A CRITICAL REVIEW OF THE IMPACT OF GOOD ACCOUNTING SYSTEM IN THE GROWTH AND DEVELOPMENT OF INSURANCE INDUSTRY (A CASE STUDY OF IGI, LEADWAY AND NICON INSURANCE COMPANIES)

Thesis Overview

INTRODUCTION1.1       BACKGROUND OF THE STUDYInsurance accounting as related to insurance company is a district and specialized account that is always referred to as ‘specialized account” just like taxation is a specialized area. Though it employs the general accounting principles, concepts and conventions, there are needs for a clear understanding of its preparations.In the days of T-form presentation of financial statement an insurance company account could be easily recognized from the sides of the “T” to which income and expenditure items are posted, they are not in conventional form. The convention was placing revenue to the right of the “T” insurance company revenue items to the left of the “T’ and expenditure items to the right.Nowadays, there are other features that distinguish accounting system in insurance industry or company or company’s from their accounting system, they are:i.             Requirement by law for remitting of quarterly and annual returns to central bank of Nigeria (CBN) and Nigerian Insurance supervisory bank (NISB).ii.             Prescription by law of the type and level of investment of insuranceiii.          Requirement by law for condition of returns to the Nigerian Insurance supervision board (NISB) with stated deadline.iv.          Requirement by law of the maintenance reserves known as “TECHNICAL RESEARVES” comprising of insurance funds, reserves for outstanding losses reserves for incurred but not reported and contingency reserves.All these are in addition to rendition of the required returns to the corporate affairs commission (CAC) being and incorporated company under in pursuant to the companies and allied matters decree (CAMD) 1991.From the above, it can therefore be seen that without a proper understanding of intricacies involved in both the interpretation of the decree as well as items that makes up insurance accounts and right treatment is afforded to the financial statement as narrated wil not give a true and fair view of the statement of affairs and of profit and loss for the period.Having read and studied the above insurance industry, the researcher felt it work bring out a detailed research work in order to benefit the students in higher institutions and readers alike.1.2  STATEMENT OF THE PROBLEMSome of the problems facing accounting system in insurance industry includes:1.   Good accounting system has not been adequately carried out in insurance.2.   Inadequate accounting management in insurance industry causes fraud.3.     financial statement mis-interpretation also causes a problem.1.3       OBJECTIVES OF THE STUDYThe objectives of this research work is to find solution to the above mentioned problems and at the same time explain and illustrate some of the items so as to practically assist staff of the account department of the insurance industry as follows:1.   To examine why good accounting system has not been adequately carried in insurance.2.   To evaluate how inadequate accounting management in insurance industry can cause fraud.3.   To explain how financial statement misinterpretation can cause problem.1.4 RESEARCH QUESTIONS.Some of the research questions are:1.   Why is good accounting system has not been adequately carried out in insurance?2.   How is inadequate accounting management in insurance industry caused fraud?3.    Explain how financial statement mis- interpretation also caused a problem?1.5       RESEARCH HYPOTHESISIn this research work, Null Hypothesis (Ho) and alternative hypothesis (Hi) will be used, Null hypothesis (Ho) will use for rejection while alternative hypothesis (Hi) will be used for acceptance.1.   Ho: Good accounting system has not been adequately carried out in insurance.Hi: Good accounting system has been adequately carried out in insurance.2.   Ho: Inadequate accounting management in insurance industry causes fraud.Hi: Inadequate accounting management in insurance industry does not causes fraud.3.   Ho: Financial statement mis-interpretation also causes a problem.Hi: Financial statement mis-interpretation does not causes a problem.1.6       SIGNIFICANCE OF THE STUDYIndustry keeps growing which shows an increase in the public funds placed in another person’s hand in form of premium. There is the need for proper and adequate reporting so that confidence in the industry can be established. Capital market internalization distress in the economy and subsequent need for merger and acquisition as a means of survival calls for proper understanding as well as to treatment is based, which will be used for all these.The following are the significance of the study1.   It is important to me in partial fulfillment of HND degree.2.   It is important to the insurance industry to their accounting section.3.   It is important to the financial industry on their accounting management.4.   It is important to the society on their day to day transactions.5.   It is also very important to the economy special in oil and gas sector.