The Influence of Tone at the Top on Financial Statement Fraud of Listed Manufacturing Firms in Nigeria

Financial statements prepared by the management remains the umbilical cord that connects the financial health of an enterprise to the various stakeholders who rely on them to take informed economic decision. However, the contemporary global business community has unimaginably been submerged in the recent wave of the shocking death of notable corporate entities sooner after the publication of juicy profits which metamorphosed from the poor and ineffective tone at the top orchestrated by top management in collaboration with the independent external auditors. Most of these corporate collapses were associated with the top management with widely exercised corrupt practices. The inefficient or nonexistence of tone at the top in most of entities contributed to the widespread violations and exploitation of accounting loopholes. These apparent upsurge of recently doctored financial statements frauds have resulted in the impairment of firm’s productivity, operational efficiency, damages reputation for businesses, heavy financial losses, collapse of an entire organization and have severely eroded the stakeholders’ confidence and public trust. The thrust of this study is to establish and develop efficient and formidable tone at the top that will help to ameliorate financial statement fraud rascality in the quoted Nigerian manufacturing sector. Ethical leadership strategy, corporate ethical culture and risk management practices were used as the proxies of tone at the top while improper revenue recognition dimension of the financial statements fraud. The researchers adopted correlational survey design for the study and used primary data via structured questionnaire. The null hypotheses were formulated and tested at 0.05 level of significance and other data were analyzed by Pearson Product Moment Correlation and multiple linear regression model with the aid of Statistical Packages for the Social Sciences version 25. The study found that all the tone at the top proxies; Ethical leadership strategy, corporate ethical culture and risk management practices positively and significantly related to improper revenue recognition of quoted Nigerian manufacturing companies in the period of this study. The study concludes that tone at the top effectively and significantly related with the financial statement fraud. We recommend that the policymakers to prompt manufacturing companies in the country to develop strategies for tone at the top with strong ethical approach where employees will be trained and re-trained on the need always to do what is rightful and needful at every moment in the society and workplace. We also suggest that the parents should give their wards very good upbringing so that they can be useful in society and will be free from all social vices such as fraud.