ABSTRACT

This study examined the creative accounting practices and financial performance of listed manufacturing firms in Nigeria. However, the specific objectives are: to examine the effect of revenue manipulation on return on asset of listed manufacturing firms in Nigeria, to determine the effect of misclassification of expenses on return on asset of listed manufacturing firms in Nigeria and to examine the effect of valuation of asset on return on asset of listed manufacturing firms in Nigeria. To achieve the objectives of the study ex-post facto research design was adopted. The study adopted secondary data using annual reports and account of the selected firms. The population of the study is 59 listed manufacturing firms while the sample size is 10 selected firms after adopting judgmental sampling. To test the hypotheses, multiple regression analysis was used. The findings revealed that (i) Revenue manipulation has a significant effect on return on asset of listed manufacturing firms in Nigeria, (ii) Misclassification of expenses has no significant effect on return on asset of listed manufacturing firms in Nigeria (iii) Valuation of asset has a significant effect on return on asset of listed manufacturing firms in Nigeria. The study recommends that Firms should avoid creative accounting practices on expenses, revenue, earnings, liabilities and assets as these affects their future long term survival. Artificial transactions are often entered into to manipulate balance sheet amounts and to move profits between accounting periods. The study also recommends for proper revaluation to assets and liabilities to be carried out in accordance to the IFRs to avoid creative accounting as it was found in the study to be affecting the long term survival. Accountants should be straightforward, honest and sincere in their approach to professionalism.