Critical Examination of the Impact Accounting Ethics and Creative Accounting on the Financial Statements

Adel M Qatawneh,Atala M Alqtish

doi:10.5539/ibr.v10n6p104

Abstract

This study aimed to determine the impact accounting ethics and creative accounting on the financial statements in Jordan, the study importance arises from the need to recognize creative accounting and profession ethics for accountants, creative accounting can be used to manage profits, income smoothing.Earnings management occurs when accountants use judgment in financial statements and in structuring transactions to alter financial statements to either mislead some shareholders about the underlying performance of a company, sometimes to impact contractual outcomes that depend on financial reporting.To achieve the objectives of this study a questionnaire designed and distributed to the society of tax auditors and mathematical model built to link between creative accounting and accounting ethics percentage and some financial figures.The statistical analysis showed that ethics and creative accounting had a positive impact on the financial statements.

Highlights

Accountants use their knowledge in the accounting rules and standards to manipulate the financial figures in the reported financial statements to get more favorable appearance for it, this process become considered as creative accounting, which was handled by many of studies from the theoretical or argument perspective, and rarely from empirical one
This view will be from a tax perspective which mean that we want to explain if the differences between the income presented by companies in reported financial statement and the adjusted income by income and sales tax department (ISTD), and try to know if the different caused by creative accounting and ethics or differences between taxes law and accounting standards (IFRS). (Qatawneh, 2012)
Qatawneh, (2013), investigate the effect of developing the international financial reporting standards and international standards on audit on the tax legislation in Hashemite kingdom of Jordan, This study found that there is a statistical evidence of the international financial reporting standards on the tax law, with the presence of some weak effect from the point of view of the research sample related to the fair value and the extent of its use in the investments, and the financial instruments

Summary

Introduction

Many researchers or writers try to get definition for this concept like (Naser, 2015) who give an academic view offers a definition “ creative accounting and ethics is the transformation of accounting figures from they are to what prepares desire by taking advantages of the existing rules and\or ignoring some or all of them” this definition take one of the creative accounting and ethics sides, which related to the high flexibility and alternatives of financial rules and standards, but creative accounting and ethics does not stop hear , Jameson write about this subject as the following “The accounting process consist many of dealing with many matters of judgment and resolving conflicts between competing approaches to the presentation of the results of financial events and transaction” in our opinion this view look more wider Which mean that creative accounting and ethics may consist the judgments factor which can be used in a wrong way from some parties, so from previous we can see that we got many definitions of creative accounting, because according to our view there is no clear picture about creative accounting and ethics yet Accountants use their knowledge in the accounting rules and standards to manipulate the financial figures in the reported financial statements to get more favorable appearance for it, this process become considered as creative accounting, which was handled by many of studies from the theoretical or argument perspective, and rarely from empirical one. This view will be from a tax perspective which mean that we want to explain if the differences between the income presented by companies in reported financial statement and the adjusted income by ISTD, and try to know if the different caused by creative accounting and ethics or differences between taxes law and accounting standards (IFRS). (Qatawneh, 2012)

Objectives

Methods

Results