Global Advanced Research Journal of Management and Business Studies Vol. 1(x) pp. 051-060, March, 2012 Available online http://garj.org/garjmbs/index.htm Copyright © 2012 Global Advanced Research Journals Full Length Research Paper An evaluation of the regulatory framework for the prevention of misstatement of financial statements in Nigeria DR PAUL AONDONA ANGAHAR Senior Lecturer / Deputy Dean, Department of Accounting, Faculty of Management Sciences, Benue State University, Makurdi. Nigeria. E-MAIL-angahar63@yahoo.co.uk: Tel: +234-706-801-0515 Accepted 20 February, 2012 The paper seeks to describe the operations of the regulatory framework for the prevention of financial statement misstatement/manipulation in Nigeria, which is provided by the Securities and Exchange Commission (SEC) and to assess the extent of its effectiveness in preventing misstatement/manipulation of financial statements in financial reporting in Nigeria. The Descriptive method was employed for the study; data were collected through interviews and documentary evidence. Using descriptive statistics consisting of frequencies, a measure of central tendency, visual representations made up of the bar chart, pie chart, and time series plot, the data were analyzed. The findings of the study indicated that the SEC is effective to the extent of detecting a mean of 25 cases of financial statements misstatement/manipulation annually for the study period 2003 to 2010 and thus prevented or deterred them. The regulatory agency has however been reluctant in applying the full force of the law in the enforcement of accounting rules. Keywords: Regulatory framework, Accounting rules, Misstatement, Manipulation, Financial Statements, Enforcement. INTRODUCTION The image of the accounting profession has been badly eroded in recent times. The profession has been smothered by massive financial reporting scandals resulting from manipulation of financial statement numbers with the active collusion of auditors in a manner that clearly vitiates the notion of the independent auditor. Confidence in publicly available financial information has been weakened globally (Sulton 2002a). Today, the institutions responsible for financial reporting in our capital markets are reeling from the fall out of financial reporting scandals of colossal proportions. Reports on the collapse of Enron, the bankruptcy of WorldCom, and a growing list of failures have laid bare the massive manipulation of financial reporting by management, inexplicable breakdown in the independent audit process, astonishing revelation of holes in the financial reporting standards, (Sulton 2002 b). This exact scenario that played out in the collapse of Enron- the United States giant energy company, which resulted in the demise of the accounting firm Arthur Andersen has followed other companies such as WorldCom, Adelphia, Global Crossing, Qwest, Tyco, Xerox, Martha Stewart, Health South, Royal Ahold, Parmalat, the mutual funds among others, (Copeland Jr, 2005). Optimistic accounting results in an illusively prosperous public image and consequently inappropriate decision-making by investors and creditors. Once the real situation is disclosed, the company will have to face the situation of insolvency and the shareholders and creditors will suffer unaffordable disaster, such situation had been repeatedly proven by many corporations’ collapses internationally and was responsible for the collapse of HIH Insurance, Ansett Airlines and One Tel network in Australia (Jiang, 2006).