The advent of creative accounting in the middle of the 20th century sparked great interest among researchers and practitioners. In the work of both foreign and Lithuanian scientists, this phenomenon ...is widely researched and defined as the ability to use the flexibility of legal acts in order to reflect subjective information in financial statements. However, in contrast to foreign literature, linguistic interpretations of the term "creative accounting" appeared in Lithuanian literature, which gave this phenomenon a positive meaning, associated with creativity and identified as positive creative accounting. The article examines the concept of creativity, its relationship with accounting, assesses the compatibility of creativity with creative accounting. Based on the analysis of the literature, it is proposed to refuse to divide creative accounting into positive and manipulative, as such a division not only contradicts the concept of creativity, but also undermines the essence of accounting and its multiplicity.
The article describes the bonus plan, debt/equity and political cost hypotheses, based on a positive accounting theory, with reference to opportunistic approach, explaining the reasons for choosing ...accounting methods. Research based on these hypotheses has revealed the main types of financial information manipulation - earnings management and creative accounting. After conducting the analysis of scientific sources, the article presents the definitions of earnings management and creative accounting of various authors, distinguishes the types of earnings management – accrual-based earnings management and real earnings management. After analyzing the manipulation methods indicated in the literature, a comprehensive list of profit management and creative accounting methods are presented. The methods are structured and classified according to their compliance with accounting standards, types of profit management and their impact on accounting areas. The provided list and classification of methods is useful in a scientific sense for further research on this phenomenon.
Purpose: The research aims to demonstrate the impact of disclosure as an accounting standard to reduce any manipulation of bank profits, when using creative accounting, and improve the performance of ...bank departments, especially senior management, which is the main cause of profit manipulation, and to indicate the extent of the impact of accounting disclosure as an accounting standard to reduce creative practice.
Theoretical framework: The study shows the effect of accounting disclosure as an accounting standard, to reduce creative practice, and disclosure as an accounting standard, one of the most important of these criteria used, which is the course through which details are presented and the decisions are submitted to the policy followed by the facility (Hassan, 2010: 25)
Design/methodology/approach: For the purpose of completing the study, a sample of the banking sector was chosen in the Iraqi environment, where (13) banks were chosen, namely (Commercial Bank- Investment Bank- Ashur Bank- Investment Bank- Gulf Bank- United Bank- Middle East Bank- Al Mansour Bank- Mosul Bank- Bank Baghdad - Somer Bank - Al -Ahly Bank - Credit Bank - Al Ittihad Bank). Sound and correlation and influence laboratories have been used to extract results
Findings: The results of the descriptive analysis showed that there is no weakness in the level of disclosure in Iraqi banks, during the study period, and the values of proportions indicate a relative rapprochement between banks in the terms of disclosure.
Research, Practical & Social implications: The study shows the effect of applying disclosure as an accounting standard in reducing creative accounting practice.
Originality/value: The results of the statistical analysis showed that the value of (ProB) for the independent variable apply the disclosure as an accounting standard less than (0.05), as it reached (0.017), which indicates that there is a reverse moral impact to apply disclosure as an accounting standard No. (1) on creative accounting.
I study whether managers use real activities manipulation and accrual-based earnings management as substitutes in managing earnings. I find that managers trade off the two earnings management methods ...based on their relative costs and that managers adjust the level of accrual-based earnings management according to the level of real activities manipulation realized. Using an empirical model that incorporates the costs associated with the two earnings management methods and captures managers' sequential decisions, I document large-sample evidence consistent with managers using real activities manipulation and accrual-based earnings management as substitutes.
A BRIEF ANALYSIS OF CREATIVE ACCOUNTING ANA-MARIA COMÂNDARU (ANDREI); ADRIANA HORAICU; VOLODEA MATEEVICI ...
Analele Universităţii Constantin Brâncuşi din Târgu Jiu : Seria Economie,
04/2021
2
Journal Article
Peer reviewed
Open access
Creative Accounting is an Anglo-Saxon concept that describes communication practices and techniques, often at the limit of law and lawlessness, where the information in the financial statements is ...adjusted by professional accountants so as to satisfy the interests of their users. The positive aspect of creative accounting (exploiting the gaps in accounting standards and norms to provide solutions to existing problems) is diminished by accountants who use their knowledge to manipulate accounting information on which the position and performance of the entity are valued. The link between creative accounting practices and business decline has been highlighted by the numerous economic scandals that have led to flawed bankruptcies. The objective of this research is to identify creative accounting techniques and the risks of using them in the context of overcoming the limit between legality and illegality. In order to realize the present article, I will use the theoretical documentation, based on the specialized papers that exist at international level, but also on an empirical research based on the studies of the big bankruptcies of the international companies that used creative accounting techniques.
During 2005 to 2007, the SEC ordered a pilot program in which one-third of the Russell 3000 index were arbitrarily chosen as pilot stocks and exempted from shortsale price tests. Pilot firms' ...discretionary accruals and likelihood of marginally beating earnings targets decrease during this period, and revert to pre-experiment levels when the program ends. After the program starts, pilot firms are more likely to be caught for fraud initiated before the program, and their stock returns better incorporate earnings information. These results indicate that short selling, or its prospect, curbs earnings management, helps detect fraud, and improves price efficiency.
Although banks have been conducting credit lending activities for centuries by using traditional credit risk assessment methods, the scientific art of credit risk management has evolved over the last ...few years along with the Basel agreement. The risks to which banks are being exposed when they fund societies keen on creative accounting techniques are considerable, the misleading attempts and the "production" of financial statements for a successful image in front of the bank in order to convince with a view to obtaining funding are often common practice. The consequences are particularly severe for the financing institution that will mark losses on the transaction concluded on the basis of these glossed over economic realities. That is why it is very important to look beyond this picture, to compare the image presented by the client with images of other reporting periods in order to identify changes in the accounting records techniques. It is best to understand the film of the last 2 or 3 years to grasp the reality of a society and not just the image that it has been thoroughly prepared to be shown to the bank in order to get credits.
This study aims to investigate the role of forensic accounting methods in reducing creative accounting practices in Jordan as a developing country. The targeted population consisted of 357 ...respondents from auditing accounting working in auditing offices in Amman. A self-administrated questionnaire was used as an instrument for data collection and multiple-regression analysis was employed for data analysis.
The study findings indicated that three factors could be extracted from forensic accounting methods; namely, investigation operations, procedures and evaluation processes. These factors (methods) showed to have a positive relationship with reducing creativity accounting practices from auditors’ perspective in Jordan. The most crucial forensic accounting method (factor) that proved to be highly associated with reducing creativity accounting practices was the “procedures” method
Creative Accounting: A Literature Review Murineanu, Alina Maria
Proceedings of the ... International Conference on Business Excellence,
06/2024, Volume:
18, Issue:
1
Journal Article
Peer reviewed
Open access
Creative accounting has come to the attention of researchers and continues to remain a hot topic due to major financial scandals where companies have used creative accounting techniques for various ...reasons. Creative accounting is often seen as a manipulation of figures to show what management, the preparers of financial statements want them to show. This paper is a traditional review of the literature dealing with the concept of creative accounting. In it I highlight what the definitions of creative accounting are, the views on creative accounting, the motivation for using creative accounting and the topics discussed on creative accounting in the literature. The research is conducted on a sample of 14 articles selected from the EbscoHost and ProQuest databases. In the articles included in the sample, creative accounting is generally viewed from a negative perspective, as a manipulation of financial statements, aiming to mislead the users of these reports. Reasons why companies choose to use creative accounting practices include: keeping company results within the limits set by shareholders, raising additional capital at a favorable price, meeting listing requirements, lower taxation, deferring insolvency, smoothing earnings to show a better image to investors, hiding poor management. This research aims to be a literature review showing what the view of creative accounting has been in recent years, with most of the articles reviewed from the period 2010-2022.
This study examines whether socially responsible firms behave differently from other firms in their financial reporting. Specifically, we question whether firms that exhibit corporate social ...responsibility (CSR) also behave in a responsible manner to constrain earnings management, thereby delivering more transparent and reliable financial information to investors as compared to firms that do not meet the same social criteria. We find that socially responsible firms are less likely (1) to manage earnings through discretionary accruals, (2) to manipulate real operating activities, and (3) to be the subject of SEC investigations, as evidenced by Accounting and Auditing Enforcement Releases against top executives. Our results are robust to (1) controlling for various incentives for CSR and earnings management, (2) considering various CSR dimensions and components, and (3) using alternative proxies for CSR and accruals quality. To the extent that we control for the potential effects of reputation and financial performance, our findings suggest that ethical concerns are likely to drive managers to produce high-quality financial reports.
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