Abstract
The phenomenon of creative accounting has attracted the attention of researchers for decades, especially in the financial sector for its implications on the quality of financial reporting. Although several procedures have been developed by researchers and practitioners to determine any manipulation in financial reporting, the practice of creative accounting is still prevalent, resulting in poor quality financial reporting. The present study investigated the moderating role of transparency and disclosure with respect to enhancing the impact of creative accounting determinants and financial reporting quality in the context of commercial banking. A deductive research method driven by a survey questionnaire is used to examine the proposed hypotheses and attain the designed objectives. The analysed data provide a theoretical conceptualisation and practical validation for the integration of the moderator in the relationship between creative accounting determinants and financial reporting quality in banks, with significant advantages. Furthermore, the present research findings show that the degree of impact for creative accounting determinants is linked to the aspects of transparency and disclosure. Lastly, the results present concurrent evidence of the flexibility of creative accounting determinants with implications for transparency and disclosure and financial reporting quality.
Highlights
Creative accounting is the practice of influencing financial indicators using accounting knowledge without explicitly violating accounting policies, rules, and the law
This study presented a useful strategy for practitioners, scholars, and policy makers to follow through in examining the essential determinants of creative accounting that can lead to the detection of reasons for fraud financial reporting as well as indications for improving its quality in the commercial banking sector, with significant consequences for national economic policy
The study focused on the commercial banking sector, which is considered to be the backbone of the national economy of any nation
Summary
Creative accounting is the practice of influencing financial indicators using accounting knowledge without explicitly violating accounting policies, rules, and the law. Creative accounting is practiced to show the financial position as the company management would like it to be; stakeholders are informed of what the management wants them to perceive [1]. This practice allows financial information to be manipulated from its proper and accurate form; the creative accountant exploits the existing rules or, in several cases, ignores one or more rules [2]. The researchers indicate that “It is the biggest con trick since the Trojan horse. This deception is all in perfectly good taste. It is creative accounting” [3]
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