Effects Of Ethical Accounting Practices On Financial Reporting: A Survey Of Listed Firms In Kenya

The study sought to investigate the effects of ethical accounting practices on financial reporting of listed firms in Kenya. The study therefore examines the effects of accounting objectivity, professional competence, integrity and confidentiality on listed firms in Kenya. Listed firms in Kenya continue to face challenges in financial reporting. These challenges include fabrication of assets, alteration of accounting records, inability to provide documents to support the financial statements, misinformation in financial statements, and failure to apply accounting principles leading to fraud and unreliability of the financial statements this study was based on three theories; the Positive Accounting Theory, Compliance Theory and stakeholder’s Theory.  This study adopted descriptive research design as the blue print that guided the study in data collection, analysis and presentation of findings. The study targets all the 67 listed firms in Kenya. The study used census method to select all the listed companies in Kenya. However, 6listed firms were selected for a pilot study and the other 61 firms were studied in the actual study. The 6 firms represent 10% of the sample size. Structured questionnaires were used in data collection. The study sought to ascertain whether the data collection tool measures to what the study intends to measure using content validity index. Reliability of the questionnaires was tested using Cronbach’s Alpha test of internal consistency. The study used descriptive statistics (frequencies, percentages and mean scores) and inferential statistics (Correlations and Multiple linear regressions) in the analysis of data. Multiple linear regressions were also used to predict the financial reporting for the listed firms using the ethical accounting practices. The study undertook a multiple linear regression analysis with a view of explaining the effect of objectivity, professional competence, integrity and confidentiality on the financial reporting of the listed firms. The study found a coefficient of determination of 0.632 indicating that 63.2% of the variability in the financial reporting that is attributable to the cumulative effect of confidentiality, professional competence, objectivity, and integrity. The achieved score of 0.632 indicates that 63.2% of the variability in the financial reporting was a result of the cumulative effect of confidentiality, professional competence, objectivity, and integrity. The achieved beta coefficients for objectivity, professional competence, integrity and confidentiality had beta coefficients of 0.264, 0.263, 0.299, and 0.228 respectively. The positive beta coefficients of all the variables indicated that increase in the respective independent variables were associated with increase in the dependent variable with the remainders of the variables kept constant.  The study further found that there were statistically significant effects between each of the accounting practices and financial reporting. The study recommended that listed firms should observe objectivity in order to improve on the financial reporting of the firms. Amongst the aspects that the firms should observe include elimination of the conflict of interest in the drawing of the financial reports.