Asian Journal of Business Management 3(3): 152-160, 2011 ISSN: 2041-8744 © Maxwell Scientific Organization, 2011 Received: April 21, 2011 Accepted: June 10, 2011

Published: August 20, 2011

Ethical Compliance by the Accountant on the Quality of Financial Reporting and Performance of Quoted Companies in Nigeria
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G.N. Ogbonna and 2Appah Ebimobowei Department of Accounting, Faculty of Management Sciences, University of Port-Harcourt, Port-Harcourt, Nigeria 2 Department of Accounting, Bayelsa State College of Education, Okpoama, Brass Island, P.M.B. 74 Yenagoa, Nigeria

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Abstract: The study investigates the ethical compliance by the accountant on the quality of financial reporting and performance of quoted companies in Nigeria. Five hypotheses guided the study. The sample for the study which was twenty companies from five sectors quoted in the Nigerian Stock Exchange. They were systematically and purposively selected from the number of quoted companies in the exchange. A five point scale questionnaire was used with items on ethical issues on organizational financial reporting and performance. Data was analyzed using descriptive statistical tools and Spearman Rank Order Correlation Coefficient. Findings suggest that the compliance by the accountant positively and significantly affect the quality of financial reports and performance of organizations. The conclusion drawn from the findings is that the compliance by the accountant on professional ethics of integrity, objectivity, honesty, compliance and accountability will improve the quality of financial reports and the performance of organizations. Based on the findings, some recommendations were made, among which are that organizations should establish a position for ethics officers in Nigerian organizations; creation of non-threatening environment for the discussion of ethical problems and co-operation between the accountant, other employees and management in solving ethical difficulties that prevail or impinge on the environment. The accountants should up-hold the codes of professional ethics in their day-to-day responsibilities. Key words: Ethical compliance, financial reporting, organizations, performance, Nigeria INTRODUCTION Widespread corruption in the business environment seems to be the order of the day in all societies. In the United Kingdom, corporate scandals have involved such companies as Independent Insurance and BCCI. Recent times had witnessed the collapse of a number of corporate giants in the USA such as Enron Corporation, Tyco International, WorldCom, Global Crossing, Arthur Anderson etc. (Ajibolade, 2008). Similarly, Luftig and Quellete (2009) noted that Enron, WorldCom, Tyco, Cedant are companies that collapsed as a result of unethical practices. Bernie Madoff, former Chairman of the NASDAQ, is now cooling his heels in jail. The exCEO of converse is arrested in Namibia, the CEO at the United Health Care is forced to step down, and Patricia Dunn of Hewlett Packard is charged in an ethics scandal. And, of course, the AIG has no problem doling out millions of bonuses to the very people who drove the company into financial crisis. It seems that no matter where we look today, the erosion of ethics and basic principles of right or wrong has taken us to a situation where the very systems that make society work are in imminent danger of oblivion. According to Aguolu (2006), these failures have brought to greater scrutiny the work of the accountant from both within the profession and from outside. Beverly et al. (2007) says certain factors have been identified as contributing to unethical beahviour such as self interest, failure to maintain objectivity and independence, inappropriate professional judgement, lack of ethical sensitivity, improper leadership and ill culture, failure to withstand advocacy threats, lack of competence, and lack of organsiaitonal and peer support and lack of professional body support. Also Sims (1992) noted that managers behave unethically contrary to their ethical philosophies represents serious limit to ethical reasoning in the organization. Research in ethical behaviour strongly supports the conclusion that if ethical behaviour is desired, the performance measurement and reward systems must be modified to account for ethical behaviour (Webley and More, 2003; Ajibolade, 2008). Accounting professionals, who are once historically regarded as the watchdog of the society, are being

Corresponding Author: Appah Ebimobowei, Department of Accounting, Bayelsa State College of Education, Okpoama, Brass Island, P.M.B. 74 Yenagoa, Nigeria. Ph: +23408037419409

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Asian J. Bus. Manage., 3(3): 152-160, 2011 implicated in these scandals which have cost the investing public serious financial losses amounting to several billions of dollars. Idialu and Oghuma (2007) have noted that a general belief that without the accountants aiding unethical practices in business and in public service as a whole, there would be no corruption. This argument is consistent with the words of Achua (2009) that the dishonest attitude of accountants and their fraudulent practices affects organisaitons both public and private: instead of being faithful custodians of public funds, public sector accountants by their sloppy attitude to standard of professional ethics, have provided a cover for dishonest public officers to loot government treasuries of all levels of government. Not surprisingly, statutory allocations purportedly appropriated for the public good fragmentally disappear into the private pockets, often without trace, chiefly because the books are badly kept… and the rampant cases of public officers trading illegally with government funds by placing such funds into private interest yielding deposit accountants, are also directly traceable to poor and fraudulent accounting records. Ethical compliance by business people in general and an accountant in particular, is not a luxury or a discretionary good thing to do but an absolute necessity for the smooth functioning of an organization. These recent events have consequently renewed interest in the question of ethics in the accountancy profession. They have created a new challenge for the accounting profession in terms of the ethical development of its members. As Ajibolade (2008) put it, why would members of a respected profession with strict ethical standards, be so willing to be in breach of the standards by engaging in the level of ethical violations observed in recent times all over the world? Some scholars have linked part of this non-compliance to the codes of ethical standards issued by the various professional bodies worldwide as the complete absence of ethics courses in the accounting courses except audit and investigation and others have also argued that the pressure from inside and outside the organization to get things done with little attention. Therefore, this renewed interest in ethics in the accounting profession and the concern for improving professional ethics, there is the need to evaluate the extent to which ethical compliance by accountants affects the quality of financial reporting and performance of quoted companies in Nigeria. THEORETICAL AND EMPIRICAL LITERATURE Ethics are the moral principles that an individual uses in governing his/her behaviour. It is the personal criteria by which an individual distinguishes “right from wrong”. Nwagboso (2008) on the other hand defines 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” - meaning a wild, untamed, and unpredictable landscape. Nwagboso (2008) believes ethics is in ferment and chaos among all people. He also emphasized that ethics is not about what we are or what we were, or even about what we will be. He insists that ethics is about what ought to be that is, the standard by which we judge character and action. Hayes et al. (1999) says ethics represent a set of moral principles, rules of conduct or values. Ethics apply when an individual has to make a decision from various alternatives 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 many commonly held ethical values of a society such as integrity, loyalty, and pursuit of excellence cannot be incorporated into law. They further notes 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, responsible citizenship, pursuit of excellence and accountability. Elegido (2000) has proved an excellent description of the aim of ethics in these words: ethics is, first of all, the quest for, and the understanding of, the good life, living well, a life worth living. It is largely a matter of perspective: putting every activity and goal in its place, knowing what is worth doing and what is not worth doing, knowing what is worth wanting and having…It is also, within business itself, keeping in mind what is ultimately important and essential and what is not, what serves our overall carrier goals and what does not, what is part of business and what is forbidden to business, even when increased profit-the most obvious measure of business success is at stake. Ajibolade (2008) noted the following differentiations in the field of ethics: (1) Meta - ethics is the reflection upon ethics concepts and theories; (2) Ethical theories is the substantive proposals regarding those considerations 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. Also Jenfa (2006) and Nwagboso (2008) gave the advantages

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Asian J. Bus. Manage., 3(3): 152-160, 2011 of ethics as: it helps the accountant to determine the prosperity of his conduct in his professional relationship; it indicates the kind of professional posture the accountant must maintain if he is to succeed; it gives clients and potential clients a basis for feeling confident that the professional sincerely desires to serve them well and places service above final reward; it gives clients assurance that standards of competence, independence and integrity shall remain the goal of the accountant; it enables member bodies and regulatory authorities to fulfill their responsibility of ensuring that the professional accountants have the capabilities and competence expected of them by employees, clients and the public and public interest is protected and the credibility of the profession is enhanced. Basic approaches to ethical behaviour: Ethical behaviour in the accounting profession draws its justification and basic nature from the general theory of ethics. These basic approaches to ethical beahviour include: Utilitarian approach: This approach proposes that actions and plans should be judged by their consequences. People should therefore behave in such a way that will produce the greatest benefit to society with the least harm or lowest cost (Singh, 2006; Nwachukwu, 2007). Individual approach: This approach has certain fundamental rights that should be respected in all decisions. According to Nwachukwu (2007), the rights view is concerned with respecting and protecting individual liberties and privileges such as the right to privacy, freedom of conscience, free speech etc. Nwagboso (2008) argues that this approach focus on the individual’s right to choose for him or herself. Justice approach: According to Nwagboso (2008), Aristotle and other Greek philosophers propounded the idea that ethical actions demand that all human beings be treated equally or if not equally fairly of equitability. Singh (2006) commenting on the justice approach maintained that: decision makers should be equitable, fair and impartial in the distribution of costs and benefits to individuals and groups. It follows the principles of distributive justice and fairness. Integrative social contract approach: This approach proposes that ethical decisions should be based on empirical (what is) and normative (what should be) factors. He further noted that this view of ethics is based on the integration of two contracts: the general social contract that allows business to operate and defines the acceptable ground rules and more specific contract among members of a community that addresses acceptable way of behaving. 154 Ethics in the accounting profession: Accounting is a profession that rests heavily on the need to exhibit a high sense of accountability and stewardship, hence the emphasis that all members be guided by professional code of conduct (Nwagboso, 2008). According to Beverly et al. (2008), due to the diverse range of accounting services and recent corporate collapses, attention has been drawn to ethical standards accepted within the accounting profession. These collapses have resulted in a wide spread disregard for the reputation for the reputation of the accounting profession (Dellportas, 2006). To combat the criticism and prevent fraudulent accounting various organizations and governments have developed regulations and remedies for improved ethics among accounting profession. Nwagboso (2008), Aguolu (2006), Jenfa (2006), Okezie (2008) and ICAN (1998) gave fundamental ethics and guidelines applicable to all accountants. These guidelines are: Integrity: This is the quality of being honest and having strong moral principles. It implies not merely honest but fair dealing and truthfulness. This principle of integrity imposes an obligation on all accountants to be straightforward and honest in professional and business relationships. A professional accountant should be straight forward and honest in performing professional service (Nwagboso, 2008; Okezie, 2008). According to Osisioma (2000), integrity is the ultimate test of professionalism. It is the state of being complete, unified. When I have integrity, my words and my deeds match up. I am, no matter where I am or who I am with. He further noted that integrity is antithetical to the spirit of our age. The overarching philosophy of life that guides our culture revolves around a materialistic consumer mentality. Objectivity: The principle of objectivity imposes the obligation on all professional accountants to be fair, intellectually honest and free from conflicts. Professional accountants will be exposed to situations which involve the possibilities of pressures being exerted on them. Accountants are obliged to ensure that personnel engaged on professional services adhere to the principles of objectivity. IFAC (2006) Code of Ethics for professional accountants recognizes that the objectivity of the accountancy profession are to work to the highest standards of professionalism, to attain the highest levels of performance and generally to meet the public interest requirement. The code recognizes that these objectives require four basic needs to be met: (i) credibility (ii) professionalism (iii) quality of service (iv) confidence. Professional competence: A professional accountant, in agreeing to provide professional services implies that he is competent to perform the services. Accountants should

Asian J. Bus. Manage., 3(3): 152-160, 2011 refrain from agreeing to perform professional services which they are not competent to carry out unless competent advice and assistance are obtained. Confidentiality: A professional accountant should respect the confidentiality of information acquired during the course of performing professional services. They should not use or disclose any such information without proper and specific authority. According to Aguolu (2006), the accounting profession places great emphasis on the confidentiality of information. In auditing, the client is required under section 360 of CAMA 1990 to provide the auditor with all information he considers necessary for purposes of the audit. The ethics of the profession, in order to protect businesses and the public, require the auditor to treat such information, which comes to his knowledge because of his position as auditor with confidentiality (Jenfa, 2006). Professional behaviour: An accountant should act in a manner consistent with the good reputation of the profession and should refrain from any conduct which might bring discredit to the profession considering responsibilities to clients, third parties, other members of the accountancy profession, staff, employees and the general. Technical standards: Professional services should be carried out in accordance with the relevant technical and professional standards. The services should conform with the technical and professional standards promulgated by IFAC, IASC, ICAN, ACCA, etc and any other legislation. Independence: Independence in auditing means having a position to take an unbiased viewpoint in the performance of audit tests, analysis of results, and the attestation in the audit report. Accountants must not only maintain an independent attitude in fulfilling their responsibilities, but the users of financial statements must have continence in that independence. Financial reporting: According to Adebayo (2005), financial reporting is the only way by which managers of organizations give account of their stewardship to their owners and other stakeholders. He further argued that financial reporting shall disclose in clear terms and languages what resources are acquired and available, how they are utilized and achieved results from such utilization. Obazee (2005) says financial reporting is the process of communication of financial information. Financial reporting is a key source of information managers needs to make informed choices about how to use limited resources to best serve the interest of shareholders. 155 Mainoma (2002) posit that a financial statement should serve four main purposes. That financial information should cater for external users needs like the potential investor, consumers, suppliers and the local communities. That is should also satisfy the needs of the shareholders by way of reporting equitable sharing of corporate profit. He also insists that the information provided should be useful for playing purposes and finally that the information provided should be capable of influencing socially desirable behaviour and should discourage unethical behaviour. According to Lewis and Pendrill (1996), a more recent description of the objective served by financial statements has been provided by the British Accounting Standards Board. The Board states that: “the objective of financial statements is to provide information about the financial position, performance and financial adaptability of an enterprise that is useful to a wide range of users for assessing the stewardship of management and for making economic decision”. Furthermore Belkaoui (2002) says financial reporting is not an end in itself, but it is intended to provide information that is useful in making business and economic decisions. The objectives are not immutablethey are affected by the economic, legal, political and social environment in which financial reporting takes place. Alexander and Britton (2000) say the fundamental objectives of corporate reports is to communicate economic measurements of and information about the resources and performance of the reporting entity useful to those having reasonable rights to such information. The corporate reports suggested seven qualities of corporate reporting (Belkaoui, 2000). These seven are relevance, understandability, reliability, completeness, objectivity, timeliness and comparability. In an empirical study conducted, Mainoma (2002) on the objective of financial statements, forty five percent (45%) of the respondents believe that the objective of financial reporting is stewardship. Thirty two percent (32%) believe that financial statements are prepared to enable investors make informed decisions. Eight percent (8%) of the respondents however believe that it is all about the determination of value of the business. twelve percent (12%) believe that it is just a historical document. What this has clearly shown id that different groups might have different reasons for financial information. It is therefore necessary to prepare and present financial information on the basis of needs of the majority of the shareholders. Ethical behaviour and financial reporting and performance: Financial reporting is a process that has been under a great deal of scrutiny currently. It is also one of the most important functions that an organization will take care of and requires a higher code of ethical

Asian J. Bus. Manage., 3(3): 152-160, 2011 beahviour; particularly in the public markets where financial reports will help to determine a shareholders decision to buy or sell the stock of a company. Whittington (2000), in the article “Trust in Financial Reporting”, says the directors of the company have responsibility for producing financial reports, and the shareholder-director relationship is a classic example of an agency relationship. This relationship is characterized by information asymmetry: the directors know more than the shareholders, and the financial reports are supposed to redress this imbalance to some extent. The effectiveness of financial reports depends upon shareholders being able to trust directors to tell the truth. Marshall (2003) argues that various methods of unethical reporting resulted to major problems within organizations and the economy as a whole. Financial reporting is designed to meet the needs of users by providing information that is relevant to making rational investment and credit decisions, and other informed judgments. The users of accounting information are assumed to be reasonably astute in business and financial reporting practice. However, each user reads the financial statements with her or his own judgement and biases and must be willing to take responsibility for her or his own decision making. The ethical boundaries that accounting needs to stay within is to hold honest and accurate, complete and concise reporting as the most important function to the organization and to shareholders. This is why organizations like the ICAN, ACCA, AICPA, FASB, and SEC have been put in place to ensure that accounting standards and ethics are held to a higher degree and will serve the financial statement readers with complete information that will provide support well considered decisions and comparisons. Webley and More (2003) in the United Kingdom studied the presence of code of ethics and the performance of an organization. The findings of Webley and More (2003) can be summarized as follows:
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has suggested that a stable P/E ratio tends to attract capital at below average cost; having a code may be said to be a significant indicator of consistent management. The indicator that showed a different result pattern to the others was Return on Capital Employed. No discernable difference was found in ROCE between those with a code for 1997-1998. However, from 1999 to 2001 there was a clear (approximately 50%) increase in the average return of those with codes while those without a code fell during this period. The data also indicates that in the years 1997-2001, those with an explicit commitment to doing business ethically have produced profit/turnover ratios at 18% higher than those without a similar commitment. The general conclusion by Webley and More (2003) from their study is that there is a strong evidence to indicate that large UK companies with codes of ethics, e.g. those who have explicit about business ethics, outperform in financial and other indicators than those companies who say they do not have a code.

Empirical studies: A number of studies have emerged in the literature since ethical compliance became popular (Webley and More, 2003; Flugrath et al., 2007). The Table 1 shows a summary of empirical studies. MATERIALS AND METHODS Design: The choice of design in research depends on the purpose of the problem and variable alternatives for investigating the problem of that nature. This study is descriptive; hence the descriptive survey design was employed. The design is considered appropriate for the fact that it facilitated the collection of detailed factual information on ethical compliance and the quality of financial reporting and performance of quoted companies in Nigeria (Table 2). Population and Sample: The target population for this study is accountants and accounting officers in quoted manufacturing companies in Nigeria and the accessible population are manufacturing companies in Rivers State of Nigeria for the year 2010. The research was conducted in Port Harcourt, Nigeria’s second largest commercial and agricultural centre and has the second busiest seaport and the heart of the hydro - carbon in Nigeria. A combination of purposive and systematic sampling was employed to determine the sample and theYaro Yamen formula was used in the determination of the sample size for the study. Research instrument: A research designed questionnaire developed by the authors was utilized to generate data 156

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Regarding financial performance, from three of the measures of corporate value used in their study (EVA, MVA and P/E ratio). It was found that those companies in the sample with a code of ethics had, over the period 1997-2001, out performed a similar sized group who said they did not have a code. Companies with a code of ethics generated significantly more Economic Value Added (EVA) and Market Value Added (MVA) in the years 19972001 than those without codes. Companies with code of ethics experienced far less P/E ratio volatility over a four year period, than those without them. This suggests that they may be more secure investments in the longer term. Other research

Asian J. Bus. Manage., 3(3): 152-160, 2011
Table 1: Empirical Studies on Ethical Behaviour on Financial Reporting and Performance Authors Method/Sample Main Results C It was found that those companies in the sample with code of Webley and More (2003) 41-86 sampled companies in UK using ordinary least square regression analysis ethics over the period 1997-2001 out-performed those who said they did not have a code C The general conclusion from their study is that there is a strong evidence to indicate that large UK companies with codes of ethics outperform in financial and other indicators than those without ethics Flugrath et al. (2007) 112 professional accountants using The results indicate that the presence of ethics has a positive questionnaire and interview impact on the quality of the judgements made by professional accountants. D’Asquila (2001) 400 CPAs in USA- using questionnaire C Accountants have more positive attitudes about management and interview. expectations of them more than they do about managements own actions in terms of ethical behaviour. C The majority of accountants reported that some pressure to achieve short-term perform report. Berrone et al. (2005) 515 companies used ordinary least square Their study showed that a strong corporate ethical identity was regression analysis. positively related to high levels of stakeholder satisfaction. In turn, stakeholders satisfaction had a positive influence on the financial performance of the firm. Adapted from authors Table 2: Descriptive Statistics by accountants on financial reports and performance N Min. Max. Mean Integrity 123 12 25 19.26 Financial reporting and profit. 123 10 24 17.62 Valid N 123 Objectivity 123 12 25 20.50 Financial reporting and profit 123 11 24 18.15 Valid N 123 Honesty 123 12 25 19.27 Financial reporting and profit. 123 10 24 17.59 Valid N 123 Competence 123 12 25 19.28 Financial reporting and profit. 123 10 24 17.75 Valid N 123 Accountability 123 12 25 19.24 Financial reporting and profit. 123 11 24 17.74 Valid N 123

S.D. 3.494 3.372 3.446 3.246 3.504 3.346 3.521 3.321 3.0504 3.246

Skewness -0.3210.218 0.013 0.218 -.796 .218 -.108 .218 -0.322 0.218 0.014 0.218 -0.3160.218 -0.066 0.218 -0.320 0.218 0.0300.218

Kurtosis -1.0240.433 -0.9530.433 -.437 .433 -.903 .433 -1.024 0.433 -0.896 0.433 -1.038 0.433 -0.8650.433 -1.0320.433 -0.9510.433

from the respondents. The main instrument is a 27 item questionnaire which measures the ethical compliance by accountants on the quality of financial reporting and performance. Response for the statements was therefore keyed using a Likert type scale ranging from: no effect-1; little effect-2; some effect-3; much effect-4 and great effect-5. The instrument was pilot tested to determine its reliability by administering it to 20 accountants. A total of one hundred questionnaires were administered to respondents and the researchers were only able to collect one hundred and twenty three which was used for analysis. The test-retest reliability coefficient was found to be 0.73 which signifies that the instrument was quite reliable. Data analysis: The data collected from the questionnaires were analysed using descriptive statistics and Spearman Rank Order Correlation Coefficient. The Excel software helped us to transform the variables into a format suitable for analysis, after which the Statistical Package for Social Sciences (SPSS) was utilized for data analysis. 157

RESULTS AND DISCUSSIONS Analysis of research questions: Hypothesis testing: H01: There is no significant relationship between integrity by accountants on the quality of financial reports and profitability of organizations in Nigeria. The Table 3 shows the result of spearman (rho) rank order correlation coefficient on the effect of integrity by the accountant on the quality of financial reports and profitability of organizations. The rho of 0.369 with a pvalue of 0.000, implying that we fail to accept the null hypothesis. Therefore accept the alterative hypothesis that the integrity by accountants and financial reporting and profitability are positively significantly correlated. H02: There is no significant relationship between objectivity by accountants on the quality of financial reports and profitability of organizations in Nigeria.

Asian J. Bus. Manage., 3(3): 152-160, 2011
Table 3: Correlation on Integrity of accountants and financial reports and profitability Integrity Spearman’s rho Integrity correlation coefficient 1.000 Sig. (2-tail) N 123 Finan. Report and profit. Correlation coefficient 0.314** Sig. (2-tail) 0.000 N 123 **: Correlation is significant @ the 0.01 level (2-tail) Table 4: Correlation on objectivity of accountants and financial reports and profitability Objectivity Spearman’s objectivity correlation coefficient 1.000 Sig (2-tail) N 123 Financial reports and profit. Correlation coefficient 0.314** Sig (2-tail) N 123 **: Correlation significant at 0.01 level Financial reports and profitability 0.369** 0.000 123 1.000 123

Financial reports and profitability 0.314** 0.000 123 1.000 0.000 123

Table 5: Correlation on honesty by accountants on the quality of financial reports and profitability of organizations Honesty Financial reports and profitability Spearma’s rho honesty correlation coefficient 1.000 0.350** Sig. (2-tail) 0.000 N 123 123 Financial reporting and profit. Correlation 0.350** 1.000 Sig. (2-tail) 0.000 N 123 123 **: Correlation is significant @ the 0.01 level (2-tailed) Table 6: Correlation on competence by accountants on the quality of financial reports and profitability of organizations Competence Financial reports and profitability Spearman rho competence correlation 1.000 0.368** Sig. (2-tailed) 0.000 N 123 123 Financial reports and profit. correlation 0.368** 1.000 0.000 Sig (2-tail) N 123 123 **: Correlation is significant at the 0.01 level (2-tailed) Table 7: Correlation on accountability by an accountant on the quality of financial reports and profitability of organizations Accountability Financial reports and profitability Spearman rho Accountability correlation 1.000 0.396** Sig (2-tail) 0.000 N 123 123 Financial reporting and profit correlation 0.396** 1.000 Sig (2-tail) 0.000 N 123 123 **: Correlation is significant @ the 0.01 level (2-tailed)

Table 4 shows the rho of 0.314 and the p-value of 0.000 which shows that the null is rejected and alternative accepted. Hence, there is a significant relationship between objectivity by an accountant on the quality of financial reports and profitability of organizations in Nigeria. H03: There is no significant relationship between honesty by an accountant on the quality of financial reports and profitability of organizations in Nigeria Table 5 shows the Spearman (rho) rank order correlation coefficient on the effects of honesty by the 158

accountant on the quality of financial reports and profitability of organizations. The rho of 0.350 with a pvalue of 0.000, implying that we reject the null and accept the statement that honesty by accountants does significantly affect the quality of financial reports and performance of organizations in Nigeria. H04: There is no significant relationship between competence by an accountant on the quality of financial reports and profitability of organizations in Nigeria. Table 6 shows the Spearman rank order correlation coefficient on the effect of competence by accountants on

Asian J. Bus. Manage., 3(3): 152-160, 2011 the quality of financial reports and profitability of organizations. The table shows the rho of 0.368 with a pvalue of 0.000, implying that competence by an accountant significantly affects the quality of financial reports and profitability of organizations in Nigeria. H05: There is no significant relationship between accountability by an accountant on the quality of financial reports and profitability of organizations in Nigeria. Table 7 shows the results of spearman (rho) on the relationship between accountability and the quality of financial reports and profitability of organizations; the table shows rho of 0.396 with a p-value of 0.000, implying rejection of the null hypothesis and acceptance of the alternative. Thus, we can infer that accountability by an accountant significantly correlate with the quality of financial reports and profitability of organizations in Nigeria. CONCLUSION AND RECOMMENDATION The central objective of this study, no doubt, stems from the need to evaluate the quality of financial reports and performance of organizations in Nigeria. Five major hypotheses were therefore tested and the results were: the integrity by accountants and the quality of financial reports and profitability of organizations are significantly correlated. This implies that where accountants comply with integrity in the financial reporting process, it will improve the quality of financial statements produced and profit performance of organizations. This result is consistent with the findings of Verschoor (1998), Webley and Moore (2003), Flugrath et al. (2007) and Ugoji et al. (2007) which indicates that the presence of ethics has a high level of effect on the performance of organizations; the objectivity of accountants and the quality of financial reports and profitability of organizations are significantly correlated; the honesty of accountants and the quality of financial reports and profitability of organizations are significantly correlated; the competence of accountants and the quality of financial reports and profitability of accountants are also significantly correlated; and the accountability of accountants and the quality of financial reports and profitability of organizations are significantly correlated. The above findings therefore inform the researchers to conclude that the compliance by an accountant on professional ethics of integrity, objectivity, honesty, competence and accountability in the financial reporting process will go a long way in ensuring that organizations have quality financial statements and hence better performance. On the premise of the foregoing findings and conclusions, the researchers made the following recommendations: organizations in Nigeria and any part 159 of globe need to encourage employees including accounting officers to comply with codes of ethics as a means of achieving quality financial statements devoid of errors, irregularities and fraud; organizations should establish a position of ethics officer or ethics compliance officer that will provide the necessary platform for guidance on issues that bothers on ethics; and organizations should create a non-threatening environment for the discussion of ethical issues, and therefore rewarding ethical compliance could possibly encourage accountants to go an extra mile in adopting the best ethical compliance in their decision making. Hence, accountants will likely perform better and feel a high level of job satisfaction, and in turn will develop more commitment towards organizational performance. REFERENCES Achua, J.K., 2009. 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