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1.1     Background to the Study

The issue of proper documentation of financial record which is the major responsibility of the accounting department in an organization has continue to drown attention, on how this record are keep such that in some case after the company announcing interim results with enthusiastic comments on prospects for the year and beyond the company still closed down it operation month or years letter with it   owners and shareholders still suffering loses. Oluba (2009). Some companies in the country fiddle their profits. Some set of published accounts is based on books which have been gently cooked or completely roasted. The figures which are fed twice a year to the investing public are sometime been changed in order to protect the guilty Wikipedia (2008). It is the biggest con trick since the Trojan horse ... In fact this deception is all in perfectly good taste. It is totally legitimate. It is creative accounting". What has become worrisome, however, is the fact that many users of accounting information have had disappointing experiences by their reliance on accounting data. Companies have gone into liquidation soon after providing ‘beautiful ‘results of their operations to users. Sen and Inanga (2005) cited an example of Polly Peck in UK, which was placed under administration, three months, after announcing interim results with enthusiastic comments on prospects for the year and beyond.

In Nigeria for instance, most banks that collapsed in the late 1990’s and early 2000’s had fantastic audited results. This of course, became a challenge to the professional bodies whose members were auditors and accountants of such failed banks as society questioned the integrity of such experts. Society believes that accountants and auditors are obligated to the organizations they serve, their Profession, the Public and themselves to maintain the highest standards of ethical behaviour. The basic question therefore is: Is it that the management of such failed organization lied in the reports provided to users? Why didn’t auditors discover such misrepresentations? The answer lies largely on the fact that such organizations engaged in creative accounting. A lot of organizations are into this practice with the most celebrated ones in recent times being Enron Corporation in USA and in Nigeria, the African Petroleum Plc. Oluba (2009) observed that not a few banks in Nigeria are involved in a mild form of creative accounting.

He found that banks directly lend to stockbrokers to buy their own shares to sustain demand pressure thus causing continued price rise without corresponding appreciation in underlying values or fundamentals. Creative accounting, also called earnings management, aggressive accounting, according to Wikipedia (2008) is the manipulation of financial numbers, usually within the letter of the rules of law and standard of accounting practices, but deviating from the spirit of those rules and certainly not providing the true and fair view that accounts are supposed to.

Mulford and Comiskey (2002) identified creative accounting practices to include: recognizing premature or fictitious revenue, aggressive capitalization and extended amortization policies, misreported assets and liabilities, getting creative with income statement and problems with cash flow reporting. They added that managers play this game for rewards that as favorable effect on share prices, lower corporate borrowing costs due to an improved credit rating, incentive compensation plans for officers and key employees and or political gains. Beside these, Merchant (1990) notes that general economic conditions are also an attracting factor for creative presentation of results. Of these differences attraction, the major concern of this paper research work is the effect of creative accounting of the performance of an organization. The performances of organization which might be affected are depicted in the financial statement of the organization and this information could be used by investors to base their investment decision on.


   1.2         Statement of Problem

In recent times, there have been issues identifying research problems and suggest solution to them, further analysis and finding of a fundamental issues in any research work. Some of the problems under considerations in this research work are to:

          i.            What is the impact of creative accounting of the overall revenue of the organization?

       ii.            What impact does creative accounting has on liquidation

    iii.            How does auditors and other Accounting professionals  detect financial misrepresentation

     iv.            Does Creative Accounting have any effect on your Companies Performance?

 Does Creative Accounting have a negative effect on the Market Value of a Firm?

1.3     Objective of the Study

The main objective of this study is to examine the effect of Creative Accounting on the performance of coca cola Nigerian bottling company Kaduna branch. The specific objectives of the study are to:

i.                   Examine the effect of Creative Accounting on Profit of coco cola Nigeria

ii.                 Assess the effect of Creative Accounting on Company’s Market Value

iii.              Examine the effect of Creative accounting on Turnover of coco cola Nigeria

iv.              Determine the effect of Creative Accounting on Return on Investment (ROI) of coca cola Nigeria including the value of the company

1.4      Research Questioners

In order to achieve theabove objectives, the following research questions are formulated and answered.

i.        Does Creative Accounting affect the Profit of the quoted company?

ii.       Does Creative Accounting affect Company’s Market Value?

Iii   Does Creative accounting affect the Turnover of the quoted company?

iv.       Does Creative Accounting have any effect on Return on    Investment (ROI)?

1.5      Significance of the Study

       Due to the misleading nature of the end product of a creative accounting on financial restatement, whosoever consult such a window dressed financial statement for investment decision will definitely end up making a wrong decision. With this in view, this study will be beneficial to the following:

i.                   Owners or shareholder: owner or shareholder will need a financial statement to ascertain general performance

ii.       Managers: managers of organizations will need financial information on all aspect of the firm in other to monitor performance and compare actual performance with planed performance for appropriate correctness of deviance.

iii.      Lenders banks and others: Lenders banks and others who lend money to the firm are primarily concern with information regarding the ability of the business to generate the liquid resources to make necessary interest payment and repayment of principal.

v.                             Employees: Employees need information regarding the financial position and profitability of the firm as this will influence the trade union negotiation

vi.                                   Future  researchers: Future  researchers will definitely will find  the outcome of  the study useful in terms of reference material for future study

vi.      Employees need information regarding the financial position and profitability of the firm as this will influence the trade union negotiation.

vii.     Government: government through tax authority needs the actual financial statement for the purpose of assessing tax liability of the firm.

1.6     Scope of the Study

The study is to examine the effect of creative accounting on the performance of the quoted company Coca-Cola Nig Plc; it covers a period of five years from 2010 to 2014.

1.7 Definition of key terms

Creative Acquisition accounting: This occurs when companies allocate a large portion of an acquisition price as "in process"                      Income smoothing: the use of accounting techniques to level out net income fluctuations from one period to the next.

Materiality concept: It is an accounting principle that state an accounting standard can be ignored if the net impact of doing so has such a small impact on the financial statement that a reader of the financial statements would not be misled

Round trip technique: the round trip techniques used to trade stocks is a method used to increase the volume of transactions through buying and selling products simultaneously between companies working together

Scandal: A publicized incident that brings about disgrace or offends the moral sensibilities of society or damage to reputation or character caused by public disclosure of immoral or grossly improper behavior

Earning management: The use of accounting techniques to produce financial reports that may paint an overly positive picture of a company’s business activities and financial position

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