Internationalization and globalization of economic trade and businesses are on the increasing order. Subsequently, financial statements prepared concerning nation’s local accounting system might not meet the needs of investors, business associates, those in charge of finance and decision-makers who are up-to-date with international standards. For the moment, the market of the emerging countries are the target of the developed and leading industrial countries that are operating in the western countries. To better carry out their activities in developing and emerging countries; they need to accept international accounting standards that suit necessities [1]. Furthermore, overseas investment is a crucial boost to the economics of emerging countries and investors may request vivid and comprehensible financial information emphasizing the purpose why developing countries need to accept International Accounting Standards [1]. Concerning accounting standards between countries, Francophone Sub-Saharan Africa Countries in which Cameroon is one of the Member State, since the end of the 20th Century, the treaty of Port-Louis, Mauritius created a new accounting system on October 17, 1993, which was established in Africa. These Countries have made significant efforts in harmonizing domestic accounting standards and financial reporting with the International Financial Reporting Standards (IFRS). Moving from two diverse OCAM streams to two OHADA streams (effective 1985) and now one OHADA Uniform Accounting Act embodying 17 member states in which Cameroon is one [2] is an effort leading to harmonization of financial reporting practice both domestically and internationally. 

Richard, explains that, the change from OCAM plan to OHADA uniform Act was put in place to tackle issues of regional integration with the purpose to modernize the legal framework among member states in Africa and to improve on their business climate and interregional trade to stand a better chance with international accounting practices. The OHADA uniform Act advocate for the modernization of previous legislation to suit international standards, most especially those of the International Accounting Standards Committee (IASC). Belkaoui explained the importance of improving accounting principles by facilitating the understanding of accounting and accounting operations with the possibility of comparing accounting documents in time and space. This with the goal to rally statistics for the specific needs of national accounts, the practice of amalgamation of accounting group, the production of shared information, the production of information which facilitates decision-making, the production of a safe and feasible information". The desired goal of these requirements is to familiarize accounting practices with international standards. 

Despite the laudable effort of OHADA Uniform Accounting Act and other financial organizations to ensure that all financial records are understandable, reliable and relevant to all users of financial records. Peng et al. saw that the compliance and harmonization of standards by companies are difficult because of the institutional (cultural, legal, tax) differences among countries and the incentives those differences create amongst the preparers of financial reports. Most financial records sent out for global consumption seems not to meet the international standard prescribed by International Accounting Standards Committee. These have partly been blamed on the poor accounting practice by most persons who prepare financial reports [3]. Of the several factors that influence accounting practice which in turn influences financial reporting standards is the qualification of the person who prepares the financial report. According to Dechow and Dichev [4], most financial managers lack the requisite qualifications to allow them to practice successfully. People from another field of study, such as Arts and Sciences who did not undertake courses in accounting and finance related areas are made to be financial managers of companies.

Another critical factor that influences accounting practice and financial reporting standard is the inexperience of most financial managers. Daske and Gebhardt [5] observed with great disappointment that financial managers of most companies have no experience in reporting financial matters, but because of their relations with the management of the firms, they are made to be financial managers. These groups of financial manager’s end up presenting financial reports that are not understandable, relevant and reliable to the finale users of financial reports. This research work is therefore set to investigate the factors affecting accounting practice and its effects, on financial reporting with the aim of making necessary recommendations that will assist in developing best accounting practice that will influence proper financial reporting standard.

Research Hypotheses 

• H₀:  Accountants qualification does not significantly influence financial reporting in terms of understandability, relevance and reliability

• H₀:  The years of working experience of accountants does not significantly influence financial reporting in terms of understandability, relevance and reliability

• H₀:  There is no significant relationship between code of ethics and standards of accountants and financial reporting in terms of understandability, relevance and reliability

Literature Review and Theoretical Framework 

Conceptual framework 

Harmonization of Accounting Standards: The benefits of international harmonization of accounting standards and practices have been described by various authors to include:

• improving international comparability in financial statements

• enhancing international capital flows

• raising the general level of accounting practice

• reducing the costs of preparing financial reports for multinational corporations facilitating social control over the global corporation; and

• improving the resource allocation decision of international portfolio managers [6]

However, the word harmonization appears to mean different things to different people. Some see harmonization as the same as unification or complete standardization, while others view it as the process of increasing the compatibility of accounting practices by setting boundaries to variation [7]. 

Radebaugh and Gray [8] distinguish between harmonization and standardization and state: “harmonization implies a more flexible approach compared to standardization which suggests a stricter approach resulting ultimately in a state of uniformity.” Most (1994) defines uniformity, standardization and harmonization as distinct, though related, concepts as follows: Uniformity refers to the elimination of options in accounting and accounting operations system for economic transactions relating to such economic events and economic circumstances. Standardization, on the other hand, refers to the reduction of alternatives while maintaining a high degree of flexibility of accounting feedbacks. 

Harmonization on her part refers to the reconciliation of unlike accounting practices and financial reporting systems by matching them into common comprehensive classifications, in such a way that form becomes more customary while content preserves significant differences. In this broader view, harmonization is seen almost as the solution to universal comparability of financial data. 

Quality of Accounting Standards 

Accounting standards stand as a regulatory device which is essential for accounting practices. They serve as guidelines amongst parties who participate in a firm, which includes management, creditors, and shareholders [8]. Financial reporting standards put in place direction on how accounting information ought to be recorded, reported and interpreted. Variances in quality of accounting standards, correctly, play a role in the difference in value significance of accounting numbers [9]. Accounting standards define how the accounting earning information must be calculated and reported. User’s awareness about the excellence of financial information is influence by high-quality standards. The used of any standard results from the user’s awareness of such a standard in creating accounting information that is readily used by the users of such accounting information to enrich the worth of accounting information relevance. The relevance, reliability, consistency, and comparability of financial information are apparently the results of high quality of accounting standards used by investors in making informed investment decisions [10]. 

SEC [11] stresses that to measure the quality of any accounting standard, such a standard ought to result in a detailed exposure of transparency and the application of consistency with the purpose that investors make informed decisions on the bases of relevance and reliability of information produced by such a standard. The high-quality standard of accounting information is generated by accounting standards that achieved the needed degree of quality of accounting information like those of a firm’s retained earnings. In case of losses as a result of incorporation, Ball, Kothari, and Robin (the 2000s) advocates that common-law countries produce significant accounting earnings more opportune, conventional than code law countries. The variance between earnings of countries accounting standards and the IAS predicted faults of experts as advocated by Ashbaugh and Pincus [12] are associated. That is, the little the variance with the IAS and those of the national accounting standards, so little to the faults of earnings predictions. Furthermore, they saw that expert; accurate prediction is enhanced as firms implement the IAS. Moreover, this reveals that the implementation of IAS leads to an accurate forecast of a firm’s financial accounting information. These studies show that accounting standards improve the quality and posting of accounting earnings. 

Theoretical framework 

Ethical Judgment Theory: The theory explains that professions need a code of ethics to reassure the public and clients of their members’ responsibilities and thereby maintain members’ integrity and reputations Velayutham [13]. The Code identifies the objectives of the accountancy profession as working to the highest standards of professionalism, attaining the highest levels of performance and meeting its responsibility to the public through strict observation of the fundamental principles: integrity, objectivity, professional competence and due care, confidentiality, professional behavior and compliance with technical standards. Of great significance, Velayutham separates the principles in the code into two categories: those principles that establish the character and moral responsibility of the members of the profession and those principles that establish the characteristics of professional behavior and the requirement to comply with technical standards. Velayutham [13] challenges the ability of the code to put in place the moral responsibility of the profession. Velayutham [13] explain that the code focuses primarily on the quality of the service provided by accountants and auditors and not on ethics. He suggests that the principles of professional behavior and compliance with technical standards are not ethical principles due to their compliance which depends on law-like statements and quality standards that do not give way for autonomous decision-making. In Velayutham’s [13] idea, only the principles that look on character and moral responsibility are ethical principles. Also, the requirement that auditors evaluate whether financial statements fairly present the underlying transactions and events regarding statements of GAAP has shifted the focus of the Code from ethic to quality [13]. Schlachter [14] suggests that ethical judgment is a function of the Code and of the written and unwritten organizational policies that govern members’ contacts with colleagues, clients, and third parties. Francis [15], on the other hand, states that accountants’ moral agency is involved in the production and creation of accounting reports. Elias [16] explains how members of the accounting profession view aggressive earnings behavior, and he concludes that highly idealistic members judge earnings management more harshly than less idealistic members do Rabin [17]. In this context, idealism is defined as an “individual’s attitudes towards the consequences of an action, and how these consequences affect the welfare of others.” In summary, auditors’ ethical judgments are formed by the provisions of the code, organizational policies governing ethics and individuals’ moral agency. Ethical judgment is fundamental to auditors in forming an opinion as to whether financial statements fairly present the financial position, results of operations and cash flows of an entity and is distinct from compliance with statements of GAAP. 

The implication of this theory to the present study is that the theory helps explains how financial managers should exercise the code of ethics in preparing financial statements. Thus, if the code of ethics is applied in preparing financial reports, the report will be relevant, understandable and reliable.

Empirical Literature

Qualification of Financial Managers and Financial Reporting Standards : Onuh [18] in support of this view asserted that an administrator could not become an administrator without a requisite professional qualification. Professional training could bring additional knowledge to financial administrators in that all the skills he would need to impart in the process of financial reporting must be given to him while in training if he must carry out this function effectively. A man would not know what he never learned, hence without additional professional training; a financial manager would not carry out his financial reporting duty efficiently. Odigbo [19] researched on educational attainment and efficiency of financial managers in carrying out their duty of financial reporting. He used a sample size of forty (40) financial managers in 40 firms. Survey inferential research design was adopted for the study. Using Independent Pearson Product Moment Correlation Analysis, he found that the proper approach in financial reporting was through training. He stressed that such training involved acquiring more knowledge and higher qualification. According to him, it would not be safe to assume that all employees employed as administrators had their prerequisite qualification to perform their duty. 

Ndoma [20] investigated the relationship between educational qualification and effectiveness of administrators in carrying out their duty. His sample was 55 respondents drawn from the manager in companies. Survey search design was adopted for the study. Data for the study was collected using a well-validated questionnaire. Data collected was analyzed using One Way analysis of variance. Results of the finding revealed that educational qualification of managers significantly influenced their administrative effectiveness and efficiency. Managers that had Bachelor or Master Degree in business and business administration were able to carry out the task more effectively than others with degrees in other fields of study but employed as administrators. Ndoma’s [20] study supported the findings of Odigbo [19]. Both researchers agreed that specific educational qualification ensures that the supervisory duties of managers are carried out appropriately. 

Financial Managers Working Experience and Financial Reporting Standards 

In current literature, administrators’ experience had been used as one of the vital factors in administrator’s effectiveness which reflected in the quality of their duty. Ozumba [20] in his study classified company’s managers in three categories in Lagos State. These were: long experience (Ten years and above) average experience (five - nine years) and short experience (below four years). One-way analysis of variance was used to test the hypotheses. The result showed that there existed a significant influence of administrators working experience on their administrative effectiveness. Ajayi’s (study, however, found that administrators with long experience (above fifteen years) seemed to be more efficient in their managerial task more than their counterparts with low working experience of fewer than fifteen years. He also found that such managers with long working experience had the highest degree of job satisfaction and stability handling their managerial task efficiently. 

Code of Ethics and Accounting Profession 

Professional ethics in the accounting profession is developed over time using an evolutionary process They have a practical purpose, and this practicality is vividly shown in the way these rules are developed. With the enactment of the first joint stock companies Act 1844 in the UK, the workload of accountants gradually increased, not only in the financial accounting area but also in the handling of audits and bankruptcies. Well into the twentieth century, the support displayed by the financial sector also consolidated the professional status of accountants. However, the credibility of the accounting profession can be of great value if the accountants themselves are perceived to be independent and competent, and the quality of their work is adequate. Thus, over a period of sixty years or more, the code of professional ethics evolved as the product of thousands of minds which were guided by the experience of decades. A number of the rules were adopted as the result of specific events urging the need for additional standards to accommodate changing circumstances. 

Accountants have always borne in mind three critical factors: the public, their clients and other accountants when devising specific rules of conducts. The specific professional rules of conduct are the direct result of the accountants pooling their wisdom to identify the most acceptable behavioral patterns among professionals by the set priority. At times, specific rules are formed as a result of particular events, as the governing bodies of the accounting societies fear that public confidence would be further impaired if future repetition were not prevented. The code of ethics thus evolved; the rules were modified and expanded as circumstances within the environment changed over time. A more recent example is the abolition of the rule against advertising within the accounting profession. There were sufficient societal and economic demands that the US accounting profession deregulated the solicitation and advertising rule in 1978, followed by the UK and Australia in 1984. New Zealand did not follow until 1986. These demands reflect the accounting profession’s responses to the expectations and challenges created by itself, the business community, regulation and other users of financial statements who rely on members’ independence, integrity, objectivity, and adherence to professional standards’ [21].

Research Gap 

The differences in accounting practices and financial reporting in different countries like Germany, IAS, US GAAP, Switzerland, Africa and Cameroon in particular where OHADA is practiced have been highlighted in various research studies over the past decades. For example, Choi and Bavishi [6] have provided an exciting synthesis of world diversity of accounting practices. As a result of the increased awareness of such diversity, attention was drawn to the need for international harmonization of accounting practices. As Rahman, Perra and Tower point out, the benefits of international harmonization of accounting standards and practices have been described by various authors to include: 

• improving international comparability in financial statements

• enhancing international capital flows

• raising the general level of accounting practice

• reducing the costs of preparing financial reports for multinational corporations 

• facilitating social control over the global corporation; and 

• improving the resource allocation decision of international portfolio managers [6]. In Cameroon, limited literature exists to showcase the factors affecting accounting practices and its effects on financial reporting. However, the gap covered in literature is that this study has not yet been conducted in Douala Cameroon. This research work will fill a gap in literature as it will be investigating Determinants of the Quality of Financial Reports the Case of Selected Manufacturing Companies in Douala Cameroon. As a result, there is a knowledge gap. This study aims to fill.

The ex-post facto is the research design adopted for this study. According to Kerlinger ex-post facto research design is “a systematic empirical inquiry in which the scientist does not have direct control of the independent variables.” Moreover, is because their manifestations have already occurred or because they are inherently not manipulatable. Inferences about the relationship among variables are made without direct intervention from the concomitant variation of independent and dependent variables. A sample of 59 accountant from 59 manufacturing firms in Douala were selected and used for the study. A well validated structured questionnaire was used for data collection. Data collected were analyzed using independent t-test, one-way analysis of variance and Pearson product moment correlation coefficient 

Test of Hypotheses 

Hypothesis One: Accountants professional qualification does not significantly influence financial reporting standard in terms of understandability, relevance and reliability. The independent variable in this hypothesis is accountant’s professional qualification while the dependent variable is financial reporting. Accountant’s qualification was categorized into Chartered and non-chartered accountants. Independent t-test statistical technique was used to test the hypothesis. The result is as presented in Table 1. The result in Table 1 revealed that the calculated t-value of 4.40 for understandability, 3.12 for relevance and 3.51 for reliability were all found to be greater than the critical t-value of 1.98 needed for significance at 0.05 level of significance with 59 degrees of freedom. With this result, the null hypothesis was rejected for all the sub-indices of financial reporting (understandability, relevance and reliability). This result therefore implies that accountants’ professional qualification significantly influence financial reporting in terms of understandability, relevance and reliability.

Table 1: Independent t-test analysis of the influence of accountant’s professional qualification on financial reporting in terms of understandability, relevance and reliability

*P<0.05, d.f = 59, critical t = 1.98 

Source: Fieldwork, 2018

Hypothesis Two 

The years of working experience of accountants does not significantly influence financial reporting in terms of understandability, relevance and reliability. One-way analysis of variance (ANOVA) was used to test this hypothesis. The result is as presented in Table 2. Examination of Table 2 shows that the years of working experience of accountants has a significant influence on financial reporting in terms of understandability, (F = 160.38, P<.05) relevance, (F = 99.37037, P<.05) and reliability (F = 108.764, P<.05). The null hypothesis was rejected and the alternate hypothesis accepted because the calculated F-ratios of 1601.38, 99.37, and 108.76 were found to be greater than the critical F-ratio of 3.00 given .05 alpha level with 2 and 58 degrees of freedom. This finding implies that years of working experience of accountants significantly influence financial reporting in terms of understandability, relevance and reliability. 

Table 2:   Descriptive statistics and one-way analysis of variance (ANOVA) of influence of years of working experience of accountants on financial reporting in terms of understandability, relevance and reliability 

Source: Fieldwork

Hypothesis Three 

There is no significant relationship between code of ethics and standards of accountants and financial reporting in terms of understandability, relevance and reliability. Pearson’s product moment correlation coefficient statistical technique was used to test this hypothesis. The result is presented in Table 3.

From Table 3, the calculated r-value of 0.46 for understandability, 0.36 for relevance and, 0.22 for reliability were all found to be greater than the critical r-value of 0.165 needed for significance at 0.05 level of significance with 48 degrees of freedom. With this result the null hypothesis was rejected and the alternate hypothesis accepted for all the sub variables of financial reporting. This finding implies that code of ethics of accountants significantly relates to financial reporting in terms of understandability, relevance and reliability.

Table 3: Pearson’s product moment correlation analysis of the relationship between code of ethics and standards of accountants and financial reporting in terms of understandability, relevance and reliability (n-61).

* p < 0.05, df = 59, critical r = 0.165

Source: Fieldwork

Discussion of findings 

In this research, three hypotheses were tested. The results that were drawn from the three null hypotheses were statistically tested and the findings were that all the three hypotheses in the null form were rejected; leaving out the conclusion that accounting practice has significant influence on financial reporting. These findings gave rise to a transparent conclusion that educational qualifications of accountants significantly influence financial reporting in terms of understandability, relevance and reliability. This finding is in agreement with the finding obtained by Onuh [18] who supported this view by asserting that an administrator could not become an administrator without a requisite professional qualification. Professional training could bring additional knowledge to financial administrators in that all the skills he would need to impart in the process of financial reporting must be given to him while in training if he must carry out his function effectively. A man would not know what he never learnt, hence without additional professional training; a financial manager would not carry out his financial reporting duty effectively. This finding is also in agreement with the finding arrived at by Odigbo [10] who researched on educational attainment and efficiency of financial managers in carrying out their duty of financial reporting and found that the proper approach in financial reporting was through training. The finding of research hypothesis two revealed that there exists a significant influence of years of working experience of accountants on financial reporting in terms of understandability, relevance and reliability. This finding is in line with the finding obtained by Ebak [5] who carried out a study on working experience of administrators and financial reporting standards and found out that financial managers with long experience (eleven years and above) seemed to be most favorable in terms of the standard of financial reports in which they prepared, seconded by those with average working experience of six to ten years and lastly those with short term experience (less than five years). The finding of research hypothesis three revealed that there exists a significant relationship between accountant’s code of ethics and financial reporting in terms of understandability, relevance and reliability. This finding is in line with the findings of Mintz [21] who noted that accountant’s adherence to strict code of ethics and standards as put up by accounting regulatory bodies will help them put up reports that are useful to users who rely on their integrity and objectivity. 

Summary of findings 

This chapter concludes the study thereby presenting summary of findings and providing recommendations which if implemented will help improve the situation. It was found during the study that if accountants acquire the required educational and professional qualifications, it would make them better understand the basics in financial reporting quality and thus put up reports that are useful. The study went further to discover that the number of years accountants put in practice makes them more competent and efficient with issues relating to reporting financial information. This is because such reports will possess the qualities necessary to be used by its users in making decisions and it shall be in compliance with its purpose.The study also found that code of ethics has significant influence on financial reporting. This is because it compels ethical behaviour on them and their compliance to written code of ethics will enable them prepare reports that are understandable, relevant and reliable. From the study, it was found that accounting practice has significant influence on financial reporting in most manufacturing companies in Douala Cameroon.

Based on the findings obtained from the analysis of the hypotheses that directs the study, the following conclusions were made: Accountants qualification significantly influence financial reporting in terms of understandability, relevance and reliability. Specifically, chartered accountants were able to present their financial reports better than non-chartered accountants. The findings also leads to the conclusion that years of working experience of accountants significantly influence financial reporting in terms of understandability, relevance and reliability, implying that accountants with longer years of working experience presents their reports better than those with shorter years of working experience. Lastly, there exist a significant relationship between accountants’ code of ethics and financial reporting in terms of understandability, relevance and reliability.

Recommendations 

Based on the findings, the following recommendations were made: 

• That employment of accountants into positions relating to financial reporting should consider their educational and professional qualifications as a matter of importance

• Serving accountants should be made to undergo in-serving training from time to time, to gain new knowledge and experience

• Code of ethics should be made available to all accountants and adherence to it be made compulsory. This would enable them prepare financial reports that are reliable to the extent that there are verifiable, reports faithfully and free from errors

• Due to the increased diversity in accounting practices put up by most companies, it is also recommended that attention should be drawn to the need for international harmonization of accounting practices, which in turn will improve financial reporting in terms of reliability, understandability and relevance

• Future scholars should aim at increasing both the sample of companies being studied and studying of company’s overtime as such insights may also create deeper understanding of accounting practices and financial reporting

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