Accounting Project Topics

The Effect of Accounting Ethics on the Quality of Financial Reports of Nigerian Firms

The Effect of Accounting Ethics on the Quality of Financial Reports of Nigerian Firms

The Effect of Accounting Ethics on the Quality of Financial Reports of Nigerian Firms

Chapter One

  Objectives of the Study

The main objective of the study is to critically examine the effect of accounting ethics on the quality of financial reports of Nigerian organizations using a case study of selected brewery companies. The specific objectives are:

  1. To examine the effect of disclosure on the quality of financial reports of brewery companies in Nigeria.
  2. To examine the effect of objectivity on the quality of financial reports of brewery companies in Nigeria.
  3. To examine the effect of integrity on the quality of financial reports of brewery companies in Nigeria.
  4. To evaluate the effect of professional independence on the quality of financial reports of brewery companies in Nigeria.
  5. To assess the effect of competence on the quality of financial reports of brewery companies in Nigeria.




Our focus in this chapter is to critically examine relevant literature that would assist in explaining the research problem and furthermore recognize the efforts of scholars who had previously contributed immensely to similar research. The chapter intends to deepen the understanding of the study and close the perceived gaps.



The preparation process of any entity’s financial statement is governed by accounting principles, policies, methods, techniques and systems. For those transactions and events not specifically covered by an official pronouncement; accountants must exercise professional judgment in determining the treatment that is most credible and consistent with generally accepted accounting principles.

The role of accountants includes serving as financial reporters and intermediaries in the capital markets which mean that they owe their primary obligation to the public interest. The information provided by accountants is essential in assisting managers, investors and others in making key economic decisions. In view of that, ethical improprieties by accountants can be harmful to the accounting profession in particular and society in general, resulting in distrust by the public and disruption of efficient capital market operations.

The quality of financial reporting points to a limit in which the financial reports of an entity, its economic status, and functions, which are measured over period of time, are presented honestly (Talebnia, Salehi & Jabbarzade, 2011). The extent to which financial reporting is perceived to be true and trusted, depend on far more than the actions and decisions of individuals or sophisticated “mechanisms” for the whole system (Enderle, 2006). This is because business practices, environments, and culture are known to possess the capability, in varying degrees, to affect the value of and hence, confidence in the financial reporting systems, (Gilligan, 1977; Langenderfer & Rockness, 1990; Paradice & Dejoie, 1991). Therefore, reliability of, and trust in the financial reporting system cannot be an issue of either personal or institutional ethics alone, (Brenkert, 2004). Accountants’ obligations are primarily to shareholders, creditors, employees, suppliers, the government, the accounting profession and also the public at large. The reporting accountants’ responsibility goes beyond their immediate client because assessments made on information provided by these accountants can significantly affect the lives of any or all of these stakeholders.


his or her behaviour. It is the personal criteria by which an individual distinguishes right or wrong”. In Ogbonna’s view, when we talk about ethics and ethical values, we mean our concern about things, which we think, say and/or practice that may not necessarily violate the rules of the organization or infringe the law of the land or amount to outright crime or felony, but which borders on our sense of morality, our sense of right and wrong. It concern itself with issues like conflict of interest, insider’s dealings, compromising integrity, objectivity, independence, confidentiality, disclosure of official secrets and destruction of official documents for financial benefits and other similar acts that are against moral principles and ethical standards. Nwagboso (2008) argues that ethics or morality as matters of good and evil, right and wrong and subscribes to the fact that “we are living today in an ethical wilderness”. He believes that ethics is in ferment and chaos among all people. Hayes. Schilder, Dassen and Wallage (1999) argue that ethics represent a set of moral principles, rules of conduct or values. Ethics apply when an individual has to make a decision from various alternative regarding moral principles. Ethical behaviour is necessary for society to function in an orderly manner. The need for ethics in society is sufficiently important that integrity, loyalty, and pursuit of excellence cannot be incorporated into law. They further stated that the following ethical principles incorporate the characteristics most people associate with ethical behaviour; honesty, integrity, promise keeping, loyalty, fairness, caring for others, respect for others, pursuit of excellence and accountability. Ajibolade (2008) divided the field of ethics into Meta ethics, ethical theories and applied ethics. Meta ethics is the reflection upon ethics concepts and theories. Ethical theories is the substantive proposals regarding those consideration that would determine morally acceptable conduct and applied ethics is the deliberation related to a specific field of enquiry. Examples include ethics in business, public service and general professional ethics. Mathews and Perera (1996) states that a formal code of ethics ensures that professional members will be more aware of the moral aspects of their work; an accessible reference tool for managers to keep ethical concerns in mind; abstract ideas will be translated into concrete terms applicable to every situation; members as a whole will act in a more standardized fashion throughout the profession. According to Jenfa (2000) and Nwagboso (2008), professional ethics provides accountants with certain advantages such as determining the professional posture he should adopt if he is to succeed and determining the prosperity of his conduct in his professional relationship.





In this chapter, we described the research procedure for this study. A research methodology is a research process adopted or employed to systematically and scientifically present the results of a study to the research audience viz. a viz, the study beneficiaries.


Research designs are perceived to be an overall strategy adopted by the researcher whereby different components of the study are integrated in a logical manner to effectively address a research problem. In this study, the researcher employed the survey research design. This is due to the nature of the study whereby the opinion and views of people are sampled. According to Singleton & Straits, (2009), Survey research can use quantitative research strategies (e.g., using questionnaires with numerically rated items), qualitative research strategies (e.g., using open-ended questions), or both strategies (i.e., mixed methods). As it is often used to describe and explore human behaviour, surveys are therefore frequently used in social and psychological research.


According to Udoyen (2019), a study population is a group of elements or individuals as the case may be, who share similar characteristics. These similar features can include location, gender, age, sex or specific interest. The emphasis on study population is that it constitute of individuals or elements that are homogeneous in description.

This study was carried out to examines the relationship between accounting ethics and quality of financial reports in Nigerian brewery industry using accounting practitioners in six selected brewery firms in Nigeria as case study.




This chapter presents the analysis of data derived through the questionnaire and key informant interview administered on the respondents in the study area. The analysis and interpretation were derived from the findings of the study. The data analysis depicts the simple frequency and percentage of the respondents as well as interpretation of the information gathered. A total of thirty-six (36) questionnaires were administered to respondents of which only thirty (30) were returned and validated. This was due to irregular, incomplete and inappropriate responses to some questionnaire. For this study a total of 30 was validated for the analysis.




The study examines the relationship between accounting ethics and quality of financial reports in Nigerian brewery industry. The study explicitly assesses the impact of accounting ethical principles of disclosure, objectivity and integrity on the quality of financial reports of selected firms in the Nigerian brewery industry. Primary data was used in the study. The data were obtained from structured questionnaires administered to 120 accounting practitioners in six selected brewery firms in Nigeria. Analysis of data was done using the descriptive statistics and linear regression analysis.

The results showed that accounting ethical principles of disclosure (β=0.887; R2=0.936; p<0.05); objectivity (β=0.896; R2= 0.952; p<0.05) integrity (β=0.768; R2=0.917; p<0.05); professional independence β=0.730; R2=0.895; p<0.05) and competence (β=0.868; R2=0.934; p<0.05) significantly influence the quality of financial reports of selected organizations. The study suggests amongst others that, accountants should totally adhere to ethical principles while carrying out their responsibilities in order to generate quality, authentic, reliable and dependable financial reports.


In this study, the effect of accounting ethics on the quality of financial reports of firms in Nigeria was evaluated. This hypothesis was tested by using data from the administered questionnaires using the Ordinary Least Square regression technique. The analysis of the data showed that accounting ethics had a significant relationship with financial reporting quality. The result is consistent with the study of Ogbonna and Appah (2011) that ethics in the accounting profession is fundamental in the quality of financial reports of organizations. On the basis of the findings, the study concludes that high ethical standard is fundamental in achieving an objective, reliable and transparent financial report. The following recommendations are provided to improve the financial reporting framework:

  1. The employment processes of firms should be improved upon so that men and women with high level of ethical standing would be employed.
  2. Firms in Nigeria should put in place ethics and compliance department to direct and monitor ethics implementation in their day-to-day operations.
  3. Firms reporting structure should adhere strictly to the financial reporting framework issued by the International Financial Reporting Standards for better and more acceptable financial reports.
  4. Accountants as custodians of good financial reports should follow the codes of professional practice issued by the Institute of Chartered Accountants of Nigeria (ICAN) for their day-to-day responsibilities.
  5. All the relevant professional accounting bodies in Nigeria should monitor the activities of their members to ensure that codes of ethics are followed in the preparation of quality financial reports in the country.


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  • Alexander, D., & Britton, A. (2000). Financial Reporting. (5th Ed.). London: Thomson Learning.
  • Appah, E. (2010). Ethical accounting standards and societal expectations. International Journal of Social. Policy Issues, 7(1), 53-63.
  • Brenkert, G.G. (2004). Corporate integrity and accountability: Thousand Oaks.
  •  Beuselinck, C., & Manigart, S. (2007). Financial reporting quality in private equity backed companies: The impact of ownership concentration. Small Business Economics, 29, 261- 274.
  • Catacutan, R. (2006). A humanistic perspective in teaching business ethics in accountancy, paper presented at the 6th Annual Ben-Africa Conference University of Stellenbosch, Cape Town, South Africa 26-28 Strathmore University Nairobi, Kenya, 1-6.
  • Carrol, R.A. (2005). Model for ethical education in accounting, In Gowthorpo, C. and Blake J. (Eds.) “Ethical Issues in Accounting” (2nd ed). Taylor and Francis e-Library, 149-164.
  • Enderl, G. (2006). Confidence in the financial reporting system: Easier to lose than to restore.10In: Lu, X and Enderle, G. (Eds.) Developing Business Ethics in China. New York: Palgrave Macmillan.
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