending, compassionate lending of loans to families and friends without due diligence, inadequate disclosure and transparency. The consequences of these accounting manipulation by the managers of DMBs in Nigeria in the last fifteen years has led to liquidations, loss of identities resulting from mergers and acquisitions and taking over of some DMBs by Assets Management Corporation of Nigeria (AMCON). Example of such banks were Oceanic bank, Intercontinental bank, bankPHB, Afri bank among others (Senusi, 2010).
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