Creative Accounting: A Fact or Illusion in Indian Corporate Sector Financial reports are prepared to ensure timely availability of reliable information regarding companies’ state of affairs to its users (ICAI, 2000)

Abstract

The goal of the present study is “to investigate the concept and techniques of creative accounting, as well as how it is implemented and how it can result in financial crimes”. The procedures that are followed, as well as the individuals who are involved in and victims of such crimes. The means employed to carry out the action and how it is carried out. This study also investigates the workings of “accounting policies” and how “loopholes” in them might be exploited, resulting in a set of games that can be played around them in order to get the desired results in the “preparation of financial statements”. The outcomes of the study show that “creative accounting though legal and acceptable around the world. It provides door to loopholes provided by the acts and laws governing the preparation of financial accounts, resulting in financial crimes and hampered economic growth”. “Creative accounting though not illegal but the excess use of the same has given daunting effects on the financial statements and as a result have resulted into financial frauds and looting of people’s money throughout the world”. The Institute of Chartered Accountants of India (ICAI) along with its members have always played a vital role in ensuring transparency in accounting, still there are many organizations which are try to manipulate the financials. Although creative accounting is not prohibited, its widespread use has had alarming implications on financial accounts, resulting in financial fraud and the looting of people’s money around the world. Investors’ “hard-earned money” is stolen, and there is no way to stop it because the mechanisms and legal bodies are still working to solve the problem, so it is critical to understand about “creative accounting”. Earlier AS were applied in preparation and presentation of financial statements which are shifted to Ind AS for all large companies. Ind AS provides more focus on fair valuation of various items which includes application of judgement and principles. Hence, it becomes more imperative to understand the concept of creative accounting. This research contributes to a better understanding of the rise of “creative accounting” and how it has led to “accounting fraud and financial crimes” in the economy.