Impact of Creative and Aggressive Accounting on the Quality of Financial Reporting in the Hospitality Industry in Zimbabwe

Banele Dlamini () and Sibonginkosi M.C. Murisa ()
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Banele Dlamini: Lupane State University
Sibonginkosi M.C. Murisa: Lupane State University

Acta Universitatis Danubius. OEconomica, 2024, issue 20(1), 45-54

Abstract: Objectives The study examined the impact of creative and aggressive accounting on the quality of financial reporting in the hospitality industry in Zimbabwe., Prior Work The study also identified the motives behind creative accounting and established the areas that are mainly affected by creative accounting in financial reporting. Approach This study adopted a mixed-methods research design, integrating both qualitative and quantitative approaches. Twenty-six semi-structured interviews were conducted, and financial statements were analyzed from five hotels which were randomly sampled. Results The study found that management uses creative accounting for their personal gain, to improve share market prices, to avoid paying taxation, to ensure that they do not fail in debt covenants, and to acquire loans from financial service providers. The study found that hotels in Zimbabwe use creative accounting methods such as altering accounting principles, asset valuation, intra-company transactions, undervaluing liabilities, and early revenue recognition. The findings further revealed that there is a significant relationship between creative accounting practices and the quality of financial reporting in the hospitality industry in Zimbabwe. Implications This suggests that those entities that practice creative accounting practices in manipulating their financial statements, jeopardize the quality of the reports, and misleading various stakeholders, hence, they should be sanctioned or forced to pay penalties. Value This study provides research-based knowledge as it is the first studies to be conducted in Zimbabwe on creative accounting in the hospitality industry in Zimbabwe.

Keywords: Creative accounting; Quality; Financial reports; Hospitality industry; Zimbabwe (search for similar items in EconPapers)
Date: 2024
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