Creative Accounting Essay Example | Topics and Well Written Essays - 2000 words

Creative Accounting - Essay ExampleAmong the various stakeholders, investors and potential investors bring into being the primary group for whom financial statements are basically intended. Investors put their hard earned money with a firm on the basis of the financial information exhibited by statements and their scrutiny. Therefore, accountants are bound to oblige the rules and regulations of explanation practices in the preparation and presentation of financial statements. These rules are framed by method of write up bodies of a inelegant in line with international chronicle standards. Nevertheless, some news report standards are violated by report professionals/firms for their personal gain. Such practices are illegal and against the ethics of accounting professionalism. Many such practices admit been detect from different parts of the world. Such a practice is known as fictive accounting. Creative accounting is a sort of accounting scam, which does not follow the acco unting rules and principles as such or finds the grummet holes in the accounting rules for the benefit of the preparers and those at the helm of the organization. This essay is meant to detail the basics of creative accounting and the reasons thereof. ... It is the act of using the skill and knowledge of accounting professionals to make advantage of the loopholes of accounting rules so as to manipulate the financial information and thereby deceive the users of such statements. This term is also coined as battleful accounting since it involves the destruction of current accounting rules and specifications with the intention of deceiving someone. Though, the ultimate intentions of creative accounting are manifold, the sound aim is to give unfair and incorrect information about the company and its operational results. Numerous interpretations have been developed on the term creative accounting by eminent authors. In the words of John Blake and Jack Dowds, creative accounting may be defined as a process whereby accountants use their knowledge of accounting rules to manipulate the figures reported in the accounts of a business (Blake). Metcalf, L. (US Senate) in his work (The Accounting Establishment, 1977, p.188), interprets creative accounting is recognized as a synonym for deceptive accounting. Creative accounting methods are noteworthy because they pillow in use as generally accepted accounting principles, even though they have been shown to be deceptive in many cases (Robb, 2007, sl.3). According to Charles W. Mulford, Eugene E. Comiskey in their famous book entitled The Financial numbers racket Game Detecting Creative Accounting Practices, creative accounting practices --a termthe authorschose to encompass any and all steps used to play the financial numbers game -- may be employed in diversify for a variety of expected rewards. These rewards may include a favorable effect on divide prices, lower corporate borrowing costs due to animproved credit rati ng,