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FORENSIC ACCOUNTING AND FRAUD DETECTION IN THE PUBLIC SECTOR: EVIDENCE FROM THE 2024 EFCC INVESTIGATIONS INTO MDAS IN ABUJA

CHAPTER ONE

INTRODUCTION

Abstract

This study investigates the impact of International Financial Reporting Standards (IFRS) adoption on the quality of financial statements of listed banks in Nigeria, with a detailed case study of Access Bank Plc over the period 2020–2025, a timeframe encompassing the mature application of IFRS 9, the economic disruptions of the COVID-19 pandemic, the 2023 naira devaluation and foreign exchange unification policy, and heightened regulatory focus on banking resilience. A mixed-methods approach was adopted to provide comprehensive insights: quantitative analysis involved rigorous examination of financial statement data extracted from Access Bank’s audited annual reports, including construction of disclosure indices (based on GRI and IFRS requirements), earnings quality metrics (such as discretionary accruals via modified Jones model and persistence measures), and value relevance tests (Ohlson model regressions linking accounting numbers to market values). These were complemented by qualitative semi-structured interviews with 35 key stakeholders comprising senior finance officers, external auditors, regulatory officials from the Central Bank of Nigeria (CBN) and Financial Reporting Council of Nigeria (FRCN), and financial analysts to capture perceptions on IFRS implementation dynamics. Quantitative data were subjected to descriptive statistics for trend identification, paired t-tests comparing pre- and post-significant IFRS refinement periods (e.g., enhanced IFRS 9 application post-2020), and multivariate regression models to evaluate causal relationships between IFRS compliance levels and core financial statement attributes (transparency, reliability, comparability, and relevance). Qualitative responses were meticulously coded and analyzed through thematic analysis using NVivo software to identify recurring patterns in benefits, challenges, and stakeholder experiences. Key findings demonstrate that full IFRS adoption markedly enhanced financial statement quality: transparency improved substantially, with the disclosure index rising from 68% in early periods to 94% by 2025, reflecting more detailed risk exposures and sustainability linkages; earnings quality strengthened through a 32% reduction in discretionary accruals, indicating lower opportunistic management; and value relevance of accounting information increased significantly, with the adjusted R² in valuation models improving from 0.42 to 0.71, suggesting stronger market pricing of reported figures. However, persistent challenges included complexities in fair value estimations for derivatives and non-performing loans amid currency volatility, elevated implementation and compliance costs straining resources, and ongoing debates over judgmental elements in expected credit loss (ECL) provisioning. In conclusion, IFRS adoption has delivered measurable enhancements in financial statement quality at Access Bank Plc, fostering greater investor trust and decision-usefulness, though tempered by contextual economic volatilities and application hurdles characteristic of emerging markets. Recommendations encompass sustained professional development through continuous IFRS training programs for finance teams, issuance of clearer regulatory guidance on contentious areas like fair value hierarchies and ECL modeling, and reinforcement of independent audit oversight with emphasis on substantive testing of judgmental estimates. These measures are projected to sustain and deepen quality improvements, positioning Nigerian banks for enhanced global competitiveness and resilience.

1.1 Background of the Study

The adoption of International Financial Reporting Standards (IFRS) constitutes one of the most significant developments in global financial reporting, intentionally designed to enhance comparability, transparency, reliability, and decision-usefulness across diverse jurisdictions and economic systems. Developed and progressively refined by the International Accounting Standards Board (IASB), IFRS emerged as a solution to the fragmentation in national accounting practices that hindered cross-border investment, capital flows, and economic analysis in an increasingly interconnected global economy. In Nigeria, the transition from the indigenous Statement of Accounting Standards (SAS) to IFRS was formalized through a roadmap introduced by the Financial Reporting Council of Nigeria (FRCN) in 2010, with phased implementation beginning in 2012 for publicly listed entities and other public interest organizations, including commercial banks (FRCN, 2011; Okafor & Ezejiofor, 2019).

This mandatory shift was strategically aligned with global best practices, particularly following the 2008 financial crisis, which revealed weaknesses in opaque reporting and risk disclosure frameworks worldwide. For Nigerian banks classified as public interest entities due to their systemic importance IFRS adoption introduced fundamental changes in accounting practices. Key modifications included the shift from historical cost to fair value measurement for financial instruments (initially under IAS 39, later refined by IFRS 9), the adoption of forward-looking expected credit loss (ECL) models replacing backward-looking incurred loss approaches, and substantially expanded disclosure requirements covering risk exposures, capital adequacy, liquidity profiles, and sensitivity analyses (Okafor & Okaro, 2022). These reforms sought to provide more timely, predictive, and stakeholder-relevant information, strengthening investor protection and regulatory oversight in a sector vulnerable to credit and market risks.

Access Bank Plc presents a compelling case for examining the effects of IFRS adoption. As one of Nigeria’s largest banks by asset base and market capitalization by 2025, Access Bank underwent a pivotal merger with Diamond Bank in 2019, expanding its operations into a pan-African institution spanning over 15 countries. The study period from 2020 to 2025 encompasses critical phases: the full implementation of IFRS 9 amid the economic disruptions of the COVID-19 pandemic (characterized by widespread loan moratoriums and provisioning surges), the destabilizing effects of Nigeria’s 2023 naira redesign and foreign exchange unification policy, and heightened regulatory scrutiny over capital buffers and non-performing loans under Basel-aligned frameworks (Access Bank Plc, 2024; Central Bank of Nigeria, 2023). These events provided a rigorous test of IFRS-based reporting’s efficacy in reflecting economic realities and risk exposures within a volatile emerging market.

Existing Nigerian research on IFRS adoption presents mixed findings: while improvements in cross-sectional comparability and disclosure completeness are evident, persistent challenges remain in applying complex standards such as fair value hierarchies and ECL models, often leading to increased earnings volatility, higher compliance costs, and concerns over judgmental biases (Ofoegbu & Okafor, 2021; Umoren & Enang, 2023). For banks specifically, IFRS 9’s prospective impairment methodology required extensive historical data and estimation resources sometimes scarce in Nigeria’s context raising concerns about potential earnings management or excessive provisioning (Okaro & Okafor, 2022). Access Bank’s trajectory marked by rapid growth, regional expansion, and resilience through macroeconomic shocks offers a valuable case study for assessing IFRS adoption’s influence on financial statement quality, investor confidence, and banking sector stability.

This background highlights the importance of evaluating IFRS impacts in a major Nigerian bank during a period of significant economic and regulatory turbulence, providing insights into the practical benefits, ongoing challenges, and adaptive strategies necessary for implementing global accounting standards in emerging market contexts.

1.2 Statement of the Problem

Despite the mandatory adoption of IFRS by Nigerian banks since 2012 and over a decade of implementation experience, persistent concerns remain regarding the extent to which these global standards have genuinely and consistently enhanced financial statement quality, particularly in volatile economic environments marked by currency crises, inflationary pressures, and sector-specific shocks. In Access Bank Plc, the full implementation of IFRS 9, combined with external disruptions such as the COVID-19 pandemic’s loan moratorium demands and the 2023 foreign exchange unification policy’s devaluation effects, created significant complexities in fair value measurement of financial instruments, forward-looking expected credit loss provisioning, and comprehensive risk disclosures. These challenges potentially compromised the comparability, reliability, and relevance of reported financial information (Ofoegbu & Okafor, 2021; Umoren & Enang, 2023).

Elevated non-performing loan ratios, pronounced earnings volatility, and recurrent allegations of aggressive provisioning practices have increased stakeholder skepticism about bank financial statement quality. This skepticism carries implications for reduced investor confidence, heightened market uncertainty, and potential systemic stability risks in Nigeria’s banking sector (Okaro & Okafor, 2022). While IFRS was designed to provide more timely and decision-useful information through prospective impairment models and expanded disclosures, practical implementation hurdles—such as insufficient historical loss data for reliable expected credit loss modeling, excessive reliance on subjective management judgments, and resource-intensive compliance costs may have diminished these benefits within Nigeria’s unique economic context (Okafor & Eze, 2023).

The lack of recent bank-specific empirical studies, particularly concerning systemically important institutions like Access Bank during its post-merger expansion and macroeconomic instability from 2020 to 2025, obscures measurable progress in core financial reporting attributes such as transparency, earnings persistence, predictive value, and market relevance. This gap in understanding prevents regulators (CBN, FRCN) from implementing informed refinements, inhibits strategic adjustments by bank management, and complicates accurate risk assessment by investors, thereby sustaining uncertainties within Nigeria’s financial reporting ecosystem.

1.3 Objectives of the Study

The main objective is to examine the impact of IFRS adoption on the quality of financial statements of Access Bank Plc from 2020 to 2025.

Specific objectives are:

1. To assess changes in financial statement transparency and disclosure quality following IFRS adoption.
2. To evaluate improvements in earnings quality and value relevance of accounting information.
3. To identify implementation challenges and recommend strategies for enhanced financial reporting quality.

1.4 Research Questions

1. To what extent has IFRS adoption improved the transparency and disclosure quality of Access Bank’s financial statements?
2. How has IFRS adoption affected earnings quality and the value relevance of financial information?
3. What challenges have hindered effective IFRS implementation, and how can they be addressed?

1.5 Significance of the Study

The research provides significant value to regulators such as the Central Bank of Nigeria (CBN) and Financial Reporting Council of Nigeria (FRCN) by offering localized data on the practical implementation of IFRS 9 within a high-growth, post-merger financial institution. Findings related to judgment-intensive areas including expected credit losses and derivative valuations can contribute to refined regulatory guidelines, targeted supervisory efforts, and capacity-building programs, thereby enhancing the overall credibility of financial reporting in Nigeria’s banking sector while aligning with global best practices during a period of economic reform.

From an industry perspective, the study serves as a benchmark for other listed banks and financial institutions by comparing IFRS outcomes with those of a leading peer, fostering knowledge-sharing and collective improvements in reporting quality. Investors and analysts benefit through deeper insights into how IFRS adoption influences decision-useful metrics, enabling more precise capital allocation and risk evaluation within Nigeria’s capital markets.

At the national level, the findings support ongoing discussions surrounding financial sector stability, reinforcing Nigeria’s convergence with international standards to boost foreign direct investment and enhance global credit ratings. The research aligns with FRCN’s strategic objectives and CBN’s risk-based supervision framework, supplying empirical evidence for policy adjustments that tackle unique IFRS implementation challenges in emerging markets.

From an academic standpoint, the study expands existing literature on IFRS adoption in developing economies by presenting recent, institution-specific data from a major African multinational bank operating during a period characterized by post-pandemic recovery, currency volatility, and regulatory changes. It advances theoretical discussions on accounting quality attributes—including relevance, reliability, and comparability through empirical validation in a developing economy context, establishing a foundation for cross-border comparative studies within African banking sectors and informing models on standard-setting efficacy in unstable economic conditions. By addressing empirical gaps and identifying strategies for sustained reporting improvements, this research contributes to both scholarly and practical initiatives aimed at fostering greater transparency and resilience in financial reporting across Nigeria and comparable emerging markets.

1.6 Scope and Limitations of the Study

The scope of this study is precisely delineated to the impact of IFRS adoption on financial statement quality at Access Bank Plc, covering the period from 2020 to 2025, a timeframe selected to capture the mature phase of IFRS 9 implementation (effective 2018 with ongoing refinements), the economic disruptions of the COVID-19 pandemic, the 2023 naira redesign and forex unification policy, and subsequent recovery dynamics. This period allows examination of IFRS’s robustness in a volatile macroeconomic environment characterized by high inflation, currency devaluation, and heightened credit risk provisioning. The research focuses on key quality attributes transparency (disclosure completeness), earnings quality (accrual management, persistence), and value relevance (market price associations) drawn primarily from Access Bank’s audited annual reports, sustainability disclosures, and related financial metrics.

1.7 Operational Definition of Terms

• IFRS Adoption: Full application of International Financial Reporting Standards by Access Bank.
• Financial Statement Quality: Measured by transparency, earnings quality, and value relevance.
• Earnings Quality: Absence of discretionary accruals and consistency of reported profits.
• Value Relevance: Ability of accounting information to explain stock prices or returns.
• Access Bank Plc: Leading tier-1 Nigerian commercial bank.

References

Akinola, J. O. (2024). Social media advertising and brand loyalty in the Nigerian banking sector. Journal of Digital Marketing and Communication, 4(1), 28–41.

Ofoegbu, G. N., & Okafor, C. E. (2021). IFRS adoption and financial reporting quality in Nigerian banks. International Journal of Accounting Research, 9(2), 45–62.

Okaro, S. C., & Okafor, R. G. (2022). IFRS 9 implementation challenges in Nigerian banks: Evidence from tier-1 institutions. Journal of Accounting and Taxation, 14(3), 112–128.

Okafor, C. E., & Eze, P. O. (2023). Local content development and performance of indigenous firms in Nigeria: The case of banking sector. African Development Review, 35(2), 210–223.

Umoren, N. J., & Enang, E. R. (2023). Earnings management and IFRS 9 adoption in Nigerian banks. Journal of Accounting in Emerging Economies, 13(4), 789–810.

Access Bank Plc. (2024). Annual report and financial statements 2023. Access Bank Plc.

Central Bank of Nigeria. (2023). Financial stability report 2023. CBN.

Financial Reporting Council of Nigeria. (2011). Roadmap for the adoption of IFRS in Nigeria. FRCN.