CREATIVE ACCOUNTING AND CORPORATE FINANCIAL REPORTING IN NIGERIA
ABSTRACT
This study examined creative accounting and corporate financial reporting in Nigeria. In light of the empirical review and other discussions, a number of questions arose as to whether there is significant relationship between creative accounting, return on asset, earnings per share and leverage. The nature of this study necessitated the use of secondary data which was sources from the selected quoted banks in the Nigeria Stock Exchange from 2007 – 2011. Using the Ordinary Least Square (OLS) regression technique with the aid of computer software, the empirical findings revealed among other things that there is a significant relationship between creative accounting and return on asset. The researcher recommended that, the regulatory agencies in Nigeria should draft rules that minimize the use of judgment estimation and prediction in the treatment of certain entries in financial reporting, e.g., extraordinary item.
TABLE OF CONTENTS
CHAPTER ONE: INTRODUCTION
Background to the Study                         
Statement of the Research Problem                
Objective of the Study                            
Research Hypothesis                    
Scope of the Study                        
Relevance and Significant of the Study            
References                             
CHAPTER TWO: LITERATURE REVIEW
Introduction                                 
Definitions of Creative Accounting            
Motivation for Creative Accounting            
Reasons for Creative Accounting                
Techniques of Creative Accounting            
The Ethical Perspective                    
Accounting Scandals                        
Corporate Reporting Standards and Regulatory
Bodies in Nigeria                            
The Challenges of Regulatory Agencies in Nigeria        
The Effect of Creative Accounting on Job Performance
Theoretical Review of Creative Accounting         
Empirical Studies on Creative Accounting         
The Ethical Perspective of Creative Accounting     
Concept and Objectives of Financial Reporting    
References                              

 CHAPTER THREE: RESEARCH METHODOLOGY
Introduction                            
Research Design                            
Population and Sampling                    
Sources of Data                            
Model Specification                        
Data Analysis                                
CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS
4.1    Introduction                                
4.2    Presentation and Analysis of Results            
Test of Hypotheses                         

   CHAPTER FIVE:    SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
Introduction                                 
Summary of the Findings                         
Recommendations                        
Conclusion                                
Bibliography                             
Appendix                                    
CHAPTER ONE
INTRODUCTION
BACKGROUND TO THE STUDY
Creative accounting and earnings management are euphemisms for accounting practices that tend to circumvent, albeit, cleverly, or manipulate the rules of standard accounting practices or the spirit of those values. They are characterized by dubious complication and use of 'novel' ways of presenting Income, assets or liabilities. It is the deliberate dampening of fluctuations about "some level of earnings considered to be normal for the firm" (Barnea et al. 1976).
Schipper (1989) observes that 'creative accounting' can be equated with 'disclosure management', in the sense of a purposeful intervention in the financial reporting processes. In Naser's (1993) view, "Creating accounting is the transformation of financial accounting figures from what they actually are to what preparers desire by taking advantage of the existing rules and/or ignoring some or all of them".
The information perspective (Schipper, 1989) is a key element under-pinning the creative accounting phenomenon. A conflict is created by the information asymmetry that exists in complex corporate structures between a privileged management and a more, remote body of stakeholders.
Managers may choose to exploit their privileged position for private gain, by managing financial reporting disclosures in their own favour. The presumption of the information perspective is that accounting disclosures have an information content that is of value to stakeholders.
Cadbury Nigeria Plc sacked its Managing Director, Mr. Bumi Oni and Mr. Ayo Akadiri, the company's Finance Director in 2007, on account of manipulating the company's financial records, book padding scandal and corruption. This warranted the Board of Directors to commission the firm of Pricewaterhousecoopers to review and investigate the company's accounting records. The investigation confirmed a deliberate overstatement of the company's financial position .over a number of years to the tune of N13 and N15 billion.
Cadbury Nigeria had to adjust its accounts to reflect an operating loss between N1 and N2 billion. According to the company's Public Affairs Manager, "over the number of years, Cadbury Nigeria had assigned itself an ambitious growth target. To achieve these targets, several systems abuses occurred. The over-statements are directly traceable to those systems abuses, n particular, deliberate breaches of our accounting systems and controls."
The recent global widespread corporate scandals and failures have their roots in dishonest management decision and, in some cases, outright cover-ups of illicit activities. Another example is the alleged Afribank's financial misstatements, an accusation leveled by its former managing Director that the Board of Directors colluded with its external auditors to cook the books. These developments have further raised the problem of ensuring that an appropriate balance is maintained between management and stakeholders' interests.
In all these cases, it would appear that corporate governance has been sacrificed at the alter of opportunism and, sometimes, outright corruption.
In 2002, a wave of separate but often related accounting scandals swept across the USA and the rest of the world. All of the leading public accounting firms (e.g., Arthur Andersen, Deloitte• and Touche, Ernest and Young, KPMG, PricewaterhouseCoopers and others) have admitted to or have been charged with negligence by their failure to identify and prevent fraud, insider abuses and falsification of financial reports by their clients. The ultimate and ulterior purpose of such opportunistic practice was to give a misleading impression of their clients' financial status. In these and many other cases, the amounts of fraud involved ran into billions of dollars.
Financial reporting, according to Nzekwu (2007), supplies key quantitative representation of individual corporations that support a wide range of contractual relationships and enhance the information environment more generally while its quality also impacts on firms' cash flows as well as influencing the cost of capital on which the cash flows are discounted.
He added that financial reporting about firms and their competitors enable managers and investors to identify and evaluate investment opportunities. Thus, the "absence of reliable and accessible information in an economy impedes the flow of human and financial capital towards sectors that are expected to have high returns and away from sectors with poor prospects". Therefore, Nzekwu noted that financial accounting information enhances economic performance by reducing adverse selection and liquidity risk.
STATEMENT OF THE RESEARCH PROBLEM
Accounting scandals or corporate accounting scandals are political and business scandals which arise from the disclosure of misdeeds by trusted executives of large public corporations. Such misdeeds typically involve complex methods for misusing or misdirecting funds, overstating revenues, understating expenses, overstating the value of corporate assets or under reporting the existence of liabilities, sometimes with the cooperation of officials in other corporations or affiliates (wikipedia, free encyclopedia: 2007).
An accounting scandal is corporate misuse or misrepresentation of funds typically by top management of a corporation. "Overstating revenue and understating expenses and liabilities" are the basis of accounting scandals (Russell: 2005). In public companies, this type of creative accounting can be tantamount to fraud and may warrant investigations by regulatory agencies, such as the Securities and Exchange Commission (SEC).
In the light of this, the study intends to address the following problems.
Is there significant relationship between creative accounting and return on asset?
Is there significant relationship between creative accounting and earnings per share?
Is there significant relationship between creative accounting and leverage?
OBJECTIVE OF THE STUDY
The objective of this study is to examine the relationship between creative accounting practices and corporate financial reporting in Nigeria. Thus, the study seeks to:-
determine if there is significant relationship between creative accounting and return on asset.
verify if there is significant relationship between creative accounting and earnings per share.
ascertain if there is significant relationship between creative accounting and leverage.
RESEARCH HYPOTHESIS
      The research hypotheses relevant to the above questions and objectives are:-
Hypothesis One
Ho:    There is no significant relationship between creative accounting and return on asset.
H1:    There is a significant relationship between creative accounting and return on asset.
Hypothesis Two
Ho:    There is no significant relationship between creative accounting and earnings per share.
H1:    There is a significant relationship between creative accounting and earnings per share.
Hypothesis Three
Ho:    There is no significant relationship between creative accounting and leverage.
H1:    There is a significant relationship between creative accounting and leverage.
SCOPE OF THE STUDY
The research work is to show the relationship between creative accounting and corporate financial reporting in Nigeria.
The time period for the research is for the period of five years (2007 to 2011).
The sample size is more concerned with accountants, managers and investment analysts in the private and public sectors of the economy, namely accountancy practicing firms, banks, capital markets, manufacturing company and government regulatory agencies in Nigeria.
Geographically, the study which is specifically restricted to Benin City, Edo State for proper conduct of this study.
RELEVANCE AND SIGNIFICANT OF THE STUDY
This study on creative accounting and financial reporting will provide the following benefits.
The research work will broaden the understanding of interest group such as shareholders and stakeholders. It will enable them understand published corporate financial reporting of corporations better and help them make proper decision.
The research work will be of benefit to government as it will broaden their understanding of the validity of creative accounting and corporate financial reporting and factors that this information can be used by the government to implement policies that will improve the financial reporting of the financial sector in Nigeria.
The research work will be useful to corporations as information on the creative accounting and corporate financial reporting in Nigeria.
The study will be useful for further researchers who may decide to carry out research work on this subject since it will serve as a guide and a reference point for further study.
 REFERENCES
Breton, G. and Tamer, R. J. (1995), Creative Accounting and Investment Analyst Response, Accounting and Business Research, Vol. 25, No 98, pp. 81 – 92.
Naser, K. (1993), Creative Financial Account: Its Nature and Use (London: Prentice Hall).
Nzekwu, G. (2007), “Corporate Governance Now Critical in Nigeria” World Bank, Vanguard Business, March 8th.
Schipper, W. M. (1989), Creative Accounting in Inquire, Breakthrough Publishers Ltd.  

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