# EXAMINATION OF THE IMPACT OF BOOK ENTRIES ON CREATIVE ACCOUNTING: METHODOLOGY

The research was conducted in Nigeria and it adopted an ex-post factor design. Secondary data was collected from the Annual Reports of the sampled companies. Two different ratios were computed; one in the traditional way and the other by adjusting the deferred tax and depreciation which are the major book entries allegedly used as creative accounting techniques. An independent samples t-test was used to statistically obtain the significant difference between the unadjusted and adjusted ratios. Then the significance of the t value is compared against the statistically accepted bench mark of 0.05. If the significant value is greater than 0.05, the null hypothesis stands rejected and the alternative hypothesis accepted. The t-test statistic was used to test the hypothesis through the Micro Soft Special Package for Social Sciences (SPSS) version 16.0

FINDINGS AND DISCUSSIONS

We test the null hypothesis that ‘there is no significant difference between the unadjusted and adjusted ratios due to the use of Book Entries as creative accounting techniques in manipulating the information content of annual financial statements of companies in Nigeria’. If this hypothesis is not rejected, then we reject the alternative hypothesis ‘ that there is a significant difference between the adjusted and the unadjusted ratios due to the use of Book Entries as creative accounting techniques in manipulating the information content of annual financial statements of companies in Nigeria’.

Table 1: An Independent Sample T- Test

RESULTS

An independent samples t-test was used to statistically obtain the significant difference between the unadjusted and adjusted ratios. Then the value obtained (0.891) of the t-statistics is greater than 0.05 level of significance, thus there is no significant difference between the unadjusted and adjusted ratios. Therefore book entries are not used as creative accounting techniques.

Decision Rule

Since the t value is 0.137 < 2.000 and the significant value 0.891 > 0.05 at 5% level of significance we reject the alternative hypothesis and accept the null hypothesis. We conclude that Book entries are not significantly used as creative accounting techniques in Nigeria. The implication is that management does not fundamentally rely on Book Entries as are typified by deferred tax and depreciation in evolving creative accounting techniques. Therefore to manipulate the information content of the Annual Reports, the management goes far beyond the traditional Book Entries. They perfect strategies that enable them keep separate accounting records for the major items that appear in the financial statements. It is thus a thorough and impeccable fundamental fraud intended to satisfy the whims and caprices of top management at the expense of the other stakeholders and users of accounting information. That is, different sets of accounting records to wit, source documents, journals ledgers and other summary statements such as the trial balance are sufficiently provided to achieve whatever purpose management wants irrespective of the actual transactions of the entity. This automatically shows that Auditors should therefore intensify not only their vouching processes but also the evidencing procedures while doing the audit work.